The Restructuring Review: India

Overview of restructuring and insolvency activity

The spread of covid-19 has affected economies across the world, including India's. India's growing economy was badly hit, and this was exacerbated by the second wave of covid-19. Historically, India's financial services sector has been afflicted by a high level of non-performing assets (NPAs). Indian public sector banks were collectively owed approximately 6.8 trillion rupees in NPAs in 2020.2 This rise of NPAs stemmed from inter alia the tendency of Indian banks to postpone defaults, covid-19, the slow churn of cases at various courts and ineffectual resolution and enforcement mechanisms. Although the Insolvency and Bankruptcy Code 2016 (IBC) heralded a new era in resolving stressed assets in India, its current role has been reduced to a mechanism to incentivise settlement between defaulting companies and promoters who do wish to lose control of their companies. Unfortunately, the resolution mechanism under the IBC has not proven to be wholly successful – only 13.12 per cent of cases have been resolved under the IBC, whereas almost 48.13 per cent cases have been subject to liquidation.3 Currently, however, NPA levels have declined marginally in light of the provisions made by lending institutions and the remedial measures introduced by the Reserve Bank of India (RBI) for borrowers.4 The impact of the pandemic-induced disruptions to asset quality will be spread over FY21 and FY22, with bad loans expected to rise and restructuring and insolvencies being inevitable.

One of the sectors that has seen significant disruption is financial services. Due to defaults by non-banking financial companies (NBFCs) (specifically, the Infrastructure Leasing & Financial Services Limited (ILFS) Group), and the consequent liquidity crisis, NBFCs have been starved of fresh capital. The past year also witnessed the resolution of one of India's leading distressed NBFCs – Dewan Housing Finance Limited (DHFL). The resolution of the ILFS group is ongoing. Another financial services-related default was seen in the mutual funds industry (specifically, Franklin Templeton). Debt mutual funds with significant exposure to the debt instruments of certain companies like ILFS, DHFL, Yes Bank Limited and the Reliance (Anil Ambani) group had to either write off their exposure or take substantial haircuts. To date, Franklin Templeton is in the process of winding up six of its debt schemes as a result of heavy exposure to these defaulting companies.5

One of the key factors affecting the resolution of distressed companies is judicial backlog. This issue is expected to worsen following the retirement of the sitting judges of the National Company Law Tribunals (NCLT) and the lack of regular hearings by NCLTs and courts (since they are currently hearing only urgent matters). Additionally, even if cases are adjudicated by NCLTs, due to conflicting and questionable judgments by different benches of the NCLT, key legal issues are not being resolved for protracted periods of time. Accordingly, key fundamental legal issues are required to be resolved by the Supreme Court of India (the Supreme Court). For instance, recently, personal guarantors sought to challenge the existence of their independent liability on the basis of ongoing corporate insolvency resolution processes of corporate debtors. Eventually, the Supreme Court had to clarify the well-established legal principle (i.e., a personal guarantor is required to be independently liable under his or her contract of guarantee).

General introduction to the restructuring and insolvency legal framework

i Indian legislation and frameworks governing resolution and enforcement

The following are the four broad resolution and enforcement frameworks in India:

  1. resolution of defaulting companies by way of the corporate insolvency resolution process (CIRP), failing which, liquidation or voluntary liquidation under the IBC;
  2. restructuring of distressed companies (i.e., companies that have defaulted on their debt obligations for a period of 30 to 60 days) by RBI-regulated institutions under the relevant circulars issued by the RBI;
  3. restructuring of assets and liabilities by companies further to a scheme of arrangement under the Companies Act 2013 (the Companies Act); and
  4. enforcement or recovery against a defaulting company and its assets or guarantees by way of statutory mechanisms under the Recovery of Debts Due to Banks and Financial Institutions Act 1993 and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act 2002.

ii Resolution under the IBC

Under the IBC, any financial creditor or operational creditor, or even the company in default of its debts (corporate debtor), may file an application to initiate a CIRP before the NCLT6 pursuant to a default of 10 million rupees (known as a resolution application).

Once a resolution application is filed, the NCLT will either reject or admit such application. If the NCLT admits the resolution application, the CIRP will commence. An interim resolution professional shall be appointed, and the erstwhile board of directors will be suspended. During the CIRP or liquidation, the directors are required to cooperate with the resolution professional or liquidator as required.

The interim resolution professional or resolution professional will be responsible for running the operations of the corporate debtor on a going-concern basis. The interim resolution professional will invite claims and constitute a committee of creditors. As part of the CIRP, the resolution professional will invite resolution plans from eligible bidders. A legally compliant resolution plan must be approved by financial creditors holding 66 per cent of the voting share (the approved resolution plan).

