[Richa Saraf is a Legal Advisor at Vinod Kothari Consultants Pvt Ltd] A combination of sections 45, 49, 66 and 69 of the Insolvency and Bankruptcy Code, 2016 (the Code) requires and empowers the liquidator to apply to the National Company Law Tribunal (NCLT) for appropriate orders in case the Liquidator comes across any vulnerable transactions during the process of liquidation. Such transactions...
Section 29A of the Insolvency and Bankruptcy Code, 2016: The Ambit Narrows
[Rudresh Mandal is a 4thyear student at NALSAR University of Law and Mallika Sen is a 3rdyear student at National Law School] Section 29A of the Insolvency and Bankruptcy Code, 2016, (‘IBC’) has been heavily criticised for casting a net exceedingly wide for preventing maximisation of pay-outs to creditors merely because the bidder is the promoter of the corporate debtor, or for ignoring the...
Validity of Employment Bonds in India
[Apoorv Madan is a 4th year law student at Jindal Global Law School in Sonipat] Background Corporations often invest huge amounts of time and money in imparting training to their employees so as to gain competitive advantage. Regardless, the attrition rate continues to be significant. Several employees, after acquiring valuable skills, leave the organization for diverse reasons. Therefore, the...
NCLT Order Facilitates Cross-Breeding of Entities
[Pammy Jaiswal is a Partner at Vinod Kothari and Company] Background Earlier under the Companies Act, 1956 (the ‘Act, 1956’), sections 391 to 394 dealt with provisions relating to compromises, arrangements, amalgamation and reconstruction. The said provisions were re-cast under the Companies Act, 2013 (the ‘Act, 2013’) under sections 230 to 234. The statutory provisions under the Act, 2013 suffer...
Delhi High Court Circumscribes SEBI’s Power to Initiate Adjudication Proceedings
Independent regulators must demonstrate their independence and fairness in their actions in order to maintain credibility. For this, the process by which they carry out their actions must be robust. This applies equally to India’s securities regulator, SEBI, which is the earliest independent regulator in the post-liberalisation era and one that heralded the advent of an array of similar...
Subordination of Operational Creditors under IBC: Whether Equitable?
[Vinod Kothari and Sikha Bansal are at Vinod Kothari & Company and can be reached at [email protected]] Introduction Section 53 of the Insolvency and Bankruptcy Code, 2016 (IBC) puts unsecured financial creditors above the claims of the governments. These unsecured financial creditors may actually be even related parties and, therefore, the underlying financial transaction may be...
A Tribunal Benched
The Securities Appellate Tribunal has yet again been rendered dysfunctional. I wrote a piece in the Business Standard last week about how, yet again, the functioning of the tribunal for substantive final hearings has come to a halt. As the appellate tribunal that is exclusively empowered to hear appeals against every order of the Securities and Exchange Board of India, the Insurance Regulatory...
Doctrine of ‘Reverse’ Piercing and the Jurisprudence of Indian Courts
[Debarshi Chakraborty is a 3rd year B.A., LL.B. student at National Law University Odisha.] The doctrine of ‘reverse’ piercing, although relatively new, is a controversial area of corporate law. This doctrine could be problematic given the situations where a body corporate has multiple shareholders. Conversely, there have been times even in relation to companies with one shareholder where it has...
Territorial Scope under General Data Protection Regulation
[Kunal Garg is an associate at Alaya Legal Advocates, New Delhi] After years of discussion and debate, the European Union (“Union”/“EU”) adopted the General Data Protection Regulation (“Regulation”) on April 8, 2016 for personal data protection of natural persons. This Regulation came into effect on May 25, 2018 replacing the old Directive 95/46/EC (“Directive”) on data protection. All the...
The Battle against Non-Performing Assets
[Pranjal Doshi is an MCL Candidate, University of Cambridge] The foundation of an enduring banking industry lies in robustly crafted recovery mechanisms. It promotes the stable existence of the borrower-lender relationship. Incongruously, non-performing assets (“NPAs”) have grown substantially in India from 9.2% (September 2016) to 10.2% (September 2017)[1], amounting to ₹8,36,782 crores (October...
SEBI proposes wide powers for penal actions against auditors, company secretaries, valuers, etc.
SEBI has released a consultation paper on 13th July 2018 proposing amendments to 30+ of its Regulations. The amendments provide for duties and liabilities of Chartered Accountant/auditors, Company Secretaries, valuers, etc. This is in respect of the certification and reporting work they carry out for listed companies, various intermediaries and other persons associated with the capital market. In...
Can Liquidator’s Outreach Grab Guarantor’s Assets?
[Sikha Bansal is a Senior Associate at Vinod Kothari & Company and Shreya is a B.A., LL.B. (Hons.) student at Rajiv Gandhi National University of Law, Punjab. The authors can be reached at [email protected]] In Punjab National Bank v. Vindhya Vasini Industries Limited, [C.P. ( IB)-1170(MB)] the issue before the National Company Law Tribunal (“NCLT”), Mumbai Bench was whether a...
Corporatisation Prospects for Unregistered Entities: Amendment to Section 366 of the Companies Act, 2013
[Pammy Jaiswal is a Partner at Vinod Kothari and Company] Background By virtue of the enforcement notification of the Ministry of Corporate Affairs (‘MCA’) dated 5 July 2018, the proposed change under section 75 of the Companies (Amendment) Act, 2017 (‘Amendment Act’) relating to section 366 of the Companies Act, 2013 (‘Act, 2013’) has been notified with effect from 15 August 2018. Further, by...
