Winding Up under the Companies Act and CIRP under IBC: Concerns and Directions for Reform – By Anoushka Goel and Sidharth Sajeev

Winding Up under the Companies Act and CIRP under IBC: Concerns and Directions for Reform 

Authored by:
Anoushka Goel, BBA LLB, 4th year at Jindal Global Law School
Sidharth Sajeev, BBA LLB, 4th year at Jindal Global Law School


In India, under the erstwhile regime, bankruptcy and insolvency of corporates was governed by a host of legislations such as Sick Industrial Companies Act, 1985 (herein ‘SICA’) , Companies Act,1956, Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and SARFAESI Act, 2002. However, a lacuna was felt in these existing legislations in providing a time-bound resolution of insolvent entities. Consequently, in 2014, the Bankruptcy Legislative Reforms Committee, under the leadership of Shri T.K. Vishwanathan proposed the implementation of the Insolvency and Bankruptcy Code, 2016 (herein the Code). Thus, acting on its basis, the Code received the President’s assent on 28th May, 2016 and was finally brought into effect from 1st December, 2016, with the repeal of SICA.

The Code is the principle legislation governing matters related to insolvency and resolution of corporates and individuals in the Indian corporate landscape. It was introduced with the object to facilitate revival of a corporate debtor firstly, by balancing the interests of all stakeholders and secondly, by maximizing value of the assets of such corporate debtor. The legislation comes as a significant factor in contributing to ‘Ease of doing Business In India’[1]. Chapter II of the Code pertains to the initiation of what is known as the Corporate Insolvency Resolution Process (herein CIRP). This process may either be initiated at the behest of financial creditor[2] or at the behest of the operational creditor[3] or even the corporate debtor itself [4]. In effect therefore, the implementation of the Code brought a paradigm shift in the law regarding winding up of companies under the Companies Act, 2013 (herein the 2013 Act).

The provisions relating to winding up were introduced for the first time in the legal sphere through the Companies Act, 1956 (herein 1956 Act) under Part VII. Thereafter, these provisions were carried over to the 2013 Act with limited amendments. Under the Act, Chapter XX encapsulated provisions relating to winding up of companies precisely, section 270(1), the 2013 Act which provided for ‘modes of winding up’. The introduction of the Code brought in sweeping changes to Chapter XX (Winding Up) of the 2013 Act. It becomes interesting to note at this juncture that prior to the enactment of the Code, the term ‘winding up’ found no conclusive definition either under the 1956 Act or in 2013 Act . It was only post its enactment, that the term is defined in Schedule XI by introducing Section 2(94A) to the 2013 Act to mean ‘winding up under this Act or liquidation order under the Insolvency and Bankruptcy Code-2016’. Thus, it is clear from the definition that winding up proceedings will fall under the purview of both the 2013 Act as well the Code.

Implementation of the Code has either lead to omission of some sections relating to winding up in its entirety, “while others have been reduced to a skeletal fashion[5]. Inevitably, there have been instances of encroachment between the Code and the 2013 Act. Thus, an understanding of these changes highlight the superiority of the Code over provisions of winding up as against the 2013 Act. However, the same comes with concerns of its own. The subject matter of this paper is relevant to understand the shortfalls in the process, more so in light of recent judicial pronouncements and reports issued by the Insolvency and Bankruptcy Board of India (IBBI), Insolvency Law Committee (ILC), Ministry of Corporate Affairs etc. This paper will look to analyse the concerns and propose/analyse the reforms in the current insolvency regime in India.

Research Methodology: The research involved in the present paper is Doctrinal in nature, consisting of :

  • An analysis of winding up provisions under the Act and CIRP under the Code to understand overlapping provisions, lacunae and the grey areas that surface.
  • Review and research on existing literature regarding the concerns and reforms pertaining to insolvency laws in India through the reports issued by the IBBI, ILC etc.
  • Suggesting reforms in the insolvency laws of India through comparative analysis with insolvency laws in the UK.



(a) Voluntary Winding Up

Exercising powers under the Code, the Government notified Section 255, the Code which provides that 2013 Act shall be amended in the manner prescribed in the Eleventh Schedule, the Code. By virtue of the notification of the Eleventh Schedule, the Code dated November 15, 2016, provisions for voluntary winding up under Chapter XX ranging from Sections 304 to 323, the 2013 Act were entirely omitted. As a result thereof, provisions for voluntary winding up now fall under the purview of Section 59, the Code which provides that ‘A corporate person who intends to liquidate itself voluntarily and has not committed any default may initiate voluntary liquidation proceedings under this chapter’.

