This article was first published on India Business Law Journal on 22 June 2023.
In M Suresh Kumar Reddy v Canara Bank and Ors, the Supreme Court clarified that its observations inVidarbha Industries Power Limited v Axis Bank Limited were restricted to the particular facts of that case. Therefore, except in exceptional circumstances, National Company Law Tribunals (NCLT) must admit applications under section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), once the existence of a debt and default is established.
What is the so-called "creditor duty"?
This is the duty, introduced into English common law by the leading case of West Mercia Safetywear v Dodd1 in 1988, of company directors to consider, or act in accordance with, the interests of the company's creditors when the company becomes insolvent, or when it approaches, or is at real risk of insolvency.
Background
On 22 July 2022, the English High Court sanctioned Houst Limited’s (“Houst” or the “Company”) restructuring plan (the “Restructuring Plan”), which significantly, is the first time a Restructuring Plan has been used to cram down HM Revenue & Customs (“HMRC”) as preferential creditor.1
Background
On 12 January 2022, the English High Court granted Smile Telecoms Holdings Limited’s (“Smile” or the “Company”) application to convene a single meeting of plan creditors (the super senior creditors) to vote on the Company’s proposed restructuring plan (the “Restructuring Plan”). It is the first plan to use section 901C(4) of the Companies Act 2006 (“CA 2006”) to exclude other classes of creditors and shareholders from voting on the Restructuring Plan on the basis that they have no genuine economic interest in the Company.
Background
On the 19th of August 2021, the English High Court sanctioned a Part 26A restructuring plan proposed by the administrators of Amicus Finance plc (in administration) (“Amicus”) for the company’s solvent exit from administration, enabling the company to be rescued as a going concern (the “Restructuring Plan”).
On 29 September 2021, the English High Court rejected a challenge in respect of Caff Nero's company voluntary arrangement ("CVA"), brought by a landlord on the grounds of material irregularity and unfair prejudice. The single disgruntled landlord, with the backing of the EG Group ("EG") (who were interested in acquiring Caff Nero), argued that the directors of the company and the CVA nominees breached their respective duties in refusing to adjourn or postpone the electronic voting process to vote on the CVA, after EG had submitted an eleventh-hour offer for Caff Nero.
The COVID-19 pandemic has led successful resolution applicants to seek withdrawals of, or modifications to, approved resolution plans. This article examines the Supreme Court’s recent judgment on claims of force majeure in the resolution process of Amtek Auto.
Key Takeaways
Key Takeaways
The Insolvency and Bankruptcy Code, 2016 (Code) was enacted to enable corporate insolvency resolution of financially stressed corporate debtors in a time bound manner, so as to maximise the value of their assets. The decision to rehabilitate or liquidate a corporate debtor lies with the committee of creditors (Committee), comprising the corporate debtor’s financial creditors. The Code allows the Committee sufficient freedom and flexibility to explore, negotiate and, subsequently, choose the most suitable option for the corporate debtor.