Insolvency & Liquidation of Financial Service Providers: IBC’s Special Provisions – Adv. Vishawjeet Singh and Adv. Yash Gupta

The introduction of the FSP Rules is a critical and timely first step in resolving financial firms in India. These Rules provide a unique interplay between the processes outlined in the Insolvency and Bankruptcy Code (IBC) and the principles that are distinct but complementary to financial firms. The regulator, the Committee of Creditors (CoC), and the adjudicating authority each have a specific role to play in this process. The FSP Rules will bring much-needed relief to the stakeholders involved in the financial sector, as they now have a clear path to implement resolution plans. However, it is essential to note that the FSP Rules are an interim measure, and comprehensive legislation in this regard will be crucial. As the resolution of FSPs is undertaken through these Rules, it is crucial to monitor the implementation of this framework closely. The FSP Rules provide a necessary first step in addressing the challenges faced by the financial sector, but a comprehensive legislative framework is needed to provide a lasting solution. Therefore, the FSP Rules are a critical first step in resolving financial firms in India, providing a clear path for stakeholders to implement resolution plans. However, ongoing monitoring and the development of comprehensive legislation are needed to address the challenges faced by the financial sector fully.

Bar on Personal Guarantors as Resolution Applicants under IBC: Understanding the Implications of Invoking Guarantee – By Adv. Yash Gupta and Adv. Nitish Gajraj

The IB Code has undergone several amendments since its inception, and one such amendment that has been introduced is the insertion of Section 29A, which has garnered considerable attention and criticism alike. Further, a specific provision was included in Sub-Section (h) of Section 29A to address the eligibility of Guarantors to Corporate Debtor (CD). This Sub-Section aims to disqualify any "person" who has provided a personal guarantee to a creditor from becoming a resolution applicant once the creditor invokes their personal guarantee. This article aims to discuss Section 29A of the IBC concerning the ineligibility of personal guarantors as a resolution applicant.

Modification of claims post approval of Resolution Plan: can NCLT exercise equity-based jurisdiction? – By Adv. Srivatsava Reddy Beerapalli

The Code as it exists in our country has consciously limited the jurisdiction of the Adjudicatory Authority in approving resolutions plans under Section 31 and the legislature has not conferred independent equity-based jurisdiction on the NCLT. Primarily, this helps reduce delays and increase time bound resolution ensuring value maximization. On the contrary, the remarks made by the NCLAT in Paramvir and continued litigation for equitable treatment in distribution of proceeds under the resolution plan to certain stakeholders leaves room for discussion on the treatment of all stakeholders under approved resolution plans in the prevailing status quo.

Litigation Financing and Its Viability under Insolvency Bankruptcy Code, 2016 – By Rachit Gupta

Third party funding (TPF), also known as litigation funding, is a significantly growing contemporary area of practice now a days. It involves a third party acting as a litigation financer who is ready to incur the entire cost of legal battle on behalf of the claimant of a legal claim in exchange of returns by a fixed share from expected relief from the case.

Examining the Right of Subrogation under IBC: Current Status and Implications – By Adv. Yash Gupta and Adv. Vishawjeet Singh

The IBC prioritizes the revival and rehabilitation of the corporate debtor over the recovery of debt by the personal guarantor. This means that the personal guarantor's right of subrogation is sacrificed to achieve the IBC's objective. The extinguishment of the personal guarantor's right of subrogation is a departure from the established principles of contracts of guarantee. This has led to debates and discussions about the fairness of the IBC towards personal guarantors. Once the Principal Debtor's creditors have been reimbursed by the guarantor, the IBC regime does not provide for the right to subrogation, and the guarantor cannot proceed against the Principal Debtor under the IBC. Denying the right of subrogation to guarantors may have a negative impact on the credit market, as guarantors may be reluctant to participate in transactions without recovery rights.

Decoding the Commercial Wisdom of Committee of Creditors (CoC) : An analysis of Indian & Global Scenarios – By Adv. Vishawjeet Singh

The focus of this article is to compare the “Indian Scenario vis-à-vis Global Scenario” relating to commercial wisdom of Committee of Creditors during the resolution process of a distressed company and whether the judiciary is required to interfere with the commercial decisions of the Committee of Creditors during or after the completion of process or not. The NCLT, NCLAT & Supreme Court have time & again stressed upon the ‘supremacy’ of the commercial wisdom of the Committee of Creditors. However, on numerous occasions, the  courts have been tempted to decide on their scope of interference with the commercial decisions of the CoC.