Section 59, the Code states read with Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 and Rule 4 of the Companies (Transfer of Pending Proceedings) Rules, 2016 makes it sufficiently clear that all fresh proceedings for voluntary liquidation of corporate persons shall fall under the aegis of the Code and regulations made thereunder shall be instituted before NCLT. This section also prescribes conditions and procedural requirements for voluntary winding up. Thus, the event which triggers the applicability of the section under the IBC is the ‘occurrence of default’ by a corporate person. To this effect, Section 59(3)(a), the Code mandates a declaration of solvency by majority of the directors of a company by passing a resolution verified by an affidavit and further, that the liquidation is not for the purposes of defrauding anyone.

(b) Compulsory Winding Up

Section 271, the 2013 Act provided seven[6] grounds for compulsory winding up, one of them being on the grounds of “inability to pay debts” under 271(1)(a), the 2013 Act. Under the current regime, as a result of the notification of Section 255, the Code, Section 271(1)(a), the 2013 Act stands omitted as ground for compulsory winding up. However, the same is now covered in Chapter II of the Code under sections 7 to 9, where the financial and operational creditors respectively file and application for initiation of Corporate Insolvency Resolution Process (CIRP).Thus, there now exists a difference between winding up of a company instituted on inability to pay debts and otherwise. In the former, it will be translated as an application of CIRP under the Code. While the latter will fall under the purview of the 2013 Act. This leaves potential for possible overlapping of provisions between 2013 Act and the Code leading to uncertain conclusions.


The potential overlap mentioned above is quite prominent with regards to voluntary liquidation under s.59, the Code vis-à-vis Section 271(a), the 2013 Act, when members pass a special resolution mandating for winding up of the company by the NCLT. Now, given that such a process suffers from the vice of being cumbersome and time-consuming, it seems unlikely that a company would opt for this route of winding up over voluntary liquidation under the IBC. However, the fine print reveals otherwise.

As stated before, the pre-condition to trigger voluntary liquidation under s.59, the Code is that a default must not have been committed by the corporate debtor. However, such corporate debtor might take recourse under s.271(a), the 2013 Act, through a special resolution as no such pre-condition is required under it. At this juncture, it becomes important to point that s.59(3)(c)(i), the Code also mandates such a special resolution to be passed by the company in its general meeting. To this effect, the question of why the Parliament would retain such a cumbersome winding up process under the 2013 Act, especially considering that the Act is silent on when a winding up petition under s.271(a), the 2013 Act should be admitted remains unanswered[7]. This brings us to the necessary conclusion that in cases of default, there is an embargo on the company to voluntary liquidate itself under the Code, yet has the option of winding up under the 2013 Act, provided a special resolution to that effect is passed by the members. Such an overlap presents itself as a double-edged sword firstly, because although it provides greater control to the management of the company as opposed to creditors under CIRP process, it nevertheless comes as a concern as it opens up a possibility for the such corporate debtor to evade the provisions of CIRP under the Code. Secondly, even though it seems far-fetched to accept that the NCLT would allow winding up under the 2013 Act if it is carried with the intention to circumvent provisions of the Code, there still exists a legal lacuna as regards a definitive approach of the NCLT in addressing the issue.


Section 29A, the Code introduced vide the Insolvency and Bankruptcy Code (Amendment) Act, 2017 is directed to oust the former promoters and directors of the corporate debtor from submitting resolution plans. However, Section 230, the 2013 Act provided a ‘back-door’[8] entry route to erstwhile management, ineligible under Section 29A, the Code to propose a scheme of arrangement during liquidation under the 2013 Act thereby, circumventing the said section. This ambiguity has now been clarified by the Supreme Court in Arun Kumar Jagatramka v. Jindal Steel & Power Ltd. (herein Jindal Steel)[9], wherein the disqualification under section 29A, the Code has also been extended to Section 230, the 2013 Act. Thus, under the current scenario, the there exists a blanket ban persons ineligible under Section 29A, the Code from proposing schemes under Section 230, the 2013 Act. This comes as a cause of concern because the blanket ban imposed by Section 29A, the Code to schemes under the Act takes within its sweep not only the unscrupulous but also genuine promoters, who failed due to purely external reasons. This becomes ironical, more so, because even the Bankruptcy Law Reform Committee (BLRC) in its report[10], has distinguished between ‘malfeasance’ and honest ‘business failures’, recognising the latter as “normal and legitimate part of the working of the market economy[11]. This is also problematic given that the intent of the Code is to revive the company and not to debar the continuation of honest promoters/ management. It is imperative to realise that, in some cases, continued presence of erstwhile management may have a significant bearing on the CIRP process, given their know-how of the concerned company[12] therefore, instead of assessing each case separately, the blanket ban imposed by Section 29A, the Code acts as a pitfall for honest promoters in regaining control of their company.

