The question of whether the creditors and an insolvent corporate debtor can enter into an out-of-court settlement that results in the withdrawal of the insolvency process has been a vexed one. The issue has received the attention of the Supreme Court on at least three occasions, as previously discussed on this Blog (here, here, here and here).
However, as I argue in this column in BloombergQuint, the issue continues to evade a satisfactory resolution. This is especially so in light of the hotly contested Binani Cements case wherein the adjudicating authorities themselves have nudged the parties to explore the possibility of a settlement, and the matter is likely to reach the Supreme Court. In the column, I also discuss the various factors that are at play in the context of settlement in insolvency cases, and examine the reforms recently recommended by a Government-appointed committee.
At the end of the day, the creditors will have to shell out above Rs.1,000 crores to the borrower promoter because unjust enrichment is barred in law. This aspect has not been considered and is subject matter of many petitions filed and pending in the Hon’ble High Court of Madras. Illegality apparent on the face of it. Details not available to the writer of Sarfaesi and DRT proceedings to pinpoint the amount payable to secured creditors. Otherwise, one minute’s work.