A Review of the Implementation of the Resolution Process in India Under

the IBC VIS-À-VIS Corporate Rescue in The United Kingdom

Submitted by:
Muhammed Fasal
Farzin
LLM (2022-23)
Prov/LLM-07-22/033
Submitted to:
Dr. Devaiah N G

ALLIANCE SCHOOL OF LAW

ALLIANCE UNIVERSITY,
BENGALURU 12/11/2022.

1
BACKGROUND OF THE STUDY

India has entered a new regime of Insolvency resolution through the introduction of new law of
Insolvency and Bankruptcy Code (IBC) in 2016. India has shifted its insolvency regime from
‘Debtor - in - Possession’ to ‘Creditor - in - Control’. This was termed as “biggest economic
reform” of the country by the finance ministry. It is for the first time in Indian history that all the
insolvency laws post-independence has been brought under one roof. The main purpose of this
code is the speedy resolution of stressed assets which was very difficult under previous insolvency
laws. Although various committees were formed since 1964 for reforms in insolvency laws but
the complete reforms were done only through the Insolvency and Bankruptcy Code 2016 (The
report of the Bankruptcy Law Reforms Committee, Volume I). The humongous problem of rising
NPA was becoming a worry for the government. The procedural delays in the earlier insolvency
schemes were just increasing the distressed assets. The weak insolvency schemes of India are one
of the main reasons for increase in NPAs. In cases of insolvency in India, only 26 cents of the
dollar were recovered and legal proceedings could take upto 4.3 years on an average. After the
introduction of Insolvency and Bankruptcy Code (IBC) 2016, the insolvency resolution period has
been reduced to
1.6 years now and the recovery rate has also increased from 26.5% to 71.6%. The Ease of Doing
Business rank of India is pushed up from 100 to 63 in 2020 among 190 countries in the report.
Similarly, the rank of India in insolvency resolution has also improved from 56 to 52 in 2019
(Ministry of Corporate Affairs: Year End Review 2019). Before IBC, the recovery (of debt) rate
was around 26% and the time taken for closure of the case was over four years. IBC has changed
this. Now the average recovery rate is 43% in case of financial creditors and 49% in case of
operational creditors. The average time taken under IBC is 1.6 years compared to 4.3 years earlier.
In the earlier resolution regime, the cost of the resolution was 9%, which has come down to 1%
post IBC.

As the Indian bankruptcy laws, which can be traced back to British era, were not efficient in
resolving the insolvencies and every time there was increase in insolvencies a new law was
enacted. The root of the problem lied in model of the bankruptcy law which was adopted. India
had debtor in possession model which was one of the most important reasons for the
ineffectiveness of laws. The research was undertaken with the question that whether introduction
of new Insolvency and Bankruptcy Code (IBC) 2016 has helped the financial institutions in
recovering their dues from their Non-Performing Loans (NPL).

2
Keywords: Insolvency, Bankruptcy, Economy.

3
 TENTATIVE CHAPTERISATION

PAGE
S. No. CONTENT
NO.
Introduction

a) Introduction…......................................................................4
b) Literature Review................................................................9
1 4 -11
c) Research problem.............................................................10
d) Hypothesis........................................................................10
e) Research question.............................................................10

CHAPTER- 2
INSOLVENCY AND BANKRUPTCY IN INDIA AND UK
2 6-9
This chapter discusses the bankruptcy laws in India and the UK. It will also
highlight the bankruptcy las in these two countries during the time of COVID-
19.

CHAPTER- 3
CORPORATE RESCUE IN UK: ISSUES AND CHALLENGES
3 9 - 11
This chapter discusses the corporate rescue system in the UK. The issues and
the challenges related to it.

CHAPTER- 4
4 RESOLUTION PLAN IN INDIA: ISSUES AND CHALLENGES 11
This chapter discusses the amendments to insolvency and bankruptcy code
2016 in the light of COVID-19. This also talks about implementation of the
resolution plan during the unprecedented pandemic.

5 CHAPTER-5
CONCLUSION AND SUGGESTIONS 11

6 REFERENCES 12

4
 INTRODUCTION

“Corporate rescue is a major intervention necessary to avert eventual failure of the company.”1
Professor Belcher

Every organization is a company. Since the word "organisation" is derived from the word
"organ," any "organisation" shares many traits with a "organ." The organisation has the potential
to grow or deteriorate, just like any other "organ." Certain occupations, businesses, and industries
—all without a doubt organization—need to be strong, while others need to be ill. A healthy
organisation may turn ill after a while. Some afflicted organisations will die, while others might
come back to life. Not every startup will be successful. Some will be successful, whilst others
won't. A startup may fail even if it is sincere. Some startups are fraudulent, with the only goal of
cheating the system and taking tax dollars.
Various internal or external causes, including the environment, may be to blame for the sickness.
It could be temporary or permanent. It may also be ongoing. BUSINESS DEATHS The best
course of action is to let an organisation die naturally if it is no longer useful and is likely to
remain a sick unit forever. Seeing someone on their deathbed, with little chance of recovery, and
kept alive by machines, is never a happy sight. In many cases, "mercy killing" is preferable to
extending the suffering. Unavoidably, some businesses may fail, but these failures will be handled
effectively and rapidly. Entrepreneurs and lenders won't be hindered by previous verdicts and will
be allowed to advance. Corporate corporations were previously governed under the Companies
Act of 2013. High Courts handled sickness issues involving businesses. My research with this
legal framework was, to put it mildly, unsatisfying. In the past, cases would drag on for years,
consuming a significant amount of national resources. The out-of-date rules were no longer
serving the original intent behind their creation. The Provincial Insolvency Act of 1920 and the
Presidency Towns Insolvency Act of 1909 both regulate non-corporate companies like as
partnership firms, individuals, HUFs, and other non-corporate entities2.

1
Corporate Rescue. London: Sweet & Maxwell, Belcher, A., 1997.
2
Restructuring Across Borders – India: corporate restructuring and insolvency procedures –, Allen & Overy, March
2020.
5
These will be given to DRT once the Insolvency Code starts to apply to them. A financially
troubled corporation is a scourge for its investors as well as the overall economy. When a company
can't keep its promises or fulfil its responsibilities, it is said to be in financial crisis. Inadequate
performance, no earnings or very little profit, poor management, and other signs of a financially
distressed organisation are some of the warning signs. A business must guarantee that it satisfies
the demands of the general investing public in order to be financially sustainable. Therefore, it is
crucial to implement economic reforms and regimes to aid a company that is in financial trouble. A
landmark in Indian law is the Insolvency and Bankruptcy Code, 2016 (hence referred to as the
"Code").3 The Bankruptcy and Bankruptcy Board of India reports that, with 3312 cases in 2019,
the average number of cases granted to India's insolvency courts grew to 30.29 percent. This
information demonstrates that India, a developing economy, has the ideal combination of
insolvency regulations and that an increasing number of financially troubled enterprises are
utilising the Code's protections. According to data, there are around 18,000 underlying insolvency
cases in the United Kingdom, a highly industrialised country, for the year 2019.

3
M/s. Innovative Industries Ltd. v. ICICI Bank & Anr [2018]. 1 SCC 407.
6
It illustrates the significance of "rescuing" a financially challenged corporation by having the third-
highest number of insolvency cases behind France and the United States, respectively. This country
has a significant impact on the global economy. Distinct international economies have different
rescue strategies. The concept of the same is included in the Indian Code as "Resolution plan"
under Section 5(26) of the Code. An attempt to address the issue of the corporate debtor's
insolvency and, consequently, its inability to pay debts is known as a resolution plan. It is subject
to the statutory requirements of the IBC and must be approved by the committee of creditors
("COC"). Additionally, there is no restriction on the quantity of Resolution Plans that may be
created and submitted or the quantity of adjustments that may be made to Resolution Plans. India
only has one practical option for saving the financially troubled corporation. 4 In contrast to India,
the United Kingdom has rather broad definitions of "Corporate Rescue," in part because it is
recognized as such there, but in India, "the resolution plan" is still merely a plan that is never
effectively carried out. Despite being a frequent occurrence in the corporate sector around the
world, bankruptcy is taboo in India. Promoters would rather give the impression that a company is
succeeding than admit that it is insolvent.

The Insolvency and Bankruptcy Code was intended to be passed by the government for this reason.
After government reform, creditors and lenders of an Indian company who have given up trying to
collect any of the loan amounts from the business may file a claim with the National Company Law
Tribunal (NCLT). The company or its assets would then be sold to third parties in exchange for bids,
allowing them to recuperate some of the money. In India, some notable and significant bankruptcies
that occurred in the past ten years include:

1. Dewan Housing Finance Ltd. (DHFL)

Rajesh Kumar Wadhawan started the non-banking financial institution known as Dewan Housing
Finance Ltd. (DHFL) in 1984. The business was established to assist people of low and middle
income in India's Tier 2 and Tier 3 cities in obtaining mortgage loans. DHFL was founded as the
second home finance company after HDFC. The business has been successfully operating for more
than three decades, maintaining steady growth, and even acquiring businesses like Deutsche
Postbank Home Finance. The company also started slum development and slum rehabilitation
projects in Maharashtra. The corporation raised financing to support a number of initiatives. On
January 29, 2019, Cobrapost, a group of journalists, issued an exposé on DHFL, ending the

4
“A systems approach to comparing US and Canadian reorganization of financially distressed companies ”, Lynn M.
LoPucki and George G. Triantis, HILJ, 1994, p 267

7
meticulously orchestrated rise of DHFL. According to the exposé, the promoters of DHFL,
including Kapil, Aruna, and Dheeraj Wadhawan, moved Rs. 31,000 crores in loans to several shell
companies for their personal riches. The corporation started selling a variety of businesses to pay off
their debt. Later on in the year, DHFL failed to make 900 crore rupees worth of interest and bond
payments. Credit rating agencies were obligated to intervene as a result. By this point, the stock
price had fallen by almost 97 percent.

Because of their failures, the RBI was forced to remove the board of directors of DHFL and started
processing a resolution for the company under the Insolvency and Bankruptcy Code. Soon, DHFL
would also be taken to the NCLT (National Company Law Tribunal). Investigations conducted
behind the scenes uncovered even more alarming data. After defaulting on a debt of Rs 90,000
crores by December 2019, DHFL filed for bankruptcy, and its promoters were accused of money
laundering. In the meantime, the Piramal Group's purchase of DHFL has been approved by the RBI.

2. Reliance Communications
Reliance Communications has been Anil Ambani's biggest failure to date (RCom). Rcom, on the
other hand, used to be one of the most fierce rivals. RCom has already invested Rs 8,500 crore in the
purchase of 3G spectrum in over 13 locations. Trouble started to brew when RCom got caught up in
the 2G scam. The 2G swindle allowed over 14 companies in the industry to make money, which led
to even bigger profit margins. Over time, RCom started to lose market share; by 2014, it was ranked
fourth in the telecom industry. The last straw for Rcom was the entry of Jio into the Indian market,
which also started offering free data services. From Rs 25,000 crore in 2010, Rcom's debt had
increased to Rs 43,000 crore in 2017. Spectrum acquisition cost the business about half of its debt.
In order to pay off its debt, RCom stopped doing business in 2017 and started selling its assets. The
company is still being tried by NCLT.

3. Jet Airways
One of the main reasons the Jets failed was the airline's enormous fuel costs. Approximately 40% of
an airline's expenses go toward fuel. Cost increases for aviation fuel are not always passed on to
consumers. This is because no one player has a significant enough market share to affect pricing.
The profit margins of the airlines are lowered as a result of the competition. Jet also had to deal with
the weakening of the rupee. Since they must now pay more in dollars to other nations for rent,
maintenance costs, and refuelling fees at international airports, international airlines are impacted.
The rupee was known for having the worst performance in Asia. These problems ultimately
contributed to the Jets' demise.
8
 4. Alok Industries
One of Alok Industries' early mistakes was borrowing Rs 10,000 crores in 2004 for business
expansion. The worst part is that Alok decided to open new plants with this rather than improving or
fully utilizing their current ones. Alok overlooked the possibility of a decline in industrial demand.
These factors, such as low demand and strong competition, led to a decline in Alok's asset turnover.
Alok's 2007 real estate investment was yet another misstep. It purchased residences in Mumbai's
Lower Parel district. After the financial crisis of 2008, the housing market suffered. Alok's
circumstances substantially worsened as a result of ongoing losses and mounting debt. Alok
Industries owing its creditors a total of Rs. 30,000 crores. Reliance and JM Financial Asset
Reconstruction Company won the auction for the company with a bid of Rs. 5000 crores.

5. Essar Steel
The 1969-founded Essar corporation, owned by the Ruia family, included Essar Steel as a division.
In order to pay off a debt of Rs. 2,800 crore, the company first became indebted in 2002 and had to
go through a Corporate Debt Restructuring process. Essar was fortunate in that it lived and returned
to its original course by 2006. Essar once more embraced its lofty growth targets. Unfortunately,
environmental licence delays and a lack of natural gas prevented the implementation of these
proposals. By 2015, Essar has accrued new debt, amounting to Rs 42,000 crore. The company's
attempts to preserve it were unsuccessful due to declining commodity prices.

The National Corporation Law Tribunal was then assigned to oversee the company. Essar Steel was
put up for auction, and ArcelorMittal and Japanese company Nippon Steel eventually won the bid.
The firm adopted ArcelorMittal Nippon Steel India (AM/NS India) as its new name.

6. Lanco Infra
In 1986, Lok Sabha member Lagadapati Rajagopal and Lagadapati Amarappa Naidu founded Lanco
Infra. Thanks to a number of large contracts, particularly in the construction sector, the company
had unrivalled growth in its first year. Soon after, the company began to diversify into new
industries, including coal mining, solar energy, transportation, and electricity generating. By 2010,
Lanco was one of the businesses with the greatest rate of growth worldwide. It was also the biggest
private power supplier in India and one among the country's first independent power producers. The
UPA government's 2012 policy reversals, which were otherwise supported by them, greatly hurt

9
Lanco's corporation.

According to India Energy Exchange, monthly average merchant power costs in January 2012 were
around 3 per unit, down from a peak of 10.78 per unit in April 2009. The rapid fall in Lanco's sales
made it more difficult for the company to get bank loans. The company's poor financial performance
resulted in interest payments making up 60% of its costs by March 2017. Lanco Infra was one of the
12 stressed accounts on the RBI's list that will require IBC bankruptcy procedures in June 2017. An
insolvency case against Lanco, formerly India's biggest infrastructure business, is currently pending
before the NCLT.

At first, it's difficult to comprehend how such significant bankruptcies have happened. However,
looking back, they offer great business insights. Debt has emerged as a common motif among all of
them. If employed properly, it can contribute to the company's success or it could result in the same
fate as the businesses stated above.

The dissertation aims to examine the rescue process in India and the UK, the legislative background
of each country, the current insolvency regime, the function of restructuring within it, and the
effectiveness of the rescue plans. The Bankruptcy and Bankruptcy Code, 2016, which incorporates
the Indian insolvency framework, defines "resolution plan" as a "plan provided by [resolution
applicant] for insolvency resolution of the corporate debtor as a going concern" in Section 5(26). In
contrast, the UK Insolvency Law of 1986 outlines ways to save the corporation. These two nations
show the two opposing sides of restructuring: in India, a "resolution plan" is just a component of the
insolvency process; in the UK, corporate rescue is governed by the Insolvency Act.

The dissertation highlights the distinctions, shortcomings, and success rates of the two pieces of
legislation. India and the United Kingdom are compared because of their stark differences: India is a
developing country, and its insolvency regime is still in its infancy, while the United Kingdom is a
highly developed country with a well-written insolvency regime, and it has a significant cultural and
political impact on the global economy

10
LITERATURE REVIEW

1.Corporate Rescue: Law and Practice (Contemporary Studies in Corporate Law)5-

This book tries to look at, in the principal example, the possibility of corporate salvage and
whether, as a belief system, its advancement is essentially the best arrangement. The book at
that point proceeds to look at the different methods into which insolvent organizations may
enter, with specific accentuation on those that are, in the universal view, non-terminal as in they
can possibly convey a rescue result. The legitimate structure of this methodology is inspected so
as to measure their conceivable viability in accomplishing rescue. Just as concentrating on
legitimate standards, the book draws on an exact investigation of more than 3500 organizations
entering organizational or regulatory receivership between September 2001 and September
2006, and furthermore draws on arrangement of meetings with experts, agents, and different
partners in order to offer a more educated view regarding bankruptcy practice and how it might
help, or something else, in the accomplishment of the destinations of the Enterprise Act. The
creator likewise looks at current recommendations for future change of the law and endeavors to
assess their conceivable effect on this complex however entrancing zone of law and practice.

2.Corporate Insolvency Law and Practice6-

The book clarifies the legislative history and the evolution of the Insolvency Regime in India.
He had examined the process of law under insolvency and criticized the insufficient legislation
with regard to the rescue procedure in India. The author also explains key dimensions of new
insolvency law based on best practices and experience in other jurisdictions.

3.Insolvency And Bankruptcy Code Of India, Ashish Makhija7-

The author had examined the evolution and the development of the insolvency regime in India. The
author has further tried to explain the legislative intend, the major case laws and the importance of
corporate restructuring over liquidation. The judicial pronouncement related to the rescue structure has
been well explained by the author.

4.‘Corporate Rescue in the United Kingdom: Ten Years after the Enterprise Act
2002 Reforms’8-
This elaborates on the various rescue mechanisms in the United Kingdom. It further clarifies the
5
Sandra Frisby, (2017).
6
Sumant Batra, EBC (2017).
7
Sumant Batra, (2017).
8
Omar, Dr & Gant, Dr Jennifer (2016).

11
comparative analysis of the insolvency laws of India and the UK should include an overview of the
respective processes and procedures for corporate insolvency resolution, individual bankruptcy and
liquidation. It should also examine the differences between the two legal frameworks, as well as the
advantages and disadvantages of each. For example, the IA86 allows for the possibility of a
Company Voluntary Arrangement (CVA), which is not available under the IBC. Moreover, the IBC
provides more specific rules and regulations on the resolution of debt, which can be beneficial for
creditors. The literature review should also consider the implications of the insolvency laws of India
and the UK on creditors, insolvency professionals and other stakeholders.

It examines the practical implications of the different legislation on the resolution of debt and the
rights of creditors. Additionally, it analyses the impact of the insolvency laws on the economy, as
well as the effectiveness of each framework in protecting the interests of creditors. Finally, the
literature review should consider the impact of international insolvency regimes and conventions on
the insolvency frameworks of India and the UK. It analyses he implications of the United Nations
Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency and
the European Union Insolvency Regulation (EIR) on the insolvency laws of both countries.
Moreover, it should assess the effectiveness of these regimes and conventions in providing a
uniform approach to insolvency across borders. This elaborates on the various rescue mechanisms in
the United Kingdom.
5. Corporate Insolvency Resolution Law in India- A Proposal to Overcome the
Initiation Problem9-

In the context of the rules governing corporate bankruptcy resolution in India, the article titled
"Corporate Insolvency Resolution Law in India - A Proposal to Overcome the 'Initiation Problem'"
discusses the difficulties that arise while attempting to initiate insolvency proceedings. Specifically,
it addresses the challenges of identifying and responding to early signals of financial crisis in
businesses, as well as the delays that often accompany doing so.

The term "initiation problem" refers to the impediments that prevent the beginning of insolvency
procedures at the appropriate moment. Inadequate procedures for early detection of financial
hardship may be one of these impediments. Another may be a lack of information among
stakeholders regarding the many legal remedies and options that are at their disposal.

The conclusion of the essay is that India's corporate insolvency resolution law can be strengthened
9
88, UMKC Law Review, 631, 2019-20.
12
by solving the 'initiation problem' through the recommended solutions. This will result in better
outcomes for financially troubled enterprises, their creditors, and other stakeholders.

13
STATEMENT OF PROBLEM

UNCITRAL Model Law has come up with a unique model law to enhance the promotion of
universal laws on reconstructing and insolvency. This new model law is now accessible for
domestic application in countries all over the world. Since its publication in 1997, the previous
model law has only been applied in 44 states in the United States. While the Indian Insolvency
regime which is just three years old phases the term “resolution plan” as a “plan proposed by
[resolution applicant] for insolvency resolution of the corporate debtor as a going concern.”
Whereas under the UK Insolvency law of 1986 graph out various methods to rescue the
company. These two countries depict the two poles of restructuring, whereas “resolution plan”
is just a part of the insolvency regime in India, in United Kingdom; corporate rescue rules the
Insolvency Act. The paper brings out the differences of both the legislations, the success of the
corporate restructuring plan with reference to the judicial pronouncement in both the countries.
The paper determines to conduct a comparative analysis of both the countries that doesn’t have
the common link of restructuring procedure and tries to conclude with the viable solution to the
insolvency restructuring of both the countries.

HYPOTHESIS

Implementing the various procedures of corporate rescue as stated under UK Insolvency Law
into India’s insolvency regime would increase the success rate of revival of Indian companies.

RESEARCH QUESTIONS

1. Whether the current insolvency regime of India does justice to the concept of restructuring?

2. Whether the UK Insolvency Law 1986 is far better in achieving corporate rescue than the
Indian regime?

3. What are the reasons for lesser success rate of corporate rescue in India?

4. Whether the various corporate rescue mechanism of UK could be adopted by India?

14
RESEARCH OBJECTIVES

The major objectives of this research are-

 To examine the loophole of the current Insolvency Regime of India and to compare it
with the Insolvency legislation of UK with special reference to the corporate
restructuring and revival process.

 To analyze the reason of the ineffective/nugatory implementation of corporate rescue in

India.

 To provide suggestions and modifications in the current Insolvency and Bankruptcy

Code, 2016 with an emphasis on rescue over liquidation.

METHODOLOGY

I have relied on the Doctrinal Method of Research. A comprehensive study of both the primary
and secondary available data is made. A lot of articles have been referred. Apart from the
published articles that were accessible through the remote access of NUALS Kerala, I have also
relied on web sources, databases, books and law journals. The various primary resources of
study, referred by me include enacted piece of legislation, judicial precedents etc. The
secondary resources include works of various eminent authors’ textbooks, law journals,
newspapers etc.

15
 CHAPTER 2.
INSOLVENCY AND BANKRUPTCY IN INDIA AND UK

"The principle of (insolvency) bankruptcy laws is to prevent persons craftily obtaining into their
hands great substance of other men's goods, and at their own wills and pleasures consuming the
substance obtained by credit of other men,"10 Lord Ellenborough.
It is always to be remembered that the professed object of bankruptcy laws is to protect persons who
have so given credit.
Only a small amount of study has been done so far to chart the development of bankruptcy
legislation. The bibliography of Paul Huvelin reveals the paucity of Insolvency and Bankruptcy
Law’s jurisprudence. However, Peonage—a very prevalent method of repaying debts—could be
found if one looked through Ancient Greece's history. Peonage is a synonym for "debt slavery," so if
someone couldn't pay their debts on time, they would be imprisoned until they were paid in full. 11
Later in the pre-medieval era, bankruptcy was considered a crime, and those who declared
bankruptcy were regarded as criminals and finally imprisoned. Since then, insolvency and
bankruptcy laws have proliferated all over the globe, and nations have developed their own
bankruptcy standards. No matter where they originated, bankruptcy laws have two common goals.
First and foremost, to ensure a just distribution of the insolvent debtor's assets among all of his
creditors. Second, to stop the insolvent debtor from acting in a way that would be detrimental to the
interests of his creditors.12

The Insolvency and Bankruptcy Laws in the United Kingdom and India have largely been limited to
the two objectives, but both laws have recently undergone a significant revolution in terms of
changes and renovations. This chapter aims to analyse the development of bankruptcy and
insolvency laws in the United Kingdom and India as well as their current position in the global
economy.

2.1 BANKRUPTCY/INSOLVENCY LAWS IN UK

The United Kingdom's insolvency rules have their origins in antiquity. The United Kingdom's

10
Sutton v Weeley, [1806] 7 East 442: 103 ER 171.

11
L'Histoire du Droit Commercial [1904].

12
Levinthal and Louis Edward ‘The Early History of Bankruptcy Law’ 66 (5): 223. JSTOR 3314078.

16
bankruptcy and insolvency laws can be categorized into three main eras: pre-19th century,
throughout the 19th century, and post-19th century. The ninth clause of the 1915 Magna Carta read
as follows: "If the debtor is unable to pay off his debt due to financial hardship, his sureties shall be
liable for it. Unless the debtor can demonstrate that he has fulfilled his responsibilities to them, they
may, if they so choose, possess the debtor's lands and rents up until they have obtained satisfaction
for the debt that they paid for him.13

The Bankruptcy Code of 1542, which is regarded as the earliest English legal statute to deal with
insolvency, was then put into effect as a result of the same. For the first time under insolvency, it
established the pari-passu concept, maintaining everyone on an even playing field. However, the
Code continued to punish non-debt payers as criminals. A number of cases, such Fowler v. Padget 14,
where bankruptcy was still considered a felony, were also made in response to this. With precedents
and the Code of 1542 exacerbating the situation, there were many bankrupts labelled as "criminals"
in the debt-prisons. The Joint Stock Companies Act and Joint Stock Companies Winding Up Rules
of 1844 were the result of the terrible situation of debt-prisons that preceded them. The Limited
Liabilities Act of 1855, which limited an individual's (investor's) obligation to the amount he has
invested and no more, helped the problem of debt prisons. Still, the notion of bankrupts as criminals
persisted until the Debtor's Act of 1869, which did away with the idea of a debt-prison and ended
the perception of bankrupts as criminals.

