INDIA Law and Practice Contributed by: Shardul Shroff, Misha, Kritika Poddar and Aishwarya Satija, Shardul Amarchand Mangaldas & Co
5.4 The Position of Shareholders and Creditors in Liquidation Rights of Members and Partners of the CD All powers of the board of directors, key managerial personnel and the partners of the CD cease to have effect and such powers are vested in the liquidator from the date of their appointment. The promoters, directors, partners of the CD (or their representa - tives) may attend the meetings of the SCC but will not have any right to vote. In the order of priority for distributions made during a liquidation process under the Code, preference shareholders are placed at the penultimate priority, and equity shareholders and part - ners are placed at the last priority. See 1.2 Types of Insolvency (Liquidation upon failure of the CIRP or PPIRP). Third parties or non-debtors are not released from their obligations when the CD undergoes liquidation. For instance, personal and corporate guarantors of the CD remain liable even during or after the liquida - tion of the CD has been completed. Similarly, associ - ate, holding and subsidiary companies also remain liable for their own debt obligations. Managing direc - tors continue to be liable for offences committed by the CD. Rights of Creditors See 1.2 Types of Insolvency (Liquidation upon failure of the CIRP or PPIRP). Secured creditors that have not relinquished their security interest are excluded from the SCC. Pre-judgment attachments See 2.4 Unsecured Creditors . Under the Code, there is no formal process to grant interim or final reliefs prior to the commencement of liquidation and, there - fore, pre-judgement attachments are not common. Retention of title Operational creditors (excluding workmen and employees) and other stakeholders are required to submit details of any retention of title agreement in respect of goods or properties to which the claim refers while submitting their proof of claim to the liq - uidator. Such retention continues to be governed by the contractual terms between the parties during liq - uidation.
Set-off Where there are mutual dealings between the CD and another party, the sums due from one party will be set off against the sums due from the other to arrive at the net amount payable to the CD or to the other party. FCs, OCs and other stakeholders may provide details of mutual dealings to be set off while submitting their claims to the liquidator. Furthermore, the moratorium in the liquidation process does not specifically bar set-off. 6. Cross-Border Issues in Insolvency 6.1 Sources of International Insolvency Law The Code does not contain a comprehensive frame - work to deal with cross-border insolvency, although it allows the Indian government to enter into bilateral treaties with foreign countries prescribing the man - ner in which cross-border insolvency issues related to each country will be dealt with. The Indian government has previously expressed its intention to adopt the UNCITRAL Model Law on Cross-Border Insolvency. The Insolvency and Bank - ruptcy Code (Amendment) Bill, 2025 was introduced in August 2025, which empowers the central govern - ment to prescribe rules for administering and con - ducting cross-border proceedings under the Code. However, the final contours of the provisions remain to be seen as the Bill has not yet been enacted into law. The Civil Procedure Code, 1908 (CPC) allows for enforcement of judgments passed by superior courts of reciprocating countries. 6.2 Jurisdiction The Code does not lay down any criteria to determine which country has jurisdiction to open a restructuring or insolvency procedure. In the absence of a codified framework, courts have allowed co-ordination and co- operation with foreign courts through protocols. In the CIRP of Jet Airways (India) Limited, insolvency proceedings were initiated against the CD in India and the Netherlands. The NCLAT directed the Indian RP of Jet Airways and the Dutch trustee to enter into a protocol for the harmonisation of the parallel proceed -
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