While section 29A, the Code is well-intentioned, its impact on schemes under Section 230, the 2013 Act might prove counter-productive, in some cases. Thus, keeping in mind the significance of the role of erstwhile management in reviving the company, it is necessary to realize that very few opportunities exist for honest promoters/management to regain control once an application for CIRP is admitted by the NCLT against such a corporate debtor. In this light, it would be a better route to amend the current position to firstly, recognise the difference between malfeasance and honest business failures in the current regime, as also stated in the BLRC Report[13]. For this purpose, establishment of an independent committee to scrutinize bona fides of the promoter/management can be a way forward. In this way, bona-fide promotors would no longer be ineligible to propose schemes of compromise/arrangement under the 2013 Act to prevent liquidation of the corporate debtor while at the same time honouring the intent of section 29A, the Code.


(a) Procedural Amendments relating to resolution plans

A key reason attributed to the failure of the erstwhile insolvency regime was a lacuna in the existing legislations to provide for a time-bound resolution of insolvent entities. Thus, the timelines prescribed under the Code are considered the “USP of the Code”[14]. Section 12, the Code postulates a timeframe of 180 days from the date of admission of CIRP application to by the Tribunal, with an extension of 90 days permitted by the Adjudicating Authority, i.e., NCLT, in certain cases[15]. In any case, proviso to Section 12(3), the Code prescribes a cap of 330 days from the date of insolvency, including judicial pronouncements, with an extension only in exceptional circumstances[16]. However, several reasons have been attributed to the delay in adhering to the prescribed timelines.

Within this, Regulation 36-B of CIRP Regulations stipulates a minimum period of 30 days for submission of resolution plans by prospective resolution applicants along with a revision/modification of the same subject to the stipulated time. However, there was no ceiling on the number of such revisions/modifications allowed within the 30 day timeframe. This provision was recognised by the IBBI to invariably delay the resolution process[17]. Resultantly, on 30th September, 2021, the IBBI issued amendments to the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016 vide IBBI ( Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2021. Amongst these, the amended regulations limits the applicants’ requests for modifying/revising the plans, invitations for expression of interest etc. only once[18]. Furthermore, the amendment disallows the Committee of Creditors (CoC) from considering resolution plans received, inter alia, after a certain time[19].

It is not disputed that these amendments carry no weight in addressing the challenges faced in adhering to the prescribed timeline under Section 12, the Code however, while a timely completion of the resolution process is vital, the same is to be kept in juxtaposition with one of the primary intended purpose behind such a resolution- maximisation of value of assets for all concerned stakeholders. Judicial precedent in this regard also largely supports this idea. For instance, the Supreme Court in Binani Industries Ltd. v Bank of Baroda (Binani)[20] and IMR Mettalurgical Resources Ag v. Ferro Alloy Corp. Ltd.,[21] has upheld CoC’s decision to consider and even accept resolution plans submitted post the stipulated timeline, solely to maximise value of the assets of the corporate debtor. Though it remains unsettled whether these amendments will be directory or mandatory, in its present form, they may prove to be a bane rather than a boon for the corporate debtor, especially in light of the non-justiciability of the “commercial wisdom”[22] of CoC in approving/rejecting resolution plans.

For one, it poses a possibility of impacting the CoC’s commercial wisdom in approving a bona-fide, albeit late resolution plan as they may be driven by the overly technical approach of abiding by the one-time cap on revisions/modifications and non-consideration of resolution plans, even though the intent of maximising the corporate debtor’s value is either not met, or could be better achieved through late bids, as upheld in Binani[23]. This becomes problematic, more so, because post COVID-19 led suspension of CIRP provisions in India, efficient restructuring of debts of stressed businesses has been recognised as one of the key drivers of sustained economic recovery[24]. Thus, while CIRP is in progress, the CoC may fall prey to the temptation of accepting short-term gains to fulfil the one-time criteria, completely disregarding bona-fide bids and going against the legislative intent behind such a process.

(b) Regulating the Committee of Creditors (CoC)

The Supreme Court in K. Sashidhar Vs. Indian Overseas Bank & Ors[25] confirmed the supremacy of the CoC by holding that the legislature has not envisaged any provision which allows the adjudicatory authority to interfere in the decision-making powers of the CoC with respect to the resolution plan. Therefore, NCLT plays a “hands off role”[26] in the entire the insolvency process restricting itself to ensure that the resolution plan is within the ambit of the code. The unfettered rights conferred upon the CoC owing to their “commercial wisdom” has been upheld by the Supreme Court in Essar v Satish Kumar[27]. The unfettered rights conferred on the CoC has been subject to wide misuse, inviting questions regarding the efficiency and conduct of the committee. In Bank of Baroda v Sisir Kumar[28] the CoC attempted to transfer the control of the corporate debtor ti an ineligible person as per Section 29A, the Code, i.e., promoter, who was primarily responsible for the insolvency.