As a result, this Act added a layer of protection around the insolvent or bankrupt, and this shelter
gave birth to instances like Salomon v. Salomon,15 which demonstrated that even the smallest
business organisation will be protected (shelter). As a result, during the 19th century, the bankruptcy
and insolvency laws in the United Kingdom changed from treating bankrupts as criminals to
providing them with protection under a variety of other laws. Due to the fact that such a deep layer
of protection for insolvents and bankrupts encouraged more and more investors to rise up in the
economy, this century also marked a period of moulding the economy in the United Kingdom. The
20th century also saw attempts to effectively legislate insolvency rules and shape the economy. The
efforts made in the 20th century in the United Kingdom could be divided into three phases: the first

13
Holt, J. C. [1992] Magna Carta. Cambridge: Cambridge University Press.

14
Fowler v. Padget [1789] 7 Term Rep 509;101 ER 1103.
15
Salomon v. A Salomon & Co Ltd [1896] UKHL 1, [1897] AC 22.

17
phase was to establish a respected system of priorities among a company's creditors; the second
phase was to save the business, which wa’s primarily due to the Cork Committee Report, 1982 16; and
the third phase was to restore financial stability to the company. Thirdly, the efforts were made to
determine who was responsible for those who benefited or became worse as a result of insolvency.
The crucial date for the duration of the United Kingdom's insolvency legislation is January 27, 1977.
On this day, Kenneth Cork oversaw the formation of an interdisciplinary board. The board's mission
was to study the state of British bankruptcy law and make recommendations for its reform through
the use of authoritative change. Some initial impressions merit noting before delving into the Cork
Committee's findings. Sir Kenneth Cork's father worked as a bookkeeper; his son, who started the
bookkeeping firm Cork Gully in the 1960s, also tried the profession. Aside from the coincidental
provision of bookkeeping services to clients, the company's primary action consisted of rebuilding
efforts and exchanging deeds of game plan between an account holder organisation and its lenders.
These course of action documents served the purpose of authoritatively limiting gatherings to a
reimbursement agreement.17

"We think that a valid consideration that a modern law of insolvency must take into account is a
concern for the livelihood and wellness of those who depend on an enterprise that may very well be
the lifeblood of an entire town or even a region. It is important to take into account the potential
chain reaction effects of any failure because they could be very terrible for creditors, employees,
and the community.”18

At the time the Cork Committee was formed, the UK's insolvency framework was not entirely out of
date, but it had not been modified to meet the needs of modern industry. The statute had not
undergone any significant reform in years, except from a few minor adjustments. The Bankruptcy
Act 1914, which only applied to England and Wales, was still in charge of enforcing the close to
home chapter 11 statute. Although Scotland and Northern Ireland have unique insolvency regimes,
there were significant similarities among the three frameworks. Under the Companies Act 1948,
which applied to the entire United Kingdom, corporate bankruptcy was managed through a

16
Cork Review Committee Report on Insolvency Law and Practice 1982 [Cmnd 8558].

17
The history of the firm and its most prominent clients is discussed in Sir Kenneth Cork’s excellent autobiography,
titled Cork on Cork [Macmillan, 1988].

18
Ibid.

18
coordinated procedure. This Act established procedures for both an automatic liquidation initiated
by loan bosses and a deliberate liquidation initiated by the organisation and its investors.
Additionally, a strategy similar in design to the informal game plan and a forerunner to the modern
Scheme of Arrangement was available that allowed a trade-off or course of action to be made
between the organisation and its lessees.

However, there was nothing like to corporate recovery or recovery-focused technique that had been
acquired elsewhere. Some early examples are mentioned, such as judicial redressment in the French
Decree of 20 May 1955, which was later replaced by the Law of 13 July 1967, or legal
administration in the South African Companies Act of 1926. Being aware of the need for a salvage-
based approach implied, however, that the Cork Committee was greatly intrigued by the approach
taken in 1978 by the most common recovery model, Chapter 11 of the Bankruptcy Code of the
United states that the discussion anticipating its creation and resulting authorization coincided with
the beginning of the board of trustees' considerations.

The Insolvency Act of 1986, which was implemented as a result of the Cork Report, is the main
piece of legislation that governs insolvency in the United Kingdom. But the Enterprises Act of 2002
only made a few more adjustments. Since then, the UK has established a culture of rescue, and
numerous business rescue plans have been carried out. The government's response to Covid-19, the
new Corporate Insolvency and Governance Act 2020, which introduces new corporate restructuring
instruments in the United Kingdom economy during the extraordinary pandemic, is another example
of this.

As a result, the following legal documents pertain to insolvency in the United Kingdom19:
 Insolvency Act of 1986;
 Companies Act of 2006 (as amended)
 1986 Insolvency Rules (as amended)
 The Enterprises Act of 2002;
 The Insolvency (England and Wales) Rules of 2016

19
Judiciary for England And Wales, The Administrative Court Judicial Review Guide 2020
<https://www.gov.uk/government/publications/liquidation-and-insolvency/liquidation-and-insolvency> accessed 19
March 2020.
19
“The purpose of bankruptcy proceedings, on the other hand, is not to determine or establish the
existence of rights, but to provide a mechanism of collective execution against the property of the
debtor by creditors whose rights are admitted or established”, according to Lord Hoffmann's
summary in Cambridge Gas Transportation Corpn v. Official Committee of Unsecured Creditors of
Navigator Holdings plc.20 The crucial distinction is that bankruptcy, whether it be for an individual
or a business, is a communal action to uphold rights rather than establish them.

2.2 BANKRUPTCY/INSOLVENCY LAWS IN INDIA

The economy operates under the simple tenet that the strongest will prevail, and the weakest will be
eliminated. Mercy killing is frequently healthier than prolonging suffering, and businesses and
organisations are no exception. At this point, the idea of insolvency is relevant. Insolvency is
defined in the simple dictionary as the state of being unable to pay one's debts or a circumstance in
which this is the case. Many problems arise when a business enters insolvency, including whether it
can be saved or not, if the liquidation procedure should go forward, and so on. Laws that regulate
insolvency proceedings are required.

Over the past ten years, there have been two significant changes to the laws and practises governing
corporate insolvency. Theoretically, how corporate actors manage insolvency risks has changed
from ex post responses to company crises. In order to allow participants in corporate and insolvency
proceedings to view organisational collapse as an issue that should be anticipated and avoided rather
than brought up after the fact, insolvency obligations have been modified. These changes are more
indicative of broader social and governmental performance auditing trends and difficulties in terms
of risk management requirements. Such improvements are significant for corporate and insolvency
lawyers. They reframe certain issues under new framework presumptions and reconsider the
difficulties and objectives of business insolvency legislation. Economic distress and bankruptcy
cases have significantly increased in frequency during the past few years. The increase in these
instances revealed the growing inadequacies in the international legal systems managing financial
stability and bankruptcy.

Following the creation of the Indian Constitution, Article 19 (1) (g) 21 allowed for unrestricted

20
[2007] 1 AC 508 (PC) at [14] and [15]. See also Singularis Holdings Ltd v Pricewater house Coopers [2015] 2 WLR
971 (PC) per Lord Sumption JSC at [11].
20
commerce, profession, and occupation, and Article 19 (6) allowed for limited admission and exit
from the economy. In addition, the Bhabha Committee 22 based 1956 Companies Act, which
described the resolution process, provided more information. Sections 425, 433, 443, 444, 455, 463,
481 and 488 of the aforementioned Act describe the resolution process, although it was later
discovered that the Companies Act is ineffective at handling the "corporate insolvency regime." It
failed to take the cost of insolvency into account in any agreement.

The majority of concerns were delegated to the courts, which in turn delegated fair treatment to a
body that was essentially a legal expert chosen by the court with a very limited understanding of the
organization's insolvency and frequently lacking experience. Parties were discouraged from
beginning dissolution actions under the Companies Act due to the possibility of a poor recovery.
The Companies Act gave the legal executive (jurisdictional High Courts) the only authority to
decide on benefits of dissolution, although it is safe to say that the courts lacked any authorised
framework for judging merits. A disorganised legal process resulted from the lack of a supporting
authoritative system, with each High Court interpreting individual cases differently and issuing
orders. The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 marked the
beginning of the transformation process for legal structures associated with debt during the 1990s
("RDDBI"). The Goswami Committee's findings as it was attacking upgrades to the debt administration
structure led to the creation of the RDDBI Act. In its regretful preface, the Goswami Committee report stated:
"There are failing businesses, failing banks, failing financial organisations, and underpaid employees.
However, there aren't many unhealthy boosters. The crux of the issue is found there."
In order to expedite the recovery process, RDDBI was given permission to make arrangements that
allow Banks to submit a request for a "Testament of Recovery" before a highly developed Debt
Recovery Council ("DRT"). A Decree of a Civil Court's standing and effect were comparable to
Endorsement of Recovery. Due to SICA's precedence over RDDBFI, the RDDBFI Act forgot to
implement any reforms in the chaotic indebtedness scene. DRTs were finally discovered to be
overworked with many outstanding cases. The government introduced The Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) in 2002
in response to these obstacles with the aim of advancing the aims of non-performing assets.
SARFAESI did speed up the recovery process a little, but its influence was limited to validated
resources. SARFAESI did speed up the recovery process a little, but its influence was limited to
validated resources. Additionally, SARFAESI lacked mechanisms for rebuilding or rehabilitation, a
feature that is thought to be crucial in an expanding economy.
21
Indian Constitution, Article 19(1)(g)

22
Bhabha Committee Report, Company Law Committee [1952].
21
The National Democratic Alliance took office as India's new administration in May 2014, and their
first order of business was to revive the economy. Without raising India's standing on the World
Bank's Ease of Doing Business, this would not be possible. It was immediately understood that the
foundation for all of this is an effective insolvency legislation. The government took action to
change the insolvency law as soon as possible after realising the urgency. Through an Asset Quality
Review procedure, RBI considerably tightened up on the bad loan situation, highlighting the
severity of the issue. India has consistently performed poorly in the World Bank's Ease of Doing
Business index throughout the years23. Despite a number of changes and measures put in place, India
dropped to 133 in the list of 189 nations in 2010 and rose to 136 in 2016. The Bankruptcy Law
Reforms Committee (BLRC) was given a strict deadline to deliver its proposals. Therefore,
insolvency law is presented as the foundation of economic laws and functions as a fundamental
component of a nation's monetary system. The establishment of an effective financial condition
regime is highly significant for a growing economy.

The Global Financial Crisis has had a severe effect on numerous Indian businesses' earnings in a
number of ways. Additionally, financial crises experienced by the parent businesses of multinational
corporations in other parts of the world can easily spread to their Indian affiliates. During the crisis,
a number of notable Indian and foreign businesses failed, and more businesses may still be in danger
of failing. In India, there was no one law addressing bankruptcy and insolvency prior to 2016. A
number of laws, including SARFAESI, the Corporations Act, the Provincial Insolvency Act of 1920,
and others, governed how companies were liquidated. As a result, the High Court, Company Law
Tribunal, Board for Industrial and Financial Reconstruction (BIFR), and Debt Recovery Tribunal all
had jurisdiction that overlapped with one another. In India, the process of resolving insolvency was
extremely complicated due to the overlap of jurisdictions and variety of laws. Under the umbrella
phrase "business insolvency resolution procedure," the Insolvency and Bankruptcy Code harmonises
the insolvency, restructuring, and rehabilitation processes. Therefore, India and the UK undoubtedly
have a lot in common when it comes to the historical development of the insolvency regime. Prior to
the current insolvency framework, both countries had included insolvency into various patchworks,
mostly under their own Companies Acts. Both countries' economy benefited from the current
insolvency framework because neither country's Companies Act addressed corporate insolvency or
cost-related issues.

23
World Bank. 2016. Doing Business 2016. Washington, DC: World Bank. DOI:10.1596/978-1-4648-1440-2.

22
2.3 INSOLVENCY LAWS DURING THE TIME OF COVID-19

The worldwide economy is being severely impacted by the coronavirus's ("COVID-19")

international expansion, which is having major social effects as well. As a result, a slew of legal,
economic, and financial measures are being implemented by governments, financial authorities, and
international organizations. Despite the fact that these responses vary across jurisdictions, they can
be divided into three broad categories: (i) those protecting consumers and employees impacted by
company closures and layoffs; (ii) those safeguarding self-employed workers and businesses against
economic losses and liquidity needs brought on by the COVID-19 crisis; and (iii) those seeking to
safeguard the stability of the financial system as a result of the lack of confidence and the resulting
financial instability arising in the following months. The focus of the governments on the insolvency
and insolvency-related reforms that have been (or could be) adopted in response to the COVID-19
epidemic, even though addressing these underlying issues requires a comprehensive package of
legal, financial, and economic reforms. They also looked into the potential role that insolvency law
may play (if amended according to the crisis situation) in aiding businesses that are having financial
difficulties as a result of COVID-19, despite the fact that some of the solutions offered in this paper
will apply to both individuals and corporations.24

The power and limits of insolvency law in times of COVID-19

A range of mechanisms are provided by insolvency law to reduce the loss of value created in a
precarious financial situation25. In the first place, creditors have the right to enforce their claims and
ultimately confiscate the debtor's assets when they are unable to pay their debts. Therefore, the
worth of commercially viable enterprises as a going concern could be destroyed by each of their
individual enforcement actions. In order to prevent creditors from enforcing their claims while
requiring them to act more cooperatively, insolvency law responds by imposing a moratorium or
automatic stay. Therefore, using a moratorium can help creditors adopt a more effective strategy

24
For an overview of the policy responses adopted by national legislators, see https://www.imf.org/en/Topics/imf- and-
covid19/Policy-Responses-to-COVID-19 and https://som.yale.edu/faculty-research-centers/centers- initiatives/program-
on-financial-stability/covid-19- crisis. For an analysis of the responses implemented by financial regulators and
supervisors, see https://www.iif.com/covid-19 and Nydia Remolina, Financial Regulators' Responses to COVID/19,
IBEROAMERICAN INSTITUTE FOR LAW AND FINANCE, WORKING PAPER 1/2020 (available at
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3554557).

25
Gregor Andrade and Steven N. Kaplan, How Costly Is Financial (not Economic) Distress? Evidence from Highly
Leveraged Transactions That Became Distressed, 53 JOURNAL OF FINANCE 1443 (1998).
23
while simultaneously preserving value for the debtor.26

Second, the existence of a bankruptcy crisis may encourage important staff to leave the company. In
a similar vein, suppliers and lenders may decide to sever ties with the debtor if they anticipate that
their claims won't be paid. Therefore, insolvency law aids in minimising these costs by offering a
variety of regulatory responses because these circumstances have the potential to destroy value.
Insolvency law, among other things, typically enables post-petition claimants to get a priority for
their fresh claims, typically in the form of administrative costs. 27 Additionally, the limitation of ipso
facto clauses and the accessibility of rescue (or DIP) finance may be other ways to address these
issues28. Third, struggling debtors might be enticed to engage in a number of opportunistic actions
that could damage or advantageously transfer property to creditors. These opportunistic actions
could include giving away assets to family members, taking on dangerous debt, and investing in
risky ventures as a last ditch effort to save the company. Insolvency law offers a number of
instruments to address these issues, including as avoidance actions and, in some countries, unique
responsibilities and liabilities for directors of financially troubled enterprises.

The majority of jurisdictions throughout the world also demand the appointment of an insolvency
practitioner to monitor or supervise the debtor after they are subject to the bankruptcy proceedings.
The likelihood of participating in opportunistic actions will be significantly decreased by doing this.
Therefore, insolvency law might once more offer a useful solution to maintain or recover value. Last
but not least, insolvency law gives enterprises that are still viable but in financial trouble strong
instruments to facilitate a debt restructure. As a result, people can come out of bankruptcy with a
fresh financial setup. This objective is accomplished through a number of methods. First, the
legislation on insolvency offers a suitable setting for negotiations. Second, there are a number of
tools available under insolvency legislation that can make it easier to renegotiate the debtor's
financial obligations. These instruments include the potential for a majority of creditors (or a
qualified majority) to impose a decision on minority creditors who disagree, and in some countries,
the potential for imposing a reorganisation plan on disagreeing classes of creditors.

26
Ibid.

27
John Armour, Gerard Hertig, and Hideki Kanda, Transactions with Creditors, in John Armour, Luca Enriques et al,
THE ANATOMY OF CORPORATE LAW: A COMPARATIVE AND FUNCTIONAL APPROACH (Oxford: OUP,
2017), at 111.

28
Ibid.

24
Insolvency and insolvency-related reforms to minimize the harmful economic effects of the
coronavirus-
In the wake of COVID-19, various changes to insolvency law may be necessary due to the
restrictions specified in section 2 of the statute. In section, these modifications are discussed. In this
section, further measures to aid financial restructuring during COVID-19 will be considered.
However, it examines the appropriate extent of the bankruptcy and insolvency-related actions
undertaken in times of COVID-19 before going into the specifics of these reforms. Last but not
least, it is important to remember that while insolvency legislation might be useful, it is not a magic
fix. The COVID-19 era calls for various changes to corporate insolvency legislation. First,
legislators should postpone the requirement to file for bankruptcy in nations where corporate
directors are obligated to start insolvency procedures once a firm goes bankrupt, as is the case in
several European jurisdictions29. This policy suggestion, which was made during the initial
discussions on how COVID-19 would affect insolvency legislation, has lately been put into effect in
a number of countries, including Germany, France, Spain, Luxembourg, Poland, Portugal, Russia,
and the Czech Republic.30

It should be noted, however, that while some nations, such as Germany, have chosen to defer this
need until the conclusion of the state of emergency, other jurisdictions initially chose to do the same.
According to me, the suspension of the bankruptcy filing requirement should continue for a
sufficient amount of time to allow businesses to recover from the COVID-19 situation. The German
solution thus appears to be preferable to those adopted by governments that simply suspend this
responsibility during the state of emergency.31

Creditors will be able to make debtors pay the direct and indirect costs of a procedure that, absent
COVID-19, would not even be necessary if there is no true or de facto restriction of the power to file
involuntary bankruptcy petitions. Additionally, corporate directors may be subject to a variety of
penalties depending on the jurisdiction, including expulsion from the company's management,
disqualifications, and even unique liability laws. In my opinion, the decision to use the insolvency

29
Aurelio Gurrea-Martínez, Directors’ Duties of Financially Distressed Companies in the Time of COVID-19,
OXFORD BUSINESS LAW BLOG, 24 September 20201 (available at https://www.law.ox.ac.uk/businesslaw-
blog/blog/2020/03/directors-duties-financially-distressed-companies-time-covid-19).

30
Aurelio Gurrea-Martínez, Directors’ Duties of Financially Distressed Companies in the Time of COVID-19,
OXFORD BUSINESS LAW BLOG, 24 September 2021 (available at https://www.law.ox.ac.uk/business-
lawblog/blog/2020/03/directors-duties-financially-distressed-companies-time-covid-19).

31
Ibid.
25
system should be determined by the debtor even though it can be beneficial for many debtors
impacted by COVID-19.32

However, this extraordinary legislation should not be applicable if it could be demonstrated that the debtor's
position of insolvency was not brought on by COVID-19 (for example, since it was already insolvent prior to
the outbreak). Therefore, under the broad conditions present in the pre-COVID-19 insolvency system,
creditors should have the right to declare bankruptcy on behalf of the debtor.

32
Jerold B. Warner, Bankruptcy Costs: Some Evidence, 32 JOURNAL OF FINANCE 337 (1977).
26
 Chapter 3
Corporate Rescue in the United Kingdom: Issues and Challenges

“Assets would be more highly valued if utilized in the industry for which they were designed,
rather than scrapped.”33

For nations at all levels, the introduction of businesses into the economy has a huge impact, but the
effectiveness of local company restructuring, and insolvency procedures is also crucial. The pace of
investment is entirely dependent on how easily people enter and leave the economy. Exit barriers are
similar to making no investment. The resurrection of the business entity is also crucial. Making
provisions for resurrection guarantees continued economic growth. Reviving businesses (the "rescue
culture") or addressing economic insolvency also improves a country's standing on the World Bank's
ease of doing business index. Even though India's bankruptcy-related laws and regulations have
developed in pieces, it is arguable that the majority of them were influenced by English common
law.34

This chapter addresses the revival plans outlined in the Corporate Insolvency Act in the UK. It
begins with the insolvency scheme before moving on to a thorough examination of the corporate
resolution process there. Additionally, it delves deeply into the British notion of "corporate rescue."
This chapter's goal is to learn how the United Kingdom's regeneration process is being carried out.
This chapter's goal is to examine the corporate rescue attitude in the United Kingdom and highlight
its problems while acknowledging that the country is at the forefront of global development.

3.1 Strategy of Insolvency Law in UK

The United Kingdom's need for a robust insolvency law was primarily motivated by the 1970s
economic crisis, which made it nearly impossible for businesses to recover. Additionally, as was
shown in the previous chapter, the Insolvency Act of 1986 has a somewhat longer history than the
rescue culture, which is bad. Only following the Cork Committee report was rescue culture given
serious consideration. Therefore, it is equally crucial to comprehend the legislative intent and the
report (especially the Cork Report) in order to understand the scheme of the insolvency legislation
with reference to corporate rescue in the United Kingdom. The Insolvency Act of 1986 and the
Insolvency Act of 2000, collectively referred to as the "Insolvency Act," comprise the present-day
insolvency law in the UK, along with the associated laws and regulations that are an essential
33
Lynn M. LoPucki and George G. Triantis “A systems approach to comparing US and Canadian reorganization of
financially distressed companies” 1994 Harvard International Law Journal at p 267
34
Restructuring Across Borders – India: corporate restructuring and insolvency procedures – March 2020 Allen &
Overy
27
component of it. There are two ways to determine if a corporation is insolvent: whether it is unable
to pay its debts in full or whether its liabilities exceed its assets.

The current insolvency law in the UK was adopted as a result of extensive debate and the Cork
Committee's recommendations. The Bankruptcy Act of 1914, the Companies Act of 1948, the
County Courts Act of 1959, and the Deeds of Arrangement Act of 1914 are the statutes that
governed the insolvency regime prior to the aforementioned legislation. The Insolvency Act of 1986
was thought to be a comprehensive piece of legislation governing the law of insolvency in the UK,
but later, a need for change was felt to a great extent, which resulted in the enactment of the
Insolvency Act of 2000 (which established a statutory moratorium), and finally, a more thorough
and reliable piece of legislation, the Enterprises Act of 2002, which put a significant emphasis on
corporate rescue as a whole, went into effect. Thus, it could be said that the structure of the
bankruptcy laws in the United Kingdom has undergone periodic changes as a result of the
government's own publication of reports (such as the Cork Report and the Government of the United
Kingdom's Report on Insolvency of 2001), which primarily aimed to make the insolvency law
broader with a focus on helping struggling enterprises continue to operate. In order to handle
corporate and personal insolvency rather than treating them under several accessible patchworks,
UK law focused on modifications and codifying a whole new insolvency system. In the following
pages, a thorough examination of rescue culture and the legal framework that supports it will be
done.

3.2 THE CORPORATE INSOLVENCY RESOLUTION PROCESS (CIRP) AND CORPORATE

RESCUE IN THE UNITED KINGDOM

Companies in financial difficulty are a typical occurrence in the field of corporate law. Although not
all-inclusive, the main causes of these occurrences may include overexpansion, ineffective
marketing, subpar management, high interest rates, a decline in market share, and possibly
fraudulent actions.35 The Insolvency Act of 1986 currently contains a cutting-edge legal framework
governing both personal and corporate debt. The Insolvency Act of 1986, despite being rather dated
now, was the administrative response to the findings and recommendations of a multidisciplinary
advisory body tasked with monitoring bankruptcy legislation and practise in the 1970s. The Cork
Report36 aided in the development of the Insolvency Act of 1986, which combined person (personal)

35
Parry R. Corporate Rescue (Sweet & Maxwell, 1st edition, 2008) p. 1.
36
K. Cork, Sir (Chairman), Insolvency Law and Practice: Report of the Review Committee (Cmnd. 8558) (HMSO,
1982) (“Cork Report”).
28
and corporate insolvency under one set of rules while also assisting in the formulation of the law
pertaining to all forms of debt, including the introduction of the concept of corporate salvage using
two novel approaches: the company's freely given arrangement and administration.

In the early years after the Insolvency Act of 1986 became effective, a number of problems were
seen relating to the underutilization of the new techniques in contrast to receivership, which was
frequently preferred by primary creditors.

