Due to the Covid-19 pandemic, consolidation transactions are likely to increase in India and globally as many businesses may not have the financial wherewithal to survive the crisis and will look to sell out. At the same time, there will be buyers (“Buyer”) who may have enough cash to be deployed in taking over distressed businesses. This article discusses some of the issues which the Buyer should keep in mind while buying distressed assets.

Introduction

The term ‘dispute’ assumes great importance under the Insolvency and Bankruptcy Code, 2016 (Code). This is because under Section 9(5)(ii)(d) of the Code, an operational creditor’s application for initiating corporate insolvency is liable to be rejected if a ‘notice of dispute’ in relation to ‘existence of a dispute’ is received by such an operational creditor from a corporate debtor. The term ‘dispute’ is defined in Section 5(6) and referred to in Section 8(2) of the Code in the following manner: