Insolvency Law

[By Arunav Kapur and Jacob Eldho Kalarikkal] The authors are students of Rajiv Gandhi National University of Law, Punjab Introduction In the era of ever-increasing need for expeditious travel and prioritization of convenience, the aviation industry plays a major role in providing swift and accessible transportation. The aviation industry of India recently made history with over 5,00,000 travelling passengers accounted for in a single day. Yet, paradoxically, the industry operates on razor-thin margins. It is a huge loss bearing industry with a net loss of over Rs 110 billion in 2022-2023, driven by high fixed costs, volatile fuel prices, and cutthroat competition on fares. Along with this it is pertinent to highlight the extreme capital required to purchase an aircraft outright. To overcome this, airlines rely on sale-and-leaseback models, leasing up to eighty percent of their fleets from international financiers. However, when an airline defaults on its payments and insolvency proceedings are started, the presence of these international entities who are the lessors of the aircraft causes a complex jurisdictional and statutory conflict. Against this backdrop, the Convention on International Interests in Mobile Equipment (“the Cape Town Convention” or “CTC”) becomes the necessary guiding force. The CTC, aims to reduce the risks of aircraft financing by establishing a predictable, structured and independent framework for lessors to protect their asset i.e. the aircrafts. Through this essay, the authors analyse the conflict between the Irrevocable De-Registration and Export Request Authorisation (“IDERA”) mechanism under the CTC and the statutory moratorium period under Section 14 of the Insolvency and Bankruptcy Code, 2016 (“IBC”). By examining recent legislative advancements leading to the Protection of Interests in Aircraft Objects Act, 2025 (“the Act”) and drawing  insights from U.S. jurisprudence. While giving appropriate arguments and reasoning, the author would highlight rationale behind the prioritization of the IDERA provisions as well as the need to find a balance in aviation insolvency between international financiers and corporate debtors. Domestic Moratorium vs. International Repossession Section 14 of the IBC lays down provisions for a strict moratorium period upon the commencement of a Corporate Insolvency Resolution Process (“CIRP”). This provision provides an automatic stay, prohibiting the enforcement of security or recovery over any asset in the possession of the debtor. It also includes those assets which are under lease with the objective of preserving the debtor as a going concern. In the aviation context, this historically froze the assets of insolvent airlines, prohibiting lessors from deregistering and exporting their aircraft. Conversely, the CTC champions the express repossession of mobile equipment. Under the CTC framework, an IDERA empowers an authorised party (typically the lessor) to procure the deregistration and physical export of an aircraft without judicial impediment, overriding local insolvency moratoriums. For years, this created a severe normative hierarchy dispute in India. The IBC’s asset-freeze ideology clashed directly with the CTC’s asset-recovery mandate. Lessors argued that grounding aircraft during a protracted CIRP inevitably destroys their value, as aircraft are highly depreciable assets that require rigorous, continuous maintenance. Article 13 of the Protection of Interests in Aircraft Objects Act, 2025, which implements the Cape Town Convention, provides for the statutory recognition of the Irrevocable De-registration and Export Request Authorisation regime under the Aircraft Protocol as the only authorised party able to initiate the deregistration and the export of the aircraft, i.e., the lessor, an irrevocable request is made to the local aviation authority to deregister the aircraft and physically remove the plane overriding any local insolvency moratorium. The Go First Catalyst The breaking point for this statutory dissonance was the insolvency of Go First in 2023. When the National Company Law Tribunal (“NCLT”) admitted the airline into CIRP and imposed a moratorium, lessors were barred from repossessing over fifty aircrafts. In response, the Aviation Working Group had downgraded India’s compliance rating, which is used to decide the interest rate and other financials relating to the leasing,  triggering an immediate spike in leasing premiums for all lessees from India. The crisis laid bare a fundamental reality that prioritising domestic insolvency moratoriums over international finance obligations artificially inflates the cost of doing business for the entire domestic aviation sector. Acting under the pressure of plummeting investor confidence, the Ministry of Corporate Affairs issued a notification in October 2023 under Section 14(3)(a) of the IBC, exempting aircraft and engines from the statutory moratorium. While this action facilitated the deregistration of Go First’s aircraft, it was widely viewed as a stop-gap measure. Delegated legislation lacks the permanence often preferred by international financiers. Recognising