Photo of L. Viswanathan

National Chair and Partner in the Finance and Projects Practice Area at the Mumbai office of Cyril Amarchand Mangaldas. Viswanathan advises India’s leading corporate and financial institutions on infrastructure projects and banking and finance deals, and has deep expertise relating to regulatory aspects of major energy projects. He can be reached at l.viswanathan@cyrilshroff.com

In its judgment pronounced on May 9, 2018, the National Company Law Tribunal (NCLT), Allahabad, in the case of ICICI Bank Limited v. Mr. Anuj Jain (Resolution Professional of Jaypee Infratech Limited), addressed the issue of the rights of third-party security holders of a corporate debtor under the Insolvency and Bankruptcy Code, 2016 (IBC).

The judgment negated ICICI Bank Limited’s contention that it should be considered a financial creditor of Jaypee Infratech Limited, the corporate debtor. ICICI Bank’s claim was based on the corporate debtor having created mortgages on its property to secure loans provided to Jaiprakash Associates Limited, the holding company of the corporate debtor. The NCLT concluded that there was no financial debt owed to ICICI Bank by the corporate debtor, and so it could not be considered a financial creditor of the corporate debtor.

We consider here the correctness of the judgment and whether the NCLT has considered all the implications of its finding.

Continue Reading Is a Third-Party Security Holder a Financial Creditor Under the Insolvency and Bankruptcy Code?

Despite several existing schemes and interventions by the Reserve Bank of India (RBI), the problem of bad debt has plagued the Indian banking system. For years, various high value accounts have undergone restructurings that have not resolved stress or the underlying imbalance in the capital structure, or addressed the viability of the business.

The existing RBI stipulated resolution mechanism included corporate debt restructuring (CDR), strategic debt restructuring (SDR), change in ownership outside the strategic debt restructuring (Outside SDR), the scheme for sustainable restructuring of stressed assets (S4A), etc. All of these were implemented under the framework of the Joint Lenders’ Forum (JLF).

On February 12, 2018, the RBI decided to completely revamp the guidelines on the resolution of stressed assets and withdrew all its existing guidelines and schemes. The guidelines/framework for JLF was also discontinued.

The New Framework

The new framework requires that as soon as there is a default in a borrower entity’s account with any lender, the lenders shall formulate a resolution plan. This may involve any action, plan or reorganisation including change in ownership, restructuring or sale of exposure etc. The resolution plan is to be clearly documented by all the lenders even where there is no change in any terms and conditions.

Continue Reading Overhaul of Stressed Assets Resolution

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