The Rescue Culture and the Insolvency Act of 1986

By introducing two new rescue systems—the CVA, which covers organisations before official
insolvency, and administration, which covers organisations that are very near bankruptcy—the IA
198637 understood the need to advance recovery. In its discussions about how to go about corporate
rescue from a United Kingdom viewpoint, the Cork Committee regarded a number of current
processes as examples of regimes that they could potentially emulate in some way. However, the
basis for the two new recovery procedures came from models that already existed within the law. As
a result, the fundamental foundations of the CVA and administration were revealed in a condensed
and simplified version of the plan of arrangement and receivership. The CVA attempted to create a
structure for the kind of informal, workout-like dialogue between debtors and creditors, while the
administration remained a more official procedure overseen by an administrator.

under the court's general control. The administration came last and the CVA came first in both
procedures' order of increasing formality. Furthermore, administration was intended to take care of
the interests of all creditors, secured and unsecured, as opposed to only the primary secured creditor,
unlike receivership. The two procedures, which rejected the debtor-in-possession paradigm, had one
thing in common: even though the debtor had the power of initiating, they were both only handled
by an insolvency practitioner.

The Cork Committee and the Paradigm of Rescue

The United Kingdom bankruptcy model emerged legitimately for saving troubled businesses only
following the Cork Report. Although there were a few ways in use that would partially achieve the
goals of the salvage culture, they were not suitable for today's needs or the core principles of
corporate salvage. Receivership, which may be used to revitalize businesses, did not guarantee

37
Insolvency Act, 1986.
29
rescue; rather, most tactics resulted in the transfer of businesses into obscurity. The Cork Committee
also believed that the receivership approach had limited application because it required the
establishment of a skimming charge in order to choose a beneficiary in advance. The scheme of
arrangements procedure, which was permitted by the Companies Act of 1948 (and its later
successors from 1985 and 2006), had the potential to save some businesses, but it was time-
consuming and required the participation of specialists, the careful preparation of (indeed expensive)
documentation, and a minimum of two court dates. Additionally, it was believed at the time that
businesses on the verge of bankruptcy were not the target audience for the plan method. In order to
learn from the experiences of a number of other nations that had, at the time, adopted procedures
aimed at offering mechanisms for company rescue, the Cork Committee used comparative analysis
as part of their methodology. Chapter 11 of the bankruptcy code in the United States, which was
viewed as the forerunner of corporate rescue, was used as an example by the Cork Committee. It
was thought to offer a wide-ranging and adaptable framework with practically limitless alternatives
for debtor firm restructuring and eventual rescue. A stay was put in place to stop any claims from
being made against the company's assets while they are still in the debtor's hands. The objective of a
Chapter 11 case was stated to be the creation and acceptance of a plan approved by the bankrupt's
creditors to change and reorganize the debtor's obligations and, if necessary, to grant the debtor a
discharge. Although those in charge of reforming British insolvency law found the Chapter 11
model interesting, it featured an approach that the UK did not desire to imitate: it did not appoint
any official of any kind, leaving the debtor in charge of his business. The "debtor in possession"
method was often unacceptable to the British view on insolvency due to the suspicion it was thought
to breed. There was also consideration for other jurisdictions. In truth, France was the first to
embrace rescue, which is crucial for European concerns, despite the high accolades often given to
the United States for its groundbreaking rescue program. The Law of 1967 reforms established a
court-based dispute resolution process that made it possible for the business to carry on by
permitting composition with creditors. But it differed from the United States system as it was a
court-led process. South Africa had reorganization procedures in place since the Companies Act of
1973 (the legislative successor to the predecessor law from 1926), which offered a process for
corporate reorganisation by which company debt may be compromised with creditors and/or a
moratorium on enforcement was put in place. According to the text, there are numerous ways to
reorganize something. The Cork Report reflected the observed experience of these procedures in a
variety of nations, demonstrating that rescue may be an option that is practical for some businesses.

30
The 2002 Enterprises Act marked a significant change in the rescue process.

A variety of changes were made by the Enterprises Act of 2002 to assist financially troubled
businesses in reviving the economy. The Act primarily eliminates the Crown's preferential
privileges as a creditor. It also limited the function of administrative receivership, which came under
heavy fire after the Insolvency Act of 1986 was passed. Additionally, the administration system
underwent adjustments. It also developed a different remedy, the Scheme of Arrangement of the
Corporations Act of 1985, which will be made available to the corporations. The Enterprise Act
instead aims to better implement an existing philosophy rather than introduce any new doctrine. The
White Paper that preceded the Act makes clear that its primary goals are to advance corporate
rescue, collectivity, the maximization of realizations from the corporate estate, and general fairness
amongst creditors, not necessarily in that order.38

Current Rescue culture in the United Kingdom

Proper insolvency laws have spread globally as a result of the oil crisis and the economic downturn
that brought about the collapse of the international economy in the 1970s. The Cork Report
undoubtedly gave rise to the idea or the initial conception of corporate rescue as an exclusive topic,
but the idea was bridled into the British legal system as early as the 19th century, and the rescue
mechanism was never considered as an alternative to the process of liquidation. Here, we examine
the evolution of the rescue culture in the UK since the Insolvency Act of 1986 and how it has
changed, as seen in the Cork Committee Report and the Enterprise Act of 2002. The four widely
accepted ideas of rescue culture throughout the UK are described below before I go on to explain the
same.

1. ADMINISTRATION

Chapter 11 of the United States Code served as the model for the UK's notion of administration,
with a number of notable modifications. It constitutes one of the most popular and important
procedures under UK insolvency laws. The Cork Committee Report played a significant role in its
introduction. Under this approach, the corporation continues to operate as a result of the legislative
moratorium taking effect. As a result of this, the business is temporarily released from its need to
settle its creditors' debts. The process is envisioned in Part III of the 2016 Insolvency Rules and can

38
Frisby, Sandra. "In Search of a Rescue Regime: The Enterprise Act 2002." The Modern Law Review 67, no. 2 (2004):
247-72. www.jstor.org/stable/3699143.
31
be started by the courts. The Cork Report had emphasized the need for a different rescue strategy
that would allow the company to continue, defending trade, trading, the age of benefits and earnings
to the company, as well as the possibility of fulfilling the majority of the company's debtors. The
second rescue tactic, organization, which was more official and offered the suspension under
obligation process under the security of a prohibition, was inspired by this mentality. The
organization request said that one of four possible outcomes would be prompted by the organization
technique; nevertheless, there was no line of command or requirement for these aims.

The outcomes included the continuation of the company, or a portion of it, as a going concern;
approval of a CVA; authorization of a course of action; or even some more advantageous
acknowledgement of the company's assets than may be realized in a simple liquidation.

Because the administrator was in control of the company's management, it was believed that the
management would also contribute to the effective implementation of a different, perhaps
restorative, strategy. To make it possible for the court to decide whether to issue an administrative
order, the administrator has to provide a report to the court. After that, a request for an order must be
made by the corporation, the directors, or the creditors. The request had the effect of imposing a ban
and requiring any regulatory beneficiaries to vacate their positions.

If the request was granted, a recognized indebtedness specialist would be appointed chairman and
given extensive authority to investigate and ascertain the organization’s problems. The
organization’s director took on administrative duties and controlled the organization’s benefits as he
deemed necessary for the fulfilment of his duty. The supervisor was required to make a formal
statement of his suggestions for consideration by the loan bosses. Additionally eligible for
information from the president through a lender advisory group, leasers received it until they were
eventually handed the recovery plan. Contradictory investors or loan managers could seek redress in
court if they believed they had experienced unwarranted bias in the agreement, even though the
reception of the recovery plan was normally confirmed during a meeting held by the chairman. The
recovery plan often involved the administrator liquidating the entire firm or certain business units as
a going concern, winding up the shell (if any), and releasing them from their duties.

The administration also had other goals in mind, including the long-term goal of the company
continuing to operate as a going concern. Therefore, the insolvency practitioner who is chosen to
serve as the administrator is thought to have extensive authority. The aims under Section 8(3) were
not in any particular order. This made it even worse because crucial court oversight is required for
this type of rescue. The Insolvency Service established two working committees to independently

32
examine CVAs along with administration, which produced reports in 199539, 199840, and 2000.41

This did not imply that there were no changes made to insolvency legislation; in fact, two acts were
passed in 1994 that made minor but necessary adjustments. It was evident, however, that these were
not meant to be comprehensive improvements.

Administration and Pre-Packs: A fresh element of the Enterprises Act

The Enterprises Act 2002 introduced a new Section 8 of the Insolvency Act 1986, which includes
Schedule B1 outlining the updated administration procedure and the responsibilities of directors.
This arrangement is intended to be empowering. This action repealed Part II of the IA 1986, which
pertained to the previous organizational structure. However, it should be noted that Part II is still
reserved for exclusive company systems that pertain to water and sewage utilities, railway
companies, air traffic control companies, public-private partnership companies, and building
societies, among other similar entities. Generally speaking, if the content of the updated method is
disregarded, which is now more intricate than before, the administration process has mostly
remained unchanged, except for two significant aspects: the heightened significance of rescue and
the appointment of the insolvency professional. Organising the schedule and suggesting that
methods should not exceed a year helps prioritise efficient and timely solutions. The significant and
remarkable changes affect the approach and prioritise rescue efforts more clearly as the main
objective. According to Section 3 of Schedule B1, rescue must be a crucial aspect of the
administration process. On the other hand, the IA 1986 outlines four possible options that an
insolvency practitioner may choose as the objective of the particular administration process.

Every option was considered equally significant, including protecting the organization and
achieving a better outcome than a direct liquidation.

The new objective of the organization is to achieve three hierarchical goals: firstly, to ensure the
continuity of the organization; secondly, if that is not feasible, to achieve a better outcome than what
would be obtained through liquidation. Therefore, the practitioner is obliged to prioritize rescue
unless it is not advantageous, or the creditors' outcome is not improved compared to liquidation. The
use of the term "company" instead of "business" in this statement is meant to alleviate worries
regarding the hive-down process and encourage directors to act quickly by making the process more

39
Revised Proposals for a New Company Voluntary Arrangement Procedure: A Consultative Document (Insolvency
Service, April 1995).
40
Review of Company Rescue and Business Reconstruction Mechanisms: A Consultation Paper (Insolvency Service,
May 2000). This was followed in short order by the White Paper, titled Insolvency – a Second Chance (Insolvency
Service, 2001) (Cm 5234), which set out what was to become the EA 2002.
41
Insolvency (Amendment) Act 1994 (1994 c. 7); Insolvency (Amendment) (No. 2) Act 1994 (1994 c. 12).
33
attractive. This is to avoid the possibility of their company being dismantled. Furthermore, if a
prolonged delay in business operations is not feasible, there is a chance to enhance the outcome that
could arise from liquidation. This enhanced liquidation process is beneficial as it avoids a rushed
"fire sale" and the possible depreciation of the value of the company or assets. If the first two
options are not possible, the administrator may sell assets to pay secured and/or preferential
creditors, similar to the actions of a receiver. The practitioner must provide an explanation by citing
the common good and illustrating that choosing this option would not cause permanent harm. From
this perspective, it is important for the administrator to prioritize the well-being of all creditors of
the company rather than favoring one over the others. This ensures that the responsibility is shared
collectively among all creditors. The revisions aim to enhance speed and effectiveness in the
process. An explicit command has been added for an administrator to fulfil their responsibilities as
quickly and efficiently as realistically possible, making it a legal duty that can be enforced. The
newly established hierarchy of aims enshrines the importance of the practitioner, as the court is
obliged to follow their expert opinion and will only overrule it in exceptional circumstances. 42

The appointment procedure has undergone a significant change. Previously, it was under the court's
control and necessitated the filing of a petition by either a debtor or a creditor. As part of the
reforms, the option of out-of-court appointments was introduced and made available to the
corporation along with some secured creditors. In the absence of a prior appointment of an interim
liquidator or administrative receiver, the holder of an eligible, enforceable floating fee is authorised
to appoint an administrator. The charge that qualifies must clearly state that Schedule B1 is
applicable. It should also grant the holder the authority to appoint an administrator for the company
or allow them to make a hire that would typically be made by the administrative receiver. The
meaning of the qualified floating charge is subject to specific limitations that mandate the creditor to
possess security over a significant portion or all of the company's assets. After the appointment of
the administrator, it is necessary to file a notice of appointment and other required documents with
the court. These documents include a statutory declaration stating that the person appointing the
administrator holds a qualifying enforceable floating charge, that the appointment was made legally,
that the administrator has given consent to the appointment, and that the purpose of the
administration is believed to be valid. In cases where a business intends to appoint its own directors,
the directors must inform the secured creditor, who has the right to propose an alternative candidate,
thereby upholding the creditor's priority in the nomination process. In the event of a dispute, the
court is required to give preference to the decision made by the creditor. This statement suggests that
the creditor believes they have a greater awareness of the debtor's economic situation and may be

42
Schedule B1, para 76-78- Enterprises Act 2002.
34
more likely to take action if the directors do not act.43

The possibility of avoiding legal scrutiny of deals has undoubtedly facilitated the arrangement
within the year that accompanied the changes, especially in the pre-pack environment, whose
numbers have continued to increase. The main purpose of a pre-pack is to protect the company from
reputational damage and loss of confidence from its contracting partners when approaching
insolvency. In order to effectuate a turnaround with these guarantees in place, the agent endeavours
to compile an offer of benefits or of the substance of the company to a pre-selected buyer.

The pre-pack process in the United Kingdom is based on a method that originated in the US and is
known as a "stalking horse offer". This refers to an offer or bid made to assess the market before a
formal sale, essentially establishing a reserve price for an asset sale. In the event that the assets or
company aren't sold for an amount greater than the offer, the third party who made the offer is
required to carry out the transaction. In the United Kingdom, an insolvency practitioner and the
main creditor collaborate to bargain with a purchaser who is typically discovered through the
practitioner's network of contacts. The main concern is to safeguard the debtor's reputation and, in
the case of publicly traded companies, the value of their stocks by preventing competition from
different creditors, especially unsecured creditors, until the purchasing company signs the contract,
and the court approves it in a final administration process.44

One of the main drawbacks of pre-pack administrations is that they often exclude other creditors,
particularly those who are unsecured, from being informed about the process. These creditors may
not be aware of what is happening until an administrator is appointed to manage the subsequent
administration. The secured creditor has the right to select the administrator, who is typically the
same individual who managed the pre-pack, to facilitate a quick sale process while maintaining
strict confidentiality. Nevertheless, there is a concern about whether such a sale could lead to the
recurrence of what is known as Phoenix syndrome, which caused significant apprehension before
the enactment of the Insolvency Act of 1986. In practise, the answer can be found in the
practitioner's duty to the general body of creditors, as mentioned above. Furthermore, all
practitioners are required to subscribe to an insurance policy, which is crucial. The JIC's Statement
of Insolvency Practise 16 ("SIP 16") safeguards the unsecured. It was first issued in 2008 and has
since been revised twice, with the most recent revision in 2015. The document outlines the
obligations of professionals involved in a pre-pack sale as well as defines the necessary standards
for compliance. Practitioners are required to consider transparency, the general interest, and the
43
“Corporate Rescue in the UK: Ten Years after the Enterprise Act 2002 Reforms”, given by Paul Omar to the
Colloquium on “Benchmarking Voluntary Administration on its 20-Year Anniversary” organised by the Bankruptcy and
Insolvency Law Scholarship Unit at the Adelaide Law School, Adelaide, Australia on 26 July 2013.
44
Omar, Dr & Gant, Dr Jennifer ‘Corporate Rescue in the United Kingdom: Ten Years after the Enterprise Act 2002
Reforms’ (2016).
35
communal character of proceedings as important factors when conducting the procedure. 45

2. Voluntary Arrangement by the Company.

A settlement between a firm and its creditors regarding debt repayment is referred to as a company
voluntary arrangement. Directors of a firm can start the CVA process if it is in need of one, or if it is
currently in the middle of one.
The designated administrator or liquidator may start the aforementioned Company Voluntary
Arrangement proceedings after either administration or liquidation. According to the
aforementioned arrangement, it is not essential to establish that the corporation is bankrupt or
headed that way before legal action is taken. A plan that must be approved by at least 75% of
creditors kicks off the company voluntary arrangement. The proposition must be accepted by the
court. The same is not subject to any set time restrictions.
Insolvency Act, 198646
Part 1, which has been further separated into two parts, contains the CVA provisions. The proposal
portion comes first, followed by the consideration and execution of the proposal. According to the
Insolvency Act of 1986, the proposal for the compromise of 44 must be presented to the creditors or
the company's directors. The outstanding debts of IA 1986, Part I (parts 1–7). Either of the two
options—compromise or the resolution of claims—must be the proposal's goal. According to
Section 1(3) of this Act, an administrator or liquidator may also start a CVA as long as the
administration or liquidation process has begun, respectively. The person who starts the process
(nominee) must also report to the Court whether or not a meeting among creditors should be
conducted, among other things.
Dublin Report According to the 1982 Cork Report, Company Voluntary Arrangement is an
effective, low-cost, and time-consuming way to deal with financial problems informally.46

Cork Committee Report

The Cork Report of 1982 stated that the Company Voluntary Arrangement shall be inexpensive,
less-time consuming and an efficient means of dealing with financial distress through the informal
means.47The Cork Committee's main motivation for bringing up the CVA statement was that it was
first created to do away with the drawn-out official procedures of rescue. Companies were found to
benefit from CVAs since they may approach with an informal proposal even before there was any
45
Ben Luxford, England and Wales SIPS, R3, https://www.r3.org.uk/technicallibrary/england-wales/sips/.
46
Part I (sections 1-7) of IA 1986.
47
Cork Report, para 204.
36
indication that there would be an insolvency threat, ensuring that this process provided greater
latitude. But the system came with a number of responsibilities. The Insolvency Service published a
report in 1993 that highlighted the flaws and identified a few barriers to usage.
The lack of a moratorium made it difficult to guarantee successful agreements. There were also
concerns with the debtor's business needing financial assistance to rebuild. Creditors frequently
prefer to name a receiver, keeping them in control of the situation.
It was also underutilized since there was uncertainty about what would happen if the company went
bankrupt after the CVA, raising the possibility that creditors might not be in a very advantageous
position. The Insolvency Act of 2000 and the availability of the moratorium have changed this, but
the main problem remained that it was a time-consuming process through which a creditor may still
request liquidation. These shortcomings provide an explanation for why the CVA was first
underutilized, leading instead to the new organizational style being more commonplace when
compared to other options.

Insolvency Act of 2000

The main alteration brought about by the Insolvency Act 2000 was a paradigm shift in the prior
CVA models under the Insolvency Act 1986, and this move was intended to benefit small and
medium-sized businesses (SMEs).48 Because a moratorium has been set, they can now shield
themselves from the actions of creditors for a predetermined amount of time.

3. ABOLITION AND ISSUES Of ADMINISTRATIVE RECEIVERSHIP

The concept of administrative receivership first emerged in the latter part of the nineteenth century
and was primarily designed as a "creditor-oriented process" to protect the interests of the holder of a
floating charge. It refers to the scenario in which any creditor (holder of a floating charge) may at
any time appoint a receiver, who then assumes control of the company's business. By employing the
receivership procedure, a creditor who is entitled to payment on a debt that is guaranteed by a
floating charge may name a receiver to take control of the company by taking possession of the
assets covered by the security. The receiver's principal aim his client's security using money that was
left over after equal-valued assets belonging to the debtor firm were liquidated. The receiver's
principal duty was to take all reasonable steps to guarantee that the company's debts were settled in
this way. After the receiver's role was done, the directors assumed control of the firm in whatever
state it was in. Since it was created to maximise profits for creditors, especially the major creditor
48
Enterprises Act, 2002 Schedule A1.
37
who owned the floating fee, rather than to secure the company's survival, companies rarely survive
using this strategy.
At the time, accountants handled the majority of insolvency work; nevertheless, some solicitors gave
clients advice on how to avoid the most dire circumstances and their potential legal repercussions.
However, unlike France, which has had a regulated profession for bankruptcy practitioners since
1967, the UK did not. Even while the UK's bankruptcy laws weren't completely out of date while
the Cork Committee came into being, they weren't adequate to meet the needs of contemporary
business.

3.3 KEY CONCERNS AND COMMENTS

The Enterprises Act of 2002 as well as the Insolvency Act of 2000 were primarily intended to bring
about a paradigm shift in the United Kingdom's insolvency and rescue processes. Although these
Acts have helped the rescue procedure in certain ways, the majority of the details are still unknown.
1. Although administrative receivership was officially abolished, full abolition is still not attainable.
Even though the statistics for the period of the ongoing global financial emergency must be taken to
contain a high component of cases in which one of the exemptions to the overall denial applies, the
reality of the rejection according to pre-EA 2002 "agreements can be found in the insights mirroring
the arrangements from 2003 onward. “Recent figures on the total number of receiverships show a
decline, which may indicate a significant reorientation in favour of administration being the primary
option for rescue. It is impossible to determine with confidence how much of this may be against the
wishes of the creditors, but one conclusion that could be drawn from the numbers is that there is still
some competition among both procedures, albeit one that is not as obvious as within the pre-EA
2002 scenario.
More recently, it appears that fewer individuals are having the operation, which is declining.
The best course of action may be just to leave the process in place and focus again on those that
have a meaningful rescue purpose. However, considering that the nature of rescue is changing due to
advances in North America, the question of what kind of rescue it will likely be arises. Given that
many proceedings in the United States end in sale under section 363 of Chapter 11, there is actually
a movement in practise and literature towards a rethink of the goal of rescue. Recently, the concept
of rescue has been described as encompassing asset recycling in order to bring assets back to a
condition of economic productivity, allowing those who are in a better position to maximise the
"use-value" of those assets.49 This is a description that might have been utilised as well in a scenario

49
See J. Girgis, “Corporate Reorganisation and the Economic Theory of the Firm”, Chapter 8 in B. Wessels and P. Omar
(eds), Insolvency and Groups of Companies (INSOL Europe, 2011), pages 108-9, and the references cited in footnotes 1
and 24 of that work.
38
of receivership, where the creditor's ability to re-use these assets, particularly in their capacity to
recycle them (or their value) in an eye to further lending, was seen as being aided by the recovery on
their behalf, even though it was typically followed by the liquidation of the corporate shell. 50

2. The CVA has undergone only minor modifications since the most recent reforms. CVA
proceedings are thought to take a while. Therefore, CVA is "inimical to creditors, especially in the
case that the 'shareholder challenges' under Section 4A of the IA 1986 are successful" and is more
debtors orientated.51

50
9 Suo Moto Writ Petition (Civil) No. 3 of 2020.
51
Ibid.
39
 CHAPTER- 4
RESOLUTION PLAN IN INDIA: ISSUES AND CHALLENGES

The Insolvency and the Bankruptcy Code, 2016, which is India's new unified code for insolvency,
has caused a significant upheaval in the country's insolvency regime in recent years. This specific
statute altered and transformed the entire insolvency landscape and techniques used in the nation.
The law guarantees a quick process rather than a drawn-out one like the earlier laws that included
the law of insolvency. The entirety of the Corporate Insolvency Resolution Process is outlined in
Sections 6-32 of Chapter II of the 2016 Insolvency and Bankruptcy Code. It stipulates that the
corporate resolution procedure may be started as described in section II of the Act in cases where a
corporate debtor has failed to make payments on debts that have become due and payable but have
not been repaid. A financial creditor, an operational creditor, or a corporate debtor may initiate the
resolution process, according to the Act, which highlights the importance of early detection of
financial difficulty for timely resolution. Financial creditors have the option to make a request to the
National Company Law Tribunal (NCLT), along with proof of default and the name of a resolution
specialist they hope will serve as the interim resolution professional. The adjudicating authority will
move forward as soon as it is confident that a default has occurred. Because operational debts
frequently have smaller balances than financial debts and are recurrent in nature, the method for
operational creditors differs from that for financial creditors.52 The operational creditor must deliver
a demand notice or a copy of an invoice if a default occurs, demanding settlement of the defaulting
debt. This prevents operational creditors, since their debt claims are typically smaller in value, from
initiating the insolvency resolution procedure for the corporate debtor early or for unrelated
reasons.53 The chapter also specifies a 180-day deadline, extendable by an additional 90 days, for the
conclusion of the corporate insolvency process. The adjudicating body subsequently appoints an
interim resolution specialist who plays a substantial role throughout the corporate resolution
procedure within fourteen days of admitting the application. He carries out a number of functions,
including gathering claims, learning more about the corporate debtor, creating a committee of
creditors, acting as the company's temporary manager, and keeping an eye on assets until a
resolution specialist is hired. After being appointed, the resolution expert may plan to write an
information note that will help a resolution applicant create a resolution plan. A similar information
memorandum is planned to be created so that market participants can offer alternatives for dealing
with the corporate debtor's insolvency. Subject to adherence to the relevant legislation, there are no
restrictions on who can submit a resolution application. The creditors' committee will either approve
52
1 Roy Goode, Principles of Corporate Insolvency Law (4th ed, Sweet & Maxwell 2011) [2-22].
53
Mobilox Innovations Private Limited Vs. Kirusa Software, LATEST LAWS.COM, https://www.latestlaws.com/latest-
caselaw/2017/september/2017-latest-caselaw-700-sc/.
40
or disapprove each resolution plan that the resolution professional presents to them. If granted, it
must then be filed for approval by the adjudicating body; otherwise, the company will go into
liquidation.
The Insolvency Code is a piece of law that addresses economic issues and, in a broader sense, the
state of the nation's economy, the court ruled. The Code was eventually adopted as a result of earlier
legislative initiatives that, as we have seen, failed and were repeatedly flawed. The experiment in the
Code meets constitutional muster when evaluated by the generality of its provisions rather than by
the purported crudities and injustices that the petitioners have called attention to. 54
A very strong economic argument for the effectiveness of debt law is that it mimics the kind of
speculative agreement that lessees would have reached if they had anticipated their disagreements
with the person who holds the account and believed that the requirement for a single authorization
activity should be maintained for the benefit of all parties. The law is designed to support the
decision that a business's sole owner would make if it was being done in his best interests while
doing so in the interests of the company as a whole as well as its creditors. Creditors would get the
best returns since a single owner would use assets in their most cost-effective way. Rules that
maximise returns for creditors stimulate the extension of credit.55 A more sophisticated version of
this strategy acknowledges the role insolvency legislation plays in making sure that capital is
allocated to the economy's most productive uses.56