One of the objectives of the Code is to secure creditor rights by reducing repayment risks which would eventually lead to lower borrowing costs. Regarding the same, the 32nd Parliamentary Standing Committee on Finance[29] (Hereinafter, ‘Parliamentary Committee’) has expressed its concern over the creditors taking disproportionately large haircuts[30] (total claims minus the amount of realisation/amount of claims) which depletes the amount of recovery which is against the objective of the Code of securing creditors. For example, Twin Star Technologies proposed to payback ₹2,962 crore against a claim of ₹64,838 crore which amounts to a significant haircut of 95.85%[31]. Resolution through the Code has seen banks incurring haircuts up to 38-83 % whereas the normal haircut rates are 30-40% globally[32].

Owing to these concerns, the Parliamentary Committee[33] had recommended a code of conduct for the functioning of the CoC. Following the same, the IBBI published a discussion paper which contains a draft code of conduct[34]. It is important to note that these draft guidelines are yet to be introduced by the IBBI however, it is highly likely that they will lay down principles provided in the Annexure to the aforementioned paper[35]. This becomes problematic on constitutional grounds for twofold reasons- vagueness and lack of clarity on resultant breach. Thus, the concern in this regard stems from the overall impact of having such a code in place on the CIRP process as a whole.

Firstly, it is contended that the proposed code of conduct is drafted in a rather vague manner.  For example, “maintain objectivity while making decisions” under clause C of the Annexure[36] which might lead to confusion and conflicting judicial interpretation, opening a floodgate of litigations. Further, in Shreya Singhal v. UOI[37] the Supreme Court emphasised that a statute must be consistent and crisp which does not leave a scope for misuse of law to the detriment of a citizen. Therefore, there exists a legitimate concern regarding the misuse of the code of conduct to challenge viable resolution plans owing to its vagueness and providing an additional cause of action to unsuccessful resolution applicants. More than this, the ultimate cause of concern is effect of further delay that this would cause to the resolution process and lead to weakening of the supremacy of the CoC, which has been reiterated by the Supreme Court in several judgements[38].

Secondly and more importantly, a legal concern has been pointed out regarding the competence of the IBBI to issue the impugned guidelines regarding the conduct of financial creditors (which constitutes the CoC), given that the power to regulate financial creditors is not within its ambit[39]. In the same breadth, assuming these guidelines are made justiciable before the Tribunal, other areas of concern are (a) how the breach of guidelines by the CoC will be dealt with; and (b) what would be the impact of such a breach. This becomes problematic more so, because if the breach of guidelines leads to greater judicial intervention and subjects the decisions of the CoC open to scrutiny, it would firstly, have an adverse impact on the time-bound objective behind conducting a CIRP and secondly, it would overturn established jurisprudence that has given a long rope to the CoC as regards its “commercial wisdom”[40].


Members of the CoC through section 21 of the code are usually financial creditors who are members of banks or other financial institutions who are regulated by the RBI or the Securities and Exchange Board of India (SEBI). Rajat Sethi[41], advocates an inter-regulatory approach to enforce the code of conduct i.e., by extending the regulatory framework of the RBI and SEBI to the insolvency process under the Code. These regulatory frameworks should be outside the ambit of a law like section 30(2) or section 61(3), the Code which would allow the NCLT or the NCALT to reject a resolution plan. This would ensure that the adjudicatory authority under the code is not subject to a floodgate of litigation while ensuring that the CoC is accountable to their regulators under the code.

While this inter-regulatory approach can broadly ensure proper conduct of the CoC without causing delays, in our opinion it would be beneficial to incorporate provisions within the Code which would allow judicial intervention in cases of gross misconduct such as, attempt to control transfer of the company to restricted people under section 29A, the Code undue benefits accrued to the creditors through inclusion of their legal fees which is contrary to the law in force[42] etc.  These provisions should be carefully drafted to ensure that they are sparingly exercised, to ensure that the commercial wisdom of the CoC does not contravene the object of the Code. Further, the code can mandate a maximum limit of haircut in-order to ensure that the CoC in exercise of its commercial wisdom does not take actions that are prejudicial to the stakeholders and a fair value is obtained from the resolution process.

Therefore, our opinion, introducing an inter-regulatory code of conduct for the CoC, statutorily restricting gross misconduct within the code and imposing a maximum limit of haircut would safeguard that the interest of all the stakeholders vis-à-vis the conduct of the CoC.



Restructuring of debt can be undertaken by a corporate entity by subscribing to any of the three following methods-

  • Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016
  • Compromise, restructuring, composition, and arrangement of scheme under section 230 of the Companies Act, 2013
  • Prudential framework for Resolution of Stressed Asset prescribed by the RBI.

While restructuring the debt, several classes of creditors may put forth individual or class concerns leading to stalling of the debt restructuring process. Schemes have been historically held up by the creditors in hopes of a better deal[43], while they have no real interest in the revival and restructuring of the company.

