Background

The partly liberalized Indian economy has been aptly referred to in the Economic Survey of India 2015-16 as one that had transitioned from ‘socialism with limited entry to “marketism” without exit.

Given the vexed ‘twin balance sheet’ problem chafing both banks and corporates in India, the Insolvency and Bankruptcy Code, 2016 (IBC/Code) was a critical structural reform. Many issues have surfaced since the Code was operationalised and the courts and the Central Government have stepped in to iron out such issues in the last one year.

The Bankruptcy Code gives secured creditors certain rights and protections. For secured creditors whose collateral is worth more than the creditor’s claim, these rights may include payment of attorney’s fees and post-petition interest at a rate agreed to in the debtor’s and creditor’s prepetition agreement. A chapter 11 bankruptcy plan, however, may have provisions in it that expressly takes away a secured creditor’s right to post-petition interest.

Introduction

Recently, in Neelkanth Township and Construction Pvt. Ltd. v.Urban Infrastructure Trustees Ltd, Company Appeal (AT) (Insolvency) No. 44 of 2017 (Neelkanth Township), the National Company Law Appellate Tribunal (NCLAT) addressed several issues with regard to the Insolvency and Bankruptcy Code, 2016 (IBC).

Creditors lacking liens to secure their claim can fare poorly in a bankruptcy case. The “absolute priority rule” is a bedrock principle of bankruptcy law and provides that a creditor at a particular rung of the claim priority hierarchy must be paid in full before any money flows down to junior creditors. Secured creditors reside near the top of the hierarchy, followed by administrative expense claimants, priority claimants and general unsecured creditors.

In its first detailed ruling on some of the substantive legal questions under the Insolvency and Bankruptcy Code, 2016 (Code), the Hon’ble Supreme Court (Apex Court) has delivered a landmark order in the matter of Innoventive Industries Ltd v ICICI Bank and Another with an expressly avowed objective of ensuring that all the courts and tribunals across the country take notice of a ‘paradigm shift in the law’ ushered in by the Code.

Brief Background

A recent decision by the Ninth Circuit Court of Appeals has fanned the smoldering dispute among courts regarding the scope of asset sales in bankruptcy. In the In re Spanish Peaks Holdings II, LLC decision, the Ninth Circuit affirmed a lower court’s holding that sale of commercial real estate can, in certain circumstances, be free and clear of all liens, claims, encumbrances, and interests, including a leasehold interest. In other words, a tenant of a bankrupt landlord could find itself with no interest in the property following the sale.

On June 25, 2017, Takata’s US arm, TK Holdings Inc.

Securities and Exchange Board of India (SEBI) in its meeting today has taken decisions that will make M&A and private investment in public equity (PIPE) transactions easier.

Open Offer Exemption for Distressed Public M&A