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Out-of-Court Settlements under the Insolvency Regime

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.