PRINCIPLES OF INSOLVENCY

Insolvency means a situation where a person or a company is unable to repay debts. It is not
just about financial failure but also about finding a fair legal solution for both the borrower
and the lender. The main goal of insolvency law is to balance the rights of the debtor and
creditor and resolve the financial crisis in a fair and speedy manner.

MAIN PRINCIPLES OF INSOLVENCY:

1. Maximization of value:
All efforts should be made to get the highest possible value from the debtor’s assets so
that creditors get more money.

2. Equality and fairness:

Creditors should be treated fairly. The law ensures no one is given special benefit
unless clearly justified.

3. Time-bound process:
Delays in legal cases reduce the value of assets. So, insolvency laws fix strict
deadlines (180 days + 90 days) to resolve the matter quickly.

4. Fresh start for debtors:

If the debtor is honest and cooperative, the law gives him a chance to start fresh by
discharging unpaid debts.
5. Creditors take control:
In corporate insolvency, the existing management of the company is removed.
Creditors, through a Committee of Creditors (CoC), take decisions.

6. Encouragement of resolution before liquidation:

The first priority is to revive the company and save jobs, not to close it immediately.

7. Transparent process:
Every step in the insolvency process must be open, clear, and under supervision of
experts and tribunals.

So, insolvency law is not just about punishment or sale of property. It is about finding the
best solution to a financial crisis in a fair and legal way.
CORPORATE INSOLVENCY

Corporate Insolvency means a condition where a company (not an individual) is unable to

pay back its debts and enters into a legal process to either get revived or get closed down. In
India, the law that handles this is the Insolvency and Bankruptcy Code (IBC), 2016.

HOW CORPORATE INSOLVENCY WORKS:

 If a company defaults on a payment of ₹1 crore or more, CIRP (Corporate

Insolvency Resolution Process) can be started.
 It can be started by:
o Financial Creditors (like banks)
o Operational Creditors (like suppliers)
o The company itself (Corporate Debtor)
 The process is handled by NCLT (National Company Law Tribunal).
 After NCLT admits the case:
o The company’s board of directors loses power.
o A Resolution Professional (RP) is appointed to manage the company.
o A moratorium is declared — all legal cases and recovery actions are paused.
o A Committee of Creditors (CoC) is formed to take decisions.

POSSIBLE OUTCOMES:

1. A Resolution Plan is approved — company is revived.

2. No plan is approved — company goes for Liquidation.

This legal process ensures that the company is either saved or shut down in a proper, fair, and
time-limited way.

INSOLVENCY AND LIQUIDATION

Insolvency refers to a financial situation where an individual or a company is no longer able

to repay its debts to creditors on time. In simple terms, when the total debts become greater
than the total assets or when the person or company fails to make regular repayments, they
are said to be insolvent. Insolvency is not just about being temporarily short on cash — it
means there is a deeper financial breakdown where liabilities exceed income and assets,
making it impossible to run operations smoothly or repay loans.

There are two types of insolvency: cash-flow insolvency and balance-sheet insolvency.
Cash-flow insolvency occurs when a debtor does not have enough liquid funds to pay debts
as they fall due, even if they might have enough assets overall. Balance-sheet insolvency
happens when the total liabilities of a person or business exceed the total value of their assets,
showing that their financial health is broken. Both forms can lead to legal proceedings if
creditors decide to recover their dues through formal processes.

Once insolvency is officially recognized under the law — especially for companies — the
next legal step is often liquidation. Liquidation means closing down the business
permanently and selling off all its assets to repay the outstanding debts to creditors. It is the
process of winding up the affairs of the company and distributing whatever is left, based on a
priority order set by law. This is the last resort and is usually used only when the business has
no chance of revival or restructuring.

Under Indian law, the process of insolvency and liquidation is now regulated by the
Insolvency and Bankruptcy Code (IBC), 2016. The IBC brought a clear distinction
between resolution and liquidation. Resolution means trying to save the company and bring
it back to health by restructuring its debts or changing its management. But if that resolution
plan fails or if no plan is submitted within the time limit (usually 330 days), then the
company moves into liquidation. The liquidation process is then conducted by a liquidator
appointed by the tribunal (NCLT), who takes control of the company’s assets, prepares a list
of claims from creditors, sells the assets, and then distributes the money according to the
legal waterfall mechanism.

