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).

Owing to the dynamic nature and demand of the business, the entities require to constantly modify their business model. Corporate restructuring is an instrument to effectively implement the strategies devised by changing the business model, management team or financial structure of the corporations. Growth of these corporations is either through organic means (through internal means like financial restructuring) or inorganic means in order to obtain accelerated growth (through external sources like mergers, acquisition).

Need for Merger

The efficacious implementation of the comprehensive and systematic Insolvency and Bankruptcy Code, 2016, (hereinafter referred to as “IBC”) has instilled confidence in the creditors being a comprehensive, systemic and speedy reform thereby paving way for development and progress. The latest revision in the IBC by the Insolvency and Bankruptcy Board of India (hereinafter referred to as “IBBI”) has further tightened the reins over the dishonest and fraudulent debtors by implementation of stricter policies controlling their conduct.

Introduction:

The Insolvency and Bankruptcy Board of India amended regulations regarding Corporate Insolvency Resolution Process wherein it has stated that the resolution plans with respect to Section 30 and Section 31 of the Insolvency and Bankruptcy Code, 2016, will be required to contain details of the resolution applicant as well as the connected Persons.

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:

Debt recovery in India has been a challenge with creditors and debtors disputing rights and obligations in legal wrangles under various provisions under applicable laws making the process time consuming and costly.

Background

India’s Ministry of Corporate Affairs (MCA) issued a notification on December 7 (Notification) announcing that certain provisions of the Companies Act, 2013 (Act), which are currently not in effect, will come into force on December 15, 2016.

The key provisions that will be brought into force include the following:

Compromise, Arrangements, and Amalgamation

Certain provisions contained in Chapter XV of the Act will be brought into effect that deal with

The insolvency and bankruptcy regime in India has historically been fragmented, involving a number of regulations implemented by several regulatory authorities and adjudication forums. The introduction of the Insolvency and Bankruptcy Code, 2016 (Insolvency Code) is a significant development aimed at a comprehensive, centralized regime and an efficient procedural framework.

The Insolvency Code is intended to integrate the regulatory framework provided under: