Introduction
The Insolvency and Bankruptcy Code, 2016 (Code) has just been passed by both Houses of the Indian Parliament. The key objectives of the Indian government in driving this legislation forward were to improve India‘s poor ranking on the ease of doing business index created by the World Bank Group and to stimulate the growth of the Indian capital markets, and the stated intention of the Code is to replace the relevant insolvency, restructuring and winding up provisions which are spread over a number of Indian statutes.
Our role
UPDATE
THE INSOLVENCY AND BANKRUPTCY CODE, 2016 - NEW ROAD AND NEW CHALLENGES
25 May 2016
Introduction
The National Company Law Tribunal (NCLT) was recently announced as the adjudicating authority for insolvency proceedings relating to companies, limited liability partnerships and other body corporates under the Insolvency and Bankruptcy Code 2016,(1) with effect from June 1 2016.(2) The National Company Law Appellate Tribunal (NCLAT), which will hear appeals from NCLT decisions, has also been established.(3) The NCLT will have 11 benches across India.
Introduction
From an investor's standpoint, a robust and effective bankruptcy regime is a prerequisite for the development of the corporate debt market. However, the existing insolvency and bankruptcy framework is highly fragmented, which has led to complex issues on how to reconcile various statutes with one another.
Introduction
Background and need
From the Justice Eradi Committee report of 1999 to the Department of Financial Services’ indicator of October 2015, the pendency of winding-up cases in India has been piling up to reach an alarmingly high level of backlog [see end note 1]. The World Bank has ranked India on the 130th position among 189 economies as it takes more than four years on an average to resolve insolvency in India [see end note 2].
The three-Judge Bench of the Supreme Court of India in the case of Madura Coats Limited (“the Appellant”) vs.
Presently, prior to a listed Indian company filing a scheme (Scheme) before the High Court for merger/de-merger/amalgamation/reduction of capital (Reconstruction) under the Companies Act, 1956 (Companies Act), it is required to first submit the Scheme to the stock exchange for approval. Upon successful completion of the Reconstruction, the company must ensure that at least 25% of its post-issue capital is offered and allotted to the public.
Provisions under Companies Act , 1956
Chapter V of Part VI: Management and Administration of the Indian Companies Act, 1956 [hereinafter referred to as the ‘Act’] regulates Arbitration, Compromises, Arrangements and Reconstructions as covered under Section 390-396A of the said Act. Section 390 of the Act provides interpretation of Sections 391 and 393 as under:
390. INTERPRETATION OF SECTIONS 391 AND 393
In sections 391 and 393, -