The IBC has laid down a strict priority list for distributing the sale proceeds in liquidation.
First, the money is used to pay off the insolvency resolution process costs and liquidation
costs. After that, dues of secured creditors and workmen’s dues come next, followed by
unpaid employee wages, then unsecured creditors, and finally, if anything remains, it goes
to shareholders or partners. This system ensures that those who have legal or financial rights
over the company get paid in a fair and systematic manner.

It is important to understand that liquidation is not always negative — it can be a useful tool
to recover maximum value from a dying business. However, liquidation also means that the
company will cease to exist after the process is complete, which causes job losses, loss of
investor value, and economic disruption. This is why the modern legal system, including the
IBC, gives preference to resolution over liquidation. The idea is to try and save businesses
that can be saved and liquidate only those that are beyond recovery.

In India, the earlier legal system was fragmented — different laws governed insolvency of
individuals (like the Presidency-Towns Insolvency Act, 1909), companies (Companies Act),
and banks (under RBI). But the IBC unified all of this and created one common framework
for insolvency and liquidation, bringing more discipline, timelines, and transparency into the
system.

In summary, insolvency and liquidation are two connected but separate stages of financial
failure. Insolvency refers to the state of not being able to pay debts, while liquidation is the
legal process of ending the business and selling its assets to pay creditors. The IBC provides a
structured, time-bound, and fair system for both, with an emphasis on saving viable
businesses and ensuring justice to all stakeholders.

SARFAESI ACT, 2002

The SARFAESI Act stands for the Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002. This law was passed to solve a very serious
problem: banks and financial institutions were finding it extremely difficult to recover loans
from borrowers who had stopped paying back. Earlier, the banks had to go through the long
process of filing civil suits in court, which took years, and by the time they got a judgment,
the borrower’s assets had already lost their value or disappeared. So, the government
introduced SARFAESI to empower banks to recover their money without going to court in
certain situations. This made the recovery process faster and more efficient.

The main feature of SARFAESI is that it gives banks the power to take over and sell the
collateral (security) given by the borrower, such as land, building, machinery, or any other
asset, if the borrower becomes a defaulter. Once a loan becomes a Non-Performing Asset
(NPA) — which means the borrower has not paid interest or principal for 90 days — the
bank can issue a notice under Section 13(2) of the SARFAESI Act. This notice gives the
borrower 60 days’ time to repay the amount. If the borrower still doesn’t pay, then under
Section 13(4), the bank can take possession of the secured asset, manage it, or even sell it off
to recover its dues. This is a very powerful tool for lenders, as it cuts down the lengthy legal
process and allows quick recovery.

Apart from recovery, SARFAESI also introduced two other important concepts: Asset
Reconstruction Companies (ARCs) and Securitisation. ARCs are companies that buy bad
loans from banks and then try to recover the money themselves. This helps banks clear their
balance sheets and focus on fresh lending. Securitisation means converting bad loans into
tradable securities and selling them to investors, thereby reducing the risk burden on banks.
Both of these mechanisms created a new financial ecosystem for dealing with stressed assets.

However, SARFAESI is not applicable to all kinds of loans. It cannot be used against
unsecured loans (loans without collateral), agricultural land, or small loans under ₹1 lakh. It
is also not available to individual borrowers — it mostly applies to companies or firms with
business loans secured by property or machinery. Another important safeguard is that if a
borrower feels that a bank is misusing its SARFAESI powers, he can approach the Debt
Recovery Tribunal (DRT) for protection.

While SARFAESI was a significant step forward, it had some limitations. First, it could not
handle cases where the business needed restructuring or revival — it was more focused on
asset seizure. Second, it worked well only for secured creditors like banks but left out
unsecured creditors. Third, there was no time-bound framework — banks often took years
even under SARFAESI to complete the recovery process. These limitations became more
obvious with growing bad loans in India’s banking system, especially after the 2008 financial
crisis. As a result, SARFAESI was eventually integrated with the Insolvency and
Bankruptcy Code (IBC), 2016, which offers a more complete solution to corporate
insolvency and resolution.

