3RD ANNUAL INSOLVENCY SUMMIT 2018 CONCLUDES SUCCESSFULLY

Date: September 21, 2018

Event Name: 3rd Annual Insolvency Summit 2018

Venue: Taj Lands End, Mumbai

Theme: Insolvency - The New Window To Restructuring Your Business

Organizer: Legal Era – Legal Media Group

The event, with its informative sessions and consummate speakers, enabled the audience gain valuable insights into this area of law

The panels at the Summit included:

  • Insolvency - The New Window To Restructuring Your Business
  • Section 29A - A Hornet’s Nest
  • Cross-Border Insolvency In Asia: New Developments
  • Foreign Investment Into Distressed Asset - The New Investment Game
  • IBC - Case Laws And Judicial Precedent
  • How To Make The IBC Process More Effective

They served as a platform for key stakeholders – both Indian and overseas – to share their experiences and views on the current insolvency and bankruptcy scenario in India and related legislation, trends, and future opportunities and challenges.

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L-R : Padma Shri Dr.T.K.Viswanathan, Shardul S Shroff, Hon'ble Suresh Prabhu, Hon'ble P.P. Chaudhary, Amarjit Singh Chandhiok

The inaugural session had stellar personalities such as:

  • Hon'ble Suresh Prabhu, Minister of Commerce & Industry and Civil Aviation, Govt. of India
  • Hon'ble P.P. Chaudhary, Union Minister of State, Ministry of Law and Justice, and Ministry of Corporate Affairs, Govt. of India
  • Padma Shri Dr. T.K. Viswanathan, Chairman, Bankruptcy Law Reforms Committee (Summit Chairperson)
  • Amarjit Singh Chandhiok, President, INSOL India
  • Shardul S Shroff, Executive Chairman, Shardul Amarchand Mangaldas & Co

The opening session set the tone for the rest of the Summit based on the theme, Insolvency - The New Window To Restructuring Your Business.”

Highlights from the inaugural session:

Hon'ble Suresh Prabhu, Minister of Commerce & Industry and Civil Aviation, Govt. of India, said “Normally, it is said that you very rarely need to raise the corporate wealth to understand what is really behind the corporate because corporate is accepted as a legal entity. Sometimes, courts are also obliged to look into the intention of the legislature and not the law itself… In a model economy, the fact is that we are 2.6 trillion dollars already and will be 5 trillion dollars in the next 7-8 years and 10 trillion in the next 15 years, just imagine the magnitude, and most of it is going to be driven by the private sector and the bulk of the private sector activities will happen through corporates… The job of the legislature ends when the law is passed; the law the government adds when the rules are made out of the law.”

Hon'ble P.P. Chaudhary, Union Minister of State, Ministry of Law and Justice and Ministry of Corporate Affairs, Govt. of India, said “Our government is committed to end the under-practice of borrowing, defaulting, and then riling up. We aim to make the Indian business environment transparent and investor friendly so that we can further improve India’s global ranking in the ease of doing business. From 130 to 100, this rank was on account of the insolvency and bankruptcy code coming into effect.”

Padma Shri Dr. T.K. Viswanathan, Chairman, Bankruptcy Law Reforms Committee, said “The Insolvency and Bankruptcy Code  is one of the unique legislation which adorns our statute book … What the Code attempts  to do is to shift the focus from   the current business practice of raising finance through  secured credit and bank-focused finance and to enable entrepreneurs to raise capital  from the market to do business and to facilitate them to start afresh when the business fails  and also to ensure that limited liability corporation  is an essential tool for encouraging entrepreneurship in a free market.”

Amarjit Singh Chandhiok, President, INSOL India, said “This is the only legislation seen by me in my forty years of practice, where the person who created it was on a fast track, the parliament was on a fast track, and the implementators are also on a fast track. Look at the amendments that we have got in, look at the regulators how amendments are being made. Over and above that, it has created a profession which is called resolution professionals.”

Shardul S Shroff, Executive Chairman, Shardul Amarchand Mangaldas & Co, said “Section 29A of the IBC is prone to major litigation especially when there is competition for acquisition of the corporate debtor.  It causes inter se complaints to be filed between the bidders to disqualify each other.  The government sooner or later will have to consider changes.  The simplest change perhaps could be limiting the provisions of the dis-qualification to the corporate applicant who happens to be the promoter of the corporate debtor under resolution and not extend it to other companies of the promoter.  This issue becomes stark when one considers that a promoter is not a guarantor for other companies and may want to liquidate these and the disqualification for promoters was originally intended only to apply to the same corporate debtor where the promoter was bidding.”

