[Announcement from Vinod Kothari & Co.]
The following are details of a paper writing competition on a topic under the Insolvency and Bankruptcy Code, 2016 (the “Code”), as detailed below:
The Code in India makes a distinction between financial creditors (FC) and operational creditors (OC). FCs make a resolution plan; which should bind all- including OCs. FCs sit and decide whether and how much would OCs get; the downside protection is that OCs will get the liquidation value, but obviously, liquidation value is the least and the worst, if the company goes for liquidation. The company is not liquidating; it is being rescued, and obviously, there is better value in rescue than in liquidation. Is it alright for a law providing the right of decision-making to one class of creditors, to decide the fate of another class?
Resolution or arrangements under insolvency laws are obviously different from arrangements under Companies Act [say, sec 230-234, or sec 391-394 of the 1956 Act). Under corporate laws, every class of creditors has a separate meeting, and unless the plan is voted upon by a supermajority of every class, the plan does not succeed. In insolvency resolutions, both in USA and UK, there is no class voting. Yet Indian law brought a statutory demarcation of classes, by creating a class of OCs and FCs. Interestingly, even if the OC happens to be a secured creditor, the OC has no right of voting.
Is this distinction keeping in view principles of natural justice? Can someone’s property right (right in receivables) be decided upon by someone else except by authority of law. Is the distinction between FCs and OCs an intelligible distinction? The BLRC seems to say that OCs do not have risk-taking or negotiating abilities; however, at the same time, the OCs are facing the risk. Is such a distinction between FCs and OCs there in any other country in the world, or India is the solitary exception?
We invite thoughtful, well-researched articles from law students on this very interesting topic. Our objective is academic; we think we are contributing to the ever-evolving philosophical foundations of insolvency law, and more so in the present Indian context with such questions looming large in mega resolution proceedings.
We reserve the right to put selected papers on our website. Award-winning paper-writer will get accreditation from us. And we may offer internship to the award-winner too.
Last date to submit your paper: 10 April 2018