INDIA Law and Practice Contributed by: Divyanshu Pandey, Utsav Johri, Sucheta Bhattacharya and Nishal Makharia, JSA Advocates & Solicitors
6.4 A Foreign Private Credit Lender’s Ability to Enforce Its Rights The limitations applicable to enforcement by a private credit lender are similar to those that apply to other creditors generally, as follows. • The enforcement of security may be impacted by insolvency proceedings, as a moratorium is declared during which time no proceedings can be commenced against the corporate debtor and no action can be taken for the enforcement of security provided by the cor - porate debtor. Please see 7. Bankruptcy and Insolvency for further details. • The enforcement of security may be limited if the transaction is classified as a preferential transaction under IBC. Please see 7.6 Trans- actions Voidable Upon Insolvency for further details. • Limitation periods apply to the enforcement of security. Court proceedings should be brought within the relevant limitation period. • Where the security is enforced over an asset that is leased or licensed, or where a con - cession is granted by the government, the enforcement of security may require consent from the relevant governmental authority or may be subject to conditions imposed by the relevant governmental authority in relation to such enforcement. 6.5 Timing and Cost of Enforcement Please see 6.1 Enforcement of Collateral by Non-Bank Secured Lenders . 6.6 Practical Considerations/Limitations on Enforcement If an enforcement action in relation to the secu - rity (which generally is the case) is contested by the security provider, the enforcement process becomes time-consuming: it could take several
years to obtain a judgment in India in such sce - nario. The timeline depends on the facts and the relief sought, and on the backlog of cases at the time of enforcement. However, it may be possible to obtain interim relief, like restricting disposal of secured property, in a shorter timeframe. 6.7 Claims Against Secured Lenders Post-Enforcement In the case of a bona fide enforcement of secu - rity in accordance with the contractual arrange - ments, and in due compliance with applicable law and if the security is enforced for the pur - pose of completing a sale, then the creditor is generally not liable. In cases where assets are appropriated pursuant to security enforcement and the ownership vests with the creditor for the purpose of operating or using an asset, the creditor may be liable for any continuing violations under applicable law. 7. Bankruptcy and Insolvency 7.1 Impact of Insolvency Processes The type of insolvency and restructuring process in India depends on the type of incorporation of the debtor. If the borrower is a company or a limited liability partnership, the insolvency regime prescribed under IBC will apply. Under IBC, the secured lenders have an option to relinquish the security provided to them by the borrower. Depending on the exercise of the option of relinquishment of security, the priority of payments to the lend - ers may differ.
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