ACCOMODATING PRE-PACKS IN THE INDIAN INSOLVENCY REGIME
The Insolvency and Bankruptcy Code, 2016 was enacted to establish a uniform, comprehensive legal framework to govern the matters of Bankruptcy in India. Since its inception, it has been hailed as being creditor-friendly. One of the reasons for the same is that the Code leans in favour of extensive monitoring of the Insolvency Resolution Process by the Courts. Though good in its intentions, this leaves no scope for informal arrangements which may be desirable in certain circumstances. Such an approach is based on the assumption that Indian market is not mature enough for informal Bankruptcy resolution.
It is against this backdrop that this paper seeks to study Pre-Packs, a popular mode of informal/quasi-formal bankruptcy resolution prevalent in many jurisdictions over the world. Such arrangements existing in the US and UK are chosen as the primary subject matter of scrutiny. The paper evaluates the viability of Pre-Packs as an alternative Insolvency Resolution mechanism in terms of both corporate rescue and satisfaction of creditors’ claims as against the formal bankruptcy procedure. The criticisms against such arrangements are also discussed. The paper then analyses the present Indian Insolvency Regime to determine the feasibility of Pre-Packaging in India. A comparison is made between the legislative intention and judicial trend to show that such pre-packs ought to be given legal recognition. Finally, it illustrates how the Insolvency Code can be amended so as to accommodate such pre-packed arrangements in India.