In conclusion, SARFAESI was a major financial reform that empowered banks to act
independently against defaulters and recover their money without needing court permission.
It strengthened the banking sector by reducing delays in recovery and laid the groundwork for
more advanced laws like the IBC. Even after IBC came into existence, SARFAESI still
continues to operate as a parallel law and is frequently used by banks in smaller cases where
full-fledged insolvency resolution is not necessary. Its relevance, therefore, remains intact in
the Indian legal framework for financial recovery.

UNIT 2

1. INSOLVENCY REGULATOR – INSOLVENCY AND BANKRUPTCY

BOARD OF INDIA (IBBI)
The Insolvency and Bankruptcy Board of India (IBBI) is the key regulatory body under
the Insolvency and Bankruptcy Code (IBC), 2016. It was set up under Section 188 of the IBC
and came into existence on 1st October 2016. The IBBI is headquartered in New Delhi and
functions under the administrative control of the Ministry of Corporate Affairs. It is
responsible for the regulation and development of the entire insolvency ecosystem in India,
which includes Insolvency Professionals (IPs), Insolvency Professional Agencies (IPAs), and
Information Utilities (IUs).

The Board has quasi-legislative, quasi-judicial, and executive powers. It issues regulations for
all processes under the Code — from the Corporate Insolvency Resolution Process (CIRP) to
Liquidation and Bankruptcy processes. It also has investigative powers and can penalize or
suspend professionals and agencies who fail to follow prescribed standards or act unethically.

The IBBI ensures that insolvency proceedings are completed within a strict timeline,
promotes transparency, and keeps all stakeholders accountable. For example, if an insolvency
professional misuses his powers or delays a resolution process, IBBI can investigate and take
disciplinary action. The Board also maintains a comprehensive database of insolvency
proceedings, public notices, registered professionals, and approved plans, which increases
transparency.

Relevant Case:
In Vijay Sai Poultries Pvt. Ltd. v. IBBI (2022), the NCLAT upheld the IBBI’s disciplinary
authority over insolvency professionals. The professional had breached procedural rules, and
the IBBI had suspended his registration. The appellate tribunal confirmed IBBI’s power to
maintain ethical standards.

2. INSOLVENCY ADJUDICATING AUTHORITY – NCLT AND DRT

Under the IBC, different adjudicating authorities have been set up for different types of
debtors. The National Company Law Tribunal (NCLT) is the authority for corporate
insolvency, i.e., when companies and LLPs become insolvent. On the other hand, for
individuals and partnership firms, the Debt Recovery Tribunal (DRT) is the designated
authority.

NCLT has the power to admit or reject insolvency applications filed by creditors or the debtor
itself. Once an application is admitted, NCLT appoints an Interim Resolution Professional
(IRP), declares a moratorium (legal standstill), and monitors the Corporate Insolvency
Resolution Process (CIRP). If a resolution plan is approved by the Committee of Creditors
(CoC), NCLT gives it final approval. If no plan is received or approved within the time limit,
NCLT orders liquidation of the company.
The appellate authority for NCLT is the National Company Law Appellate Tribunal
(NCLAT). Further appeals can be made to the Supreme Court, but only on questions of law.
Relevant Case:
In the landmark case of Innoventive Industries Ltd. v. ICICI Bank (2017), the Supreme
Court clarified that once default is established, NCLT has no discretion to reject the
insolvency application. This ruling empowered the NCLT to act strictly according to the IBC
timeline.

3. INSOLVENCY PROFESSIONALS (IPS)

Insolvency Professionals (IPs) are qualified individuals licensed by the IBBI who are
authorized to carry out insolvency, liquidation, and bankruptcy processes. Their role is critical
because once the insolvency process starts, the control of the debtor’s company is handed
over from the board of directors to the IP.
The IP acts as an Interim Resolution Professional (IRP) first and later becomes a
Resolution Professional (RP) if approved by the Committee of Creditors. They verify
claims, conduct meetings, invite resolution plans, and manage the company during CIRP.
They also act as liquidators if the company enters liquidation. During individual insolvency,
they can act as bankruptcy trustees.

