Introduction
Recent conflicting judgments of the National Company Law Tribunal (NCLT) and the High Courts had given rise to ambiguity regarding the jurisdiction of NCLT vis-à-vis personal guarantors under the Insolvency and Bankruptcy Code, 2016 (Code).
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 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.
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.
Key Takeaways