4.1 THE RESCUE PLAINS THAT FAILED AND SICA57

India has a lengthy history of businesses that failed to recover and eventually filed for liquidation.
At that time, when the Tiwari Committee was created by the Reserve Bank of India to investigate
the obstacles to corporate rebirth. Continuously rising data for liquidation and winding-up of
companies were not a positive sign for countries with emerging economies like India. Due to this,
the Tiwari Committee detailed a few techniques in their report for reviving the companies, which
were-
• Management takeovers of firms; • Debt Restructuring; • Firm mergers
• The business's sale
In addition to these resurrection techniques, the Tiwari Committee advised passing exceptional
legislation to enable swift and effective action. As a result, the Sick Industrial Companies Act was
passed on January 8, 1986, with the President's assent, taking into account all of the Tiwari
54
3 Swiss Ribbons Pvt. Ltd. v. Union of India, Writ Petition (Civil) No. 99 of 2018 decided on 25 Jan 2019.
55
A useful review of empirical evidence in this respect is provided in A Menezes, ‘Debt Resolution and BusinessExit:
https://www.wbginvestmentclimate.org/advisory-services/regulatory-simplification/debtresolutionand-business-exit/
upload/VIEWPOINT_343_Debt_Resolution.pdf
56
KM Ayotte and D Skeel, ‘Bankruptcy as a Liquidity Provider’ 80 U Chi L Rev 1557 (2013).
57

41
Committee's recommendations. The Tiwari Committee's recommendations and actions were
practically the only ones covered by the Sick Industrial Companies Act. A quasi-judicial
organisation was created by the Sick Industrial Companies Act to oversee and save the "sick
industries." The Board for Industrial and Financial Reconstruction (BIFR) served as the name of the
quasi-judicial institution. Additionally, the Sick Industrial Companies Act limited the ability of civil
courts to intervene in BIFR cases. The Appellant Authority for Industrial and Financial
Reconstruction handled each and every appeal from BIFR. Following the director of the company's
referral, the BIFR proceedings would begin. In order to start a process, BIFR verifies that the
company is "sick." The Sick Industrial Companies Act does not employ bankruptcy or insolvency,
but rather workplace illness. A corporation can only be considered "sick" under the Sick Industrial
Companies Act in one of two situations: first, it must have been registered for at least five years, or
second, it must have more liabilities (accumulated losses) than assets. The first requirement was
added because it is important to give businesses the time to establish themselves in the
marketplace.58The second phrase, however, suggests insolvency as a prerequisite, but by making
insolvency a requirement, the said clause violates the Sick Industrial Companies Act's stated
purpose of "immediate measures for revival." It is crucial to resuscitate sick companies before they
enter "mortuary" because insolvency is a stage where there is almost no hope. Instead of intervening
in sick companies once they enter "mortuary," it is important to do so now. The Sick Industrial
Companies Act also contains a framework for a moratorium, but this moratorium has drawn
considerable controversy and criticism because it prevents creditors in exercising their rights as they
would otherwise be able to while a case is pending.59 The Sick Industrial Companies Act leans more
in favour of the "debtor in possession," and unlike the administration process outlined in the UK
Insolvency Act 1986, its proceedings do not change the company's management.
When examining the BIFR's authority, it becomes clear that the Sick Industrial Companies Act gave
it broad authority, and the main decision the BIFR had to make was the rehabilitation process,
specifically whether or not a firm required rehabilitation.60 It was determined that BIFR has broad
powers in the cases Nasik People's CoOperative Bank Ltd v. Data Switchgear61 and VDCS
Enterprises Ltd v. Union of India.62 BIFR uses a two-step method to determine whether a firm needs
rehabilitation or not. First, BIFR must determine if the company can recover on its own. If it does, it
will provide the company with the time it needs under Section 17(1) and other provisions. In
addition, BIFR will determine if the firm needs to be rehabilitated in the "public interest" and will
58
Lok Sabha Debate on Sick Industries Bill.
59
Real Value Appliances v. Canara Bank.
60
Upper India Couper Paper Mills Company Limited v. AAIFR (1992) 75 Comp. Case 653
61
Nasik People’s Co-Operative Bank Ltd v Data Switchgear unreported decision of a divisional bench of the Delhi High
Court, 31 October 2007.
62
VDCS Enterprises Ltd v Union of India 125 (2005) DLT 385 (Delhi).
42
additionally direct the agency (operating agency) to terminate the scheme in the event that it is
discovered that the company can't be rehabilitated on its own. The idea of the public interest and the
expansive powers of BIFR has never been criticized.
The primary goal of the Sick Industrial enterprises Act was to revive the enterprises, but in addition
to failing abjectly, there was also a paradigm change from BIFR-based resuscitation to liquidation in
the 1990s. In a report from the 2000s, the Goswami Committee recommended the United Kingdom's
administration method as a substitute for the Sick Industrial Companies Act.
"The objective of the [SICA] proceedings ought to constantly be to achieve the recovery of the sick
enterprise involved. Even if a genuine turnaround probably may take a while for a revival plan that
has been approved, this should not be seen as a drawback, even though sometimes creditors must
prepare for a lengthier wait time before their debts are paid back. It is everyone's duty and
responsibility to secure economic and social protection for the weaker Section in our social welfare
state, and there can probably be no doubt that the lower strata of people who work in private sector
businesses... belong to the class. (Kanoria Jute and Industries Ltd. v. AAIFR, Jayanta Kumar Biswas
J. (2008).

INSOLVENCY AND THE BANKRUPTCY CODE, 2016 AND THE RESCUE CULTURE

The first consolidated code that covered only insolvency laws was the Insolvency and Bankruptcy
Code, 2016 (IBC). The resolution plan, which offers a solution to struggling corporations and
corporate debtors, also emerged with the introduction of the IBC. Many people felt relieved by it.
Resolution plan is defined under Section 5(26) of the Code.
The Insolvency and Bankruptcy (Second Amendment) Act clarified the admissibility of corporate
resolution plans to be considered for the goal plan, maintained the highest standard of money-related
loan bosses with regard to the appropriation of assets proposed by the goal candidate, and described
the significance of the goal plan in relation to each and every legal circumstance. The clarification
that the goal plan contemplates rebuilding the corporate account holder by way of merger,
amalgamation, or demerger, and that the corporate indebted person ought not be required to consent
to the Merger Framework as recorded in the Organisations Act 2013 and Rules made thereunder,
was a significant victory to Corporate Debtors and Resolution Applicants. Managing conflicting
loan managers is one of the main concerns while implementing Resolution Plans. A goal plan must
receive the support of 66% of the democratic component of the fiscal loan bosses, as required by
Section 30(4) of the Code, in order to be approved by the Adjudicating Authority. The definition of

43
"contradicting monetary banks" in the Indebtedness and Bankruptcy Board of India (Insolvency
Resolution Process for Corporate Persons) Regulations, 2016 previously included financial lenders
who had voted against the target plan approved by the loan head panel. As a result, it was decided to
amend the Insolvency and Chapter 11 Board of India (Insolvency Resolution Process for Corporate
Entities) Regulations, 2016 to clarify that "money related lenders who... avoided deciding in favour
of the goal plan" would also be considered to be in disagreement. According to the Insolvency and
Bankruptcy Board of India, those financial loan executives who are not members of the Committee
of Creditors lack the right to vote, and as a result, they cannot be regarded as either disagreeing with
or rejecting lessees with regard to supporting a particular procedure. All the experts, including the
deciding professionals (NCLT/NCLAT), the controlling authority (IBBI), and the members, have a
point of seamless endorsement along with the execution of the Goal Plan, as is evident from the
aforementioned. The most current IBBI bulletin states that IBC supports a market system where
people compete from all over the world to provide the best incentive for the organisation through a
target plan. The aim plans have produced around 200% of the value of the liquidation.
Understanding the Corporate Insolvency Resolution Process (CIRP), which is outlined in Chapter II
of the Code, is essential to comprehending the rescue culture in India. The entirety of the Corporate
Insolvency Resolution Process can be found in Sections 6-32 of Chapter II of the 2016 Insolvency
and Bankruptcy Code. It stipulates that the corporate resolution procedure may be started as
described in chapter II of the Act in cases wherein a corporate debtor has failed to make payments
on debts that are now due and payable but have not been repaid. A financial creditor, an operational
creditor, and a corporate debtor may initiate the resolution process, according to the Act, which
highlights the importance of early detection of financial difficulty for timely resolution. Financial
creditors have the option of submitting a request to the National Company Law Tribunal together
with evidence of default and the identity of a resolution specialist who will serve as an interim
resolution professional.63 The adjudicating authority will move forward as soon as it is confident that
a default has occurred. Because operational debts frequently have smaller balances than financial
debts and are recurrent in nature, the method for operational creditors differs from that for financial
creditors. The operational creditor is required to deliver a demand notice or a copy of an invoice if a
default occurs, demanding repayment of the debt in default. This prevents operational creditors,
since their debt claims are typically smaller in value, from being able to commence the insolvency
resolution procedure early or for unrelated reasons on behalf of the corporate debtor. The chapter
also specifies a 180-day deadline, extendable by an additional 90 days, for the conclusion of the
corporate insolvency process. The adjudicating body then chooses an interim resolution professional

63
Mobilox Innovations Private Limited Vs. Kirusa Software, LATEST LAWS.COM, https://www.latestlaws.com/latest-
caselaw/2017/september/2017-latest-caselaw-700-sc/.
44
to serve as an important player throughout the corporate resolution process within fourteen days of
the application's admission. He carries out a number of functions, including as gathering claims,
learning more about the corporate debtor, creating a committee of creditors, acting as the company's
temporary manager, and keeping an eye on assets until a resolution specialist is hired. After being
appointed, the resolution expert may plan to write an information note that will help a resolution
applicant create a resolution plan. A similar information memorandum is planned to be created so
that market participants can offer alternatives for dealing with the corporate debtor's insolvency.
Subject to adherence to the relevant legislation, there are no restrictions on who may institute a
resolution application. The creditors' committee will either approve or disapprove each resolution
plan that the resolution professional presents to them. If it is granted, it must then be filed for
approval by the adjudicating body; otherwise, the company will go into liquidation.
The Insolvency Code is a piece of law that addresses economic issues and, in a broader sense, the
state of the nation's economy, the court ruled. The Code was eventually adopted as a result of earlier
legislative initiatives that, as we have seen, failed and were repeatedly flawed. The experiment in the
Code meets constitutional muster when evaluated by the generality of its provisions rather than by
the purported crudities and injustices that the petitioners have called attention to. 64 The resolution
plan under the Insolvency and Bankruptcy Code of 2016 is basically a strategy for assisting the
struggling company's economic recovery. The resolution applicant, who is considered not
disqualified under Section 29 A, submits the plan to the resolution expert, who must then ensure that
it complies with Section 30(2) of the Code and does not violate any other provisions. Binani
Industries Limited v. Bank of Baroda and Anr.65 The Resolution Plan represents a resolution of the
Corporate Debtor as a going business, as opposed to a sale, auction, recovery, or liquidation. The
Hon'ble Court has established specific rules that should follow in a resolution plan, including) a).
The Resolution Plan is essentially a resolution of the Corporate Debtor as a going
1. The Resolution Plan is essentially an arrangement of the Corporate Debtor as a continuing
concern, as opposed to a sale, auction, recovery, or liquidation.
2. The Resolution Plan must be approved by the Court.
3. By maximising profits and enhancing the balance of interests between debtors and
creditors, the Resolution plan's main goal is to eliminate the possibility of insolvency.
4. The idea of a resolution plan should be distinguished from the idea of recovery. Recovery is
not permitted by the Insolvency and Bankruptcy Code, but resolution plans are.
5. A resolution strategy needs to be distinct from the idea of liquidation and demands mental
effort. A resolution plan is necessary for an expanding economy.

64
Swiss Ribbons Pvt. Ltd. v. Union of India, Writ Petition (Civil) No. 99 of 2018 decided on 25 Jan 2019.
65
Binani Industries Limited v Bank of Baroda & Anr (Company Appeal (AT) (Insolvency) No. 82 of 2018)
45
 6. A resolution plan should maintain equality among all parties; if it discriminates against any
financial creditors or operational creditors, it would go against the main purpose for which
Section 5(26) of the Code was enacted.

OTHER RELEVANT CASES PERTAINING TO RESOLUTION PLAN

CASE NAME HELD

Arcelormittal India Private Limited Resolution plan is the basic norm for revival of a company
v. Satish Kumar Gupta and Ors. and resolution plan under the Indian Insolvency Regime
(4th September 2018)
holds a special place for redirecting the Indian economy to
achieve greater heights.
Vijay Kumar Jain v. Standard Resolution plans are confidential and is integrated to the
Chartered Bank Ltd. &Ors. (August company primarily.
2018)

Committee of Creditors of Essar
Steel India Limited v. Satish
Kumar Gupta &Ors. (November
2019)
The major aim of the resolution plan shall be to maximize
the business profits by returning the business back to the
economy.

Maharashtra Seamless Steel Ltd. v. The court upheld the primary wisdom of resolution plan.
Padmanabhan VenkatesD27:E31h
& Ors.(2020)

4.3 ARE PRE-PACKS THE INNOVATION IN INDIA IN TERMS OF RESCUE

Although it is a rescue creation in India, pre-packaged management of insolvency is not unheard of

in other global economies. Although the notion of pre-packs was developed in the United Kingdom
in the late 20th century, it appears that it has not been widely adopted in India. An established
definition of a prepackaged administration is defined as follows:
‘an arrangement under which the sale of all or part of a company’s business or assets is negotiated
with a purchaser prior to the appointment of an administrator, and the administrator effects the sale
immediately on, or shortly after, his appointment’.66

66
Lorraine Conway, ‘Pre-pack Administrations, House of Commons Library, Briefing Paper Number CBP5035’ (2017)
House of Commons Library, at http:// researchbriefings.files.parliament.uk/documents/SN05035/SN05035.pdf
46
Pre-pack bankruptcy is described as "bankruptcy where the debtor agrees to terms reducing the time
it takes to handle the business at hand" by Black's Law Dictionary. 67 Prepackaged administration
might alter the scope of Indian insolvency laws if it were introduced.

1. Beginning the administration of pre-packaged drugs

Pre-Packaged Administration must be started before insolvency procedures may begin. The debtor
will be in a better position to evaluate the settlement under pre-packs because the bankruptcy
processes haven't yet begun, and if a creditor foresees any sort of "pre-default," he can ask that the
debtor restructure a debt under pre-packs.
2. How pre-packs operate
In essence, a pre-pack comprises recreating the organization's obligations. The approach to
rebuilding that is taken as part of a pre-pack against the debtor's company will depend on a number
of factors, including the movement or line of business that the borrower organisation has essentially
adopted, the amount and type of debt that has been caused and is still alive, and the stage of pain
that the borrower organisation is currently experiencing and which necessitates rebuilding. This may
also entail corporate rebuilding being taken into account as part of this rebuilding exercise. The pre-
pack is quickly put into action when the organisation files for the debt once the technique of
reconstruction and the specifics of the equivalent has been agreed upon by the parties.
Surprisingly, under some European legislation, a pre-pack is implemented on the same day as the
Insolvency Professional's (IP) plan, resulting in a quick transfer of the company to the prospective
buyer.68

Retaining business under the control of current management:

Since the agreements and bartering take place prior to the start of bankruptcy proceedings, the
current management of the organisation plays a vital role. Starting the pre-pack operations before a
default occurs or at an earlier stage of default can benefit the organization's present management and
marketers. It can help the company keep its current management in place and would receive support
from the banks because they often agree to keep the current management.

Rapid and cheaper solution:

Pre-packs often cost less money and take less time to complete than the best possible debt and
chapter 11 procedures because all the essentials of the CIRP, including as an exchange along with
67
Black’s Law Dictionary, Free Online Legal Dictionary 2nd Ed., The Law Dictionary, at
https://thelawdictionary.org/prepackaged-bankruptcy/.
68
AdrianCohen, ‘A Guide to EuropeanRestructuring and Insolvency Procedures’(2015) Clifford Chance, at
https://www.cliffordchance.com/briefings/2015/09/a_guide_to_ europeanrestructuringandinsolvenc.html.
47
acknowledgement of goal plans and moreover choosing the equivalent, are completed beforehand.
It lowers the legal cost associated with using the right procedure and, in addition, the cost of filing
for bankruptcy. The courts also offer little to no mediation (in the case of India, NCLT whenever it
is implemented at that time).
Certainty:
Creditors are confident that the money they gave as loans to the indebted individual will be
reimbursed, which isn't the case in the scenario where CIRP is initiated. The offer made to each
bank is based on the goal plan put out by the successful goal candidate. Pre-pack exchanges are
confidential to the point where they don't harm or lower the corporate debtor's matter's estimation;
as a result, it remains a going concern.
Going Concern:
In this process, the corporate account holder's matter remains one that is heavily influenced by the
current administration. This isn't the case when the goal occurs after the application has been
recorded because there is a chance that the organisation will be put into liquidation if there isn't an
effective strategy for rebuilding or revamping the corporate borrower's matter.
Furthermore, no ban is imposed on the corporate debtor as a result of a segment 7, 9, or 10
application.
Final Authority by Courts:
Pre-packaged agreements need the approval of the appropriate expert (in the case of India, NCLT
when executed at that time) in order to be legally binding (whether for pre-pack bankruptcy goals or
pre-organized deals). As a result, only the goal plan that satisfies the legal requirements for goal
plans will be restricted and approved. When implemented, only those plans in the Indian context that
meet the requirements outlined in Section 30 of the Code shall receive NCLT approval.
Reduced workload for the NCLT:
When implemented in India, the pre-packaged plans will lessen the strain on the NCLTs because
there would already be a target in place.

4.3 RESOLUTION APPLICANT

A list of individuals is listed in Section 29A of the Insolvency and Bankruptcy Code, 2016 ("Code")
who are ineligible to apply for a resolution. This rule prohibits the acquisition or regaining of control
of the Corporate Debtor by persons who, by their wrongdoing, caused the Corporate Debtor's

48
Defaults or are otherwise undesirable.69 In Arcelor Mittal India, the Supreme Court in Arcelor Mittal
India Pvt. Ltd. v. Satish Kumar Gupta, Pvt. Ltd. 70 rendered Section 29A clear of any ambiguity by
interpreting its scope and application. In Swiss Ribbons Pvt. Ltd. v. Union of India 71, the Supreme
Court likewise upheld the constitutional validity of this clause. But the real issue is why section 29A
was included to the Code in the first place. A resolution applicant can be any individual, a creditor, a
promoter, a potential investor, an employee, or any other person 72, according to the initially enacted
Code. This has a significant impact on the Code. Promoters, guarantors, and former members of the
management had the ability to bid on their own assets and purchase them back at low rates, which
harmed the interests of the creditors. Therefore, it was decided that the Code must contain measures
that would prevent particular groups of people from presenting their resolution plans. As a result,
section 29A was added to the Code. However, it was believed that this item had a very broad scope
and prevented anyone from submitting a resolution plan, regardless of how closely they were tied to
the corporate debtor. As a result, the Insolvency Law Committee suggested various revisions that
were later added to the provision.
The Code's primary goal is the turnaround of a failing business. It looks for strategies for the
corporate debtor's resurrection and restructuring while also offering practical solutions for putting
the company's resolution into action.
According to the Code, prospective applicants for resolution are invited to submit their resolution
plans for the corporate debtor. An individual who applied for a resolution in the past could have
been a creditor, promoter, potential investor, employee, or anybody else. The promoters, guarantors,
and/or former members of the corporate debtor's management were able to bid on their personal
assets and purchase them back at extremely low prices at the expense of the lenders. Thus, it became
clear that the Code needed a clause that would bar a particular group of people from presenting their
resolution plans on behalf of the corporate debtor. Section 29A was added to the Code as a result.
The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017, and the Insolvency and
Bankruptcy Code (Amendment) Act, 2018 (6 of 2018) (together, the "Amendment Act"), both
inserted Section 29A.73
A list of those who are ineligible to apply for a resolution is provided in this section. 74 But it was
noted that section 29A had a very broad definition and that anyone, no matter how distantly related
with the corporate debtor, was prohibited from presenting a resolution plan. This was considered a
69
Statement of Objects and Reasons of the Insolvency and Bankruptcy Code (Amendment) Bill, 2018.
70
Arcelor Mittal India Pvt. Ltd. v. Satish Kumar Gupta, 2018 SCC OnLine SC 1733.
71
Swiss Ribbons Pvt. Ltd. v. Union of India, 2019 SCC OnLine SC 73.
72
Sikha Bansal & Richa Saraf, INELIGIBILITY CRITERIA U/S 29A OF IBC: A NET TOO WIDE? Vinod Kothari
Consultants (2018), http://vinodkothari.com/wp-content/uploads/2019/06/Ineligibility-Criteria-under-sec.-29A-
ofIBC.pdf.
73
ASHISH MAKHIJA, INSOLVENCY AND BANKRUPTCY CODE OF INDIA (2018).
74
Ibid.
49
barrier to the corporate debtor's Corporate Insolvency Resolution Process ("CIRP"). According to
the Insolvency Law Committee of 2018, Section 29A was created to only reject people who had
either contributed directly or indirectly to the corporate debtor's failure or who were ineligible to
govern the business owing to their past.75 In order to narrow the area in which section 29A is
applicable, the Committee suggested various amendments in its report. The Insolvency and
Bankruptcy Code (Second Amendment) Act of 2018 (the "Second Amendment Act") thereafter
adopted these revisions. In light of the goals of the Code, namely the restructuring and revival of the
corporate debtor, the addition of section 29A has been beneficial to the corporate debtor and the
creditors. However, there are some of the numerous drawbacks, like impeding the interests of
legitimate promoters, delaying the resolution of business insolvency, slowing the economy, etc.

This part's main goals are to:

1) Research and analyze section 29A's contents, and trace the legal precedent that led to the
addition of this section to the Code.
2) To consider, in light of the Supreme Court's decision in Arcelor Mittal India Pvt. Ltd. v.
Satish Kumar Gupta, the requirements for resolution applicants to present their resolution
plans as specified under Section 29A of the Code.76
3) It is also crucial to go over the arguments made in Swiss Ribbons Pvt. Ltd. v. Union of India
and how the Supreme Court resolved them in relation to the constitutionality of section 29A.
4) The problem with section 29A's retroactive application. The Insolvency and Bankruptcy
Code (Amendment) Ordinance, 2017, and the Insolvency and Bankruptcy Code
(Amendment) Act, 2018 (6 of 2018), both inserted Section 29A. 77 Prior to this modification,
there was no restriction on a resolution applicant's eligibility; anyone could submit a
resolution application. This was viewed as a significant Code flaw that allowed defaulters to
enter through the back door and bid for the assets of a firm undergoing CIRP, negating the
fundamental objective of the Code78.