‘Royalty’: a Tax? : An Analysis of the Judicial Uncertainty and its Service Tax Implications
[Velpula Audityaa and Devansh Mani are both 4th year, B.A.LL.B (Hons.) Students at Symbiosis Law School, Pune] Whether royalty payable on minerals extracted as provided for under section 9 of the Mines and Minerals (Development and Regulation) Act, 1957 is in the nature of tax is one of the questions pending before a nine-judge bench of the Supreme Court. Depending on the outcome, there will be...
The Risks of Common Ownership on Competition: Emerging Jurisprudence
[Suyash Bhamore is a 3rd Year B.A. LL.B. (Hons.) student, NLIU Bhopal] Background and Context The Competition Commission of India (CCI) in order dated 20 June 2018 in Case No. 25-28 of 2017(Meru Cabs Case) ignited a discourse on antitrust risks perpetuating from common ownership. The Meru Cabs Casedefined common ownership as “a situation where large institutional shareholders such as investment...
Scope of Settlement under the Insolvency and Bankruptcy Code, 2016
[Kanika Sood is a lawyer based in Delhi] Pre-Ordinance Position Under the Insolvency and Bankruptcy Code, 2016 (the “Code”) a settlement between the creditor and debtor could be carried out by making an application of withdrawal under Rule 8 of the Insolvency and Bankruptcy (Application to Adjudicating Authority Rules), 2016 beforethe admission of the application by the Adjudicating Authority...
Call for Papers: The National Law School of India Review
[Announcement on Behalf of the National Law School of India Review] About NLSIR The National Law School of India Review (NLSIR) is now accepting submissions for its upcoming issue – Volume 31(1). The NLSIR is the flagship law review of the National Law School of India University, Bangalore, India. The NLSIR is a bi-annual, student edited, peer-reviewed law journal providing incisive legal...
Supreme Court on Conflict in Arbitration Agreement of Insurance Policy
[Nikhil Singh is a 2nd Year B.A., LL.B. (Hons.) Student at The West Bengal National University of Juridical Sciences, Kolkata] Introduction Recently, a three-judge bench of the Supreme Court in the case of Oriental Insurance Co Ltd v. Narbheram Power and Steel Pvt Ltd analysed a contentious dispute redressal clause commonly found in insurance agreements. The Court, while finding in favor of...
The Indian Competition Watchdog’s Application of the Herfindahl-Hirschman Index
[Suyash Bhamore is a 3rd Year B.A. LL.B. (Hons.) student, NLIU Bhopal] Background and Context Economics, more specifically, tools of economic analysis have always been accorded paramount importance when conducting competition analysis. The Herfindahl-Hirschman Index (HHI) is one such econometric tool, which is widely accepted by various competition regulators as a measure of market concentration...
SEBI on “Control”: Financing vs. Acquisition
Background and Context Under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and its previous version of 1997, it is possible for a person to trigger the mandatory takeover offer requirement even without acquiring a single share in the company. This is because the person may be in “control” of the company as defined in the Takeover Regulations, which is determined...
Inclusion of Home Buyers in the Insolvency Process: An Analysis
[Ashwin Mathew is with Mansukhlal Hiralal & Co, Mumbai] Introduction Pursuant to the Insolvency Law Reform Committee Report dated 3 April 2018 (“Report”), the Government has promulgated the Insolvency and Bankruptcy (Amendment) Ordinance, 2018 (“Ordinance”) on 6 June 2018 to implement the recommendations in the Report by amending the Insolvency and Bankruptcy Code, 2016 (“IBC”). One of the...
Confidentiality: Protecting Trade Secrets
[Maneck Mulla is a Partner and M. Siddha Pamecha an Associate at M Mulla Associates] Introduction There is no copyright on ideas or information; hence, sharing any confidential information and preserving such information present complex issues, especially at the time of breach of confidence. Often, without taking adequate safeguards, companies and individuals share technical know-how, trade...
Section 29A of the Insolvency and Bankruptcy Code: A Pandora’s Box
[Garima Mehra and D Sharma are both Advocates] One of the primary objectives of the Insolvency and Bankruptcy Code, 2016 (the “Code”)) is to facilitate the adoption of a resolution plan for the corporate debtor. The resolution plan is to serve as a benefit to not only the creditors but also to the already stressed corporate debtor. Originally, section 5(25) of the Code defined a resolution...
Proof of Claim in Liquidation: Dispensable?
[Sikha Bansal is a Senior Associate at Vinod Kothari & Company and Shreya is a B.A., LL.B. (Hons.) student at Rajiv Gandhi National University of Law, Punjab. The authors can be reached at [email protected]] In SBS Transpole Logistic Pvt. Ltd. v. M.M. Cargo Container Line Pvt. Ltd. & Ors. [CA 152/2018 in CP (IB) 204(ND)/2017] before National Company Law Tribunal, New Delhi Bench...
Mandatory Pre-Institution Mediation in Commercial Matters: Is India Ready?
[Vishal Hablani is a 3rd Year B.A.L.L.B. (Hons.) Student and Pankaj Agarwal a 4th Year B.A.L.L.B (Hons.) Student at WBNUJS, Kolkata] In order to address the pendency of cases in the commercial courts, the Government of India on May 3, 2018, introduced the Commercial Courts, Commercial Division and Commercial Appellate Division of High Court (Amendment) Ordinance of 2018 (the “Ordinance”), with...
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