The CIRP must be concluded within 330 days of the date of the NCLT's admission of a resolution application, inclusive of any further extension of the CIRP period as may be granted by the NCLT and the time taken in legal proceedings in relation to the CIRP (the CIRP period). If the NCLT does not receive an approved resolution plan before the expiry of the CIRP period or if the NCLT rejects the approved resolution plan, the NCLT will order the corporate debtor's liquidation.

As part of his or her responsibilities, the resolution professional is also required to ascertain whether the corporate debtor has engaged in any avoidance transactions with any third parties or related parties prior to the initiation of the CIRP. The resolution professional will investigate the following transactions:

  1. preferential transactions;
  2. extortionate transactions;
  3. fraudulent transactions; and
  4. undervalued transactions.

Upon identifying any such transaction, the resolution professional is required to make an application to the NCLT seeking a reversal of the transaction and clawback of the amounts paid by the corporate debtor. The transactions that have occurred during the period of one year preceding the insolvency commencement date (ICD) (with a non-related party) or two years preceding the ICD (with a related party) are required to be examined for the purpose of preferential and undervalued transactions. The look-back period of extortionate transactions is two years preceding the ICD.

Under the IBC, a corporate person may initiate liquidation in respect of itself, subject to the condition that the corporate person is: (1) not in default on any of its debts; and (2) not seeking liquidation in order to defraud any individual. The liquidator must endeavour to wind up the affairs of the corporate person within one year of the liquidation commencement date.

Since the IBC's inception and as of March 2021, 4,376 companies have undergone CIRP. Of these, 2653 cases have been closed. Out of the 2653 CIRPs, 617 cases have been decided on review or appeal, 411 cases have been withdrawn, 1277 cases have ended in liquidation and 348 have yielded a successful resolution. The total recovery for financial creditors is estimated to be around 39.6 per cent of their claims on average.7 Set out below is a summary of the number of ongoing and completed CIRPs and liquidations under the IBC as of 31 March 2021, along with average timelines.


CIRP cases commencedOngoing CIRPsSuccessful CIRPsAverage timeline for successful CIRPs (days)


CIRP cases leading to liquidationAverage timeline for completion of CIRP cases leading to liquidation (days)Voluntary liquidations commenced and completedApproximate timeline for completion of voluntary liquidations (days) 

Restructuring of stressed assets

Under the RBI Circular dated 7 June 2019, the term 'restructuring' is defined to include modification of terms of advances, roll over of credit facilities, sanction of additional credit facility and release of additional funds for an account in default to aid curing of default and enhancement of existing credit limits, and compromise settlements where time for payment of settlement amount exceeds three months.

RBI restructuring schemes
  1. Restructuring under 7 June 2019 Circular: under the Prudential Framework for Resolution of Stressed Assets dated 7 June 2019, lending institutions (as specified under the circular) are required to review a default within 30 days of its occurrence and implement a resolution plan within 180 days of such review, failing which such institutions are required to make higher provisions. All lenders are required to enter into an inter-creditor agreement to implement the resolution plan.
  2. Restructuring under 6 August 2020 Circular: under the Resolution Framework for Covid-19 related Stress dated 6 August 2020 (Resolution Framework 1.0), lending institutions (as specified under the framework) may implement a resolution plan without a change in ownership in respect of eligible borrower accounts (both personal loans and other exposures) which were classified as standard, but not in default for more than 30 days as on 1 March 2020. Resolution Framework 1.0 is also applicable to micro, small and medium enterprises (MSMEs) who collectively owe more than 250 million rupees to lending institutions.
  3. In the case of MSMEs having aggregate exposure of less than 250 million rupees which were classified as 'standard', RBI has permitted lending institutions to restructure their exposure without a downgrade in asset classification by way of circular dated 6 August 2020 (Resolution Framework 1.0 – MSME) provided the restructuring is implemented by 31 March 2021. The Resolution Framework 1.0 – MSME is an extension of the earlier relief issued by the RBI for MSMEs. By way of its circular dated 5 May 2021 (Resolution Framework 2.0 – MSME), RBI permitted accounts which were not restructured under the Resolution Framework 1.0 or Resolution Framework 1.0 – MSME or the earlier frameworks, to be restructured, whereby restructuring should be invoked by 30 September 2021 and implemented within 90 days. This threshold of aggregate exposure being less than 250 million rupees has been increased to less than 500 million rupees by way of RBI circular dated 4 June 2021.
  4. For individuals and small businesses with aggregate exposure of less than 250 million rupees (excluding a few categories as specified under the Resolution Framework 1.0), the RBI has permitted lending institutions to implement a resolution plan, while classifying such exposures as standard, by way of its circular dated 5 May 2021, provided such exposure has not been resolved under Resolution Framework 1.0 and is standard as on 31 March 2021. This threshold of aggregate exposure being less than 250 million rupees has been increased to less than 500 million rupees by way of RBI circular dated 4 June 2021. Given the lack of consensus between creditors in arriving at a mutually agreed inter-creditor arrangement, usually these options are not successful.
  5. Informal and bilateral workouts: parties may engage in an out-of-court informal workout through a bilateral arrangement between the creditors and the debtor. This allows the parties flexibility in determining the terms and conditions of the restructuring without any judicial intervention in the process. Such restructurings are generally ineffectual given the conflicting interests of different lender groups.
  6. Scheme of arrangement: under the Companies Act, a debtor or company can seek to resolve its debts by way of entering into a compromise or arrangement with its shareholders and creditors of any class, supervised by the NCLT. This form of restructuring requires consent of three-quarters of the creditors in value and the majority being present and voting. The process under the Companies Act is a purely debtor-driven process. It is cumbersome to implement (with protracted timelines).