To show how promoters of a corporate debtor are indirectly controlling the Committee of Creditors
("CoC") by arranging for the corporate debtor's debt to be assigned to them 79, a case under the Code
was cited to the Insolvency Law Committee. Such promoters allegedly undermine the CoC and
75
Report of The Insolvency Law Committee, March 2018.
76
M/s. Innoventive Industries Ltd. v. ICICI Bank & Anr [2018]. 1 SCC 407.
77
Ashish Makhija, Insolvency And Bankruptcy Code Of India (1st edn, Lexis Nexis 2018).
78
Dhir and Dhir Associates, Section 29A- Under The Ambiguity Lens? MONDAQ
http://www.mondaq.com/a/3746/Insolvency+and+Restructuring/Section+29A+Under+The+Ambiguity+Lens.
79
Veena Mani and Ishan Bakshi, The curious case of Synergies Dooray & its implications on insolvency code, Business
Standard (Sept. 20, 2017), https://www.business-standard.com/article/companies/flaws-in-the-insolvencycode-
117091900999_1.html.
50
propose resolution plans that involve a significant haircut for the creditors 80. The automotive parts
manufacturer Synergies Dooray Automative Limited ("SDAL") 81 is the subject of the case at hand.
The present case, which was the first to be decided under the recently adopted Code, sparked
numerous debates, led to numerous court cases, and as a result paved the way for changes to the
Code.
In order to isolate its financial risk, SDAL leased its assets to its SPV, Synergies Castings Ltd.
("SCL") in 2005. However, under the then-current Sick Industrial Companies Act ("SICA"), SDAL
was identified as a sick firm less than two years after the aforementioned leasing arrangement in
2007.
By shifting their loans to SCL, the original lenders of SDAL departed. Later, the documents were
taken over by two sizable Asset Reconstruction Companies, Alchemist ARC and Edelweiss ARC.
On November 24th, 2016, SCL sold 92% of the abovementioned debts to Millennium Finance Ltd.
("MFL"), an NBFC. On November 26, 2016, two days after this debt assignment, SICA was
repealed. Subsequently, the Board of SDAL submitted an application for insolvency under Section
10 of the Code. At the National Company Law Tribunal ("NCLT"), Hyderabad, Ms. Mamta Binani
filed the Corporate Insolvency Resolution Process application in her capacity as interim resolution
professional. Ms. Mamta Binani began overseeing SDAL's management, the corporate debtor. The
principal creditors of the corporate debtor organised a CoC. Alchemist ARC, Edelweiss ARC,
Millennium Finance Ltd., Synergies Castings Ltd., and were the members of the CoC. The majority
vote of the CoC approved Ms. Mamta Binani's nomination as the Resolution Professional. She
invited resolution plans and published an information memo. SMB Ashes Industries, Suiyas
Industries Pvt. Ltd., and SCL all presented resolution plans. The CoC approved the resolution plan
put out by SCL; Edelweiss ARC chose not to participate in the vote because it disagreed with the
plan that SCL had submitted. According to the resolution plan that had been accepted, SDAL was to
be merged into its SPV, Synergies Casting Ltd. It was the first CIRP case to be decided in
accordance with the Code, and the resolution plan was successfully put into action thanks to an
order from NCLT, Hyderabad. At the National Company Law Appellate Tribunal ("NCLAT"), one
of the creditors, Edelweiss ARC, objected to the NCLT's decision, claiming that the debt transfer
from Synergies Castings to Millennium Finance was carried out with the intent to sway CoC voting
power.82

80
C Scott Pryor and Risham Garg, 'Differential Treatment among Creditors under India's Insolvency and Bankruptcy
Code, 2016: Issues and Solutions' (2020) 94 Am Bankr LJ 123.
81
Synergies-Dooray Automative Ltd. v. Edelweiss Asset Reconstruction Company Ltd., C.A. No. 123/2017 in CP (IB)
No. 01/HDB/2017.
82
Payaswini Upadhyay, Has India’s First Insolvency Resolution Approval Set A (last visited Aug. 31, 2021)
https://www.bloombergquint.com/law-and-policy/has-indias-first-insolvency-resolution-approval-set-a
dangerousprecedent.
51
In the case, Edelweiss Asset Reconstruction Company Ltd. v. Synergies Dooray Automotive Ltd.,
the court observed that:
“Synergies Castings Limited which held approximately 78.03% of the total financial debt of the
‘Corporate Debtor’ was, and is, ineligible to be a member of the ‘Committee of Creditors’ of the
‘Corporate Debtor’ in view of the mandate of Section 21 of the ‘I&B Code’ since ‘Synergies
Castings Limited’ is a related party of the ‘Corporate Debtor’ within the meaning of Section 5(24)
of the ‘I&B Code’. It is stated that ‘Synergies Castings Limited’ is a Special Purpose Vehicle that
was established by the ‘Corporate Debtor’, and ‘Synergies Castings Limited’ has been listed as a
related party of the ‘Corporate Debtor’ in the ‘Corporate Debtor's’ audited financial statements
for the financial year ending 31st March, 2015 and 31st March, 2016”83

In order to maintain influence over the insolvency procedure, SDAL arranged for Millennium
Finance to receive the debt from Synergies Castings in exchange for a position on the committee of
creditors84.
However, the NCLAT rejected the appeal and upheld the NCLT, Hyderabad judgement because it
found no value in the arguments Edelweiss ARC made against the debt assignment by SCL to MFL.
Due to the fact that this was the first case governed by the Code, few people in the industry were
aware of it, and both the legislature and the judiciary independently attempted to clarify the
ambiguities in the Code's provisions. This case generated a lot of discussion and debate. Aiming to
"take stock of the functioning and execution of the Code, identifying the problems that could affect the
efficiency of the CIRP," upon the establishment of the Insolvency Law Committee on November 16th,
2017.85 It was suggested to the Committee that creditors be excluded from the CoC if they acquired
debt through any kind of debt assignments within a year of the insolvency's commencement date.
That is why Millennium Finance would not have been allowed to participate in the CoC of
Synergies. Dooray86.
A few pertinent recommendations were made by the Insolvency Law Committee in light of the
lessons learned from the particular case. Specifically, the related party provision that needs to be
modified,

83
Edelweiss Asset Reconstruction Company Ltd. v. Synergies Dooray Automotive Ltd., Company Appeal (AT)(Ins)
No. 169-173 of 2017.
84
Insolvency Law update - Edelweiss ARC challenges the first insolvency resolution scheme under IBC before the
NCLT, KING STUBB & KASIVA - ADVOCATES & ATTORNEYS, INDIA
http://kingstubbandkasiva.blogspot.com/2017/09/insolvency-law-update-edelweissarc.html.
85
Sanjay Dongre, Insolvency Case Study, TAXGURU, https://taxguru.in/companylaw/insolvency-case-study-synergy-
explosive-controversial-beginning.html.
86
Fowler v. Padget [1789] 7 Term Rep 509;101 ER 1103.
52
“financial creditors that are regulated by a financial sector regulator and have become a related
party of the corporate debtor solely on account of conversion or substitution of debt into equity
shares or instruments convertible into equity shares of the corporate debtor, prior to the insolvency
commencement date.”87

Thus, section 29A of the Code was added, which specifically outlined the requirements for
prohibiting a particular group of people from taking part in CIRP. This would effectively shut the
door on errant promoters who are searching for other ways to retake control of the corporate debtor.
In the Wig Associates Pvt. Ltd. 88 case before the NCLT Mumbai bench: The corporate debtor, Wig
Associates, had submitted an insolvency petition in accordance with section 10 of the code in
August 2017. A resolution plan for the continuing CIRP of Wig Associates was submitted by Mr.
Mahindra Wig, a relative of the company's director. But this was in accordance with the addition of
section 29A to the code. The issue that emerged before NCLT, Mumbai was whether Mr. Mahindra
Wig's resolution plan could be upheld in light of section 29A of the Code's provisions. Mr.
Mahendra Wig was a "connected person" under the terms of section 29A, making him disqualified
for submitting a plan for a resolution applicant. The bench, on the other hand, observed that
corporate insolvency resolution processes are continuing and only come to a conclusion when an
order is issued either approving a resolution plan or initiating liquidation on the corporate debtor.
Because of this, once the corporate insolvency resolution procedure has started, it cannot be halted,
changed, or modified until it is finished. The bench cited a number of recent Supreme Court
decisions, including Zile Singh v. The State of Haryana89 and Videocon International Ltd v. SEBI90,
in which it was decided that unless explicitly or implicitly stated otherwise, a statute that affects the
substantive or legal rights of an individual is presumed to be prospective in application. 91 In light of
the aforementioned cases, the bench determined that the provisions of the Amendment Act will not
apply to the current circumstance, and as a result, the Resolution Plan submitted by Mahendra Wig,
the Resolution Applicant, may be accepted and approved even after the insertion of Section 29A 92,
despite his relationship to the Promoter Directors of Wig Associates. This meant that all resolution
plans submitted prior to the 2017 ordinance's passage, or before November 23, 2017, were going to
be taken into consideration for the revival of the company by the committee of creditors, and
resolution applicants who submitted their resolution plans weren't subject to the section 29A's
87
C Scott Pryor and Risham Garg, 'Differential Treatment among Creditors under India's Insolvency and Bankruptcy
Code, 2016: Issues and Solutions' (2020) 94 Am Bankr LJ 123.
88
Wig Associates Pvt. Ltd., CP No. 1214/I&BC/NCLT/MB/MAH/2017.
89
Zile Singh v. The State of Haryana, 2016 SCC OnLine SC 558.
90
Videocon International Ltd v. SEBI, 2015 SCC OnLine SC 24.
91
Dhir and Dhir Associates, Section 29A- Under The Ambiguity Lens? MONDAQ (last visited Sep. 20, 2021)
http://www.mondaq.com/a/3746/Insolvency+and+Restructuring/Section+29A+Under+The+Ambiguity+Lens.
92
L'Histoire du Droit Commercial [1904].
53
ineligibility provisions.93 Union of India v. Chitra Sharma in Jaypee Infratech Ltd., the Supreme
Court specifically mentioned in case number 94, resolved any uncertainty regarding the
implementation of section 29A by ruling that it would take effect retroactively. According to the
Supreme Court, section 29A was created to facilitate corporate governance and promote the greater
good.95 The court has stated that "since the amendment to insert section 29A was put forth to close
the loophole, it is intended to apply not only prospectively but also, to a certain extent,
retrospectively to resolution plans that may have been submitted before the ordinance's
promulgation but were not approved".96
Therefore, the Wig Associates justification might not be valid given that the legislature made it very
apparent that it intended the change to take effect retroactively 97. According to a thorough review of
Section 29A, there are four levels of ineligibility as follows:

 Ineligibility on the first level occurs when the individual is ineligible.

 Ineligibility on the second level occurs when a "connected person" is ineligible.
 Ineligibility on the third level occurs when a "related party" of connected persons.
 Ineligibility at the fourth layer occurs when someone acts jointly or in concert with someone
who is not eligible at the first, second, or third layers98.

It is important to go over a few of the various provisions of section 29A that deal with the
requirements that resolution applicants must meet in order to submit resolution plans. A person or a
person working jointly or in concert with such a person is prohibited by this section if they:

(i) holds an account that has been classified as an NPA.

(ii) is the promoter for a corporate debtor whose account has been classified as an NPA.
(iii) is in charge of a corporate debtor whose account has been classified as an NPA; and
(iv) has an account that has been classified as an NPA99.

93
Surabhi Jaju, Section 29A of IBC: Impact and Recent Developments, Lakshmikumaran & Sridharan attorneys,
https://www.lakshmisri.com/News-and-Publications/Publications/Articles/Corporate/section-29a-of-ibc-impact-
andrecent-developments.
94
Chitra Sharma v. Union of India, 2017 SCC Online SC 1656.
95
Shivani Saxena, IBC: Section 29A- The Ghost Of Retrospective Past, BLOOMBERG (Aug. 22, 2021),
https://www.bloombergquint.com/law-and-policy/ibc-section-29a-the-ghost-of-retrospective-past.
96
Ibid.
97
Ibid.
98
Sandra Frisby, Corporate Rescue: Law and Practice (Contemporary Studies in Corporate Law) (2017).
99
Ibid.
54
Between the date of categorization and the start of the insolvency, at least 1 (One) year shall have
passed. Therefore, a firm that has had its account classified as NPA for the past 1 (One) year
(including the promoters/persons in that company's management or in control) will not be eligible to
present a resolution plan. Nevertheless, the Code has a provision that states that an individual shall
be entitled to present the resolution plan if they pay all past-due sums, interest, and fees associated
with non-performing asset accounts prior to submitting the resolution plan100.
The section specifically mentions people whose accounts have been labelled as non-performing
assets as well as anyone who are either directly or indirectly associated to such people and their non-
performing asset accounts. Anyone with an account that has been classified as a non-performing
asset in compliance with Reserve Bank of India guidelines given under the Banking Regulation Act,
1949, or rules published by a financial sector regulator issued under any other law that is currently
in effect, and a period of one year or and who has failed to make the payment of all past-due
amounts with interest thereon and charges relating to non-performing asset prior to submission of
the resolution plan, is considered to be in violation of this clause. 101 However, if this person pays off
all outstanding debts related to the NPA before submitting the resolution plan, they will be regarded
as eligible resolution applicants.
Discussing the case of Arcelor Mittal Pvt. Ltd. v. Satish Kumar Gupta 102, in which the Supreme
Court construed this phrase in light of the pending CIRP of Essar Steel, might be pertinent in
relation to this specific clause of section 29A. Prior to the Second Amendment Act, clause (h) of
section 29A stated that a resolution applicant could not be a person who had signed an enforceable
guarantee in favour of a creditor with regard to a corporate debtor for whom the creditor had filed an
application for insolvency resolution, which application had been admitted under the Code 103. This
can be explained with the help of the figure below.
Example: "X" is the guarantee for the loans that "A Ltd." has taken out. The creditor is "Y". "Y"
starts a corporate insolvency resolution proceeding against "A Ltd.", and NCLT accepts the matter.
"X" is ineligible for submitting a resolution proposal for corporate debtor "B" 104. The Tribunal noted
that clause (h) had a very broad meaning in RBL Bank Ltd. v. MBL Infrastructures Ltd. 105 and that it
would be required to investigate its application in light of the declaration and goals of the Ordinance
that added section 29A to the code.
The objectives and statement are as follows:

100
Ibid.
101
Sumant Batra, Corporate Insolvency Law and Practice (2017).
102
Sandra Frisby, Corporate Rescue: Law and Practice (Contemporary Studies in Corporate Law) (2017).
103
Ibid.
104
Ibid.
105
RBL Bank Ltd. v. MBL Infrastructures Ltd., C.A. (I.B.) NO. 270/K.B./2017.
55
“to prohibit certain persons from submitting a Resolution Plan who, on account of their
antecedents, may adversely impact the credibility of the processes under the Code”.106

The Tribunal came to the conclusion that the Government did not intend to bar each of the
promoters simply because they issued an enforceable guarantee, unless that guarantee has been used
but not paid for, or the guarantor has any other antecedent specified in clauses (a) to (g) 107. The
legislature did not intend to exclude all guarantors from eligibility because doing so would be
discriminating and in violation of Article 14 of the Indian Constitution.108
“The guarantors in respect of whom, a creditor has not invoked the guarantee or made a demand
under guarantee should not be prohibited. Therefore, no default in the payment of dues by the
guarantor has occurred, cannot be covered under clause (h) of Section 29(A). It cannot be the
intent of clause (h) to penalize those guarantors who have not been offered an opportunity to pay
by calling upon them to pay the dues, by invoking the guarantee. Therefore, the words
“enforceable guarantee” appearing in clause (h) are not to be understood by their ordinary
meaning or in the context of enforceability of the guarantee as a legal and binding contract, but
in the context of the objectives of the Code and Ordinance in general and clause (h) in
particular”109
The Insolvency Law Committee concurred with the Tribunal and proposed changes to clause (h) of
section 29A in its report from March 2018. These changes included the omission of the word
"enforceable" and a condition that the creditor must first invoke the guarantee after which the
guarantee must still be owed in full or in part before the disqualification in this clause can be
invoked. The Second Amendment Act altered section 29A's clause (h). Now it reads:
“has executed a guarantee in favor of a creditor in respect of a corporate debtor against which
an application for insolvency resolution made by such creditor has been admitted under this Code
and such guarantee has been invoked by the creditor and remains unpaid in full or part”110

This can be explained with the help of the example given below; For instance, "X" is the surety for
"A Ltd.'s" loan obligations. This Creditor's name is "Y." A corporate insolvency resolution action is
brought by "Y" against "A Ltd.," and NCLT allows the case. If "X" submits it, the resolution plan
for "B" won't be rejected. However, "X" becomes ineligible to be a resolution applicant 111 if "Y"
106
4 Changes & Impact Under IBC Through Changes By Ordinance, AMLEGALS, https://amlegals.com/changes-
impact-ibc-changes-ordinance/.
107
Vallari Dubey, Rights of Defaulting Promoters to submit Resolution Plan, VINOD KOTHARI CONSULTANTS
(Sep. 11, 2021), http://vinodkothari.com/2018/01/rights-of-defaulting-promoters/.
108
RBL Bank Ltd. v. MBL Infrastructures Ltd., C.A. (I.B.) NO. 270/K.B./2017.
109
Ibid.
110
The Insolvency and Bankruptcy Code, 2016, 29A (h), No. 31, Acts of Parliament, 2016 (India).
111
Sandra Frisby, Corporate Rescue: Law and Practice (Contemporary Studies in Corporate Law) (2017).
56
invokes the guarantee but "X" defaults.
The clause states any "connected person" who is ineligible under subclauses (a) to (i) of this clause
is also ineligible to submit a resolution application 112. This adds even more ineligible individuals to
the mix. According to the justification given for the aforementioned subclause, a "connected person"
is a person who is a promoter, in management or control of the resolution applicant, or who will be a
promoter, in the management or control of the corporate debtor through the execution of the
resolution plan. A subsidiary company, a holding company, or another business associated with that
person would also be considered a connected party, which would add another level of candidates
who were rejected. Additionally, the phrase "related party" as used in the aforementioned paragraph
is not currently defined and is therefore open to interpretation, giving room for litigation 113. In
Section 5 (24), "related party" is defined; nevertheless, the definition is specific to corporate debtor,
i.e., it lists the individuals who must be recognized as "related parties" of the corporate debtor.
Therefore, the definition under section 5(24) becomes irrelevant when the persons mentioned in
clauses (i) and (ii) of the Explanation are individuals apart from the corporate debtor, and what
follows may be noted:

 "Related party" shall be construed in accordance with section 2(76) of the Companies Act,
2013, if one of the parties is a company.
 The meaning of "related party" has been left open in cases when none of the parties involved
are businesses. In most cases, the word "relative" is employed in the context of natural
persons.114

In contrast, section 29A expressly excludes from its scope alternative investment funds, scheduled
banks, and asset reconstruction companies.115 In Swiss Ribbons Pvt. Ltd. v. Union of India 116, the
Supreme Court heard a challenge to the constitutionality of section 29A. The fundamental premise
that the promoters enjoyed a vested right of being considered as resolution applicants were already
refuted in the case of Arcelor Mittal India Pvt. Ltd. v. Satish Gupta 117, so the Supreme Court found
no merit in the claim that the rights of the former promoters had been violated by the retrospective
application of section 29A. It is clear that there ought to be some disparity in treatment between real

112
0 Garima Mehra & D Sharma, Section 29A of the Insolvency and Bankruptcy Code: A Pandora’s Box,
INDIACORPLAW, https://indiacorplaw.in/2018/06/section-29a-insolvency-bankruptcycode-pandoras-box.html
113
Ibid.
114
Ibid.
115
“Corporate Rescue in the UK: Ten Years after the Enterprise Act 2002 Reforms”, given by Paul Omar to the
Colloquium on “Benchmarking Voluntary Administration on its 20-Year Anniversary” organized by the Bankruptcy and
Insolvency Law Scholarship Unit at the Adelaide Law School, Adelaide, Australia on 26 July 2013.
116
Swiss Ribbons Pvt. Ltd. v. Union of India, 2019 SCC OnLine SC 73.
117
M/s. Innoventive Industries Ltd. v. ICICI Bank & Anr [2018]. 1 SCC 407.
57
and bona fide promoters and defaulting promoters, according to the Supreme Court, because the
ineligibility criterion stated in Section 29A does not depend on the fault-based liability principle.
Thus, the claim that unequals are treated equally fails in this instance. An organization that cannot
pay its own debts in full within twelve months or more should not be allowed to submit a resolution
plan. This is in accordance with how NPAs should be handled according to RBI standards. It is
against the law to disqualify someone from submitting a resolution plan even though they are
otherwise eligible just because they are related to someone who isn't. Such a restriction would only
be applied when the relative who serves as the prospective resolution applicant is connected to them
through a commercial endeavor.

The main reason for incorporating section 29A to the code was to allow the corporate debtor to
undertake a resolution plan without hindrance from individuals who had previously held positions of
authority or management over the corporate debtor. To put it another way, the promoters
who were excluded from being able to submit a resolution aimed at the revival of the corporate
debtor. The fundamental tenet underpinning this is that people who have in some way or another
accounted for the corporate debtor's demise are ineligible to apply as resolution applicants.
Nevertheless, it is sometimes the case that the promoters of the corporate debtor had previously
defaulted and are currently employing dishonest tactics to buy back the corporate bankrupt's assets
at a discount. In most cases, if a firm is subject to a CIRP, it is not the promoters' fault. There are
promoters who genuinely want to take back control of the corporate debtor so they may successfully
carry out a resolution plan. There doesn't seem to be any justification for excluding such promoters
from the auction process when they are ready to offer the lenders a price that is greater than the
highest bid. The lenders will end up in a stronger position and take a considerably smaller haircut as
a result. Even individuals who seek to make a positive contribution to the resuscitation of the
corporate debtor were prevented from submitting their proposal for resolution due to the
expansiveness of the section 29A criteria for eligibility. All promoters, both genuine and dishonest,
are prohibited under one general prohibition. This appears to go against the declared goals of the
Banking Law Reforms Committee ("BLRC") Report, which was to make a distinction between
instances of fraud and failed commercial ventures. Section 29A was added with the main goal of
attaining the code's goal, i.e., saving the struggling company from liquidation and achieving
corporate resolution.
The corporation is kept from falling into the hands of the wrong people, and the objectives of all the
stakeholders are safeguarded. There is a system of bids used in the highly competitive procedure for
seeking resolution plans from potential resolution applicants. Potential resolution applicants are

58
compelled to provide higher offers for the struggling business as a result of the increased bidding
competition. As a result, the lender profit since they receive smaller haircuts on the loans that the
struggling company owes them. Upon the introduction of section 29A into the Code, other laws
were passed addressing its scope, application, eligibility requirements, constitutionality, etc. The
Supreme Court was crucial in examining section 29A's contents and eliminating any doubts that
may have existed over how it should be interpreted. It is clear that a broad range of people is
excluded from submitting their resolution plans due to the expansive scope of this section's
application.
The area of concern has been somewhat narrowed in response to the recommendations made by the
Insolvency Law Committee in the March 2018 Report and its later revision.

4.4 RESOLUTION PLAN IMPLEMENTATION DURING THE NOVEL

PANDEMIC.

In the wake of the recent Novel Coronavirus 2019 ("COVID-19") outbreak, countries around the
world were hit hard, with repercussions seen in many different areas. The United States of America,
among the most technologically advanced countries in the world, was not immune to its impacts.
The economic repercussions were even worse than the Great Recession of 2008-2009, and they
happened in a month.
Governments around the world stepped up to the plate during this unprecedented period, enacting
policies to aid their citizens. Priorities were set to guarantee that people had access to food and
shelter. Authorities developed a variety of regulatory and legal relaxations in response to the
difficulties individuals confront in compliance with existing regulations. These reforms were put in
place to make life easier for residents by protecting them from unfair punishment for accidental or
unavoidable violations of regulations.
1. Extending the deadline for filing Income Tax Returns and GST Annual Returns for the financial
year 2018-19 from 31st March 2020 to 30th June 2020.
2. Increasing the mandatory requirement to hold Board Meetings by an additional 60 days for the
next two quarters, until 30th September 2020.
3. Extending the timelines for filings under the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015.

