India has long recognised the right of foreign creditors to participate in the winding up of Indian companies. As early as 1961, the Supreme Court of India, in Rajah of Vizianagaram (AIR 1962 SC 500), clarified that foreign creditors have the same right as Indian creditors in winding up proceedings under Indian law. Given the backlog of cases and resultant timelines for resolving disputes in the Indian judicial system, winding up has been the remedy of choice, albeit mostly as a pressure point, for unsecured creditors including foreign unsecured creditors of Indian companies. Such creditors have taken winding up actions despite the low return (an abysmal 28% as per one source) and pace of insolvency (almost 4.5 years) in the Indian market. At the same time, there have been instances where consensual restructuring of stressed Indian companies has been halted by such actions of unsecured creditors.
The Indian government from time to time provided a specific legal regime for Indian financial creditors to recover their money – for example, debt recovery tribunals (DRT) and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI). But no additional measures were suggested for non-financial creditors.