RGNUL FINANCIAL & MERCANTILE LAW REVIEW
CONTEMPORARY ISSUES AND CHALLENGES IN INFRASTRUCTURE DEVELOPMENT AND PROJECT FINANCING IN INDIA: A CRITICAL ANALYSIS
The author is an Associate at AZB & Partners. The author was assisted by Vanshika Samir, a second-year student of B.A. LL.B. (Hons.) at Rajiv Gandhi National University of Law, Punjab. Views stated in this paper are personal.
Since Indian independence, the successive Governments of Free India endeavoured to build a new India from the colonial roubles. The prime and foremost challenge was to build an empowered nation by building on infrastructure in every possible area, be it Roads, Railways, Airways and Waterways, Telecommunications, Energy, Health Infrastructure, or other Civic Facilities. However, the roads have been long and tortuous. In the last seventy years of striving, there have been challenges, some negotiable, some frustrating, and some unsurmountable. The purpose of this paper is to identify the key challenges that beset the path to proper infrastructure for modern India. This paper would also identify the challenges faced in financing these mega projects and the possible solutions that can remedy such challenges. The ideal model for executing these projects is the PPP model through Public and Private participation. Apart from the Authority awarding the contract, there are other stakeholders involved such as the Promotors/Sponsors, Special Purpose Vehicles, Contractors, Senior Lenders, Guarantors, Engineers, Architects, Lawyers, Off takers, and other entities that facilitate the project life cycle. There are pertinent problem areas such as issues of land acquisition, obtaining regulatory approvals, financing risks, time and cost overruns, changes in political policies, environmental and social risks, design risks, technology risks among the myriad of other risks involved in the project lifecycle. These risks and challenges are to be understood and addressed for any meaningful discussion on infrastructure development and project financing in India.
REVISITING THE STATUS OF OPERATIONAL CREDITORS UNDER THE INDIAN INSOLVENCY REGIME - NEED FOR A PARADIGM SHIFT
SANSKAR MODI AND DHWANIT RATHOR
The authors are third-year students of B.A. LL.B. (Hons.) at National Law Institute University, Bhopal. Views stated in this paper are personal.
The treatment of Operational Creditors under the Insolvency and Bankruptcy Code, 2016 (“Code”) has been a contentious subject ever since its inception. The composition of the Committee of Creditors (“CoC”) and the hierarchy of the ‘waterfall mechanism’ have resulted in the marginalization of Operational Creditors, particularly with respect to the realization of their debts during the Corporate Insolvency Resolution Process (“CIRP”). In this article, the authors analyze various judicial pronouncements and legislative developments that have led to the subordination of Operational Creditors and also argue for alleviating their position under the Code. This Article is divided into five parts - the first part discusses the statutory provisions to elucidate the position of Operational Creditors
under the Code. In the second part, the authors delineate the raison d’être for the differential treatment of the Financial and Operational Creditors in light of the Supreme Court’s rulings in the ‘Swiss Ribbons’ & ‘Essar Steel’ case. In the next part, the authors outline the repercussions arising out of such differential treatment and provide empirical evidence to demonstrate that Operational Creditors do not
receive a fair share during the CIRP under the present scheme of the Code. In the fourth part, the authors propose three changes – representation and pro-rata voting rights for Operational Creditors in CoC, the equitable treatment of similarly placed creditors, and the provision of assured minimum payment - to resolve the predicament of Operational Creditors. The authors finally conclude by highlighting
the significant takeaways from this Article.
SKIPPING THE RIGMAROLE OF LISTING: CRITICAL ANALYSIS OF INDIAN REGULATIONS AND TAX PROVISIONS RELATED TO SPACS
ANANT ROY AND AVIRAL DEEP
The authors are fifth-year students of B.A. LL.B. (Hons.) and B.B.A. LL.B. (Hons.) at ICFAI University, Dehradun. Views stated in this paper are personal.
Listing a company on a stock exchange involves prolonged and complicated procedures. A company in need of immediate funding may not consider listing as an option. Interestingly, Special Purpose Acquisition Companies (SPACs) have opened an avenue for such companies. But it is problematic when majority of such transactions are concentrated in one country. To cater the very problem the article
analyses the Indian regime on SPACs and tax implications pertaining to it. It compares various methods used by Indian companies to list overseas, using foreign SPACs and discusses tax implications in those methods. Further, it sheds light on India’s plan on introducing SPACs in its newly built financial jurisdiction, GIFTCity and compares it with other jurisdictions like Singapore, Dubai, Malaysia etc. Lastly, it explains the necessity of both SPACs in India and Indian companies
merging with foreign SPACs.