Statutory enforcement and recovery mechanisms

Apart from filing recovery suits before the relevant civil courts, financial creditors have the following options to recover or enforce their debts:

  1. the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act 2002 (the SARFAESI Act): a notified secured financial creditor is entitled to sell the debtor's (whether individual or entity) secured assets by way of an out-of-court process. Enforcement under the SARFAESI Act may take six months to two years; and
  2. the Recovery of Debts Due to Banks and Financial Institutions Act 1993 (the DRT Act): an unsecured or secured financial creditor (a bank or a financial institution) may file a recovery suit against the corporate debtor by way of court-driven process before the debt recovery tribunal (DRT). From the time the application for recovery of dues is filed with the DRT, a creditor may expect to recover monies within a period of approximately one to three years.

Covid-19-related specific measures

Amendments to the IBC

The government introduced the following key amendments to the IBC.

  1. The minimum default threshold for filing an application for CIRP was raised from 100,000 rupees to 10 million rupees – only significant defaults were sought to be resolved under the IBC.
  2. The Insolvency and Bankruptcy Board of India (IBBI) notified the Insolvency and Bankruptcy (Amendment) Ordinance 2020 (the Amendment Ordinance), which suspended the initiation of CIRP in respect of a corporate debtor for any default arising on or after 25 March 2020 for a period of six months. The government thereafter extended the suspension of the IBC twice for three months each on 24 September 2020 and 22 December 2020. These changes contributed to a decline in the number of insolvency cases since July 2020. The Amendment Ordinance, while largely applauded as an effective counter measure to a potential rise in insolvency, was heavily criticised given it did not require defaults of the corporate debtor to be a direct consequence of covid-19 in order to receive the protection of the suspension.8 Additionally, corporate debtors were prevented from initiating CIRP in respect of themselves, regardless of their rationale and economic state.
  3. Notification of a pre-packaged insolvency framework for MSMEs. The main aim of the pre-packaged insolvency framework is to provide relief to MSMEs by way of an alternative resolution process.
Measures introduced by the RBI

The key measures introduced by the RBI to its regulated lending institutions were as follows:

  1. loan moratorium: lending institutions were permitted to grant moratorium on loan repayments due on and from 1 March 2020 to 31 August 2020 under the notification dated 27 March 2020. The loan moratorium permitted the period of the moratorium to be excluded from the calculation of the days of delay for payment of the loan or instalment;
  2. the Resolution Framework 1.0, the Resolution Framework 1.0 – MSME, the Resolution Framework 2.0 – MSME were introduced by the RBI for stressed assets facing financial difficulties owing to disruptions caused due to covid-19 (as discussed in Section II.ii); and
  3. the Emergency Credit Line Guarantee Scheme (the ECLGS Scheme): the ECLGS Scheme introduced by the Government aims to provide unsecured loans to MSMEs and business enterprises to mitigate the distress caused by covid-19 lockdowns. The amount of credit that can be provided to a MSME will be 20 per cent of their current outstanding loan. The credit under the ECGLS Scheme comes with a tenure of 48 months, with a principal moratorium for the first 12 months.