In order to remedy this problem, the Code classifies creditors into financial and operational creditors under section 5(7) and section 5(20). Further, as per Section 21, the Code only financial creditors are permitted to be a part of the CoC which is the decision-making body of the CIRP. Further, approving the resolution plan under Section 30(4), the Code requires 66% of voting shares of only the financial creditors. This allows a viable restructuring plan to go thorough, which is approved by a majority constituting the CoC who retain an economic interest in the business, circumventing dissenting financial creditors and operational creditors. This is an example of a Cross-Class Cramdown Provision (CCDP) which limits the ability of a class creditors to hold up a viable restructuring plan approved by the majority of creditors. Similar provisions are present in the Corporate Insolvency and Governance Act, 2020 (CIGA) of UK and Chapter 11 of Bankruptcies in the United States.

Approving the distinction created between the classes of creditors under the Code, the Supreme Court in Swiss Ribbons v Union of India (herein Swiss Ribbons)[44] held that financial creditors like the banks are ‘better equipped’ with techno-economic assessments and are privy to the financial objectives of the company that were disclosed to them while advancement of loan. Further, operational creditors are not concerned with the revival of the company, and they will exit as soon as they receive the money owed to them whereas the financial creditors have to be associated with the corporate debtor as per the terms and conditions of the loan repayment structure. Further, there are certain provisions which counterbalances this dominance of financial creditors as operational creditors are mandated to be paid a minimum repayment under the resolution procedure.

In the light of recent suspension of the Code owing to the Covid-19 pandemic, the lack of CCDP’s in the other two restructuring methods came to the forefront. The Prudential Framework for Resolution of Stressed Asset espoused by the RBI does not contain any provisions to incorporate CCDP. Section 230(6), the 2013 Act stipulates that scheme must be approved by ‘all the creditors, class of creditors or members or class of members’ which makes it possible for a class of creditors to oppose a viable restructuring plan. Although it is possible to cramdown of the dissenting minorities forming part of each class, it is not possible to cramdown on one or more classes of creditors who may not be economically interested in the revival of the company leading to excessive delays in approval of the scheme.  With the Supreme Court approving the imbalance of power between classes of creditors[45] introduction of CCDP in the 2013 Act and other debt restructuring methods can largely curtail the problem of delays owing to dissenting class of creditors. To protect the interests of the dissenting creditors, compulsory sanction of the scheme by the courts can be mandated to ensure that the plan is fair and equitable while providing sufficient protection to dissenting creditors[46].


As per the Report of Insolvency Law Committee of February 2020, the objective of the moratorium under Section 14, the Code is to form a shield around the corporate debtor to protect it from pecuniary attacks in order to continue as a going concern while formulating a scheme for revival. The moratorium as per the Code kicks in post-admission of a CIRP petition under the Code and lasts till the completion of the process, or the resolution passed by the CoC to liquidate the corporate debtor, or on the resolution plan being approved by the Adjudicating Authority.

As per section 7(4), the Code, the NCLT must admit a petition within 14 days of receipt of application under section 7,9,or 10, the Code, as the case may be. In practical parlance there are several cases where admission of a petition by the NCLT overshoots the stipulated time-limit[47]. Therefore, there is a legitimate concern that the corporate debtor may attempt to sell of their assets before the moratorium period or that the secured creditors may attempt to sell the assets of the corporate debtor in-order to recover their dues, both of which are an anathema to the object of the Insolvency and Bankruptcy Code, 2016.

In NUI Pulp and Paper Industries Private Ltd V M/s Royce Trading GMBH[48], (hereinafter, NUI v Royce), M/s Royce Trading GMBH (creditor) filed an application under section 60(5)(C), the Code read with Rule 11 of the NCLT Rules, 2016 requesting the Tribunal to pass an order to prevent the corporate debtor from engaging in creating third party interests or alienating the assets of the corporate debtor. Rule 11 of the NCLT Rules, 2016 allows the Tribunal to pass any order which is “necessary for meeting the ends of justice or to prevent abuse of the process of the tribunal”. The Hon’ble NCLT passed an order restraining the directors from ‘alienating, encumbering, or creating any third-party interest on the assets of the corporate debtor’ in the pre-admission stage until further orders, which was further upheld by the National Company Law Appellate Tribunal (NCLAT). This judgement is a welcome step as it is useful to ensure that the assets of the corporate debtor remains intact in the pre-admission stage and creditors’ interests are protected.

There is no iota of doubt that the process of admission must be fast-tracked by the courts. The tribunal in NUI v Royce[49] recognised the need for a pre-admission moratorium owing to the inefficiency in admitting petitions. In order to prevent any confusions or difficulties that may arise, it may be beneficial to statutorily introduce a moratorium in the pre-admission stage.

Pre-admission free-standing moratorium was introduced in the UK through the Corporate Insolvency and Governance Act, 2020 which allows for a moratorium even before the application or determination of the restructuring process to be followed. Under the CIGA, the moratorium is overseen by an insolvency professional while the directors remain in charge of the operations of the company.