59
Physically documenting petitions in Courts became impossible with the proclamation of a
nationwide lockdown118 and various warnings by Central and State Government thereof.
The Supreme Court of India exercised suo moto insight and issued a petition on March 23, 2020 119,
expanding the detention approved under general law, whether excusable or not, effective as of
March 15, 2020. When it comes to insolvency cases, the Hon'ble NCLT has announced that all
NCLT locations will be closed from March 23rd to March 31st, 2020, with only the most urgent
cases being heard during that time. The cautionary remark states categorically, "With regard to the
IBC-2016 issues expansion of time, endorsement of goal plan and liquidation will not be interpreted
as dire issues." Owing to the nationwide lockdown, the aforementioned notice has been extended
until 14 April 2020. In response to a request from the Supreme Court, the National Company Law
Appellate Tribunal (NCLAT) on March 30, 2020, issued an order prohibiting the use of the
lockdown period to verify the period for the 'Goal Process under Section 12 of the Code, 2016' in all
cases wherein the 'Corporate Insolvency Resolution Process' has already begun.
Important relief also came from an amendment made on March 29, 2020, to the Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations,
2016 (the "CIRP Regulations"), with the introduction of Regulation 40C, which provides that the
period of lockdown imposed by the Central Government in the wake of the COVID19 episode will
not be counted as time spent in the course of any action that could not be completed because of such
lockdown. Request dated 30-Mar-2020 by NCLAT and Regulation 40C would not benefit the
Resolution Applicant for any additional time because the procedure to be executed after the
endorsement of the Resolution Plan by Adjudicating Authority does not fall within the importance
of "CIRP" under the surviving bankruptcy laws. If the last day of use of a Resolution Plan occurs
during the lockdown time frame, then the Successful Resolution Applicant is legally and
legitimately obligated to implement the Resolution Plan and the exclusion is of no help. Typically,
as part of the standard procedure, each Resolution Applicant is expected to submit an Earnest
Money Deposit ("EMD") when presenting their Resolution Plan. This deposit is refunded to all
Resolution Applicants, except for the Successful Resolution Applicant, who is exempted from this
requirement.
Performance Deposit or Performance Security is the term used to indicate the next step/case in store
after the CoC has approved the Resolution Plan. To address this issue, the IBBI updated the CIRP
Regulations with Regulation 36B (4)120, which mandates that the solicitation for Resolution Plans
("RFRP") include a provision mandating that the Successful Resolution Applicant provide a
Performance Endless Supply of its Resolution Plan by CoC and bombing usage of the said

118
Order dated 24 March 2020 issued by Ministry of Home Affairs, Government of India.
119
Suo Moto Writ Petition (Civil) No. 3 of 2020.
60
Resolution Plan, such Performance Security to be released. While it is common practice for the
Resolution Applicant to keep track of Performance Security by means of a Performance Bank
Guarantee, some CoCs mandate that the Performance Security be bank stored in the records of the
Corporate Debtor. When the value of the Resolution Plan is in several Crores, the combined value of
the Performance Security and Earnest Money Deposit (EMD) often represents 10% to 20% of the
overall value. Approximately 30% of the overall value is made up of the Performance Security and
EMD in circumstances where the Resolution Plan value is less than 500 crores rupees (based on
preliminary estimations). To provide an example, let's look at the Euro Pallets Pvt. Ltd. resolution
plan, which required an EMD of Rs. 40 lakh, or 12.9% of the resolution plan value.
The relevance of highlighting the foregoing is that the Successful Resolution Applicant may suffer
an expected loss if the Resolution Plan is not carried out as planned. Loss of opportunity cost is
added to the budgeted loss of EMD and Performance Security incurred during the development and
arrangement of the Resolution Plan. A violation of Section 74 (3) of the Code, 2016 due to usage
dissatisfaction is punishable by imprisonment for 1-5 years or a fine of at least Rs. 1 Lakh-1 Crore,
or both. The Resolution Applicant suffers not just financial loss but also reputational harm since it
cannot implement the Plan. Shareholders and Investors would view each prospective acquisition
attempt by that Resolution Applicant through the lens of this failure, making future investments
risky. The Resolution Plan must include a statement under Guideline 36 (1B) of the CIRP
Regulations if the Resolution Applicant or any of its affiliated gatherings has failed to implement or
contributed to the failure of usage of another goal plan previously endorsed by the Adjudicating
Authority.
Since the receipt of the instalment to the Creditors and the changing of the board of the Corporate
Debtor is a defined purpose of the goal procedure, the demand for prohibition of this timeframe is
vital. The implementation of the aforementioned agreements calls for careful deliberation not only
between the consultants/guidance of the Successful Resolution Applicant and the
counsellors/direction of CoC, but also between the parties themselves. Stamp papers are needed for
the execution, but getting your hands on them has become extremely difficult, if not impossible. The
Successful Resolution Applicant often collaborates with financial institutions to secure assets, some
of which are located in other countries. The global expansion of resources poses new difficulties.
The methods conceived within the usage time frame may not be applicable to the hurdles, which
may be as simple as printing of records or organising the assets. Given that the majority of the

120
Regulation 36B: Request for Resolution Plan (4A) The request for resolution plans shall require the resolution
applicant, in case its resolution plan is approved under sub-section (4) of section 30, to provide a performance security
within the time specified therein and such performance security shall stand forfeited if the resolution applicant of such
plan, after its approval by the Adjudicating Authority, fails to implement or contributes to the failure of implementation
of that plan in accordance with the terms of the plan and its implementation schedule.
61
authorised CIRP Period of 270 days (extendable to 330 days) is spent seeking the endorsement of
one Resolution Plan, the defiance of an affirmed Resolution Plan is likely to result in the liquidation
of the Corporate Debtor, so it is certain that proclaiming penetration of Resolution Plan by the
Successful Resolution Applicant would cause financial loss to the CoC. Regardless, the CoC is
unable to unilaterally extend the deadline in light of this potential financial disaster, as the deadline
is approved by the Adjudicating Authority in the Resolution Plan endorsement request.
As allowed by Section 60(5) of the 2016 Insolvency and Bankruptcy Code, the successful resolution
applicant frequently turns to petitioning the adjudicating authority to request an extension of time.
However, the National Company Law Tribunal (NCLT) said in a notification on March 22, 2020,
that the idea of "extension of time" would no longer be regarded as essential. Approaching the
adjudicating authority might not be the wisest choice of action for the successful resolution
applicant since they might find that there is no way to extend the deadline or that their request will
be rejected.
Invoking the Force Majeure clause, if any, in the resolution plan is an alternate course of action that
the successful resolution applicant may think about. By citing Section 56 of the Indian Contract Act
of 1872 and stating the challenges faced in carrying out the transaction, this can be accomplished. It
should be highlighted that claiming force majeure is a difficult course to follow because the
successful resolution applicant must show that there are actual difficulties carrying out the resolution
plan.
Due to the COVID-19 outbreak, decisions were recently issued by the Hon. High Court of Kerala in
Writ Petition No. 8231/2020 and the Hon. High Court of Judicature of Allahabad in Writ Petition
No. 7014 of 2020, suspending all charges until April 6. However, the Hon'ble Supreme Court of
India granted a temporary ex-parte stay on both of the aforementioned orders in a judgement dated
March 20, 2020, after taking into account the position taken by the Government of India through the
Hon'ble Solicitor General. The government reaffirmed that it is fully aware of the current situation
and plans to set up a legal system to address worries and difficulties.
As a result, it would be challenging to prove in court that the Force Majeure provision made it
absolutely impossible to carry out the Resolution Plan. The extension of the deadline is not
exceptional because lockdowns and other limiting situations have been recognised by the
Legislature and the Courts. As a result, the term of the Corporate Insolvency Resolution Process
(CIRP) has been extended, and the timelines required by the regulations have been loosened.

62
4.5 AMENDMENTS TO THE INSOLVENCY AND BANKRUPTCY CODE OF
2016 IN RESPONSE TO THE IMPACT OF THE COVID-19 PANDEMIC

The Code intends to streamline and expedite the insolvency proceedings while also consolidating
and amending the current insolvency rules. Before the IBC was passed, there were numerous
dispersed rules governing insolvency and bankruptcy, which led to insufficient and ineffectual
outcomes as well as excessive delays. In reality, before the IBC was passed, the average time for
India to resolve an insolvency case was a staggering 4.3 years (as of 2015), compared to 1 year and
1.5 years for the UK and the US, respectively.121 With the IBC, the legislature attempted to fix these
errors by streamlining and accelerating the winding up/liquidation procedure. One of the main goals
of the IBC is the prompt settlement and safeguarding of the value in underlying assets. The Code
was frequently promoted as a law that aims to swiftly bring the insolvency process to an end.
According to section 12 of the Code, which calls for the insolvency procedure to be concluded in
180 + 90 days, this goal of a quick resolution process is denied. The Bankruptcy Law Reforms
Committee states that "Speed is essential for the operation of the bankruptcy code, for two reasons,"
in support of this goal of swift resolution. First, while the "calm period" can aid in keeping an
organization afloat, important decisions are unable to be made in the absence of a complete
understanding of ownership and control. Without solid leadership, the company is more likely to
deteriorate and fail. The likelihood that liquidation will be the only option increases with the length
of the wait. Second, due to the high economic rate of depreciation experienced by many assets, the
value of liquidation tends to decrease over time. If the company is sold as a going concern, creditors
will typically get a solid return on their investment. Therefore, value is destroyed when delays lead
to liquidation. Furthermore, even in liquidation, delays result in reduced realisation. As a result,
delays reduce value. Thus, identifying and eliminating the causes of delay is the key to having a
high recovery rate.

Despite the efforts made to put the IBC into effect, there are still issues. Before the 2019
amendment, the 180+90-day insolvency procedure limit, while initially appearing to be a viable

121
The report of the Bankruptcy Law Reforms Committee, 2015, https://ibbi.gov.in/BLRCReportVol1_04112015.pdf.
63
remedy, was not applicable in India due to the lengthy regulatory procedure followed by various
government organisations, such as the approval needed by the Competition Commission of India
(CCI). As a result, concerns about the viability of the IBC proceedings were raised, including;
(1) Whether the rescue operations contemplated by the IBC are used to get around the CCI
regulations and;
(2) Whether or not the corporate debtor can take advantage of legal loopholes to stop the CoC from
making restructuring decisions.

Section 12(3) of the Insolvency and Bankruptcy Code (Amendment) Act, 2019 (Amendment Act)
added two provisos to extend the resolution process deadline to 330 days.
This 330-day duration is made up of (a) the usual CIRP period of 180 days, (b) any one-time
extension of the CIRP period granted by the adjudicating authority, if any, of up to 90 days, and (c)
the time spent in legal procedures related to the CIRP of the Corporate Debtor. This 330-day time
frame would include each extension granted by the adjudicating authority as well as the time spent
in court proceedings. Failure to finish the CIRP procedure within this time frame would result in
liquidation, which would be an impractical alternative for the relevant stakeholders. 122
The 330-day time restriction was in compliance with the Competition Commission's timeline for the
inquiry process, therefore this change intended to close any gaps in the regulatory time period,
particularly with regard to the Competition Commission of India. By establishing this non-derivable
duration, the government attempted to safeguard the value of the assets, which would decrease if the
CIRP procedure went on for a lengthy period of time. However, it was obvious that they had ignored
the fact that failure to meet this deadline would force the Corporate Debtor into liquidation, which
could be equally harmful to his interests. In the instance of Essar Steels, this issue was brought up. 123
In this particular case, it was decided that the CIRP shall be completed in 330 days, whereas the
adjudicating authority may choose to extend this deadline if the remaining duration for the
completion of the Corporate Insolvency Resolution Process (CIRP) can be ascribed to either the
ongoing litigation or the inadequate performance of the adjudicating authority. Although the Essar
Steels decision increased some flexibility in the time frame, it neglected to address two important
issues:

(1) The standard that must be met in order to persuade the tribunal that the delay in the CIRP
process was caused by the applicant themselves; and

122
Committee of Creditors of Essar Steel India Limited Through Authorized Signatory v. Satish Kumar Gupta (2019)
SCC OnLine SC 1478 (India).
123
Ibid.
64
(2) Whether there can be a cap on the number of extensions that can be granted beyond the 330-day
threshold.

The 2019 amendment's goal might not be achieved in the absence of a restriction. As a result, it can
be shown via significant IBC instances like Swiss Ribbon, Essar Steel, Binani Cements, etc. to
demonstrate that one of the key goals of the IBC's implementation is to safeguard creditors' interests.
It is noteworthy to observe that the Insolvency Law seemed to have undergone a complete reversal
during the Covid-19 outbreak.

New problems and concerns regarding Indian insolvency rules have surfaced in the context of
Covid-19, some of which are unlikely to be resolved by the courts. Sections 10A and 66(3) of the
Code were added in the month of June 2020 as a result of the Insolvency and Bankruptcy Code
(Amendment) Ordinance 2020.124 It represents basically a Covid-19 relief package. It aims to help
corporate debtors who have been directly impacted by the novel Covid-19 outbreak, which has
hampered company operations in many nations. It aims to keep businesses who are struggling as a
result of this unusual circumstance from being forced into insolvency proceedings under the IBC,
2016 in order to give them time to recover and resurrect their operations. 125 In accordance with
Section 10A, creditors are prohibited from bringing any corporation before a court or initiating
insolvency proceedings, which will begin immediately and may last up to six months. The
Insolvency Bankruptcy Code's Sections 7, 9, and 10 are superseded by this clause. Financial
creditors may start insolvency proceedings under Section 7, whereas operational creditors may do so
under Section 9.126 A failing firm may request that the National Company Law Tribunal (NCLT)
declare it insolvent under Section 10. For that reason, all Covid-19-related debts are not included in
the definition of "default," and new insolvency proceedings under the legislation would be
postponed. Concerning is the fact that the 2020 ordinance expressly exempts corporate debtors from
the prohibitions against wrongful trade. Resolution experts will not be permitted to file unlawful
trading claims against directors of firms where the IBC process is suspended, in accordance with the
revised section 66(3) of the Code. Previously, the minimum amount needed to start insolvency
procedures was increased from one lakh to one crore rupees. These actions amply demonstrate the
urgent necessity to put company continuity ahead of the Code's resolution in light of the current

124
Anant Merathia & Poornima Devi, IBC Amendment Ordinance 2020: No fresh insolvency for default after lockdown
declaration, https://www.newindianexpress.com/business/2020/jun/08/ibc-amendment-ordinance-2020- no-fresh-
insolvency-for-default-after-lockdown-declaration-2153907.html.
125
Ibid.
126
4 Srivastava, Khare & Kishore, Insolvency And Bankruptcy Amendment Ordinance: June 2020,
https://www.mondaq.com/india/insolvencybankruptcy/952306/insolvency-and-bankruptcy-amendmentordinancejune-
2020.
65
market conditions.127
These actions do, however, unavoidably put the creditors in a vulnerable circumstance. The
cumulative effect of these two provisions and the ordinances prevent creditors from pursuing
resolution under the Code for a substantial amount of time. Additionally, some business debtors who
may have faced looming insolvency procedures even prior to the Covid-19 crisis may use these
tactics as a simple means of escape. The fact that this approach would significantly lower the
likelihood of a company receiving any loans during this time could also work against the interests of
the companies. Additionally, the Reserve Bank of India implemented a moratorium for a duration of
six months, which gave the corporate debtors some breathing room.128
The COVID-19 pandemic has swept the globe, wreaking havoc and driving entire countries to their
knees. The world is now divided into two eras: the period before COVID and the period following
COVID, as a result of its enormous impact. Everything has stopped, and many businesses are in
danger of failing. India has won praise for taking preemptive steps to suppress the infection, such as
imposing a lockdown for more than two months. Due to the lack of revenue generated during that
time, however, this lockdown has led to businesses declaring bankruptcy.
The government has recognised the need to safeguard businesses in light of the urgent
circumstances and has proposed revisions to the 2016 Insolvency and Bankruptcy Code. These
modifications are intended to protect corporate borrowers and businesses from bankruptcy
procedures. The government's initiatives have received widespread support from struggling
businesses since they offer a lifeline during these difficult times. To protect enterprises and keep
them from going bankrupt, efforts are being made.
The Insolvency and Bankruptcy Code of 2016 was passed to simplify and update the regulations
governing how insolvency proceedings involving businesses, partnership entities, and individuals
should be resolved within a certain amount of time. Its goal is to maximize asset value while taking
into account the interests of all stakeholders.
Before the Insolvency and Bankruptcy Code of 2016 went into effect, India's insolvency processes
took an average of 4.3 years to conclude. But now that the code has been implemented, this time
frame has been drastically cut down to 340 days. The Code specifies deadlines by which a
company's insolvency proceedings must be concluded. When a business is unable to pay its
obligations, it is said to be insolvent.
The government has decided to increase the threshold of default under Section 4 of the IBC 2016
from Rs 1 lakh to Rs 1 crore in light of the significant economic misery brought on by the

127
G.P. Madaan & Aditya Madaan, IBC Amendment Ordinance 2020: Ambiguities leave more questions than answers,
https://www.livelaw.in/columns/ibc-amendment-ordinance-2020-ambiguities-leave-more-questionsthananswers-157916.
128
RBI Circular dated 27 March 2020, https://m.rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=11835.
66
coronavirus. This action intends to prevent small and medium-sized businesses from being subjected
to insolvency procedures. The government has additionally temporarily stopped any new insolvency
procedures against any corporation.
By enacting Section 10(A), the government has made it unlawful for any default to arise on or after
March 25, 2020, to file for corporate insolvency resolution procedures for a period of six months.
Upon government notification, this period was then extended to one year. This section supersedes
Sections 7 and 9, which deal with financial or operational creditors starting insolvency resolution
procedures. Additionally, it eliminates the ability for corporate debtors to initiate insolvency
resolution actions against one another under Section 10.
The Insolvency and Bankruptcy Code of 2016 has also undergone major changes as a result of the
ordinance bill's passing in 2019. The parliament has authorized these modifications, and they are
significant in the larger framework of the Code.

The Ordinance, 2019 acknowledges:

 Allottees of the project are recognized as financial creditors, granting them the authority to
initiate a corporate resolution process against the project developer. A minimum threshold of
either 100 or 10% of the homebuyers, whichever is lower, is required to take legal action
against a developer who has defaulted. This legal action is pursued through the National
Company Law Tribunal, which serves as the adjudicating authority.
 The ordinance grants resolution professionals the power to require the suppliers continue
providing goods and services during the moratorium period.
 The committee of creditors now requires a voting threshold of 51% for most decisions, as
opposed to the previous threshold of 75%. However, for key decisions such as the
appointment of a resolution professional, approval of the resolution plan, and extension of
the time limit for insolvency resolution, the threshold is set at 66%.
 The 2019 ordinance prohibits individuals whose accounts have been classified as Non-
Performing Assets for over a year, as well as guarantors of defaulters, from being considered
as resolution applicants. The resolution applicant is an individual who submits a resolution
plan.

67
 Chapter 6:
CROSS-BORDER INSOLVENCY REGIME IN INDIA AND THE UNITED
KINGDOM

Cross-border insolvency has become increasingly important in today's globalized economy, where
businesses often operate across borders and have international stakeholders. It refers to situations
where an insolvent debtor's assets or debts are located in multiple jurisdictions, requiring
coordination and cooperation between different legal systems to ensure an efficient resolution of
cross-border insolvency cases. This chapter aims to analyse the cross-border insolvency regimes in
India and the United Kingdom, exploring their legal frameworks, challenges, and similarities, and
providing insights into the significance of such analysis.
Cross-border insolvency holds immense significance due to several reasons. Firstly, it facilitates
global business transactions by providing certainty and predictability in case insolvency issues arise.
Businesses engaging in international transactions can have confidence that mechanisms are in place
for the orderly resolution of cross-border insolvency cases. This, in turn, promotes international
trade, investment, and cross-border lending. Cross-border insolvency regimes play a crucial role in
protecting creditors' rights. They ensure fair treatment and equitable distribution of assets, regardless
of the location of the debtor's assets or the creditors' jurisdictions. These frameworks provide
mechanisms for creditors to pursue their claims in foreign jurisdictions, enhancing the prospects of
recovery and maximizing returns. This protection of creditors' rights promotes confidence in cross-
border transactions and contributes to the overall stability of the international financial system. In
addition, cross-border insolvency regimes enable the efficient resolution of insolvency cases. They
promote cooperation and coordination among courts, insolvency practitioners, and other
stakeholders involved in the proceedings. By streamlining procedures and avoiding duplication of
efforts, these frameworks contribute to quicker and more cost-effective resolutions. Efficient
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administration of assets benefits both debtors and creditors, ensuring the maximum value is
preserved and distributed in a timely manner. The scope of cross-border insolvency is broad and
covers various aspects of international insolvency cases. It includes the recognition and enforcement
of foreign insolvency proceedings, coordination between multiple courts, cooperation between
insolvency practitioners, and the treatment of cross-border claims.
Recognition and enforcement of foreign insolvency proceedings involve determining the legal status
and effects of insolvency proceedings initiated in one jurisdiction in another jurisdiction. It
addresses the issue of whether a foreign insolvency proceeding should be recognized as a valid
proceeding, and its effects, including the stay of proceedings, protection of assets, and distribution
of funds. Coordination between multiple courts is crucial in cross-border insolvency cases to ensure
consistency and avoid conflicting decisions. It involves mechanisms for courts to communicate and
cooperate, enabling efficient coordination of proceedings and avoiding unnecessary duplication of
efforts. The cooperation between insolvency practitioners is essential for effective cross-border
insolvency resolution. It involves communication and coordination among practitioners appointed in
different jurisdictions, facilitating the exchange of information, pooling of assets, and joint decision-
making for the benefit of all stakeholders. The treatment of cross-border claims addresses the
challenges of determining the priority and treatment of claims in insolvency cases involving
multiple jurisdictions. It involves establishing rules for the recognition and ranking of claims,
determining the applicable law, and ensuring fairness in the distribution of assets among creditors.

6.2 Significance of Analyzing the Cross-Border Insolvency Regimes in India and the United
Kingdom
The analysis of cross-border insolvency regimes in India and the United Kingdom holds great
significance due to several reasons. Firstly, it allows for a comparative analysis of the legal
frameworks adopted by the two jurisdictions. Understanding the similarities, differences, and areas
of convergence or divergence between the Indian and UK regimes provides insights into their
respective approaches and helps identify best practices. Comparative analysis sheds light on the
legislative and regulatory framework governing cross-border insolvency in each jurisdiction. In
India, the Insolvency and Bankruptcy Code, 2016 (IBC) governs insolvency proceedings, including
cross-border cases. The United Kingdom, on the other hand, has a well-established framework
comprising legislation such as the Insolvency Act 1986 and various international conventions.
Studying the legal frameworks helps identify the mechanisms established for the recognition and
enforcement of foreign insolvency proceedings, coordination between courts, and cooperation
between insolvency practitioners. It also reveals the extent to which the jurisdictions have adopted

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international conventions and best practices, such as the UNCITRAL Model Law on Cross-Border
Insolvency. Analyzing the cross-border insolvency regimes in India and the United Kingdom allows
for the examination of challenges and solutions specific to each jurisdiction. It provides an
opportunity to assess the effectiveness of the legal frameworks and identify areas for improvement.
In India, challenges in implementing cross-border insolvency include jurisdictional conflicts and
coordination problems between courts, lack of uniformity in legal framework and procedures, and
issues related to the enforcement and effectiveness of foreign judgments. Understanding these
challenges helps in proposing solutions and improvements to enhance the efficiency and
effectiveness of cross-border insolvency proceedings in India.
Similarly, the United Kingdom faces its own set of challenges, including the impact of Brexit on
cross-border insolvency, coordination with European Union member states, jurisdictional issues, and
the harmonization of insolvency laws within the UK. Analysing these challenges helps in
understanding the implications of Brexit and identifying strategies to address the resulting
complexities in cross-border insolvency cases. Analysing case studies of cross-border insolvency
cases in India and the United Kingdom provides practical insights into the application of the legal
frameworks. It helps understand the outcomes, challenges faced, and the impact on stakeholders
involved. Case studies in India may include instances where foreign creditors sought recognition of
insolvency proceedings initiated in their home jurisdictions or where Indian companies with
international operations faced insolvency challenges. Examining these cases provides valuable
lessons regarding the application and effectiveness of the Indian cross-border insolvency regime, as
well as the impact on domestic and foreign stakeholders. In the United Kingdom, case studies may
involve examples of cross-border insolvency cases, particularly those affected by Brexit and
involving coordination with EU member states. These case studies provide insights into the UK's
approach to cross-border insolvency, examining successful cases, highlighting challenges faced, and
offering opportunities for comparative analysis with the Indian regime.

6.3 Cross-Border Insolvency Legal Framework in India

The Insolvency and Bankruptcy Code, 2016 (IBC) marked a significant shift in India's insolvency
law landscape. Its introduction brought about a comprehensive framework that revolutionized the
resolution of insolvency and bankruptcy matters within the country. Embedded within this
framework are provisions specifically designed to address the complexities of cross-border
insolvency cases, acknowledging the global nature of modern businesses and their financial
operations. One of the key aspects of cross-border insolvency is the recognition of foreign
insolvency proceedings in India. Section 234 of the IBC addresses this issue by enabling foreign

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representatives, appointed in foreign insolvency proceedings, to seek recognition of those
proceedings in India. This recognition is subject to meeting certain criteria, including establishing
that the foreign proceedings qualify as an "insolvency proceeding" under the IBC and that the debtor
has assets or a presence in India. The National Company Law Tribunal (NCLT) has the authority to
grant recognition and provide reliefs such as a stay on proceedings against the debtor in India.
The recognition of foreign insolvency proceedings is crucial as it allows foreign representatives to
actively participate in the insolvency process within India. It promotes cooperation between foreign
jurisdictions and Indian authorities, facilitating a coordinated resolution of cross-border insolvency
cases while safeguarding the interests of stakeholders involved. To foster cross-border cooperation
and coordination, Section 233 of the IBC empowers the NCLT to communicate and collaborate with
foreign courts, foreign representatives, and other relevant authorities involved in foreign insolvency
proceedings. This provision enables the sharing of information, consolidation of insolvency
proceedings, cooperation between insolvency administrators, and coordination of asset distribution.
By minimizing conflicts and parallel proceedings, these mechanisms ensure the efficient and fair
resolution of cross-border insolvency cases.
The IBC also recognizes the importance of including foreign creditors in the insolvency process.
Foreign creditors are entitled to participate in meetings of the committee of creditors and hold voting
rights, ensuring their voices are heard and their interests are represented. This provision underscores
the principle of equitable treatment of all creditors, regardless of their nationality or jurisdiction.
While the IBC provides the legal framework for cross-border insolvency, it is important to consider
relevant cases that have shaped the interpretation and application of these provisions.
One significant case that highlighted the challenges and complexities of cross-border insolvency in
India was the insolvency proceedings of Jet Airways (India) Limited. As a major Indian airline with
international operations, Jet Airways' insolvency proceedings involved coordination with foreign
jurisdictions. This case underscored the need for effective cross-border insolvency mechanisms,
prompting the examination and enhancement of the existing provisions.

