INDIA Trends and Developments Contributed by: Shardul Shroff, Misha, Aishwarya Satija and Kritika Poddar, Shardul Amarchand Mangaldas & Co
Houses of Parliament, thereby ensuring transparency and oversight. Addressing current challenges The proposed framework in the IBC Bill address - es several persistent challenges under the current regime. First, the provision enabling the constitution of a common bench for the insolvency proceedings of corporate debtors that form part of a group resolves the structural issue arising from the NCLT’s silo-based territorial jurisdiction. The designation of a common bench will facilitate procedural alignment, ensuring that proceedings are conducted in tandem and pro - gress faster than they would if they were fragmented across multiple benches of the NCLT. It will also pre - vent the issuance of conflicting or inconsistent orders. Second, the appointment of a common insolven - cy professional will enable the co-ordinated use of group resources, ensuring that the group continues to operate effectively, especially in cases where the entities are operationally interdependent. Maintaining the group’s functionality in such cases will preserve value and enhance the prospects of resolution. Third, the creation of a group CoC will allow credi - tors to formulate co-ordinated strategies that better reflect the commercial realities of the group structure. Unifying the insolvency professional and the CoCs of the different group companies will increase efficiency, prevent duplication of work and facilitate smoother flow of information. Finally, the IBC Bill introduces pro - visions for binding agreements to co-ordinate different proceedings. The formalisation of such agreements provides a structured and transparent mechanism for stakeholders to collaborate, ensuring that each party’s roles and responsibilities are clearly defined and enforceable. The IBC Bill represents a codification of the practices that have already evolved through judicial innova - tion. Statutory incorporation of these principles will bring in more certainty and structure around group insolvencies. However, certain operational details of the framework will depend on the rules framed by the central government. These include the exact scope of the group CoC’s powers, the procedure for joint fil - ings and the modalities for developing a co-ordinated
strategy for multiple debtors. The IBC Bill has also proposed enabling provisions for cross-border insol - vency. The Insolvency Law Committee constituted by the Government of India recommended adopting a framework modelled on the UNCITRAL Model Law on Cross-Border Insolvency with suitable modifications. It remains to be seen whether the group insolvency framework will extend to international enterprise groups or remain confined to domestic ones in the initial phase as recommended by the CBIRC-II. Proposed Framework for pooling a guarantor’s assets with the corporate debtor under the IBC Bill The Bill introduces a new statutory mechanism where - by an asset of the personal or corporate guarantor of the corporate debtor may be made part of the CIRP of the corporate debtor. Although the current provisions of IBC allow principal borrower/corporate debtor’s and guarantor’s CIRP to be heard before the same NCLT bench, there are no provisions for consolida - tion of guarantor’s assets into the principal borrower’s CIRP. Nevertheless, the combined sale or realisation of a corporate debtor’s and its guarantor’s assets has been permitted in some instances under the IBC. In Vanguard Credit and Holdings Private Ltd v Kshitiz Chhawchharia (Company Appeal (AT) (Insolvency) No 1125 of 2019, Order dated 4 March 2021), the National Company Law Appellate Tribunal (NCLAT) dismissed an appeal challenging the inclusion of land, on which a factory was operated by the corporate debtor, in the resolution plan. The land was owned by a corporate guarantor of the corporate debtor and had been mort - gaged to one of its financial creditors. The NCLAT held that inclusion of the land in the resolution plan was permissible since the corporate guarantor was part of the CoC in the CIRP of the corporate debtor and had failed to object to such inclusion in a timely manner. It also noted that the land formed an essential part of the corporate debtor’s business, and the financial creditor had taken possession of the land by enforcing its security interest. In Mr Prateek Gupta & Others v Kotak Mahindra Bank Ltd (Company Appeal (AT) (Insolvency) No 147 of 2022, Order dated 7 March 2022), the NCLAT permit - ted a composite sale of assets of the corporate debtor in liquidation and its personal guarantor. The NCLAT noted that the land owned by the corporate debtor
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