IPs are expected to be neutral, professional, and act in the interest of all stakeholders. They
must comply with the Code of Conduct issued by the IBBI.

Relevant Case:
In State Bank of India v. Ram Dev International Ltd. (2018), the NCLAT discussed the
misconduct of an IRP who failed to follow procedures properly. The case reinforced the idea
that insolvency professionals must be cautious and strictly follow the law, or face
consequences.

4. INSOLVENCY PROFESSIONAL AGENCIES (IPAS)

Insolvency Professional Agencies (IPAs) are institutions recognized by the IBBI under
Section 199 of the IBC. These agencies enroll, monitor, and regulate the conduct of
insolvency professionals who are their members. They ensure that IPs follow ethical and
professional standards in their work.

Currently, there are three IPAs in India:

1. ICAI IPA – backed by the Institute of Chartered Accountants of India

2. ICSI IPA – backed by the Institute of Company Secretaries of India

3. ICMAI IPA – backed by the Institute of Cost Accountants of India

IPAs also conduct pre-registration educational courses and training programs. They can
initiate disciplinary action against IPs who violate rules or ethics, and they assist the IBBI by
forwarding complaints or irregularities.
Though there is no major individual case law on IPAs, their functioning is critical for
maintaining standards. The IBBI has, however, issued various circulars penalizing IPAs that
fail to take disciplinary action when needed, reinforcing the seriousness of their role.

5. INFORMATION UTILITY (IU)

Information Utilities (IUs) are a new concept introduced under the IBC. They are regulated
entities that collect, store, and verify financial information relating to debtors. Their main
function is to authenticate debt-related data like loan agreements, repayment history, defaults,
and other credit events.

When a creditor files an insolvency application, the IU provides proof of default, which helps
the NCLT decide whether to admit the application. This reduces reliance on lengthy
document checks and improves the speed of the resolution process.

IUs must operate under high standards of security and confidentiality, and they are regulated
by IBBI. As of now, National e-Governance Services Ltd. (NeSL) is India’s first and only
registered IU.

Relevant Case:
In Dr. Vishnu Kumar Agarwal v. Piramal Enterprises Ltd. (2019), the NCLAT
emphasized that Information Utilities can be relied upon as evidence of default and play a
valid role in streamlining insolvency processes.

Unit 3
1. CORPORATE INSOLVENCY RESOLUTION PROCESS (CIRP)
The Corporate Insolvency Resolution Process (CIRP) is the legal mechanism under the
Insolvency and Bankruptcy Code, 2016 (IBC) through which financially distressed companies
are revived or liquidated. It begins when a company defaults on a loan of at least ₹1 crore
(increased from ₹1 lakh in 2020), and a creditor or the debtor company itself can file an
application with the NCLT to initiate CIRP.

Once the application is admitted, a moratorium is imposed under Section 14 of the Code. This
prevents the company from transferring assets, repaying old debts, or facing any legal action.
An Interim Resolution Professional (IRP) is appointed by the NCLT to take over management
and verify all creditor claims. A Committee of Creditors (CoC) is then formed, consisting of
all financial creditors, and it holds the power to approve or reject a Resolution Plan submitted
by potential buyers.

The CIRP must be completed within 180 days (extendable to 330 days). If a resolution plan is
approved by 66% of CoC members, the company can be revived under new management. If
no plan is approved, the company goes into liquidation.
Case Law:

In Innoventive Industries Ltd. v. ICICI Bank (2017), the Supreme Court held that once default
is established, NCLT must admit the insolvency petition. This reinforced the principle of strict
adherence to IBC timelines and procedures.

2. LIQUIDATION PROCESS
The Liquidation Process begins when CIRP fails — either because no resolution plan is
received within the time limit or the CoC rejects all plans. In such cases, the NCLT passes an
order for liquidation under Section 33 of IBC.

A Liquidator (often the same IP) takes control of the company’s assets, evaluates and sells
them, and distributes the proceeds among creditors as per the waterfall mechanism under
Section 53. The priority of payment is:

1. Insolvency resolution process costs and liquidation costs

2. Secured creditors and workmen’s dues

3. Unsecured creditors

4. Government dues and remaining employees

5. Shareholders (if anything remains)

The liquidator also investigates transactions of the previous two years to detect fraud or
undervaluation.

