I. INTRODUCTION
On October 3rd, 2023, the Ministry of Corporate Affairs (MCA) amended Section 14(1) of the Insolvency and Bankruptcy Code, 2016 thereby exempting the transactions, arrangements, or agreements related to aircraft, aircraft engines, airframes, and helicopters in the aviation industry from the operation of the moratorium imposed upon the admission of an insolvency plea.
Introduction
Introduction
On April 26, 2024, in what has been hailed as a pivotal moment for Indian aviation and insolvency law, the Delhi High Court (“High Court”) directed the Directorate General of Civil Aviation (“DGCA”) to deregister planes leased to Go First within five working days, providing much-sought after relief to the lessors of the aircraft.
In a decision delivered by Delhi High Court on June 24, 2024 in the case of The National Sewing Thread Company Limited v. Deputy Commissioner of Income Tax (2024 DHC 4771-DB) it was held that once a resolution plan is approved by the adjudicating authority, the claims not included in the resolution plan stand extinguished, and the same is binding on all stakeholders, including the Central and State governments.
The issue of release/enforcement of third party guarantees as part of a resolution plan of the borrower has been the subject of litigation across various judicial forums in India.
To clarify this issue, the Insolvency and Bankruptcy Board of India (IBBI) has proposed amendments to IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016 as part of its recent discussion paper.
Since the inception of the Insolvency and Bankruptcy Code, 2016 in December 2016, India has witnessed not only a paradigm shift from the conventional ‘debtor in possession’ to a progressive ‘creditor in control’ but has also produced desirable results under the new statutory debt resolution regime.
A guarantor’s rights of subrogation are provided for in Sections 140 and 141 of the Indian Contract Act, 1872 (“ICA”). These rights allow a guarantor to step into the shoes of the creditor, upon fulfilling the debtor’s payment obligations to the creditor. This means that the guarantor assumes all the rights including the security that the creditor enjoyed against the principal debtor.
Under the framework of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), an asset reconstruction company (ARC) has wide powers to revive a company facing financial difficulties. It can use securitisation, reconstruction and recovery for quick resolution of distressed debt. As an alternative, the Insolvency and Bankruptcy Code, 2016 (IBC), allows ARCs with access to a formal resolution process, which has the advantage of the borrower emerging debt-free with a clean slate.