Recent legal developments

As discussed in Section III.i, creditors and corporate debtors were not permitted to file CIRP applications under the IBC in respect of defaults arising on or after 25 March 2020 up to and including 24 March 2021.9 However, due to several ongoing CIRPs, the Indian courts and tribunals remained active and delivered decisive judgments on key questions of law. The Indian law on corporate resolution or liquidation has evolved over the last six years thanks to these judicial precedents, whereas the IBC by itself remains a rudimentary and enabling framework on insolvency. Set out below are the key judicial precedents pronounced by courts and tribunals over the last year.

i Definition of financial debt under the IBC

Under the IBC, 'financial debt' means debt that is disbursed against the consideration for the time value of money. 'Financial debt' inter alia includes any amount raised under any other transaction having the commercial effect of a borrowing and guaranteed liability.

On the basis that a put option is structured as a guarantee, the NCLT and the National Company Law Appellate Tribunal (NCLAT) have held that a put-option holder may be treated as a financial creditor under the IBC.10 Similarly, in the case of a pledge which did not have a guaranteed obligation to pay, the Supreme Court held that a pledgee will not be treated as a financial creditor of a third-party pledgor.11

The Supreme Court applied the concept of time value of money to hold that real estate project allottees are financial creditors for the purpose of the IBC (on the basis that the advance payments to be made by the allottees enabled them to gain as against paying for the property after the completion of the project).12

According to the definition of 'financial debt', there has to be an actual disbursement of debt or a direct lending transaction for time value of money. On this basis, the Supreme Court held that creditors holding third-party security (i.e., security advanced by a related party or group entity in respect of the underlying loans of the holding company or company that receives the benefit of actual lending) do not constitute financial creditors for the purpose of the IBC (in this context, mortgage of assets provided by Jaypee Infratech Limited for loans advanced to its parent company Jaiprakash Associates Limited, was held to be secured debt and not secured financial debt).13 Accordingly, it could be argued that a put option is not a financial debt per se.

However, according to the NCLT and the NCLAT, given put options are for a guaranteed price, period and rate of return, they were considered to be financial debt, and, under the IBC, guarantees are clearly considered to be financial debt. On this basis, it is possible to argue that put options should be considered as a financial debt. However, given the settled status of third-party security under the IBC and considering all security documents usually contain strong guarantee-like protections with explicit covenant to pay obligations on the security provider, it remains to be seen whether the Supreme Court affirms the view that put options should be treated as financial debt under the IBC.

ii Threshold of home-buyers filing CIRP applications

Given the highly depressed real estate sector in India, the right of home-buyers to file CIRP applications under the IBC, has been frequently debated. To date, over 422,000 residential units that are scheduled to be completed by the end of 2021 across the top seven cities in India will face further delays because of the ongoing covid-19 pandemic.14 In light of these delays, home-buyers (i.e., allottees under a real estate project) have been recognised as financial creditors under the IBC;15 accordingly, no fewer than 100 allottees under a specific real estate project or not less than 10 per cent of the total number of such allottees, whichever is less, are entitled to file a CIRP application against defaulting developers. The constitutionality of this threshold was challenged by the home-buyers. The Supreme Court upheld the validity of the threshold on the basis that this was specifically recommended by an expert committee and that the threshold was crucial towards forming the 'critical homogenous mass' as envisaged by the legislature.16

iii Applicability of limitation to CIRP applications

One of the key principles in respect of enforcement of debt is limitation. Under the IBC, the Limitation Act 1963 (the Limitation Act) applies to proceedings before the NCLT or the NCLAT. The period of limitation for civil suits is three years from the date when the right accrues. A fresh period of limitation will accrue if a written acknowledgment of liability is received within this three-year period.17 It is a settled principle of law that creditors are not permitted to file CIRP applications in respect of time-barred debts.18 However, the NCLAT has held that the limitation cannot be freshly computed for the purpose of CIRP applications given the CIRP is not in the nature of a recovery action.19 Accordingly, creditors are necessarily required to file CIRP applications within three years of the occurrence of a default. The Supreme Court has recently held that the limitation period can be revived if there has been an acknowledgment of liability within the limitation period.20 Accordingly, the Supreme Court has rightly applied the entirety of the Limitation Act as has been set out under the IBC.