The pre-admission moratorium may be beneficial for both corporate debtor and creditors as the former would have a window to negotiate a settlement with the creditor and the latter will be assured that the assets of the corporate debtor remains intact. Further, as seen in the UK oversight of the moratorium by an insolvency professional would ensure that the directors of the company do not take any steps that are detrimental to the interests of the creditors.



Cross-border insolvency deals with the treatment of financially distressed companies with assets in multiple countries or if an insolvency proceeding is initiated against the insolvent debtor in multiple countries[50].  Even though the Code has made significant impact on the insolvency process in India, it is rather ineffective on the issue of cross-border insolvency. The two provisions which deal with cross border insolvency are Section 234, the Code which empowers the Central Government to enter into bilateral treaties with foreign nations for the purpose of enforcing the Code[51] and Section 235, the Code empowers the Adjudicatory Authority to issue a letter of request to a country under which a bilateral treaty has been entered into under Section 234, the Code to deal with assets in their country[52].

Concerns in the present system

It is to be noted that a pre-requisite to initiate any insolvency proceeding under the code is having an existing bilateral treater within the ambit of Section 234, the Code. The process of negotiating and entering into such bilateral treaties is time consuming and cumbersome. Further, the Code is unclear on dealing with insolvent companies who have assets in countries with which no bilateral treaty is signed. Another important drawback is the lack of clarity on the issues of parallel proceedings, coordination, cooperation between the countries in the present system. Further, the rights of foreign creditors remain unclear under the present system. There is also an ambiguity regarding participation in the insolvency process and position in the ranking of claims of foreign creditors. Most importantly, the core of any cross-insolvency process is the determination of Centre of Main Interest (COMI) which determines the country the corporate entity is most proximate to for the purposes of cross border insolvency[53]. The code is silent on the determination of the same indicating the inadequacy of the Code as regards cross border insolvency.

Judicial tryst with cross-border insolvency

In Jet Airways (India) v SBI (herein Jet Airways)[54], the SBI (financial creditor) filed an application upon which CIRP was commenced against Jet Airways (corporate debtor). The adjudicatory authority was aware of a proceeding before a Dutch Court to seize the assets (Boeing 777 aircraft) of the corporate debtor in Netherlands. Since the legislation was silent on the issue of cross-border insolvency, the NCLT applying its judicial mind adopted a restrictive approach, invalidating the Dutch proceeding. However, on appeal the NCLAT permitted the cross-border insolvency proceedings upon ensuring cooperation between the Dutch Bankruptcy administrators. The main insolvency proceeding was to be conducted in India in adherence to the domestic laws.

Recent developments towards mitigating the legislative lacunae with respect to cross border insolvency

Recognising the need to make amendments to the code to make it more effective, the Ministry of Corporate Affairs constituted the Insolvency Law Committee (ILC).  One of the shortfalls in the Code recognised by the ILC was the issue of cross border insolvency[55]. The ILC released draft guidelines in a chapter of the report titled Part Z[56] drawing inspiration from the United Nations Commission on International Trade Law Model Cross Border Insolvency law, 1997 (UNCITRAL Model Law). It is noteworthy that Singapore, Australia, South Africa etc have adopted and incorporated the UNCITRAL Model Law to make the process of cross-border insolvency streamlined and consistent with the global framework[57]. The Ministry of Corporate Affairs further constituted the Cross-Border Insolvency Rules/Regulations Committee (CBIRC) to address the specific shortfall of the Code as regards cross-border insolvency. Further, the Union Budget 2022-23, states that “Necessary amendments in the Code will be carried out to enhance the efficacy of the resolution process and facilitate cross border insolvency resolution”[58] indicating amendments to the code in line the tabled draft Part Z guidelines.


Over this paper, we have understood that ‘winding up’ as previously stood under the 2013 Act has now been reduced to a ‘skeletal regime’[59], given the sweeping amendments and omissions that took place due to the enactment of the Code. The paper initially delves into a detailed history of the winding up provisions under the 2013 Act as it underwent several developments post the Code. This extends further into unfurling the converging provisions in the Code with winding up proceedings under the Act, as they currently stand. Through this understanding, a possible grey area that comes as a concern is the possibility of circumventing provisions of CIRP under the Code to opt for compulsory winding up under the Act. Even though in some cases, this may be beneficial for the corporate debtor, nevertheless, a definitive approach of the NCLT in this regard is lacking. Additionally, it is seen how the ‘back-door’ entry route provided by Section 29A, the Code has been recently put to rest by Supreme Court in Jindal Steel[60] by extending its restrictions to schemes under the 2013 Act. However, while this was a much needed clarification, such a blanket ban puts honest erstwhile management/promoters at a serious disadvantage by excluding them from proposing schemes of arrangements under the 2013 Act. This becomes a cause of concern given the vital role of such erstwhile management in the resolution plan of the corporate debtor during the CIRP process[61].

