On 23 November 2021, the Supreme Court of India, in the case of TATA Consultancy Services Ltd. v. Vishal Ghisulal Jain, Resolution Professional, SK Wheels Pvt. Ltd. (TCS Case), clarified that the jurisdiction of the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016 (Code) cannot be invoked by the corporate debtor if the termination of a contract by a third party takes place on grounds unrelated to the insolvency of the corporate debtor.

Brief facts

The problem of Non-performing Assets (NPAs) in the Indian banking system is one of its foremost predicaments.

The Insolvency and Bankruptcy Code, 2016 (Code) has played a significant role in rescuing financially distressed companies as compared to the former insolvency law regimes which were provided in various statues having different objectives and processes. The initial success of the Code is attributable to various factors including the manner in which the Indian judiciary interpreted the law as well as the timely amendments of the Code by the Legislature.

In a recent opinion – In re Heritage Home Group LLC, et al., Case No. 18-11736 (KG), 2018 WL 4684802 (Bankr. D. Del. Sept. 27, 2018) – the Delaware Bankruptcy Court addressed the longstanding issue of which professional persons must be retained under section 327(a) of the Bankruptcy Code.

A fundamental tenet of chapter 11 bankruptcies is the absolute priority rule. Initially a judge-created doctrine, the absolute priority rule was partially codified in section 1129(b)(2)(B)(ii) of the Bankruptcy Code. Under section 1129, plans must be “fair and equitable” in order to be confirmed.

Background: Professionals’ Fees in Chapter 11 cases