the need for a permanent measure, the Parliament enacted the Protection of Interests in Aircraft Objects Act, 2025. This legislation formally incorporated the CTC into law, granting it primacy over the conflicting domestic statutes, including the IBC. Crucially, the Act adopted the “Alternative A” under Article XI of the Aircraft Protocol of the CTC. To understand its significance, it is important to understand that the Aircraft Protocol offers its Contracting States a choice of insolvency frameworks. Alternative A is possibly the most rigid, creditor-protective option. It states that upon the initiation of insolvency proceedings, the debtor or insolvency administrator must either cure all defaults and commit to future lease obligations within a strictly defined “waiting period,” or unequivocally surrender the aircraft back to the lessor. This is not a novel  experiment; rather, it is the adoption of a recognised standard that jurisdictions like the United States have enforced for decades, yielding benefits such as significantly lower capital and leasing costs for airlines. Comparative Jurisprudence: The U.S. Standard To understand the mechanics and benefits of the new regime, it is important to look at the country that inspired it the United States. Recognising the unique nature of aviation finance, the U.S. Congress carved out Section 1110 of the Bankruptcy Code. Section 1110 serves as the global gold standard for balancing airline restructuring with lessor rights. It mandates that a lessor’s right to repossess an aircraft is not hindered by the automatic stay, unless the airline debtor, within sixty days of the bankruptcy filing, agrees

[By Vanshika Kamboj] The author is a student of Rajiv Gandhi National University of Law   Introduction The Insolvency and Bankruptcy Code (“IBC” or “the Code”) has reshaped India’s approach to insolvency aiming to strike a balance between creditor recovery and fair treatment of debtors and other stakeholders. At its core, the Code is built on the ideas of value maximisation and equitable, efficient, and transparent processes. The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 (“the Amendment”), although builds on the same principles, marks a significant shift by introducing Section 28A which allows pooling of assets of corporate and personal guarantors (“guarantors”) with the Corporate Insolvency Resolution Process (“CIRP”) or liquidation estate. The Amendment aims to remove complexities and reduce delays by aligning with the Transfer of Property Act 1882 (“ToPA”) and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (“SARFAESI”). However, the real effect may be less about “harmonisation”, and more about legislative dominance, potentially overriding existing substantive provisions under other laws. While the Amendment may appear to be well-intentioned, it raises important questions about how far the law can stretch without weakening the existing statutory and constitutional safeguards available to the guarantors. Section 28A gives the Resolution Professional (“RP”) the power to bring guarantors’ assets into the ongoing CIRP or liquidation estate. It allows the RP to use or transfer them as part of a resolution plan – which marks a significant expansion of its authority. This approach marks a shift from the inter-partes framework of the ToPA (where rights arise between specific parties) to the in-rem nature of IBC proceedings (which bind all stakeholders without explicit exceptions). Hence, the real concern is whether pooling third-party assets effectively converts a single-entity, inter-party process into a collective exercise of resolution – which transgresses the existing protections. Notably, the Parliamentary Select Committee in its report on the Amendment bill dated December 17, 2025 left the issues unaddressed. Instead, it adopted the ministry’s view that 28A is merely a facilitative provision and does not override any substantive rights under any other statute, mainly ToPA and SARFAESI. This analysis interrogates this legal fiction by examining the legislative reasoning, procedural implications, and potential constitutional and jurisprudential tensions it creates. It also analyses whether Section 28A genuinely advances value maximisation or risks deepening inequities. The analysis first discusses the intent and the procedure under section 28A. Second, it critically analyses the potential conflicts with current substantive laws, especially ToPA and SARFAESI and determines their implications on guarantors’ rights. Last, the analysis examines constitutional and jurisprudential implications of the amendment, and outlines the safeguards that should be included to guarantee equitable enforcement.  