The Code is a dynamic legislation enacted as a result of the failure of the previous insolvency regime to provide a streamline manner in dealing with resolution of corporates. It has been understood that the importance of the Code towards revival of corporates in a time-bound manner specified under Section 12 as well the value maximisation of assets that it seeks to achieve in the resolution process is unparalleled however, this has to be balanced with the “commercial wisdom” that has been attributed to the financial creditors in the process of CIRP, by the Supreme Court[62] as well the NCLT[63]. Now, given that these creditors are the principal players governing the process, the need for having uniform guidelines regulating their conduct has surfaced in contemporary times. Further, there have been several reasons leading to an undue delay in completion of the time-bound process of the Code. The legal lacuna in the Code in addressing these concerns have been duly recognised[64] and attempted to be amended by the Insolvency and Bankruptcy Board of India[65]. However, the paper throws light on how these amendments might end up proving counterproductive in achieving the timelines under the Code and overturning the established jurisprudence of non-justiciability of the commercial wisdom of the CoC, despite their well-intentioned objectives. It becomes all the more important surface these issues now, more than ever given that these amendments are still at their nascent stage and their enforceability remains to be seen.

Even though the IBC has made significant progress in streamlining the process of insolvency in India, there remains a lot to be done to make the IBC adhere its objectives. Drawing inspiration from the CIGA, CCDP could be incorporated within the framework on Companies Act, 2013. Incorporation of the same can prevent a class of shareholders from sabotaging a viable resolution plan. The cross-clam-down has been approved by the Supreme court through the case of Swiss Ribbons[66]. Therefore, introduction of CCDP can be beneficial to streamline the process of insolvency across the various legislation in place and to increase the efficacy of the process. Further, incorporation of a pre-admission moratorium can ensure that the purpose of the Code doesn’t get defeated owing to procedural lapses. As seen in the case of NUI v Royce[67] a bar on alienation of their property by the corporate debtor can protect the interest of the creditors. Therefore, the need for a pre-admission moratorium has been recognised and can be statutorily incorporated to serve the objective of the IBC to ensure that the interests of all the parties are recognised.

Another concern which looms large over the process of CIRP is the regulation of the CoC. While the judiciary has recognised the commercial wisdom of the CoC, the IBBI discussion paper[68] has expressed its concern over the CoC acting contrary to the objective of the Code. Some of the concerns voiced were regarding the attempt to transfer the powers of the company to restricted person under Section 29A, the Code accepting disproportionately large haircuts which are detrimental to the interest of the creditors themselves etc. Therefore, a draft code of conduct has been suggested by the Parliamentary Committee[69], however, there remains significant concerns regarding the implementation of the same adhering to the objective of the IBC to ensure a timely adjudication of the insolvency process. The inter-regulatory approach as enunciated above will curtail the floodgate of litigation that might overwhelm the adjudicatory authority within the code, while ensuring that gross misconduct which significantly sabotages the object of the code is restricted within it.

According to the Reserve Bank of India, there are 33,550 entities[70] who have assets and liabilities in foreign countries. Therefore, it is imperative that the insolvency regime within India have efficient means to regulate cross-border insolvency. However, owing to the lacunae within the insolvency regime, judiciary has been called to adjudicate regarding questions revolving around cross-border insolvency as seen in the case of Jet Airways[71]. The MCA has instituted the CBIRC to address the legislative lacunae regarding cross-border insolvency who have submitted their first report on June 2020[72]. Therefore, it might not be long before effective cross-border insolvency regulations are incorporated within the IBC, yet let us hope that it raises up to the challenge of ensuring a global, effective system within the ambit of the objective of IBC.



[2] The Insolvency and Bankruptcy Code, 2016, §7.

[3] The Insolvency and Bankruptcy Code, 2016, §9.

[4] The Insolvency and Bankruptcy Code, 2016, §10.

[5] Rohan Kohli, Company Law vis-à-vis the Code, Insolvency and Bankruptcy Code: A Miscellany of Perspectives, Insolvency and Bankruptcy Board of India, 2019.

[6] IBC Laws, Section 271 of the Companies Act, 2013: Circumstances in which company may be wound up by the Tribunal, 2014,

[7] Anirudh Gotey, Winding-up under Section 271(a) of the Companies Act and its Impact on the Insolvency and Bankruptcy Code, INDIA CORP LAW, 2017,

[8] LexCounsel Law Offices, Back Door Entry of the Defaulting Promoters- Inapplicability of Section 29A of Insolvency and Bankruptcy Code, 2018,

[9] (2021) 46 SC

[10] Bankruptcy Law Reforms Committee, The Report of the Bankruptcy Law Reforms Committee Volume 1: Rationale and Design, 22, (November 2015).

