On August 31st 2017, the Supreme Court of India in the case of Innoventive Industries Limited v. ICICI Bank Limited* delivered its first extensive ruling on the operation and functioning of the Insolvency and Bankruptcy Code, 2016 (Insolvency Code). The Court said that it is pronouncing its detailed judgment in the very first application under the Insolvency Code, so that all Courts and Tribunals may take notice of a paradigm shift in the law.

The Supreme Court dismissed the appeal filed on behalf of Innoventive Industries Limited and confirmed the decision of the National Company Law Appellate Tribunal (NCLAT), which in turn had affirmed the order passed by the National Company Law Tribunal Mumbai (NCLT) admitting the insolvency petition filed by ICICI Bank Limited against Innoventive Industries Limited. Continue Reading Innoventive Industries Limited v. ICICI Bank Limited: Paradigm Shift in Insolvency Law in India

In a landmark judgment recently delivered by the National Company Law Appellate Tribunal (NCLAT) in the case of Innoventive Industries Limited v. ICICI Bank Limited, the NCLAT has held that the National Company Law Tribunal (NCLT) is bound to issue only a limited notice to the corporate debtor before admitting a case under Section 7 of the Insolvency and Bankruptcy Code, 2016 (Insolvency Code).

Whilst dismissing the appeal filed by Innoventive Industries Limited against an order passed by NCLT, Mumbai admitting the insolvency petition filed by ICICI Bank Limited, the NCLAT has clarified that adherence to principles of natural justice would not mean that in every situation the NCLT is required to afford reasonable opportunity of hearing to the corporate debtor before passing its order.

Continue Reading NCLAT Defines the Scope and Extent of the Corporate Debtor’s Right to Contest Admission of Insolvency Applications Filed by Financial Creditors

The Insolvency and Bankruptcy Code, 2016 (Insolvency Code) has been one of the biggest Indian reform of recent times, which has moved the regime away from one that was highly uncertain for foreign investors. Among other important changes, the Insolvency Code contemplates change in control of the company during the insolvency resolution process to an insolvency professional (IP). The Insolvency Code comes in an environment where many Indian companies have gone global and have made acquisitions outside India.

India has not adopted the United Nations Commission on International Trade Law Model Law on Cross-Border Insolvency (UNCITRAL Model Law). It is notable that only a few countries that have adopted the UNCITRAL Model Law have specified a ‘reciprocity’ requirement for recognition of insolvency proceedings. Therefore, even if India has not adopted the UNCITRAL Model Law, Indian insolvency proceedings may be recognised in a jurisdiction that does not have a reciprocity requirement (this remains untested for Indian insolvency judgements). Also, Section 234 of the Insolvency Code provides for the Indian Government to enter into bilateral treaties with other countries for application of the Insolvency Code to assets or property outside India of the insolvent entities. However, to date, no such bilateral treaty has been signed.

Continue Reading Indian Insolvency Regime without Cross-border Recognition – A Task Half Done?

The Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) was enacted to make special provisions for the timely detection of sick (and potentially sick) companies owning industrial undertakings. The Board for Industrial and Financial Reconstruction (BIFR) was formed under the SICA to determine the sickness of such industrial companies and to prescribe measures either for the revival of potentially viable units or the closure of unviable companies.

With effect from December 1, 2016, the SICA has been repealed by the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 (“Repeal Act”). This has resulted in the dissolution of the BIFR and other bodies formed under the SICA.[1] Continue Reading Repeal of Sick Industrial Companies (Special Provisions) Act, 1985

On December 7, 2016, the Ministry of Corporate Affairs (MCA) notified and brought into operation a significant chunk of sections under the Companies Act, 2013, including provisions relating to compromises, arrangements, reconstructions, mergers and amalgamations, with effect from December 15, 2016 (the Notification). This marks a paradigm shift in the corporate restructuring process, which is all set to undergo a transition from the earlier restructuring processes under the aegis of the High Courts, to National Company Law Tribunals (NCLTs), constituted with effect from June 1, 2016.

The MCA notified the Companies (Removal of Difficulties) Fourth Order, 2016, and the Companies (Transfer of Proceedings), Rules, 2016, on the same date as the Notification, clarifying that proceedings relating to schemes will stand transferred, forthwith, except where orders have been reserved. While applicants with final hearings on or before December 14, 2016, who were expecting orders to be reserved, heaved a sigh of relief, other applicants were caught in a limbo, while prospective applicants were left to surmise, and gear up for implementation of the new provisions, yet to be tested by NCLTs. The Notification was soon followed, on December 14, 2016, by the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, on sanction of schemes by NCLTs. Continue Reading National Company Law Tribunal: In the Scheme of Things