I. RATIONALE AND CONTEXT OF SECTION 28A Section 28A aims to simplify insolvency processes and allow greater creditor recovery by pooling the assets of the guarantors with the CIRP or liquidation estate. Before this amendment, third-party security holders (creditors in whose favour an asset is pledged or provided as security for another borrower’s borrowing) had to pursue recoveries pursuant to ToPA or SARFAESI, which usually resulted in delays, piecemeal recoveries, and increased litigation. Section 28A allows the creditor to pool the guarantor’s assets, whether personal or corporate, in the ongoing CIRP or liquidation proceedings. This inclusion is subject to the sanction by the Committee of Creditors (“CoC”) or creditors representing a specified majority, i.e. in case of a corporate guarantor going through CIRP, then at least 66% of CoC approval, and in case of a personal guarantor’s insolvency or bankruptcy, then by a majority of 75% in value of creditors. This is applicable when the creditor has the lawful possession of those assets. Once approved, the RP integrates the asset into the estate. Then, the Resolution Applicants (“RA”) can bid on the bundled package, with proceeds first adjusting the CD’s debt (after preservation costs), and any surplus is then returned to the guarantor. Further, Section 28A (2) creates a legal fiction by deeming that, once the assets are transferred into the estate, the buyer (potential RAs) acquires the title as though the transfer was made by the real owner i.e., the guarantor. It provides for an unencumbered title, overriding prior encumbrances, third-party claims, or inter partes rights under ToPA/SARFAESI.  II. INFRINGEMENT OF GUARANTORS’ RIGHTS While Section 28A aligns with the core objectives of IBC, i.e., value maximisation and safeguarding the interests of stakeholders, it undermines the statutory rights of the guarantors under ToPA and SARFAESI. This also results in a violation of Article 300A of the Constitution of India (“COI”). In Lalit Kumar Jain v. UOI (2021), the Hon’ble Supreme Court (“SC”), while upholding the inclusion of personal guarantors into the IBC framework, stressed that their liability remains distinct. Contrarily, Section 28A dilutes this by letting guarantors’ assets commingle with CIRP or liquidation estate, effectively subsuming the guarantee contract into the debtor’s insolvency, and hence, leaving the guarantor with far less control. The following violations are apparent: 1.Under ToPA Section 28A (2) provides that “the transfer of an asset referred to in sub-section (1) under a resolution plan shall vest in the transferee all rights in, or in relation to the asset, as if the transfer had been made by the owner of such asset.” This effectively grants ownership rights over a mortgaged asset. This position conflicts with ToPA as it limits a mortgagee’s interest to possession and enforcement only, and not ownership. Further, under Section 60 of the ToPA, the guarantor retains a statutory right of redemption, and even in the case of default, no right of ownership is transferred to the mortgagee. The only right a mortgagee gets is the right to file a suit of foreclosure u/s 67 of the ToPA. Ownership of the property can only be claimed through a suit of foreclosure, and once an order for sale or transfer of the ownership is passed, it must be followed by execution of a registered deed. The SC, in Narandas Karsondas v. S.A. Kamtam and Anr, reiterated that a mortgagee’s rights are limited, and ownership of a property can

[By shivangi nawalkha] The author is a student of National Law University, Jodhpur Introduction When Jet Airways entered its Corporate Insolvency Resolution Process (‘CIRP’) in mid-2019, the Resolution Professionals (‘RP’) came across an unexpected “intangible asset” – the airline’s entire customer database. Jet’s loyalty programme called as Jet Privilege held records of approximately 8.5 million of its members encompassing names, contact details, travel histories and payment information. Not surprisingly, prospective bidders evaluated this data trove almost as highly as the aircraft and route licences, viewing it as a revenue-generating asset that could be monetised post-acquisition. Although Jet privilege ultimately remained with Etihad and was excluded from the sale, this episode starkly illustrated a dangerous conflict at the intersection of insolvency and privacy which is that the airlines routinely hold gargantuan volumes of sensitive personal and financial data, yet neither the Insolvency and Bankruptcy Code, 2016  (‘IBC’) nor its regulations prescribe any data-privacy safeguards. Since May 2025, this tension has only intensified with the Insolvency and Bankruptcy Board of India (‘IBBI’) revamping its e-CIRP portal and expanding the online auction framework which requires the Resolution Professional’s (‘RP’) to upload and share the assets through web-based data rooms. Without clear statutory guardrails, personal data could be treated like any other asset risking mass privacy breaches, loss of consent and non-compliance with the newly enacted Digital Personal Data Protection Act, 2023 (‘DPDP’). Jet Airways’ CIRP stands as a cautionary tale to warn us that in the drive to maximise value, we cannot afford to overlook the protection of individual privacy rights. This Article critically examines the unaddressed intersection of data privacy and insolvency under India’s IBC, beginning with an analysis of why personal data demands the same rigour as tangible financial assets. It then maps the existing legal vacuum examining the IBC’s silence with