Case Law:

In Swiss Ribbons v. Union of India (2019), the Supreme Court upheld the constitutionality of
liquidation under IBC, emphasizing that revival should always be prioritized before
liquidation.

3. PRE-PACK INSOLVENCY RESOLUTION PROCESS (PRE-PACK

DEAL)
A Pre-Pack Insolvency Resolution Process is a hybrid process introduced in 2021 for MSMEs
(Micro, Small, and Medium Enterprises). It allows debtors to negotiate a resolution plan
privately with creditors before approaching NCLT. This plan is then submitted for approval,
avoiding a full-blown CIRP.

Unlike regular CIRP, where control shifts from the debtor to the IRP, in pre-packs the existing
management stays in control. It’s faster (90 days) and cost-efficient, making it suitable for small
businesses. The plan must be approved by 66% of the CoC and by NCLT.

Pre-packs are beneficial because they avoid value erosion, save jobs, and reduce litigation.
Case Law:

Although still a new mechanism, in Kishore Biyani v. Future Retail, stakeholders debated pre-
pack-style negotiations to revive the company, though formal pre-pack wasn't applied. It
demonstrates the relevance of informal restructuring talks even before formal proceedings.

4. PREFERENTIAL TRANSACTIONS, UNDERVALUED AND

EXTORTIONATE TRANSACTIONS
The IBC allows the Resolution Professional or Liquidator to review past transactions made by
the debtor during the look-back period (usually 1–2 years) to detect fraud.

 Preferential Transactions (Sec 43): These are payments or asset transfers favoring one
creditor over others before insolvency began. If proven, such transactions are reversed
by NCLT.

 Undervalued Transactions (Sec 45): These involve the sale or transfer of assets at prices
far lower than market value, usually to related parties. Such transactions hurt creditor
interests.

 Extortionate Transactions (Sec 50): These are unfair loans or credit terms with
extremely high interest rates that exploit the debtor’s financial stress. NCLT can cancel
these.

The goal is to protect the asset pool from being manipulated before insolvency and ensure equal
treatment of creditors.

Case Law:

In Anuj Jain, IRP of Jaypee Infratech Ltd. v. Axis Bank Ltd. (2020), the Supreme Court held
that mortgages given to benefit group companies were preferential transactions and reversed
them.

5. Offences and Penalties

IBC has strict provisions to deter fraudulent conduct. Sections 68 to 77 of the Code list out
specific offences like:

 Concealment of property

 False representation to creditors

 Fraudulent removal of assets before insolvency

 Intentional falsification of records

 Non-cooperation with the IP or Liquidator

  Fraudulent preference or undervalued transactions

Punishments can include imprisonment (up to 5 years) and fines. Company directors, officers,
and even creditors who collude can be held liable.

Case Law:

In R. Ramachandran v. V. N. Rajasekharan Nair (2022), the NCLT emphasized that directors

who conceal company assets or mislead resolution professionals will face criminal action.

Unit 4
1. UNCITRAL MODEL LAW ON CROSS-BORDER INSOLVENCY
The UNCITRAL Model Law on Cross-Border Insolvency, adopted in 1997 by the United
Nations Commission on International Trade Law, is a legal framework designed to assist
countries in effectively managing insolvencies involving debtors with assets or creditors in
more than one country. Its primary aim is to promote cooperation among courts and
insolvency professionals in different countries and to ensure fair treatment of all
stakeholders, regardless of nationality.

The Model Law recognizes that cross-border insolvency cases often involve complex
jurisdictional issues, like which country’s law should apply, or how to deal with foreign
creditors. Therefore, it focuses on four key principles:

 Access: Foreign insolvency representatives (like liquidators or resolution

professionals) must be given direct access to domestic courts.