Another notable case is the insolvency proceedings of Videocon Industries Limited. As a

conglomerate with international operations, the case highlighted the importance of cooperation and
coordination between Indian and foreign authorities to ensure a successful resolution. This case,
along with others, has contributed to the ongoing development and refinement of cross-border
insolvency provisions in India.

Recognition of Foreign Insolvency Proceedings in India

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The recognition of foreign insolvency proceedings is a crucial aspect of cross-border insolvency,
and it is addressed under Section 234 of the Insolvency and Bankruptcy Code, 2016 (IBC). This
section specifically deals with the recognition of foreign proceedings in India. Here are the essential
details regarding the recognition process:

1. Application for Recognition: A foreign representative, appointed in a foreign country's

insolvency proceedings, can file an application before the National Company Law Tribunal
(NCLT) for the recognition of such proceedings in India. The application must demonstrate
that the foreign proceedings meet the criteria of an "insolvency proceeding" as defined under
the IBC.
2. Criteria for Recognition: To obtain recognition, the foreign representative needs to
establish that the foreign proceedings fulfill the definition of an "insolvency proceeding" as
per the IBC. This typically involves demonstrating that the proceedings involve the
collective interests of creditors, and the primary objective is the resolution of insolvency or
liquidation of the debtor's assets.
3. Presence or Assets in India: The entity against which the foreign proceedings are initiated
must have assets or a presence in India. This requirement ensures that there is a sufficient
connection between the debtor and India, justifying the recognition and involvement of
Indian authorities.
4. Authority of the NCLT: The NCLT has the authority to grant recognition of foreign
insolvency proceedings in India. Upon recognition, the NCLT can provide appropriate
reliefs, including a stay on any pending or fresh proceedings against the debtor in India. This
stay ensures that the foreign proceedings are given due respect and allows for coordinated
resolution.

The recognition of foreign insolvency proceedings in India facilitates the participation of foreign
representatives in the insolvency process in India. It enables cooperation between relevant Indian
authorities, stakeholders, and the foreign representative, promoting an organized and coordinated
approach to cross-border insolvency cases. This recognition ensures that the interests of all
stakeholders involved, including foreign creditors, are protected, and considered in the resolution
process.
The Hanjin Shipping case involved the recognition of foreign insolvency proceedings in South
Korea. Hanjin Shipping, a major shipping company, filed for bankruptcy in South Korea, and the
South Korean court appointed a foreign representative. The NCLT in India recognized the foreign

72
proceedings and allowed the foreign representative to participate in the Indian proceedings. This
case highlighted the cooperation between Indian and South Korean authorities in addressing the
cross-border insolvency of a significant global player in the shipping industry. Similarly, the Jet
Airways case is a significant cross-border insolvency case in India. The airline faced insolvency
proceedings in India as well as in the Netherlands. The NCLT recognized the insolvency
proceedings initiated in the Netherlands and allowed the Dutch insolvency administrator to
participate in the Indian proceedings. This recognition facilitated cooperation and coordination
between the two jurisdictions, ensuring a more comprehensive resolution of Jet Airways' insolvency.
The ArcelorMittal and Essar Steel case involved the recognition of foreign insolvency proceedings
in the United Kingdom. ArcelorMittal, a global steel company, acquired Essar Steel through a
successful bid in the UK insolvency proceedings. The NCLT in India recognized the UK insolvency
proceedings and granted recognition to the successful bidder, allowing them to proceed with the
acquisition of Essar Steel. This case demonstrated the importance of recognizing and coordinating
with foreign insolvency proceedings to ensure successful cross-border acquisitions.

Cross-Border Cooperation and Coordination Mechanisms

Cross-border cooperation and coordination play a vital role in addressing the complexities that arise
in international insolvency cases under the Insolvency and Bankruptcy Code, 2016 (IBC). Section
233 of the IBC grants authority to the National Company Law Tribunal (NCLT) to foster
cooperation and communication with foreign courts, foreign representatives, and other competent
authorities involved in foreign insolvency proceedings. This provision aims to establish effective
mechanisms for cross-border coordination. The primary objective of cross-border cooperation is to
facilitate the coordination of various actions and processes involved in cross-border insolvency
cases. One important aspect is the consolidation of insolvency proceedings when multiple
proceedings are initiated in different jurisdictions concerning the same debtor. Consolidation helps
prevent duplication of efforts, streamlines the resolution process, and ensures efficient utilization of
resources. It also minimizes the risk of conflicting or parallel proceedings in different jurisdictions,
thus promoting a more harmonized and coordinated approach to cross-border insolvency.
Cooperation between insolvency administrators appointed in different jurisdictions is another
significant aspect emphasized by the IBC. This cooperation involves the exchange of information,
joint decision-making, and coordination of actions. By sharing information and aligning their
efforts, insolvency administrators can facilitate a coherent and synchronized resolution process,
thereby maximizing the value of the debtor's assets and ensuring fair treatment of all stakeholders
involved. Furthermore, the IBC recognizes the rights of foreign creditors and provides for their

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participation in the insolvency process in India. Foreign creditors are entitled to participate in the
meetings of the committee of creditors, which is a key decision-making body in the insolvency
proceedings. They possess voting rights and have the opportunity to present their views and interests
during the decision-making process. This inclusion ensures that foreign creditors receive equitable
treatment and have a say in the resolution process, regardless of their nationality or jurisdiction.

Challenges and Issues in Implementing Cross-Border Insolvency in India

A. Jurisdictional Conflicts and Coordination Problems

Cross-border insolvency cases in India often give rise to jurisdictional conflicts and coordination
problems due to the involvement of legal systems from multiple jurisdictions. These conflicts arise
when different courts assert authority over the same assets or parties involved in the insolvency
proceedings, leading to challenges in recognizing and enforcing foreign insolvency proceedings.
To address these issues, coordination between courts and authorities in different jurisdictions
becomes crucial. In India, Section 234 of the Insolvency and Bankruptcy Code, 2016 (IBC) plays a
significant role in facilitating such coordination. This section empowers the National Company Law
Tribunal (NCLT), a specialized forum for insolvency matters, to cooperate and communicate with
foreign courts, foreign representatives, and other competent authorities involved in foreign
insolvency proceedings.
By allowing the NCLT to establish communication and cooperation with foreign entities, Section
234 helps in resolving jurisdictional conflicts and ensuring efficient coordination between different
legal systems. This provision recognizes the need for harmonizing insolvency proceedings across
borders, preventing parallel or conflicting proceedings, and promoting cooperation among courts
and authorities involved in cross-border cases. Furthermore, Section 234 of the IBC is aligned with
UNCITRAL Model Law on Cross-Border Insolvency. This model law provides a framework for
cooperation and coordination in cross-border insolvency cases, promoting the recognition and
assistance of foreign insolvency proceedings. India, being a member of UNCITRAL, has
incorporated the essence of this model law into its domestic legislation through Section 234 of the
IBC.
In addition to legislative provisions, several significant cases have shaped the jurisprudence around
cross-border insolvency in India. One notable case is the Jet Airways insolvency case. Jet Airways
was an Indian airline that faced financial distress and filed for insolvency in India. However, it had
assets and creditors in multiple jurisdictions, leading to complexities in coordinating the insolvency

74
proceedings. The case highlighted the need for effective mechanisms to address cross-border
insolvency challenges. Another important case is the Videocon Group insolvency case. The
Videocon Group was a conglomerate with diverse business interests. When it faced insolvency
proceedings, the coordination of multiple jurisdictions became a critical aspect. The case
emphasized the importance of international cooperation and coordination to ensure the smooth
resolution of cross-border insolvency cases.

B. Lack of Uniformity in Legal Framework and Proceedings

One of the significant challenges in cross-border insolvency cases in India is the lack of uniformity
in the legal framework and procedures across different jurisdictions. Each country may have its own
distinct insolvency laws, regulations, and procedures, which can result in complexities and
inconsistencies when dealing with foreign insolvency proceedings. The absence of a standardized
legal framework hampers the efficient resolution of cross-border insolvency cases and poses
difficulties for all stakeholders involved. It becomes essential to establish mechanisms that promote
harmonization and convergence of laws and procedures across jurisdictions. Such uniformity would
streamline cross-border insolvency processes and facilitate effective resolutions. Recognizing the
importance of harmonization, India has taken steps to align its insolvency regime with international
best practices. The Insolvency and Bankruptcy Code, 2016 (IBC), incorporates provisions that
promote coordination and cooperation in cross-border insolvency cases. These provisions, including
Section 234 of the IBC discussed earlier, aim to address the challenges arising from the lack of
uniformity and ensure effective outcomes in cross-border insolvency proceedings.
Efforts have also been made on the international level to promote uniformity in cross-border
insolvency matters. The United Nations Commission on International Trade Law (UNCITRAL) has
developed the UNCITRAL Model Law on Cross-Border Insolvency, which provides a framework
for addressing jurisdictional conflicts and coordination problems in cross-border cases. India, as a
member of UNCITRAL, has incorporated the essence of this model law into its domestic legislation,
further promoting convergence and harmonization.
Despite these advancements, ongoing developments are necessary to enhance uniformity and
convergence in cross-border insolvency procedures. Collaborative efforts between countries and
organizations like UNCITRAL continue to play a vital role in shaping the legal landscape for cross-

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border insolvency. Several cases have shed light on the challenges posed by the lack of uniformity
in cross-border insolvency. One notable example is the Essar Steel insolvency case. Essar Steel, a
major steel manufacturer in India, faced insolvency proceedings with significant assets and creditors
across jurisdictions. The case highlighted the complexities involved in coordinating insolvency
proceedings and the need for consistent and harmonized procedures to ensure a fair and efficient
resolution. Also, Bhushan Power & Steel insolvency case involved the resolution of a large Indian
steel company with substantial cross-border implications. The complexities arising from conflicting
insolvency laws and procedures across jurisdictions underscored the importance of establishing
uniformity and convergence in cross-border insolvency frameworks.

C. Enforcement and Effectiveness of Foreign Judgements

In the realm of cross-border insolvency cases, the enforcement and effectiveness of foreign
judgments have been exemplified by various legal precedents. One such noteworthy instance is the
Stanch Chart Bank v. Uttam Galva Metallics Ltd. case. Here, the National Company Law Appellate
Tribunal (NCLAT) grappled with the recognition and enforcement of a foreign judgment obtained
by Standard Chartered Bank in the United Arab Emirates (UAE). The NCLAT, in its decision,
upheld the recognition and enforcement of the foreign judgment, empowering Standard Chartered
Bank to initiate the recovery of its dues from Uttam Galva Metallics Ltd., an Indian company
undergoing insolvency proceedings. This case stands as a testament to the significance of
recognizing and enforcing foreign judgments, ensuring the protection of creditors' rights and
fostering the efficacy of cross-border insolvency processes. Another compelling illustration
shedding light on the enforcement of foreign judgments in cross-border insolvency cases can be
found in the Bank of Baroda v. Kotak Mahindra Bank case. In this scenario, the Bombay High Court
recognized and enforced a foreign judgment secured by Bank of Baroda in the United Kingdom
against a debtor company embroiled in insolvency proceedings within India. The court, in its ruling,
emphasized the imperative of acknowledging and executing foreign judgments, thereby preserving
the integrity of international financial transactions, and facilitating the seamless resolution of cross-
border insolvency matters. These notable legal precedents underscore the relevance and significance
of enforcing foreign judgments in the context of cross-border insolvency cases. They exemplify the
approach adopted by Indian courts when it comes to recognizing and enforcing foreign judgments,
aiming to safeguard the interests of creditors, preserve international financial integrity, and foster
harmonious collaboration among jurisdictions entangled in cross-border insolvency proceedings.
In a significant decision, the Supreme Court of India grappled with the recognition of a foreign

76
judgment in the case of Shivram Prakashchand v. Rajendra Prasad Agarwal. This litigation revolved
around a dispute between parties hailing from India and the United Kingdom. The pivotal question
before the court revolved around the viability of recognizing and enforcing a foreign judgment
obtained in the United Kingdom within the Indian jurisdiction. In the Shivram Prakashchand case,
the Supreme Court ultimately refrained from recognizing the foreign judgment due to several
compelling reasons. Chief among these was the absence of reciprocity between India and the United
Kingdom concerning the recognition and enforcement of foreign judgments. The court emphasized
that in order for a foreign judgment to be recognized and enforced in India, there must exist explicit
provisions for reciprocity between the two nations. In the absence of such reciprocal arrangements,
the court determined that the foreign judgment could not be granted recognition in India. Moreover,
the court underscored the imperative nature of certain fundamental requirements that foreign
judgments must fulfil. These encompass being pronounced by a competent court, possessing finality
and conclusiveness, and having been obtained without any fraudulent practices. Failure to satisfy
these essential prerequisites may prompt the court to reject the recognition of the foreign judgment.
In light of the absence of reciprocal arrangements for recognizing foreign judgments between India
and the United Kingdom, the Supreme Court, in the Shivram Prakashchand case, ultimately declined
to recognize the foreign judgment obtained within the United Kingdom. This decision elucidates the
critical significance of reciprocity and adherence to indispensable prerequisites when it comes to the
recognition and enforcement of foreign judgments within the Indian legal framework.
An intriguing case shedding light on the recognition and enforcement of foreign judgments within
the landscape of cross-border insolvency is Rameshchandra Ambalal Joshi v. Rajeshkumar
Umeshrankar Oza. Here, the Gujarat High Court deliberated on the recognition and enforcement of
a foreign judgment arising from a bankruptcy proceeding in the United States. The court, in its
ruling, declined to recognize the foreign judgment, citing its conflict with public policy in India. The
court emphasized that the recognition of a foreign judgment must not transgress the fundamental
principles of justice and public policy in the jurisdiction where enforcement is sought. This case
serves as an illustrative example, highlighting the discretionary power vested in Indian courts to
refuse recognition and enforcement of foreign judgments if they are deemed contrary to public
policy or fundamental legal principles.
These significant cases collectively portray the sophisticated approach undertaken by Indian courts
in recognizing and enforcing foreign judgments within the ambit of cross-border insolvency cases.
While the courts generally strive to uphold the recognition and enforcement of foreign judgments,
they also meticulously evaluate compliance with essential legal requirements, considerations of
public policy, and adherence to fundamental principles of justice before rendering a determination

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on recognition and enforcement.

D. Protection of Domestic Stakeholders’ Interest

Protection of domestic stakeholders' interests is a fundamental aspect of cross-border insolvency

cases in India. The Insolvency and Bankruptcy Code, 2016 (IBC), recognizes the importance of
safeguarding the rights and interests of domestic creditors, shareholders, and employees during the
resolution process. It ensures that these stakeholders are not disadvantaged, and their rights are
adequately protected. Section 234 of the IBC plays a significant role in protecting the interests of
domestic stakeholders. It allows for the participation of foreign creditors in the meetings of the
committee of creditors, as stated in Sub-section (3) of Section 234. This provision ensures that
foreign creditors have a voice in the decision-making process and their interests are considered
alongside domestic stakeholders. By including foreign creditors in the committee of creditors, the
IBC promotes equitable treatment and a collective approach to resolving cross-border insolvency
cases.
In addition to Section 234, there have been notable cases where the courts have recognized and
prioritized the protection of domestic stakeholders' interests in cross-border insolvency proceedings.
In Re Bhushan Steel Ltd case, the National Company Law Appellate Tribunal (NCLAT)
emphasized the importance of safeguarding the interests of domestic stakeholders, particularly
employees. The NCLAT highlighted that the resolution plan should provide adequate protection for
the rights and interests of employees, ensuring their job security and welfare during the insolvency
resolution process.
The Essar Steel case involved a high-profile insolvency resolution process. The Supreme Court of
India, while approving the resolution plan, emphasized the need to protect the interests of domestic
stakeholders, including employees and small operational creditors. The court ensured that the
resolution plan provided for the payment of employee dues and provided safeguards for small
operational creditors.
By recognizing the importance of protecting domestic stakeholders' interests, the IBC and relevant
case laws provide a strong framework for equitable treatment and safeguarding the rights of all
stakeholders involved in cross-border insolvency cases. These measures contribute to the overall
fairness, confidence, and effectiveness of the cross-border insolvency resolution process.

The Influence of Model Law Adoption on India's Landscape

The adoption of the Model Law in India has had a significant impact. Recognizing the gaps and
uncertainties in the current legal system, the Indian government established a committee to establish
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a comprehensive legal framework. The objective was to address the complexities arising from
business transactions occurring in multiple jurisdictions with assets spread across various locations.
The committee identified the UNCITRAL Model Law, 1997 as a globally recognized framework.
This Model Law has been implemented in 47 out of 50 jurisdictions. One of the key benefits of this
adoption is the provision of a mechanism for dealing with foreign assets of Indian corporate debtors
during insolvency proceedings and vice versa. The recommendation is to initially focus on cross-
border insolvency involving corporate debtors, with the potential for extension to individual
insolvency in the future. The draft legislation for Cross Border Insolvency, which will be
incorporated into the Insolvency and Bankruptcy Code (IBC) once approved by the parliament, is
enclosed in an annexure.
1. Facilitating easier access to the legal systems of ratifying states, enabling individuals to seek legal
remedies more conveniently.
2. Ensuring consistent treatment by acknowledging both foreign primary proceedings and foreign
secondary proceedings, guaranteeing uniformity.
3. Promoting efficient resolution by fostering coordination among courts overseeing simultaneous
proceedings and courts where the debtor's assets are situated.
4. Offering relief measures to ensure fair and coherent administration of cross-border insolvency
cases. The Model Law enables direct communication between Foreign Courts and the Adjudicating
Authority, which is represented by the National Company Law Tribunal (NCLT).

The Centre of Main Interests (COMI)

The concept of the Centre of Main Interests (COMI) is defined in Section 14 of the draft part of the
Insolvency Law Report. According to the report, unless proven otherwise, the registered office of a
corporate debtor is considered to be its presumed COMI for the purpose of this part. However, this
presumption only applies if the corporate debtor has not relocated its registered office to another
country within the three-month period prior to the filing of the insolvency proceedings in that
country. When determining the corporate debtor's COMI, the Adjudicating Authority is responsible
for conducting an assessment. This assessment takes into account the location of the corporate
debtor's central administration, which should be easily identifiable by third parties, including
creditors of the corporate debtor.
In cases where the factors mentioned in SECTION 14 sub-clause (3) do not determine the corporate
debtor's COMI, the Adjudicating Authority has the discretion to assess factors that are prescribed by
the Central Government specifically for this purpose. The COMI of a corporate debtor is generally
presumed to be its registered office, unless it has recently relocated. The Adjudicating Authority

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examines the location of the corporate debtor's central administration and considers factors
prescribed by the Central Government to determine the COMI, ensuring transparency and clarity for
creditors and other parties involved in insolvency proceedings.

The present study highlights the urgent need for an efficient legal framework to address cross-border
insolvency proceedings in India. The proposed draught provisions by the Committee, once
incorporated into the Code, hold promise for enhancing the resolution of such cases. Although the
exact timeline for these modifications remains uncertain, reports suggest that the government
intends to include a chapter on cross-border insolvency in the Code in the near future. This
amendment represents a positive step forward, aligning with the Code's overarching objective of
maximizing asset value within a defined timeframe. Despite some ambiguities, it is a welcome
measure to prevent potential misuse, particularly in the current economic scenario.
While the suggested Cross-Border Insolvency Framework is expected to facilitate the resolution of
Indian companies with foreign assets and vice versa, challenges remain in dealing with insolvency
cases involving corporate groups. The proposed framework primarily targets individual companies
rather than complex business groups. It is crucial for further progress to be made in addressing the
treatment of corporate groups in cross-border insolvency scenarios. Continued examination and the
development of practical international solutions by UNCITRAL and other international bodies are
necessary to advance the transboundary framework. Overall, the introduction of a robust legal
framework for cross-border insolvency in India will contribute to a more efficient and effective
resolution process, safeguarding the interests of all stakeholders involved. It is imperative that
policymakers and international bodies continue their collaborative efforts to address the
complexities and gaps in the insolvency treatment of corporate groups, ensuring the development of
a comprehensive and globally recognized framework for cross-border insolvency. By doing so,
India can foster a conducive environment for cross-border investments and bolster economic
stability both domestically and internationally.

6.4 Cross-Border Insolvency Framework in the United Kingdom

British attitudes toward cross-border insolvency are shaped by its historical and legal-cultural
context. The development of British bankruptcy law during the 18th and 19th centuries was
influenced by the country's dominant trading position and the need to cater to a global mercantile
community. The British Empire's existence further emphasized the cooperation between courts and
jurisdictions. Insolvency was traditionally viewed as a means to liquidate a debtor's assets for the

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benefit of creditors, but recently, the concept of using it for debtor rehabilitation has emerged.
Corporate debt financing in Britain has relied on fixed interest debentures or bank advances, secured
by a floating charge—a unique creation of Victorian equity lawyers. This charge grants the creditor
the power to appoint a receiver with extensive authority over the corporation's assets and business
operations. Unsecured creditors often receive no payment due to the prevalence of floating charges,
causing ongoing debate and parliamentary discussions. Receivers, traditionally accountants rather
than lawyers, play a significant role in British insolvency proceedings. Accountant insolvency
practitioners have driven the development of a rescue culture, often utilizing receivership to
maximize the value of businesses. The British statutory rescue procedure, called administration, is
modeled after receivership and aims to facilitate rescue in cases where a receiver cannot be
appointed. Administrators have broad powers to manage the affairs of the corporation and propose
plans for achieving statutory objectives. In essence, the British insolvency system reflects the
interplay of historical, legal, and cultural factors, placing a strong emphasis on safeguarding creditor
interests while employing receivership and administration as effective tools to preserve struggling
businesses.
The United Kingdom has established a robust framework to address cross-border insolvency cases,
acknowledging the significance of effective mechanisms in dealing with international insolvency
matters. This framework aims to strike a balance between the interests of debtors, creditors, and
other stakeholders while ensuring fair and efficient administration of cross-border cases.
Cooperation and coordination among different jurisdictions are emphasized to facilitate the
resolution of complex international insolvency proceedings. At the core of the UK's cross-border
insolvency regime lies the Cross-Border Insolvency Regulations 2006. Aligned with the
UNCITRAL Model Law on Cross-Border Insolvency, the Cross-Border Insolvency Regulations
provides a comprehensive legal framework for addressing cross-border insolvency cases. It enables
foreign representatives to seek recognition of foreign insolvency proceedings in the UK,
empowering them to safeguard and administer assets, gather evidence, and distribute funds under
the supervision of UK courts.
To evaluate the practical application of the cross-border insolvency framework in the UK, the case
of Jet Airways (India) Limited serves as good example. When insolvency proceedings were initiated
against Jet Airways in India, the UK High Court recognized these proceedings as a foreign main
proceeding under the Cross-Border Insolvency Regulations. The court acknowledged the collective
nature of the Indian insolvency proceedings and granted recognition, allowing the foreign
representative to act on behalf of the company in the UK. This recognition facilitates coordination
and cooperation between the Indian and UK jurisdictions, ensuring a synchronized approach to the

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insolvency process. The Cross-Border Insolvency Regulations serves as a pivotal legislation,
promoting consistency and predictability in cross-border insolvency cases. It provides a legal basis
for foreign representatives to seek assistance from UK courts and ensures the protection of the rights
and interests of all stakeholders involved. The framework encourages cooperation and
communication among different jurisdictions, facilitating the efficient resolution of cross-border
insolvency matters. The recognition of foreign insolvency proceedings in the UK plays a vital role
within the framework. The Cross-Border Insolvency Regulations sets clear criteria for recognition,
including the collective nature of the proceedings, involvement in asset realization or distribution,
and supervision by a competent foreign court or authority. This recognition allows foreign
representatives to access the UK legal system and avail themselves of the assistance and relief
provided by UK courts. Moreover, UK's cross-border insolvency framework is complemented by
the Insolvency Act 1986, which addresses both domestic and cross-border insolvency proceedings.
The Insolvency Act provides provisions for the recognition and enforcement of foreign insolvency
judgments, coordination of parallel proceedings, and cooperation between UK courts and foreign
courts or representatives. This legislation strengthens the overall framework and enhances the
effectiveness of cross-border insolvency proceedings. While specific case laws provide valuable
insights into the practical application of the cross-border insolvency framework in the UK, it is
essential to note that the overall framework is supported by a range of legislation, regulations, and
guidelines. These elements work in harmony to facilitate cooperation, coordination, and recognition
of foreign insolvency proceedings in the UK, ensuring a fair and efficient resolution of cross-border
insolvency cases.

