Section 29A of India’s Insolvency and Bankruptcy Code: an instance of hard cases making bad law?

Mohan, M. P. Ram; Raj, Vishakha

doi:10.1080/14735970.2022.2083771

Cited by 4 publications

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“…Second, an amendment was made to close the loopholes posed by promoter shareholders, who are wilful defaulters, from bidding or reacquiring the debtor's assets cheaply unless they clear outstanding defaults. 167 In 2017, section 29A was introduced to exclude such promoters from submitting resolution plans. 168 The prohibition extends to a connected party of the promoter.…”

Section: Indiamentioning

confidence: 99%

Public or private gatekeepers in non‐consensual debt restructurings in emerging jurisdictions

Wan

2023

Intl Insolvency Rev

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In advanced jurisdictions, the choice of a non‐consensual debt restructuring is between a public or a private gatekeeper model where either the court or the licensed insolvency professional respectively approves a restructuring plan that binds dissenting creditors. In the United States, the only gateway is found in Chapter 11 of the Bankruptcy Code 1978, which requires court approval and gives the debtor a significant say in the outcome. In contrast, in the United Kingdom, there exist four gateways, only two of which require court approval (scheme of arrangement and restructuring plan), while the remaining two (administration and company voluntary arrangement) give significant powers to the insolvency practitioner to decide on the outcome. In emerging jurisdictions such as Mainland China and India, due to path dependency and lack of institutional capacity, the court‐supervised model is chosen as the only or primary gateway to legitimise non‐consensual restructurings though the insolvency practitioner has an important statutory role. Using the two jurisdictions as case studies, this article argues that such a choice has several initial benefits but also leads to several problems, including delays in the restructuring, does not necessarily improve substantive outcomes and does not adequately address the shareholder–creditor and creditor–creditor agency costs. This article proposes that for debt restructuring that involves the sale of the business as a going concern, the private gatekeeper should be able to decide on the sale and the distributions following pre‐bankruptcy entitlements. Recourse to the court as a public gatekeeper should only be used for reorganisation proceedings.

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Section: Indiamentioning

confidence: 99%

Public or private gatekeepers in non‐consensual debt restructurings in emerging jurisdictions

Wan

2023

Intl Insolvency Rev

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“…To prevent such abuses, the IBC precludes promoters and parties connected to them from present a resolution plan under a set of specified circumstances (section 29A). Although the policy objective of avoiding abuse is laudable (see Divan and Monga 2021;Gupta 2021;Kamalnath 2020;Mohan and Raj 2021), the prohibition is blunt and possibly unnecessary given the role and involvement of financial creditors, who should be able to accurately assess a resolution plan. The prohibitions on the promoters are complex and can generate litigation, which in turn can delay corporate resolution.…”

Section: Box 102 Corporate Resolution: Sequence and Timelinementioning

confidence: 99%

India’s Financial System

2023

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DISCLAIMER:The views expressed in this book are those of the authors and do not necessarily represent the views of the IMF's Executive Directors, its management, or any of its members. The boundaries, colors, denominations, and any other information shown on the maps do not imply, on the part of the International Monetary Fund, any judgment on the legal status of any territory or any endorsement or acceptance of such boundaries.

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A Note on Bankruptcy Auction with a Fair Bidder

Acha,

Sarkar

2023

J. Quant. Econ.

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Section 29A of India’s Insolvency and Bankruptcy Code: an instance of hard cases making bad law?

Cited by 4 publications

References 0 publications

Public or private gatekeepers in non‐consensual debt restructurings in emerging jurisdictions

Public or private gatekeepers in non‐consensual debt restructurings in emerging jurisdictions

India’s Financial System

A Note on Bankruptcy Auction with a Fair Bidder

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