 Recognition: A foreign proceeding can be recognized as either a main proceeding

(where the debtor has its center of main interests) or a non-main proceeding (in
countries where the debtor has an establishment).
 Relief: After recognition, courts can provide relief such as staying individual creditor
actions or allowing asset protection.
 Cooperation: Courts and insolvency professionals across countries must cooperate to
manage the case fairly and efficiently.

While it’s not binding, the Model Law serves as a template for national legislation. Over 50
countries including the USA, UK, and Singapore have adopted it in some form. India has not
yet adopted the Model Law but is in the process of doing so.

Importance:

 Facilitates faster and fairer recovery for creditors in multinational insolvencies.

 Prevents debtor companies from moving assets across borders to escape liability.
 Balances respect for domestic law with international cooperation.
2. CROSS-BORDER INSOLVENCY IN INDIA & GROUP INSOLVENCY
Cross-Border Insolvency in India:

India currently does not have a comprehensive law on cross-border insolvency, though
some provisions of the IBC, like Sections 234 and 235, allow the Indian government to enter
bilateral agreements with other countries and seek cooperation from foreign courts.
However, this mechanism is slow and depends on government-to-government arrangements,
which are not always practical.

To address this gap, the Insolvency Law Committee (2018) recommended adopting the
UNCITRAL Model Law with minor modifications suited to India’s legal and economic
context. A draft framework was proposed, recognizing foreign main proceedings, enabling
foreign representatives to access Indian NCLTs, and promoting cross-border cooperation.
This is still under government review and is expected to be enacted as a separate chapter in
the IBC.
Key Challenges:

 Jurisdictional conflict between Indian and foreign courts.

 Differences in insolvency laws across countries.

 Protection of Indian creditors’ interests in foreign proceedings.

Example:

When Jet Airways underwent insolvency in India, it also faced bankruptcy in the
Netherlands. The Indian NCLT initially denied the Dutch administrator’s authority, but later
agreed to cooperate with Dutch courts informally — highlighting the urgent need for a
formal legal framework.

GROUP INSOLVENCY:

Group Insolvency refers to insolvency cases involving multiple companies belonging to the
same corporate group. These entities may have shared finances, guarantees, or operations,
making it inefficient to resolve their insolvencies separately. However, India’s IBC currently
treats each legal entity independently, which may lead to value loss and confusion.

The Insolvency Law Committee (2020) has suggested a framework for group corporate
insolvency, allowing:

 Joint application for group companies.

 Coordination among resolution professionals.

 Pooling of assets and liabilities, in rare and justified cases.
This is especially relevant for large conglomerates like IL&FS, Sahara, or Reliance Capital,
where group companies are financially interconnected. A coordinated insolvency process can
enhance recovery for creditors, reduce delays, and provide a holistic resolution.

Unit 5
1. SUCCESSFUL RESOLUTIONS AND LIQUIDATIONS UNDER IBC
Since the implementation of the Insolvency and Bankruptcy Code, 2016, several landmark
cases have showcased its strength in dealing with financially distressed companies. The
primary goal of IBC is to ensure that the value of the assets is maximized, and the company is
either revived or liquidated in a time-bound manner. A few important success stories include
Bhushan Steel, Essar Steel, and Electrosteel Steels.

In the case of Bhushan Steel, the resolution was achieved by Tata Steel which paid
approximately ₹35,200 crores to acquire the company. This case demonstrated how a strong
resolution plan can benefit financial creditors and revive a dying business. Similarly, Essar
Steel was resolved through the acquisition by ArcelorMittal, who paid ₹42,000 crores.
Although the case was delayed due to litigation, the Supreme Court ultimately upheld the
primacy of the Committee of Creditors (CoC), laying down a landmark precedent. (CoC of
Essar Steel India Ltd. v. Satish Kumar Gupta, 2019).

Another important example is Electrosteel Steels Ltd., resolved by Vedanta for ₹5,320 crore.
This case was one of the earliest successful resolutions and proved that the IBC mechanism
can attract credible investors if the process is transparent.

In Alok Industries, Reliance Industries and JM Financial ARC jointly acquired the company
for ₹5,050 crore. Though creditors recovered just around 17%, it was still considered a
resolution due to the long-pending insolvency and weak financials of the company.