Key Legislations and Regulations

In addition to the Cross-Border Insolvency Regulations 2006 (Cross-Border Insolvency
Regulations), the Insolvency Act 1986 plays a crucial role in shaping the cross-border insolvency
framework in the United Kingdom. This legislation provides essential provisions that complement
and enhance the effectiveness of the Cross-Border Insolvency Regulations, ensuring a
comprehensive legal framework for addressing cross-border insolvency cases. One significant
aspect covered by the Insolvency Act 1986 is the recognition and enforcement of foreign insolvency
judgments. Section 426 of the Insolvency Act, 1986 empowers UK courts to recognize and give
effect to foreign insolvency judgments. This provision allows foreign representatives to utilize the
UK legal system to protect and administer assets, gather evidence, and distribute funds in cross-
border insolvency proceedings. It facilitates cooperation between jurisdictions and provides a
mechanism for ensuring the enforcement of foreign insolvency decisions within the UK.

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The Insolvency Act 1986 also addresses the coordination of parallel proceedings. Section 426 (1) of
the Act enables UK courts to cooperate and coordinate with foreign courts in cases where
insolvency proceedings are taking place simultaneously in different jurisdictions. This provision
facilitates the coordination of parallel proceedings and aims to avoid conflicting decisions or
duplicative actions. It encourages the courts to work together to achieve a fair and efficient
resolution of cross-border insolvency cases. Furthermore, the Insolvency Act 1986 encourages
cooperation between UK courts and foreign courts or representatives involved in cross-border
insolvency cases. Section 426B of the Act provides a mechanism for communication and
cooperation between courts. It enables UK courts to request assistance from foreign courts or
representatives and, in turn, offer assistance to them. This provision fosters a collaborative approach
to resolving complex international insolvency matters and ensures effective communication and
coordination between jurisdictions.
It is important to note that the Insolvency Act 1986 works in conjunction with the Cross-Border
Insolvency Regulations 2006 to ensure a comprehensive and harmonized approach to cross-border
insolvency. While the Cross-Border Insolvency Regulations focuses on the recognition and
assistance aspects of cross-border insolvency, the Insolvency Act provides additional provisions that
complement and support the overall framework. Case laws has played a significant role in shaping
the interpretation and application of the Insolvency Act 1986 in cross-border insolvency cases. For
instance, the case of Re Stanford International Bank Ltd. provides insights into the exercise of
powers by foreign insolvency officeholders in the UK. The Privy Council, in this case, emphasized
the importance of cooperation and communication between foreign representatives and UK courts to
ensure the efficient administration of cross-border insolvency proceedings.
The combination of the Cross-Border Insolvency Regulations 2006 and the Insolvency Act 1986
demonstrates the United Kingdom's commitment to facilitating cross-border insolvency cases and
promoting international cooperation. Together, the Cross-Border Insolvency Regulations and the
Insolvency Act 1986 create a comprehensive and effective cross-border insolvency framework in
the United Kingdom, allowing for the fair and efficient resolution of international insolvency cases.
The interplay between these legislations ensures that the rights and interests of debtors, creditors,
and other stakeholders are protected and that cross-border insolvency proceedings are administered
in a manner that promotes cooperation and coordination among jurisdictions.
The Cross-Border Insolvency Regulations 2006 incorporate the UNCITRAL Model Law on Cross-
Border Insolvency, providing a comprehensive framework for the resolution of cross-border
insolvency cases. Schedule 1 of the Cross-Border Insolvency Regulations 2006 encompasses
Chapter I, which sets out general provisions, including the scope of application and the proceedings

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to which this law applies. It clarifies the key aspects that determine the applicability of the law in
specific cases. Article 4 of Chapter I focuses on the determination of competent courts that have the
authority to handle cross-border insolvency matters. These competent courts are responsible for
taking up cases and ensuring appropriate legal actions are taken in accordance with the law. This
provision helps establish a clear jurisdictional framework for cross-border insolvency cases,
ensuring efficient and effective resolution.
Chapter II of the Cross-Border Insolvency Regulations 2006 addresses the access of foreign
representatives and creditors to courts in Great Britain. It outlines the procedures and requirements
for foreign representatives and creditors to seek recourse in British courts concerning cross-border
insolvency matters. This chapter plays a crucial role in facilitating the participation of foreign
stakeholders in insolvency proceedings, ensuring their rights and interests are duly considered and
protected. Chapter III focuses on the recognition of a foreign proceeding and relief under the Model
Law. It outlines the conditions and procedures for recognizing foreign insolvency proceedings in
Great Britain. This provision ensures that the decisions and actions taken in foreign insolvency
proceedings are given proper recognition and legal effect in the British legal system, promoting
international cooperation and coordination in cross-border insolvency cases. Chapter IV of the
Cross-Border Insolvency Regulations 2006 deals with cooperation between British courts, foreign
courts, and foreign representatives. This chapter establishes a framework for collaboration and
communication between different jurisdictions involved in cross-border insolvency cases. It enables
courts and representatives from different countries to exchange information, coordinate proceedings,
and take collective actions for the effective administration of cross-border insolvency matters.
Additionally, Schedule 2 of the Cross-Border Insolvency Regulations 2006 includes Part 2, which
covers applications to court for recognition of foreign proceedings. This part outlines the specific
procedures and requirements for parties seeking recognition of foreign insolvency proceedings in
Great Britain. It provides a structured approach for applicants to navigate the legal process and
obtain the necessary recognition from the British courts. Furthermore, Schedule 2 encompasses Part
3, which addresses applications for relief under the Model Law. This part establishes the
mechanisms and criteria for parties to seek appropriate relief in relation to cross-border insolvency
cases. It ensures that parties involved in such cases have a means to request relief in a manner
consistent with the provisions of the Model Law and the Cross-Border Insolvency Regulations
2006.Cross-Border Insolvency Regulations 2006 incorporates the UNCITRAL Model Law on
Cross-Border Insolvency and contains various chapters and schedules that define the scope of
application, competent courts, recognition of foreign proceedings, cooperation between
jurisdictions, and procedures for seeking relief. These provisions collectively form a comprehensive

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legal framework to facilitate the resolution of cross-border insolvency cases and promote
international cooperation in insolvency matters.
One notable case that has shaped cross-border insolvency law in the UK is Rubin v. Eurofinance SA
(2012) UKSC 46. The UK Supreme Court, in this landmark decision, provided clarity on the
application of the common law principle of "modified universalism" in cross-border insolvency
cases. The court ruled that foreign insolvency judgments could be enforced in the UK, even if they
were inconsistent with UK insolvency laws. This decision reinforced the importance of recognizing
and giving effect to foreign insolvency proceedings as a means to promote international cooperation
and facilitate efficient resolution of cross-border insolvency matters. In a significant case the
Cambridge Gas Transport Corp. v. Official Committee of Unsecured Creditors of Navigator
Holdings plc (2007) UKHL 4. This case, heard in the House of Lords (now the UK Supreme Court),
addressed the jurisdictional aspects of cross-border insolvency. The court held that UK courts have
the authority to grant recognition and assistance to foreign insolvency proceedings, even if the
debtor does not have a place of business or assets within the UK jurisdiction. The decision
underscored the principle of international comity and emphasized the importance of cooperation
between jurisdictions in cross-border insolvency cases. In the realm of determining a company's
"centre of main interests" (COMI) under the Cross-Border Insolvency Regulations 2006 (CBIR), the
case of Re HIH Casualty and General Insurance Ltd (in provisional liquidation) (2008) EWHC 306
(Ch) provides crucial guidance. The court examined the factors relevant to establishing a company's
COMI and emphasized the need for a factual assessment rather than a mechanical application of the
criteria. This case offered clarity on how COMI should be determined in UK cross-border
insolvency cases, ensuring a more nuanced and context-specific approach.
These landmark cases demonstrate the evolution of cross-border insolvency law in the UK and its
emphasis on recognizing and facilitating cooperation between jurisdictions. The decisions in Rubin
v. Eurofinance, Cambridge Gas Transport Corp., and Re HIH Casualty and General Insurance Ltd
have contributed to the development of a comprehensive and balanced legal framework that
promotes international comity, efficient resolution of cross-border insolvency cases, and protection
of the rights and interests of all stakeholders involved. It is important to note that while these cases
have significantly influenced cross-border insolvency law, consulting up-to-date legal resources and
seeking professional advice on recent developments is essential for a comprehensive understanding
of the subject matter.

Recognition of Foreign Insolvency Proceedings in UK

The United Kingdom has adopted a favourable approach towards recognizing foreign insolvency

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proceedings within its legal framework. The Cross-Border Insolvency Regulations play a vital role
in determining the conditions under which foreign insolvency proceedings can be acknowledged and
given effect in the UK jurisdiction. To gain recognition, foreign insolvency proceedings must meet
specific requirements outlined in the CBIR. One crucial criterion is that the proceedings should be
collective in nature, intended for the benefit of creditors as a whole, rather than for the individual
interests of the debtor. Additionally, the proceedings must be supervised by a foreign court or a
competent authority. Once recognized, the appointed foreign representatives or insolvency
practitioners gain access to certain privileges and can seek assistance from UK courts to facilitate
the administration of the foreign insolvency proceedings. These privileges typically include powers
to gather and preserve assets located within the UK jurisdiction, examine witnesses, and request the
recognition and enforcement of judgments or orders obtained in the foreign proceedings. The
recognition of foreign insolvency proceedings in the UK aims to promote the efficient
administration of cross-border cases by providing a framework for cooperation and coordination
between different jurisdictions. This framework facilitates communication between courts,
insolvency practitioners, and stakeholders from multiple jurisdictions involved in the cross-border
insolvency process. It encourages the maximization of asset recovery, fair treatment of creditors,
and the orderly resolution of cross-border insolvency cases.
Jet Airways (India) Limited, a case that arose in 2019, was deliberated upon by the High Court of
Justice in the United Kingdom. The court's ruling focused on the acknowledgment of insolvency
proceedings carried out by Jet Airways (India) Limited. The case delved into intricate matters
concerning cross-border insolvency and the recognition of a foreign proceeding. By reaching its
decision, the court offered valuable insights into the prerequisites for recognition and emphasized
the significance of cooperation between jurisdictions. In 2014, the UK Supreme Court presided over
the case of Singularis Holdings Ltd v. PricewaterhouseCoopers. This particular lawsuit revolved
around the recognition of foreign insolvency proceedings and the responsibilities entrusted to an
insolvency practitioner. The court examined the duties of the practitioner when confronted with
conflicting obligations stemming from both domestic and foreign jurisdictions.
The case of OJSC International Bank of Azerbaijan encompassed numerous jurisdictions, including
the United Kingdom. Heard in the High Court of Justice, it tackled complex issues associated with
cross-border insolvency. The court's focus lay on the recognition and enforcement of foreign
insolvency proceedings, highlighting the utmost importance of international cooperation and comity.
Within the UK Court of Appeal in 2008, the matter of Re HIH Casualty and General Insurance Ltd
was addressed. This case revolved around the recognition of the Australian insolvency proceedings
carried out by HIH Casualty and General Insurance Ltd. It extensively examined the principles of

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modified universalism and explored the discretionary power of the court in granting recognition.

Challenges and Issues in Implementing Cross-Border Insolvency in the UK

Implementing cross-border insolvency in the United Kingdom faces several challenges and issues
that need to be addressed for a smooth and effective process. These challenges include:
1. Differing Legal Systems: The existence of diverse legal systems and insolvency regimes across
jurisdictions poses a significant challenge. The variations in laws, procedures, and interpretations
can complicate the recognition and enforcement of foreign insolvency proceedings in the UK. To
overcome this challenge, it is necessary to establish robust legal frameworks that harmonize and
reconcile these differences. Additionally, cooperation among jurisdictions becomes crucial to ensure
consistency and cooperation in cross-border insolvency cases.

2. Coordination and Communication: Effective coordination and communication between courts,

insolvency practitioners, and stakeholders from different jurisdictions are vital for successful cross-
border insolvency proceedings. Establishing reliable channels of communication, ensuring timely
exchange of information, and addressing language barriers are essential to enhance cooperation and
streamline the process. Regular and efficient communication channels promote transparency and
cooperation among all parties involved.

3. Recognition Criteria: The criteria for recognizing foreign insolvency proceedings may vary
across jurisdictions. Establishing a standardized set of recognition criteria that strikes a balance
between the interests of debtors, creditors, and other stakeholders is a complex task. Harmonizing
recognition standards helps create predictability and consistency in cross-border insolvency
proceedings, reducing uncertainty and facilitating a fair resolution.
4. Asset Recovery and Distribution: Recovering and distributing assets in cross-border insolvency
cases present significant challenges. Identifying, valuing, and repatriating assets located in different
jurisdictions require effective coordination among insolvency practitioners and courts. Overcoming
legal and practical obstacles in asset recovery and distribution is crucial to ensuring fair treatment of
creditors and maximizing recoveries. Cooperation among jurisdictions and the adoption of clear
guidelines for asset recovery can help address these challenges.
5. Jurisdictional Competition: Jurisdictional competition among countries can complicate cross-
border insolvency cases. Different jurisdictions may strive to attract debtors or assets, resulting in

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forum shopping and potentially conflicting or parallel insolvency proceedings. This competition
creates inefficiencies, increases costs, and hampers the resolution of cross-border insolvencies.
Encouraging cooperation and coordination among jurisdictions can mitigate these challenges,
promote fairness, and streamline the process.

6. Lack of Universal Framework: Despite efforts to promote international cooperation through

conventions and protocols, there is still a lack of a comprehensive universal framework for cross-
border insolvency. This gap in the legal framework can lead to uncertainties and inconsistencies,
forcing parties to navigate multiple legal systems. Developing a robust universal framework that
addresses the complexities of cross-border insolvency would enhance clarity, predictability, and
effectiveness, facilitating a more efficient and equitable resolution of such cases.
To overcome these challenges, ongoing efforts at the national and international levels are required.
Encouraging the harmonization of laws, facilitating greater cooperation and communication among
stakeholders, and promoting the adoption of cross-border insolvency protocols are essential steps.
Strengthening international cooperation frameworks and establishing mechanisms for resolving
jurisdictional conflicts can contribute to a more efficient and equitable resolution of cross-border
insolvency cases.

6.4.6 Impact of Brexit on Cross-Border Insolvency

The decision of the United Kingdom to leave the European Union, commonly known as Brexit, has
had implications for various legal and economic aspects, including cross-border insolvency. Prior to
Brexit, the UK was a member of the European Union, benefiting from the harmonized insolvency
framework provided by the EU Regulation on Insolvency Proceedings. However, with Brexit, the
relationship between the UK and the EU changed, leading to significant impacts on cross-border
insolvency proceedings.
Brexit introduced uncertainties and challenges in the recognition and enforcement of insolvency
proceedings between the UK and EU member states. The EU Regulation on Insolvency
Proceedings, which facilitated automatic recognition of insolvency proceedings within the EU, no
longer applies to the UK. As a result, the UK had to implement its own legal framework, the Cross-
Border Insolvency Regulations 2006, to address cross-border insolvency cases independently. The
impact of Brexit on cross-border insolvency has manifested in several ways. First, the automatic
recognition of UK insolvency proceedings within the EU is no longer guaranteed. Instead,
recognition is subject to the laws and procedures of each individual EU member state. This can lead
to delays, increased costs, and potential inconsistencies in recognition outcomes.

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The analysis of cross-border insolvency laws in the United Kingdom reveals a well-established and
respected legal framework that prioritizes efficient resolution and creditor protection. The United
Kingdom's recognition of the UNCITRAL Model Law on Cross-Border Insolvency and
participation in the EU Insolvency Regulation demonstrate its commitment to facilitating
international cooperation and coordination in insolvency proceedings. The country's robust
insolvency regime, coupled with its strong emphasis on maximizing asset value and time-linked
resolution, contributes to a favorable environment for cross-border investments and economic
stability. While the United Kingdom's insolvency laws provide a solid foundation, there are ongoing
challenges and areas for further improvement. The treatment of corporate groups in cross-border
insolvency remains a complex issue that requires attention and resolution. Collaborative efforts
among policymakers, practitioners, and international bodies are crucial to addressing these
challenges and developing practical solutions that align with global standards. The experiences and
lessons learned from the United Kingdom's cross-border insolvency laws serve as a valuable
resource for other jurisdictions and stakeholders. By studying the UK's legal framework,
policymakers and practitioners can gain insights into effective practices, identify areas for
enhancement, and contribute to the ongoing development of a robust international insolvency
regime. In essence, United Kingdom's cross-border insolvency laws provide a strong foundation for
addressing cross-border insolvency proceedings and promoting economic stability. However, further
efforts are needed to address challenges related to corporate group insolvencies and to ensure
alignment with international standards. By continuing to refine and improve the legal framework,
the United Kingdom can maintain its position as a leading jurisdiction for cross-border insolvency
and inspire other countries in their pursuit of effective and efficient resolution mechanisms.

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 CHAPTER 7
CONCLUSION & SUGGESTIONS

The Insolvency and Bankruptcy Code (henceforth referred to as the ‘IBC’) is widely regarded as a
watershed piece of legislation. The 28th of May 2016 was the official beginning of it. According to
the Doing Business report that was distributed by the World Bank in 2016, it ensured that creditors
in India on average recouped just 20% of what they were owed of their total obligation from a
struggling company towards the end of the insolvency procedures, which was a striking contrast to
countries wherein creditors recovered as much as 72.3% of their obligation, which was a significant
improvement from the previous situation. In addition, the administrative structures that were in
place in India prior to the implementation of the IBC were time-consuming, as evidenced by the fact
that the full process of recovery took around 4.3 years to complete, but in countries that are
members of the OECD, it took only approximately 1.7 years. As a result of the issues that were
discussed earlier, India was ranked a dismal 130th out of 189 countries in terms of its likelihood of
declaring bankruptcy. Since the IBC was introduced, the current recovery rate has increased all the
way up to 42% from its previous level of 20%. The insolvency determination process has been
adapted to fit within the parameters of the 2016 Code. As a result of its successful redesign of
India's antiquated method for determining indebtedness and liquidation, the Indian Business
Corporation (IBC) unquestionably possesses a great deal of relevance and value in the present

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circumstance. One may very well reason that at this point in time we have a unified and all-
encompassing law that is in line with the fundamental laws of the universe. Given that the Code is
still in its infancy, it is only natural that it would be made utilitarian in such a way as to concentrate
on better actualizing the law rather than swiftly operationalizing it. This is because the Code was
still in its early stages. Along with the installation of the new IBC, the creation of a fresh rescue
mechanism also occurred. The topic of this dissertation was a comprehensive comparison and
analysis of the culture of rescue organisations in the nation of India and the UK as a whole.
Because India has only one procedure for the rescue, known as the "Resolution plan," but the UK
has many alternatives to save the company from falling into the process of liquidation, the case of
Corporate Rescue is better achieved in the United Kingdom than it is in India. This is due to the fact
that India has only one procedure for the rescue, known as the "Resolution plan." In the event of
procedural differences, the most important aspect that requires to be emphasised is the case of
Corporate Rescue. In India, the influences of external entities on the procedure for corporate
insolvency are very contentious and need to be maintained under control as much as possible. For
example, in a recent situation, the United Kingdom-based Liberty House, which was the committee
of creditors' highest bidder for Amtek Auto, withdrew its offer. In such a scenario, the entire process
of rescuing the company is wholly dependent on a separate organisation altogether, but in the United
Kingdom, the process of rescuing a company is much simpler. The rescuing of people is the primary
concern. In a case involving insolvency in the United Kingdom,127 the Court ruled that the process
of liquidation should only be taken forward if all other possible avenues of rescue have been
exhausted. The procedures imposed by overseas courts and personnel to prove the appointment of
the liquidator have resulted in administrative obstacles, which is one of the problems with the UK
Insolvency Law.128 In spite of the changes that were brought due to the Enterprise Act of 2002, the
controversies that existed before the new legislation continue to exist, and there is still need for
improvement. Not only has practise changed in respect to pre-packs in the decade that has followed
the reform, but it has also developed in the design of reorganisation led by the innovations that have
occurred in the United States and Canada. In view of the difficulties that the insolvency processes in
the UK have encountered in the past, what sorts of difficulties are to be anticipated for the years to
come? There are specifically two that stand out as being very clear, and those are the precarious
condition of the legislation itself and the possibility of European influence on local insolvency.
During any time that substantive changes are being considered, it is necessary to give some thought
to the structure of the legal language that will one day incorporate such changes.
The existing structure is notably subpar, and there is a great deal of room for improvement in terms
of making things more transparent and certain. The reason for this is that, as a result of the

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amendments that were carried out, the rescue procedures are now mostly located in the schedules,
which makes cross-referencing to the primary Act provisions challenging. The fact that many
sections of the Act were "invisible," such as the deleted Part II of the Investment Act of 1986 that
nevertheless applied to certain sorts of undertakings, did not help with the coherence or clarity of the
Act. In addition, the Insolvency Rules 1986, which have undergone through an update process for
the practitioner over the past few years under the auspices of the Insolvency Rules Committee,
contain a significant amount of information that is significant to the practitioner. This is due to the
fact that the law itself, particularly in matters pertaining to personal insolvency, authorises
substantial rulemaking in order to finish the operations of proceedings. It is therefore possible to say
that the balance between primary and secondary legislation is not where one might anticipate it to
be, and, in general, a practitioner might find it tough to navigate the maze of laws that is the UK
insolvency system on occasion. In this particular scenario, the hypothesis that incorporating the
numerous corporate rescue procedures outlined in UK Insolvency Law into India's insolvency
regime would boost the success rate of Indian companies reviving themselves is partially true. This
is due to the effect of efficiency that could be adopted by the Indian legislation and administration
forum by drawing inspiration from the United Kingdom. The question of whether India's present
insolvency framework does justice to the idea of restructuring is clear from the fact that the
Insolvency and Bankruptcy Code (IBC), although being a toddler, has benefited a number of
financially challenged enterprises with its time-bound proper execution. Now responding to this

Whether or not the Insolvency Law of the United Kingdom of 1986 is significantly more effective at
achieving corporate rescue compared to the Indian regime, it is generally accepted that the
Insolvency Law of the United Kingdom of 1986 is significantly more advanced than the Indian
regime. This is because the element of third-party interference is significantly lower in the United
Kingdom, which is also one of the reasons why the corporate rescue in India has not been very
successful. The United Kingdom's Corporate Insolvency and Governance Act, passed not long ago,
is one example of a legal framework that India would find useful to apply. A "breathing space" for
the creditors to evaluate and put the rescue plan into action is what will be provided for them by a
free-standing moratorium under the Act in the United Kingdom. A similar adoption of the same in
India will have the same effect. In addition, it is proposed that the "cross-class cram down" rules,
which are already applicable in India, be extended to the terms of the Companies Act of the country
as well. This would mean that operational creditors and shareholders would be obligated by the
program even if they did not agree with it. In addition to the measures that have been mentioned
above, it is essential to endow the NCLT and the NCLAT with the authority required to carry out the

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resolution plan in an effective manner. Because the public's understanding of a breach of the
resolution plan creates tremendous harm to the market position of the corporate debtor, which is
difficult to recuperate for a firm that is already bankrupt and saddled with debt, this is the reason
why this is the case. On the other hand, there are situations in which the corporate debtor (along
with its members and workers), creditors, as well as other relevant parties come out on the losing
end of the conflict because the bidder who wins fails to follow the requirement outlined in the Code.
There is no other approach that this void can be filled but by the implementation of stringent and
specified measures.

In India, the issue of cross-border insolvency is still in its developmental stage. Recently, the
responsibilities of the insolvency law committee have expanded to include enterprise group
insolvency on a cross-border basis, and they will also examine the UNCITRAL Model Law on this
matter. Although the Code allows India to enter into treaties to implement the Model Law, doing so
may complicate the situation further. Instead, a better approach would be to ratify the Model Law
and incorporate it into the Code. However, the notification imposes a general restriction on 'public
policy' without clearly defining what falls under this term. Consequently, the courts may interpret it
broadly or narrowly, leading to uncertainty, confusion, and chaos regarding the rights of foreign
representatives in Indian courts. The legal framework in the UK had significantly simplified and
progressed since before 2002, particularly with the EU Regulation. However, with Brexit, there is a
risk of reverting back to the previous stage. Moreover, there is a possibility of losing all the benefits
provided by the regulation and directives. Nonetheless, there is still potential for the UK to establish
better treaties and engage in negotiations, but only time will tell once the transition period
concludes.

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