It has also been contended and successfully held that acknowledgement of liability in the books of accounts of the corporate debtor (balance sheet or annual return) does not amount to acknowledgement in terms of the Limitation Act on the basis that such filings are mandatorily required under applicable law and do not necessarily serve as acknowledgment of liability.21 The NCLAT and the Supreme Court have held that acknowledgment of liability in the books of the corporate debtor is tantamount to acknowledgement for the purposes of the Limitation Act.22 However, the Supreme Court also observed that while entries in a balance sheet would generally constitute a valid acknowledgment of debt, it would depend on the facts of the case (such as, whether an entry made in a balance sheet qua any particular creditor is unequivocal or has been entered into with caveats or qualifications) to fully determine which such entries should be treated as acknowledgement of debt in that specific facts scenario.

iv Entitlement of dissenting financial creditors

Under the IBC, dissenting financial creditors are required to be paid the liquidation value of their claims in priority to any settlement of claims of consenting financial creditors. The IBC does not specify the manner of settlement of claims of dissenting financial creditors (i.e., whether such claims should be settled in cash or kind). In practice, resolution applicants propose a combination of upfront cash payments and long-term debt instruments or equity shares to financial creditors. It is counterintuitive to propose issuance of such instruments to dissenting financial creditors because they have voted against the resolution plan. However, the alternative – which is a higher upfront cash component – is not usually commercially preferred. Accordingly, until the Supreme Court's judgment in Jaypee Kensington Boulevard Apartments Welfare Association and Ors v. NBCC (India) Ltd and Ors,23 dissenting financial creditors usually accepted equity shares or debt instruments.

The Supreme Court has held that successful resolution applicants are required to settle the claims of dissenting financial creditors by way of direct money or enforcement of security interest to the extent of the value expected to be received by such creditors on the basis that such creditors cannot be forced to remain attached to the corporate debtor. However, the Supreme Court left it open to the dissenting financial creditors to opt for any other method of discharge of obligation owed to them. The context of this decision is the ongoing CIRP of Jaypee Infratech Limited , in which the resolution plan submitted by NBCC (India) Limited (NBCC) was approved by 97.36 per cent of the committee of creditors, and subsequently, the NCLT. NBCC proposed settlement of claims of dissenting financial creditors in the form of proportionate share in the equity of the expressway SPV and transfer of certain land parcels belonging to Jaypee Infratech Limited. This rationale may be sought to be distinguished on the basis of the facts (given, land is sought to be transferred as a mode of settlement of claims); however, resolution applicants are being required to modify the commercial terms under their resolution plans in light of this decision. It remains to be seen whether the legislature will step in to clarify the law on this issue.

v Resolution of personal guarantors' debts

The Ministry of Corporate Affairs notified the provisions in respect of the insolvency resolution process of personal guarantors to corporate debtors on 15 November 2019. Several prominent personal guarantors (including, Mr Anil Ambani) challenged this notification on the basis that the government arbitrarily and selectively notified such provisions as against notifying all provisions in respect of the resolution of individuals. Additionally, the promoters contended that they should be absolved from liability once a resolution plan in respect of the corporate debtor is approved. The Supreme Court24 held that such notification was constitutionally valid because there is sufficient indication in the IBC that personal guarantors (though forming part of larger grouping of individuals) were to be, in view of their intrinsic connection with corporate debtors, dealt with differently. Also, the Supreme Court confirmed the co-extensive nature of the corporate debtor's and the personal guarantor's liability (i.e., the approval of a resolution plan does not ipso facto discharge a personal guarantor (of a corporate debtor) of her or his liabilities under the contract of guarantee).

vi Supremacy of the IBC

The intent of the CIRP is to resolve the distress and to turn around the operations of an ailing corporate debtor. It is essential that through the CIRP, a successful resolution applicant takes over the corporate debtor on a 'clean slate' basis (i.e., without any past liabilities or claims).25 The Supreme Court reaffirmed this theory in two recent instances. It held that once a resolution plan has been approved under the IBC, all claims (including statutory claims) outside the resolution plan will cease to survive and cannot be re-initiated or continued against the new corporate body. The Court in a separate instance also held that extinguishing the criminal liability of the corporate debtor is important for the new management.26 In fact, the NCLAT recently held that there is no conflict between the IBC and the Prevention of Money Laundering Act 2002 (PMLA), and that the IBC will override the attachment of the properties of a corporate debtor under the PMLA (even in cases where such attachment takes place prior to the initiation of the CIRP).27 Accordingly, given that the supremacy of the IBC is a well-recognised principle, the CIRP of distressed assets should elicit interest from potential bidders.

vii Liquidation value as a benchmark

The underlying principle of any restructuring or insolvency regime is that stakeholders should be paid the liquidation value of their claims (i.e., the value that they would receive if the corporate debtor was subject to liquidation). Commercially, financial creditors would prefer receiving resolution plans the value of which would exceed the liquidation value of the assets of the corporate debtor. On this basis, a promoter and a financial creditor challenged the approval of the resolution plan for Maharashtra Seamless Limited. The Supreme Court held that there is no provision in the IBC specifying that the value of the resolution plan should match the liquidation value of the corporate debtor.28