The other dynamic panels comprised top-notch professionals from the industry such as (in alphabetical order):

  • Aashit Shah, Partner and Chair, Banking & Finance Practice, JSA
  • Abizer Diwanji, Partner, National Leader, Financial Services, Restructuring Services, EY India
  • Aditya Khanna, Founder, MD & CEO, ART Special Situations Finance (India) Limited
  • Ajay Shah, Professor, National Institute of Public Finance and Policy (NIPFP)
  • Anurag Das, MD & CEO, International Asset Reconstruction Company
  • Damini Marwah, General Counsel, Axis Bank Limited
  • Darius J. Khambata, Senior Counsel, Bombay High Court
  • Divyanshu Pandey, Partner, Banking & Finance Practice, JSA
  • Henry Wu, Director - Strategic Investment Group & Head of Credit Analysts, Deutsche Bank AG
  • James Noble, Partner, Litigation and Restructuring Group, Harneys
  • Kanaiya Thakker, General Counsel, Ambuja Cements
  • Nikhil Shah, Managing Director, Alvarez & Marsal Holdings, LLC
  • Nilanjan Sinha, Head Legal, India and South East Asia, ICICI
  • Sakate Khaitan, Senior Partner, Khaitan Legal Associates
  • Sapan Gupta, Partner, National Practice Head - Banking & Finance, Shardul Amarchand Mangaldas & Co
  • Shaun Langhorne, Partner, Hogan Lovells Lee & Lee (Singapore)
  • Shweta Bharti, Senior Partner, Hammurabi & Solomon
  • Siva S. Ramann, MD & CEO, National e-Governance Services Limited (NeSL)
  • Susan Thomas, Faculty Member, Indira Gandhi Institute for Development Research (IGIDR)
  • William Innes, Assistant Director, UK Restructuring, Deloitte 

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Section 29A - A Hornet’s Nest

L-R : Abizer Diwanji, Aashit Shah, Darius J. Khambata, Damini Marwah

Abizer Diwanji, Partner, National Leader, Financial Services, Restructuring Services, EY India
I think 29A has shaken up the whole sector more than the IBC code itself because really what has happened is that there has been a change of ownership which was hereunto actually unthinkable in an Indian situation... The intent was to make sure that unruly persons of any kind do not bid for companies... I think the more the law, the more difficult is the interpretation. Better would be to leave the acceptance of a Bid to the Committee of Creditors and the courts do not interfere in that decision.

Darius J. Khambata, Senior Counsel, Bombay High Court
I think IBC implementation has perhaps lost its way, largely due to the introduction of 29A because you have introduced a moral element into what was essentially a commercial resolution of insolvency... With the introduction of 29A, things have got diverted into detailed legal scrutiny of eligibility. And because 29A tries to be all-encompassing, it stretches its tentacles out in various directions; those legal issues become more and more complex. So, I think the aim and focus of the IBC, which were to cut through the morass of resolving bankruptcies and insolvencies and large NPAs, have to a certain extent got diluted.

Damini Marwah, General Counsel, Axis Bank Limited
There has been a lot of discussion going around that Section 29A is being used as a tool to stall the entire CIRP process. There have been some delays in the resolution process for sure, but to conclude that S.29A has become a tool to completely stall the process may not be a correct way to look at it. So, if there are resolution applicants who have good reason to believe that other bidders are hit by Section 29A, then they are completely within their rights to raise a challenge to have their concerns addressed. Some key concepts under S.29A are also already being considered by the Apex Court and are likely to get settled to a large extent upon the matters being adjudicated - which is usually the case with any new legislation. I don’t think of S.29A as a destructive tool or that it can bring the whole process down.

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Foreign Investment Into Distressed Asset – The New Investment Game

L-R : Henry Wu, Aditya Khanna, Shaun Langhorne, Nikhil Shah, Anurag Das, Divyanshu Pandey



Henry Wu, Director – Strategic Investment Group & Head of Credit Analysts, Deutsche Bank AG
As an investor in the Asian Distressed Market for the past 18 years, India was actually not really on our radar in recent years as the insolvency framework was lacking from a creditor’s perspective. The introduction of the IBC 2016 was a paradigm shift, in our view, and most importantly, it shifted the power back to the creditors. We are truly excited about the opportunity and this shows in our re-allocation of resources this past year. Our team previously focused very little time looking at India’s distressed debt market; today, by contrast, India occupies the lion’s share of our time as we look for interesting opportunities across Asia.