THE CURIOUS CASE OF RESOLUTION PROFESSIONAL AS AN OFFICER OF THE COURT
The author is an Associate at KN Legal, New Delhi. Views stated in this paper are personal. The author would like to thank L. Viswanathan, Dhananjay Kumar and Gaurav Gupte, Partners, Cyril Amarchand Mangaldas for their comments and inputs on this paper.
In 2016, India’s insolvency law underwent a complete overhaul with the enactment of the Insolvency and Bankruptcy Code. Under this new Code, a pivotal role was given to the Resolution Professional to conduct the insolvency resolution process. However, even after 5 years of the enactment of the Code, there is still no clarity vis-a-vis the role and position of the Resolution Professional in the insolvency regime. This has resulted in contradictory judgments and palpable ambiguity, that has to some extent also hampered the smooth conduct of the insolvency process. This paper attempts to address this research gap by undertaking a comprehensive doctrinal enquiry and examining the relationship of the Resolution Professional with various stakeholders including the court, IBBI, corporate debtor, committee of creditors, employer of the resolution professional etc. Occasional references are also made to UK law to distinguish the role of a resolution professional in India vis-a-vis UK. Finally, this paper concludes that the scheme of the Code and a holistic view of the resolution professional’s duties indicate that the Resolution Professional is indeed an officer of the court whose only duty is to act in an independent and professional manner.
NCLT’S JUDICIAL INTERFERENCE: A HURDLE TO THE COMMERCIAL WISDOM OF COMMITTEE OF CREDITORS UNDER THE IBC
NIPUN NINAD NAPHADE
The author is fourth-year student of B.B.A. LL.B. (Hons.) at Symbiosis Law School, Pune. Views stated in this paper are personal.
Over several decades, the Government of India has introduced special legislations to govern complex areas of law, and special tribunals to adjudicate upon the matters arising therein. In this context, the Insolvency & Bankruptcy Code, 2016 (IBC) was introduced to replace ineffective laws like the Sick Industrial Companies (Special Provisions) Act, the Recovery of Debts Due to Banks & Financial Institutions Act, and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act. The new Code was a well-planned reform and made the process easier to some extent. However, the overlapping provisions and vague interpretation of certain aspects led to jurisprudential ambiguity. One such area was
the liberty provided to the Committee of Creditors (COC) under the Act, in taking decisions or giving approval to a particular resolution plan. The dilemma of authority arose as the same plan would then require the approval of the National Company Law Tribunal (NCLT). The NCLT in some cases held that such a need for judicial approval meant that the commercial wisdom of the COC was not the sole deciding criteria in the resolution process, and the judicial wisdom of the Adjudicating Authority was intended to be employed before giving approval. This paper analyses the abovementioned ambiguity through an analysis of the bare provisions of the IBC, exploration of the opinions presented by government bodies, and an in-depth study of what various courts opined on the issue. The study attempts to explain how the IBC has fortified the position of the COC in order to protect the interests of the stakeholders and to increase the confidence of investors in the market.
SHARE PLEDGING: EXAMINING THE POSITION OF SECURED CREDITORS UNDER THE IBC AND THE VALIDITY OF NON-DISPOSAL UNDERTAKINGS
VARUNI AGARWAL AND PRIYANSHU BHAYANA
The authors are third-year students of B.B.A. LL.B. (Hons.) at National Law University, Odisha. Views stated in this paper are personal.
Share pledging is a method used by the promoters to secure loans, wherein shares are used as collateral and pledged with banks and Non-Banking Financial Companies. In the event of default by the promoters to repay the borrowed amount, such institutes may invoke the pledge and sell these shares. The paper is divided into 2 parts concerning share pledging. Part 1 deals with a general discussion on the position of secured creditors under Insolvency and Bankruptcy Code 2016 (“IBC”). It attempts to identify the extent of eligibility of a pledge-holder to fall under a particular class of creditors, under the application of the Insolvency and Bankruptcy Code, 2016. Furthermore, this part deals with existing studies on this subject and suggests changes that may be brought in to deal with the identified loopholes. Part 2 analyses the newly held position of pledge-holders as secured creditors and their chances to realise their securities through IBC. It examines the implications and the legal validity of restrictions on share pledging through Non-Disposal Undertakings (“NDUs”), in light of the concept of not transferring the beneficial ownership to the lender, being contrary to the Articles of Association (“AoA”) of a Company. It further analyses the consequences of such invalidity on the promoters and the company, and on secured creditors qua IBC and general suits.