[11] Id.

[12] Jasper Vikas George, Insolvency Resolution Plans: Right of Erstwhile Management, Corporate Debtor, 6(1) Journal of National Law University Delhi (2019).

[13] supra, note 10.

[14] Insolvency and Bankruptcy Board of India,

[15] Jet Airways (India) v SBI, Company Appeal (AT) (Insolvency) No. 707 of 2019; Dewan Housing Finance Corporation Ltd. v. SEBI, Appeal No. 206 of 2020.

[16] Ebix Singapore Pvt Ltd. v. Committee of Creditors of Educomp Solutions Ltd., Civil Appeal No. 3224 of 2020; Committee of Creditors of ESSAR Steel Ltd. v. Satish Kumar Gupta, (2020) 8 SCC 531.

[17] Insolvency and Bankruptcy Board of India, Discussion Paper, 2021.

[18] IBBI (Insolvency Resolution Process for Corporate Persons) Regulation, 2016, cl. 4A to Regulation 36-A.

[19] IBBI (Insolvency Resolution Process for Corporate Persons) Regulation, 2016, cl.1-A to Regulation 39.

[20] [2018] 06 NCLAT

[21] [2020] 132 NCLAT.

[22] Committee of Creditors of ESSAR Steel Ltd. v. Satish Kumar Gupta, [2019] 07 SC; Ghanshyam Mishra & Sons Pvt. Ltd. Thru. Authorized Signatory v. Edelweiss Asset Reconstruction Co. Ltd. Thru. Director, (2021) 54 SC.

[23] Id.

[24] Anirudh Burman, India’s Sustained Economic Recovery Will Require Changes to its Bankruptcy Law, 2021.

[25] [2019] 08 SC

[26] Committee of Creditors of ESSAR Steel Ltd. v. Satish Kumar Gupta, [2019] 07 SC.

[27] Id.

[28] [2020] 22 NCLAT

[29] Standing Committee on Finance, Implementation of Insolvency and Bankruptcy Code- Pitfalls and Solutions, 2021.

[30] The Economic Times, Insolvency process: Parliament panel suggests benchmark for ‘quantum of haircut’, 2021,

[31] Rajeev Jayaswal, Govt may tweak CoC rules after drawing flak over excessive haircuts, 2021,

[32] Jayanta Roy Chowdhury, Government, bankers worried over high haircuts in IBC, 2020,

[33] supra, note 29,

[34] supra, note 17.

[35] Id.

[36] Id.

[37] (2013) 12 SCC 73.

[38] supra, note 22.

[39] Shardul Amarchand Mangaldas & Co., What to expect from India’s amendments to CIRP Regulations, Asia Business Law Journal, 2021.

[40] supra, note 22.

[41] Rajat Sethi, An Alternative approach to a Code of Conduct for the Committee of Creditors in an IBC Process, National Law School Business Review, 2021,

[42] supra, note 17

[43] Aastha Agarwalla, Corporate Restructuring in India: The Cross-Class Cramdown Provision, India Corp Law, 2020,

[44] [2019] 03 SC

[45] Id.

[46] supra, note 43.

[47] Asset Restructuring Company (India) Ltd. v GPT Steel Industries Ltd., (2019) 494 NCLAT

[48] [2019] 01 NCLAT.

[49] Id.

[50] InCorp Advisory, Insolvency Laws-What is Cross Border Insolvency?, 2021,

[51] The Insolvency and Bankruptcy Code, 2016, §234.

[52] The Insolvency and Bankruptcy Code, 2016, §235.

[53] Thomson Reuters Practical Law, Centre of Main Interests (COMI), 2022,

[54] (2019) 633 NCLAT

[55] Ministry of Corporate Affairs, Government of India, Report of Insolvency Law Committee on Cross Border Insolvency, 2018.

[56] Id.

[57] Neha Malu & Shreyan Srivastava, Cross Border Insolvency in India: A Long Due Dream, Vinod Kothari Consultants, 2022,

[58] Saloni Shukla, Nirmala Sitharaman proposes faster resolution of bankrupt companies, 2022,

[59] supra, note 5.

[60] supra, note 9.

[61] supra, note 12.

[62] supra, note 22.

[63] Id.

[64] supra, note 17.

[65] IBBI (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2021.

[66] supra, note 44.

[67] supra, note 48.

[68] supra, note 17.

[69] supra, note 29.

[70] Reserve Bank of India, Census on Foreign Liabilities and Assets of Indian Direct Investment Entities, 2020-21- Data Release, 2021.

[71] supra, note 54.

[72] Cross Border Insolvency Rules/ Regulations Committee (CBIRC), Report on rules and regulations for cross-border insolvency resolution, Ministry of Corporate Affairs, Government of India, 2020.


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