the DPDP’s stringent requirements and explores our key legal tensions that RPs and CoCs must navigate. Lastly, it reviews how the EU’s GDPR and USA’s consumer-privacy ombudsman model address these challenges and concludes with five policy overhauls to embed global best practices into India’s digital CIRP and online auction processes. Importance of Privacy in Corporate Insolvencies Insolvency of an entity invariably entails transferring a company’s entire records – its financials, contracts and the operational data into the hands of unfamiliar stakeholders. In today’s digital economy, these “books” also contain vast troves of personal information. These could be passenger profiles and payment credentials in airlines, patient records in healthcare, customer usage data in telecom and employee details technically across every sector. A sudden CIRP can expose this personal data trove into the data rooms of bidders, creditors and even the competitors – none of whom the original data principals originally consented to engage with. This exposure carries serious risks because the personal data exposed during an insolvency process may be leaked for unsolicited marketing, financial fraud or re-identification attacks. Concurrently, sensitive health data and financial details such as medical histories and credit card information respectively could be exploited for identity theft, insurance fraud or targeted scams. In the wrong hands, this data could be sold on the dark web or used to profile individuals without their knowledge or consent. Crucially, unlike physical assets such as machinery or aircraft, personal data cannot lawfully change hands without informed consent, purpose limitation, and clear notice. Had bidders acquired Jet Airways’ customer files without privacy safeguards, each of its 8.5 million members would have lost control over their information with a potential of being misused. In short, insolvency dramatically escalates the privacy stakes – the larger the data pool, the greater the potential fallout from any misuse requiring the RPs treat data protection with the same rigour and care as they do financial assets. Yet, despite these heightened risks, India’s insolvency framework under the IBC remains silent on how such personal data should be handled leaving the RP’s without statutory guidance and exposing stakeholders to significant compliance and liability gaps. The Legal Landscape in India: Insolvency Law Meets (or not) Data Privacy India’s insolvency framework currently operates in a legal blind spot when it comes to personal data. The IBC and its accompanying regulations are entirely silent on how sensitive personal information should be handled during a CIRP or liquidation. There are no provisions that limit what personal data, a RP is allowed to share with the bidders nor any guidance on how long such data may be retained. Section 30(2)(e) of the IBC simply mandates that a resolution plan must not contravene any existing law and should maximise the value of “all assets” of the debtor – it does not contain any provision for the protection of personal data. This is problematic because unlike physical assets, personal data implicates individual privacy rights and are subject to completely different legal obligations i.e. DPDP. However, the section being non-exhaustive leaves enough space to carve out a provision in the IBC for the protection of the personal data. In similar spirit, regulation 36 of the CIRP Regulations has no provisions for protection of “intangible assets” like personal data. Meanwhile, the DPDP marks India’s first comprehensive attempt to regulate the collection and use of personal data. It was enacted to give effect to fundamental rights under Article 21 and is modelled on principles akin to the GDPR. It contains the provisions that would bind any entity processing personal data called a “data fiduciary.” Since a RP assumes possession and control of the corporate debtor’s personal data during a CIRP or liquidation, it may be deemed as a “data fiduciary” under DPDP. Section 6 of the same mandates consent as the default basis for processing any kind of personal data unless one of the specific “legitimate uses” under Section 7 applies. Two such exceptions could arguably apply in an insolvency for the use of personal data, first; section 7(c) which allows for processing of personal data without consent for “performance of any function under the law.” This could be a possible fit for statutory CIRP duties of