Given the protracted timelines associated with the CIRP and the uncertainty due to covid-19, financial creditors increasingly prefer settling outside the IBC. This is not entirely surprising because the IBC has also been utilised as a tool to force defaulting companies and promoters to settle with the financial creditors. As mentioned above, based on the data available until March 2021, 411 CIRPs have been withdrawn under the IBC. Under the IBC, the NCLT is permitted to allow the withdrawal of the CIRP applications on an application made by the resolution professional accompanied by justification for such withdrawal (in the event the committee of creditors has already been constituted).

In a recent instance, financial creditors have utilised this provision to withdraw a CIRP in respect of Siva Industries and Holdings Limited, which had outstanding dues of approximately 50 billion rupees to its financial creditors on the basis that the settlement would lead to greater recovery as against the expected liquidation of Siva Industries and Holdings Limited. Pursuant to the settlement, the financial creditors are expected to receive 10 per cent of their outstanding dues.29 Ideally, such settlements would not be permitted as they enable promoters to re-acquire control of their companies. The government is currently in the process of reviewing the IBC to ensure that such back-door arrangements are not permitted.30

In another recent surprising turn of events, after the committee of creditors, the Competition Commission of India and the RBI approved the resolution plan of Piramal Capital & Housing Finance Limited (Piramal) in respect of DHFL, the NCLT had ordered the committee of creditors to reconsider a settlement offer by its jailed promoter, Mr Kapil Wadhawan.

DHFL had total outstanding dues of 900 billion rupees. Piramal's total bid (which included a combination of approximately 14 billion rupees on an upfront basis and the remaining amount by way of non-convertible debentures) was for an amount of approximately 340 billion rupees. Mr Kapil Wadhawan is offering 910 billion rupees (which includes 90 billion rupees as cash upfront and the remaining amount by way of long-term instruments).

The NCLT direction has elicited severe criticism from all stakeholders because it violates the spirit of the IBC and opens a back door for promoters to regain control of the very entities they have failed to manage. The NCLAT has stayed the operation of the order passed by the NCLT. To date, the NCLT has approved Piramal's resolution plan for DHFL. We understand that DHFL's shareholders and debenture holders have challenged this approval order.

Another important aspect is the committee of creditors' commercial wisdom in deciding on a specific resolution plan. It is a well-settled principle of law that the judiciary cannot interfere with the collective decision of the committee of creditors to vote on a resolution plan, assuming that the plan complies with the requirements under applicable law.31 Accordingly, if the committee of creditors has, in exercise of its commercial wisdom, decided in favour of a resolution plan, the judiciary's remit in approving the resolution plan is limited. On this basis, the Supreme Court refused to entertain an appeal and interfere with the commercial wisdom of the committee of creditors that had rejected a settlement offer proposed by a promoter for an ailing corporate debtor.32 The DHFL situation is a clear case of judicial activism. To date, Mr Kapil Wadhawan has challenged the stay on the NCLT order passed by the NCLAT before the Supreme Court.

Significant transactions, key developments and most active industries

The past year has seen significant traction in large CIRPs, which include the CIRPs of the Reliance Communications Limited (RCom) Group (RCom Group), Aircel Limited Group (Aircel Group) and Jaypee Infratech Limited. More importantly, the last year has seen the resolution of distressed financial services companies – ILFS and DHFL.

Unfortunately, the resolution processes of the aforementioned entities remain ongoing for various reasons, which include pending legal proceedings, delays in obtaining regulatory approvals, non-fulfilment of conditions to the effectiveness of approved resolution plans and extenuating circumstances owing to covid-19.

Set out below are the key transactions that have occurred over the past year. These transactions are also indicative of the most active industries.


DHFL is the first case in terms of resolution of an NBFC under the IBC. The resolution was led by the administrator appointed by the RBI (similar to a resolution professional under the CIRP). The CIRP attracted two foreign bidders – Oaktree Capital Management (which submitted a bid for DHFL as an entity) and SC Lowy (which submitted a resolution plan for the wholesale business of DHFL) – and two domestic bidders – both Piramal and the Adani Group submitted a resolution plan for DHFL as an entity. There were four rounds of submission of resolution plans accompanied with extensive negotiations between the committee of creditors and the resolution applicants. Eventually, the resolution plans of Oaktree, Piramal and Adani were put forth for voting by the committee of creditors. These bidders had offered a combination of upfront cash payment and long-term non-convertible debentures to DHFL's financial creditors. The committee of creditors voted in favour of Piramal's resolution plan for DHFL. As discussed in Section IV, the resolution plan was approved by the NCLT. This will be followed by the implementation of the resolution plan which may take three to six months.


