The Indian Insolvency & Bankruptcy Code, 2016 (IBC) has seen several challenges in recent times. The Indian Government has been proactive in responding to these. In response to the recent set of challenges, the Government intends to implement another round of amendments to the IBC. The key takeaways from this proposed amendment are discussed below.

In a big move to strengthen norms for the Insolvency Resolution Professionals (IRP‘s), the governing body for the Insolvency Professionals, the ‘Insolvency and Bankruptcy Board of India (herein referred to as ‘the Board’) has notified amendments to the (i) the Insolvency and Bankruptcy Board of India (Insolvency Professional) Regulations, 2016 and (ii) the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016.

The terms of the transaction documents for mergers and acquisitions are often dictated by the economics of investment and the bargaining position of the parties. The terms so contractually agreed upon must, however, always be within the operative legal framework. Liquidation Preference (“LP”) is a tool often used to embolden investors seeking security of their investment. LP is crucial, especially where the investors anticipate exit at a value lower than their initial investment.

The Reserve Bank of India (RBI) issued a revised prudential framework for resolution of stressed assets on 7 June 2019 (Revised Circular) in supersession of the erstwhile circular on Resolution of Stressed Assets dated 12 February 2018 (Feb 12 Circular) which was struck down by the Hon’ble Supreme Court on 2 April 2019.

The 2005 Report of the Expert Committee on Company Law (JJ Irani Committee Report) had noted that an effective insolvency law:

“should strike a balance between rehabilitation and liquidation. It should provide an opportunity for genuine effort to explore restructuring/ rehabilitation of potentially viable businesses with consensus of stakeholders reasonably arrived at. Where revival / rehabilitation is demonstrated as not being feasible, winding up should be resorted to.

Commercial decisions are largely driven by incentive structures. Therefore, if legal policy favours a particular commercial outcome, the decision-making in that regard must be placed in the hands of entities most likely to be affected by such outcomes. This logic can also be applied to insolvency proceedings. The favoured policy outcome of the Indian insolvency law framework is the maximization of value of a corporate debtor. In the context of an insolvent company, the persons most likely to gain from such maximization of value are its creditors.

The Hon’ble National Company Law Appellate Tribunal (‘NCLAT’) in its order in Standard Chartered Bank v. Satish Kumar Gupta, R.P. of Essar Steel Limited & Ors. has dealt with various important legal issues in relation to the corporate insolvency resolution process (‘CIRP’). Some of the key aspects of this judgment have been summarised below:

1. Validity of Guarantee

I. NCLAT approves the resolution plan submitted by ArcelorMittal in the resolution proceedings in respect of Essar Steel India Limited while modifying the distribution of money to the financial and the operational creditors

The Insolvency and Bankruptcy Code, 2016 (IBC) has been widely considered a landmark legislation that has brought about a paradigm shift in the recovery and resolution process.

However, during the implementation of the IBC over the past two years and eight months, several challenges have emerged, including:

Introduction