The intention of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘IBC’) is to rehabilitate the companies and individuals by way of the Corporate Insolvency Resolution Process (hereinafter referred to as ‘CIRP’).
The IBBI Working Group on Group Insolvency (under the chairmanship of UK Sinha) and the MCA Cross Border Insolvency Rules/Regulations Committee having submitted their reports (collectively “Reports”) had recommended the introduction of a framework governing the resolution of enterprise groups under the Insolvency and Bankruptcy Code, 2016 (“IBC”) in September 2019 and December 2021 respectively.
This article analyses the extent to which dissenting financial creditors are protected under the Indian insolvency regime.
BACKGROUND
Since its inception the Insolvency and Bankruptcy Code, 2016 (Code) has been an evolving legislation with regular updation(s) being brought about in the form of rules and regulations with a view of streamlining the corporate insolvency resolution process (CIRP).
Bankruptcy Law Reforms Committee (“BLRC”) was very clear while setting out the objectives of the new insolvency law for the country and speedy resolution/decision making in an insolvency situation was stated to be one of such foremost objectives. Fragmented laws governing an insolvency and lack of a cohesive framework governing the rights of various stakeholders during insolvency was identified as a primary reason for inefficiency of the pre-existing legal framework.
The Insolvency and Bankruptcy Code, 2016 ("the Code" & “IBC”) has been widely acclaimed as a transformative legislative framework in India, representing a significant departure from previous insolvency laws by emphasizing efficient resolution processes and the professionalization of insolvency services.
In the case of Iskon Infra Engineering Private Limited v.
Since the inception of the Insolvency and Bankruptcy Code, 2016 (“Code“), the debt resolution regime in India has witnessed not only a paradigm shift from the conventional ‘debtor in possession’ to a progressive ‘creditor in control’ but has also undergone a significant transformation, marking a departure from its traditional labyrinthine processes to a more streamlined and effective framework.
Introduction
For initiating proceedings under the Insolvency and Bankruptcy Code 2016 (“IBC”), categorisation of a creditor as either a “financial creditor” or an “operational creditor” is a rather significant first step. Such categorisation is not merely organisational, but essential since the rights, obligations and procedural requirements for realisation of debt by financial and operational creditors also differ under the IBC.