The downfall of ILFS (one of India's leading NBFCs) was a watershed moment in the financial services industry. Considering the widespread ramifications of the ILFS crisis (for context, the total outstanding debt of the ILFS group was approximately 940 billion rupees), the government adopted a unique approach to resolve ILFS (i.e., suspension of ILFS's board of directors and appointment of a new board) on the basis that ILFS had mismanaged public funds and had conducted the affairs of ILFS in a manner prejudicial to the public interest under the Companies Act. The new board is currently in the process of implementing a resolution plan for ILFS under the supervision of a retired judge of the Supreme Court and the NCLAT. The resolution framework includes a combination of asset sales and divestments, sale of distressed loans and servicing of debt from solvent IFLS group companies. These individual sale processes under the larger resolution framework are similar to the CIRP; however, it is a purely creditor and ILFS driven board process. To date, it appears that ILFS has addressed group debt of 430 billion rupees and resolved 186 entities out of its 347 entities.33 It is expected the ILFS group resolution will be further delayed due to covid-19.

iii RCom Group

One of India's erstwhile but prominent telecommunications player, the RCom Group had accumulated debt of approximately 850 billion rupees.34 The RCom Group consists of Reliance Telecom Limited (RTL), Reliance Infratel Limited (RITL) and Reliance Communications Infrastructure Limited (RCIL), which own towers, fibre, media convergence nodes and spectrum.

Subsequently, following a failure to settle with one of its operational creditors (Ericsson), the RCom Group was admitted into CIRP. The resolution plan submitted by UV Asset Reconstruction Company Limited (UVARC) was approved for the resolution of RCom and RTL (such plans, UVARC resolution plans). The value of UVARC's bid for RCom and RTL was approximately 140 billion rupees.35 The UVARC resolution plans are pending approval of the NCLT. As discussed below, spectrum is not permitted to be sold as part of the CIRP unless all outstanding statutory dues are paid. Additionally, according to the RBI, UVARC (being an asset reconstruction company) is not permitted to purchase distressed assets as part of the CIRP, as such investment or infusion of equity is not permitted under its governing legislation – the SARFAESI Act. Unless these issues are resolved, it is possible that RCom and RTL will be subject to liquidation.

An affiliate of Reliance Jio Infocomm Limited, Reliance Digital Platform & Project Services Limited, was declared as the successful resolution applicant for RITL (RITL resolution plan) given its bid value of 37.2 billion rupees. The NCLT has approved the RITL resolution plan. However, its implementation is subject to the fulfilment of certain conditions precedent. It is expected that the implementation of the RITL Resolution Plan could occur within the next six to nine months.

We understand that the committee of creditors is negotiating the resolution plan for RCIL. It is expected that RCIL's CIRP could also take six to nine months to conclude.

iv Aircel Group

Another major Indian telecom company to undergo CIRP under the IBC was Aircel Limited (AL), with its group companies, Dishnet Wireless Limited (DWL) and Aircel Cellular Limited (ACL), which, similar to the RCom Group, own spectrum, fibre, data centres, towers and bulk SMS business assets. The cumulative debt of the Aircel Group stood at approximately 580.67 billion rupees.36 UVARC submitted a resolution plan for each of AL, DWL and ACL, with a bid value of approximately 66.3 billion rupees, funded primarily through zero-coupon optionally convertible debentures. Ultimately, the committee of creditors approved UVARC's resolution plans and the NCLT passed its order dated 9 June 2020 approving the resolution plans.

However, the NCLAT, in its order dated 13 April 2021, has held that spectrum cannot be transferred without payment of payable licence dues to the Department of Telecommunications. The order will affect the resolution plans for the Aircel Group.37 Financial creditors are expected to appeal against the NCLAT's order before the Supreme Court.

v Jaypee Infratech Limited

Jaypee Infratech Limited, an Indian infrastructure development company, was admitted into CIRP in August 2017. JIL was one of the top 12 NPA accounts directed to CIRP by the RBI. To date, there have been four rounds of bidding to acquire Jaypee Infratech Limited. The CIRP time lines have been affected by ongoing litigation proceedings. Government-owned NBCC (India) Limited and Suraksha Realty are the two contenders for the acquisition of Jaypee Infratech Limited. The Jaypee Infratech Limited CIRP has led to the clarification of a few key issues under the IBC.