Aditya Khanna, Founder, MD & CEO, ART Special Situations Finance (India) Limited
You are now seeing distress becoming an investible asset class. I think since SARFAESI Code came into play in 2002, it’s been sort of an asset class where risk reward has been lopsided... IBC has changed that... When you look at resolutions where we want to participate in NCLT, the playing field I think is not leveled at present; it’s tilted towards strategics and not financial investors... The operational diligence part is very important and it can be very complicated. So, you need to have the ability to have sector domain experts, and therefore, there has to be segmentation that you put in place... One of the critical elements of IBC in terms of infrastructure was information utility; we would like to see movement towards that.

 

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Cross-Border Insolvency In Asia: New Developments

L-R : Sushil Nair, James Noble, Shaun Langhorne, Dhananjay Kumar, Dr. T. K. Viswanathan

James Noble, Partner, Litigation and Restructuring Group, Harneys
In respect of the Cayman Islands, Bermuda, and the BVI, none of these jurisdictions have enacted the model law. They have their own systems which have enabled them to deal with some of the world’s largest cross-border restructuring cases, through a combination of common law assistance and specific legislative provisions. If you have an insolvency situation here in India and it’s a cross-border structure involving Cayman, BVI, or Bermudian entities, it is often imperative to also initiate proceedings in the Caribbean Courts to, amongst other things, obtain the benefit of a moratorium. That approach will then help prevent disgruntled creditors from commencing their own proceedings in those jurisdictions for the purposes of taking control of the insolvency process and fracturing any cross-border compromise or arrangement with creditors and stakeholders generally.

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IBC - Case Laws And Judicial Precedent

L-R : Kanaiya Thakker, Shweta Bharti, Sakate Khaitan, Sapan Gupta, Nilanjan Sinha

 

Sakate Khaitan, Senior Partner, Khaitan Legal Associates
While the code has commendably matured very rapidly in a short span, some grey areas continue to exist requiring court invention and interpretation from time to time. The proactiveness of the government, parliament, regulator, and courts in ensuring smooth implementation despite strong vested interests is noteworthy.



Ajay Shah, Professor, National Institute of Public Finance and Policy (NIPFP), added, “The key question is about the large delays that are shaping up with the big transactions. Many elements of the bankruptcy process do not respect the time value of money. Much more needs to be done on research and communication about bankruptcy reform. We need to steer clear of the rhetoric of preserving firms even when commercial considerations suggest otherwise.”

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How To Make IBC Process More Effective

L-R : Shardul S Shroff, Ajay Shah, Siva S. Ramann, Susan Thomas


Siva S. Ramann, MD & CEO, National e-Governance Services Limited
The NeSL Info Utility has received 25% of data related to loans to companies from 20 banks and NBFCs. Totally, 83 entities have signed agreements with us. IBC has ushered in a digital evidence-based resolution process that will be carried forward by NeSL IU.

Shardul Shroff, Executive Chairman, Shardul Amarchand Mangaldas & Co
As a means to improve the disposal rate of corporate resolution, in relation to admission of claims by NCLT we need to move to the electronic way by e-filing.  Members of NCLT should decide the admission purely on documentary evidence filed with the claim or application.  If at all a written representation can be received from the corporate debtor / promoters, without oral hearing.  The only issue to be determined is whether or not an outstanding debt of Rs.1 lac is unpaid, as that is a jurisdictional fact.  The question of amount of the claim can be determined by the resolution professional when all claims are being considered for the purposes of voting share in the CoC.  This should be the first procedural remedy that we need to introduce.

The Summit concluded with an exciting panel “How To Make the IBC Process More Effective”, wherein one of the comments made by Shardul S Shroff, Executive Chairman, Shardul Amarchand Mangaldas & Co, was “As a means to improve the disposal rate of corporate resolution, in relation to admission of claims by NCLT, we need to move to the electronic way by e-filing. Members of NCLT should decide the admission purely on documentary evidence filed with the claim or application. If at all a written representation can be received from the corporate debtor / promoters, without oral hearing. The only issue to be determined is whether or not an outstanding debt of Rs.1 lac is unpaid, as that is a jurisdictional fact. The question of amount of the claim can be determined by the resolution professional when all claims are being considered for the purposes of voting share in the CoC. This should be the first procedural remedy that we need to introduce.”

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