In contrast, there are examples of failed resolutions that led to liquidation. One major case
was ABG Shipyard, with claims of ₹19,000+ crore, but no resolution plan emerged. The
liquidation value was only around ₹2,000 crore, leading to a poor recovery for creditors.
Lanco Infratech and Amtek Auto are similar examples where resolution attempts failed,
and the companies went into liquidation.

These cases reflect both the successes and limitations of IBC. The successful resolutions
show investor interest and systemic recovery, while the liquidations highlight the need for
pre-insolvency evaluation and faster resolution timelines.
2. TIMELY TURNAROUND: BOTTLENECKS IN CIRP AND
LIQUIDATION
Although IBC mandates that insolvency resolution must be completed within 180 days
(extendable up to 330 days), many cases are delayed due to several practical obstacles. These
include judicial delays, lack of professional infrastructure, conflicting interests among
creditors, and multiple appeals in NCLT, NCLAT, and the Supreme Court.

One prominent case was Jaypee Infratech, where multiple rounds of bidding, objections
from homebuyers, and intervention by Supreme Court dragged the process for years.
Although the process was eventually resolved with Suraksha Group taking over, it exposed
weaknesses in managing real estate insolvency cases under IBC.
Another delayed case was Binani Cement, where UltraTech’s resolution offer was
challenged despite being better than the original approved plan. The courts had to step in to
ensure maximum value for creditors, which extended the timeline.

In Jet Airways, insolvency dragged on due to cross-border issues, competing claims from
foreign creditors, and regulatory clearances. Although a resolution plan was eventually
approved, it took nearly two years.

Videocon Industries, which had ₹61,000 crore of debt, also saw a delay of over 500 days
before Twin Star Technologies (a Vedanta group company) submitted a resolution plan.
However, the NCLT questioned the extremely low recovery rate (around 5%), showing that
even timelines don’t always ensure quality outcomes.

Even in liquidation, issues like asset valuation, lack of bidders, and pending litigations cause
major slowdowns. In Dewan Housing Finance Corporation (DHFL), although the
company was resolved, challenges during bidding and CCI approval caused considerable
delay.

Delays also occur during the liquidation process. It has been found that sale of physical
assets, especially land and buildings, takes longer than expected due to regulatory and
procedural hurdles. The process of inviting bids, verifying title deeds, clearing liabilities, and
obtaining approvals further extends the timeline.

To address these bottlenecks, reforms have been recommended such as:

 Strengthening the capacity of NCLT with more judges.

 Fast-tracking small and mid-sized insolvency cases through pre-packaged

insolvency.

 Digitization of asset information using Information Utilities.

 Time-bound approvals by regulatory bodies like SEBI and CCI.

3. GROUP INSOLVENCY: LEARNING FROM PRACTICAL
EXPERIENCES
Group insolvency refers to a situation where multiple companies from the same corporate
group face financial distress, and their resolution or liquidation is interconnected. The IBC
currently treats each legal entity separately, which creates difficulties in managing large
corporate groups where assets and liabilities are linked.

A classic example is the IL&FS crisis, where over 300 group companies were interlinked.
Resolving them individually would have created chaos and reduced asset value. Therefore, a
quasi-group insolvency approach was followed where a unified resolution strategy was
created under the supervision of the National Company Law Appellate Tribunal (NCLAT).
This case emphasized the need for formal group insolvency laws in India.

Another important case is Jet Airways, which faced insolvency proceedings in both India
and the Netherlands. Due to the lack of cross-border insolvency and group insolvency
provisions, legal complications arose. Later, Indian authorities agreed to cooperate with the
Dutch administrator, setting an informal precedent for future cases. This showed how
international insolvency cooperation is essential in a global economy.

Learning from these experiences, the Insolvency Law Committee (ILC) in its 2020 report
recommended the introduction of a Group Insolvency Framework in phases:

1. First, allow procedural coordination among group companies.

2. Second, assign the same Resolution Professional for related entities.

3. Finally, create mechanisms to consolidate assets and liabilities in justified cases.

Group insolvency, if formally introduced, would help in achieving better value for creditors,
faster resolution, and seamless coordination for large conglomerates like Reliance Group,
Sahara Group, etc.