To date, the IBC does not contain a cross-border insolvency framework. It merely contains enabling provisions in respect of the issuance of letters of requests for assistance to foreign courts. The insolvency law committee constituted by the Ministry of Corporate Affairs has recommended the adoption of the UNCITRAL Model Law on Cross-Border Insolvency 1997 (UNCITRAL Model Law) with certain modifications to facilitate a uniform cross-border insolvency approach across countries. In fact, in the CIRP of Jet Airways Limited, the cross border insolvency protocol formulated between the Dutch administrator and the Indian resolution professional was designed on the principles of the UNCITRAL Model Law for cross-border coordination. As discussed below, we expect that this framework will be notified soon.

Future developments

We expect the following measures to be introduced over the next year.

  1. Group insolvency: the IBC provides for the resolution of companies on a standalone basis. Corporate debtors that are part of larger conglomerates or groups should ideally be resolved as a group. The NCLTs in the past have ordered consolidation of CIRPs for entities belonging to the same group (specifically, the CIRP of Videocon Industries Limited). However, a comprehensive framework in this regard is yet to be introduced in the IBC.
  2. Cross Border Insolvency: As mentioned above in Section V, introduction of comprehensive provisions with respect to cross border insolvency has been pending for some time now and the Government is working towards notifying the same.
  3. Resolution of individuals and partnership firms: while the IBC provisions in respect of resolution and bankruptcy of personal guarantors have been notified, the IBC provisions with respect to resolution and subsequent bankruptcy of individuals and partnership firms are yet to be notified.


1 Aniruddha Sen is a partner, Karishma Dodeja is a counsel, Monil Chheda is a senior associate and Pooja Shankar is an associate at Trilegal.


6 The IBC, § 8-10.

8 The IBC, Section 10A.

9 The IBC, Section 10A.

10 IL&FS Financial Services Limited v. Pushpa Shah & Anr [Company Petition No. 919 of 2017]; Pushpa Shah & Anr v. IL&FS Financial Services Limited [Company Appeal (AT) Insolvency No. 521 of 2018]

11 Phoenix Arc Pvt. Ltd. v. Ketulbhai Ramubhai Patel [Civil Appeal No. 5146 of 2019].

12 Pioneer Urban Land and Infrastructure Limited v. Union of India, [Writ Petition(s)(Civil) No. 43/2019].

13 Anuj Jain Interim Resolution Professional for Jaypee Infratech v. Axis Bank Limited [Civil Appeal No. 8512 of 2019].

15 Pioneer Urban Land and Infrastructure Limited v. Union of India, judgment dated 9 August 2019 in [WP No. 43/2019] - The IBC, Section 8(f).

16 Manish Kumar v. Union of India, [2021 SCC OnLine SC 30].

17 The Limitation Act 1963, Section 18.

18 Asset Reconstruction Company (India) Limited v. Bishal Jaiswal & Anr, [Civil Appeal No. 323 of 2021].

19 Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries Private Limited, [Civil Appeal No. 6347 of 2019].

20 Laxmi Pat Surana v. Union Bank of India, [Civil Appeal No. 2734 of 2020].

21 V. Padmakumar v. Stressed Assets Stabilisation Fund (SASF) & Anr [Company Appeal (AT) (Insolvency)
No. 57 of 2020].

22 Asset Reconstruction Company (India) Limited v. Bishal Jaiswal & Anr, Judgment [Civil Appeal No. 323 of 2021].

23 Civil Appeal No. 3395 of 2020.

24 Lalit Kumar Jain v. Union of India [Transferred Case (Civil) No. 245/2020].

25 Committee of Creditors of Essar Steel India Limited (through authorised signatory) v. Satish Kumar Gupta and Others, [(2020) 8 SCC 531].

26 Manish Kumar v. Union of India, [W.P. (C) No. 26 of 2020].

27 Directorate of Enforcement v. Manoj Kumar Agarwal & Ors, [CA-AT (Ins) No. 575 of 2019].

28 Maharashtra Seamless Limited v. Padmanbhan Venkatesh [Civil Appeal No 4242 of 2019].

31 Kalparaj Dharamshi v. Kotak Investment Advisors Ltd [Civil Appeal No 2943-2944 of 2020]; Committee of Creditors of Essar Steel India Limited (through authorized signatory) v. Satish Kumar Gupta and Others [(2020) 8 SCC 531].

32 Vishal Vijay Kalantri v. DBM Geotechnics and Constructions Private Limited [Civil Appeal 2730 of 2020].

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