[By Avesta Vashishtha] The author is a student of Dr. Ram Manohar Lohiya National Law University, Lucknow.   INTRODUCTION There exists a plethora of international jurisprudence on waiver of the right to invoke arbitration, when proceedings in another forum have been substantially utilized. In a situation where the parties have initiated prior, or simultaneous proceedings in a different forum, than before the arbitral tribunal, then such forum has to evaluate whether the proceedings have been considerably utilized for discussing the issues that would be duplicated in the arbitration. It is a well-settled position that in case the proceedings have been exploited to such an extent where the key issues related to the merits of the case have already been examined, then the right to invoke arbitration would be waived off. However, the issue regarding waiver, when arbitration proceedings have in fact already been invoked, or when a mandatory application under Section 60(5) (Sec.) of Insolvency and Bankruptcy Code 2016 (IBC) is filed before the National Company Law Tribunal (NCLT), over which the NCLT exclusive jurisdiction, has not been brought to light yet. In the present article, I will lay out the difficulties caused due to the non-initiation of arbitration, and the subsequent filing of Sec. 60(5) application in the NCLT, and also provide a course of action to achieve clarity from the conundrums. INCONSISTENCY WITH THE RIGHT TO ARBITRATE A waiver refers to the “deliberate, intentional and unequivocal abandonment of the right that is later sought to be enforced”. The issue arises when, in an arbitration, the claims have been submitted by one of the parties before the arbitral tribunal, but the arbitration proceedings discussing such substantive claims have not yet been initiated. In the meanwhile, if one of the parties is admitted under insolvency, an application would be required to be filed under Sec. 60(5) of IBC to protect the subject matter of arbitration, which would otherwise be sold off during Corporate Insolvency Resolution Process (CIRP). For a waiver to be established, various principles have been provided in international authorities, which can be relied upon due to the dearth on Indian jurisprudence on the topic. One such principle that can lead to a waiver of arbitration is the submission of a dispute to another forum, which is inconsistent with the right to arbitrate. Such inconsistency includes (a) substantial invocation of the procedure; (b) the extent of the moving party’s activity, including discovery of evidence; and (c) duplicity of claims. However, when factual issues are decided by two forums, numerous practical problems arise. Concurrent jurisdiction might be exercised by both the arbitral tribunal and the NCLT over the factual issues, leading to duplicity of claims. Such decisions can be inconsistent with each other, and the binding value of the decisions would come into question. Further, proceedings in multiple forums can cause undue delay and diminish the economic value of the assets of the corporate debtor, further prejudicing the responding party. WHETHER SEEKING PROTECTIVE MEASURES UNDER IBC CAN LEAD TO WAIVER? Interim measures, for an arbitration proceeding seated within India, can be granted either under Sec. 9 of the Arbitration and Conciliation Act, 1996 (ACA) by the domestic court having jurisdiction over the arbitration, or by the arbitral tribunal itself under Sec. 17 of the ACA. If the arbitration is seated outside of India, the procedure provided in the law of such country would be followed. However, when the matter is related to insolvency of one of the parties, NCLT has jurisdiction over disputes that may have a monetary impact on the economic value of the debtor firm since the liquidation process will be streamlined and efficient. Sec. 63 of IBC bars any authority from entertaining any proceeding over which the ‘NCLT’ has necessary jurisdiction, even in cases not related to insolvency.[1] Nevertheless, Sec. 25(2)(b) of IBC mandates the representation of Corporate Debtors by the Resolution Professional (“RP”) in “any court, tribunal or other authority”. Such recognition of adjudicating authorities, other than the NCLT, refutes the exclusive jurisdiction of NCLT over all disputes against Corporate Debtor. Therefore, arbitral proceedings can be initiated between the parties even with the continuance of insolvency of one of the parties, by the virtue of Sec. 25 of IBC. But still, the parties cannot adopt the procedure provided under the ACA, or a foreign arbitration legislation for seeking protective/interim measures when one of the parties is undergoing insolvency, because the NCLT has exclusive jurisdiction under Sec. 60(5) of IBC for providing protective measures. Sec. 60(5) is non-obstante in nature. Therefore, when a party requests for the protective measure, which is urgent in nature due to the ongoing insolvency resolution process, or such order can be exclusively granted by the NCLT, the same cannot be decided by the arbitral tribunal, and it would not lead to the waiver of right to arbitrate. CAVEAT: ISSUES ARISING OUT OF AN APPLICATION FOR PROTECTIVE MEASURES UNDER SEC. 60(5) Sec. 60(5) primarily determines the powers of the NCLT to entertain or dispose issues related to the corporate debtor or the insolvency process. It contains various clauses, which can appear to have overlapping effects on applications presented before the NCLT. Clause (a) encompasses any legal action initiated by or against the Corporate Debtor, however, factual or substantive issues that may arise during the course of the liquidation proceedings are covered under clause (c). This means that clause (c) has been specifically incorporated for dealing with factual issues arising during the insolvency process, whereas clause (a) has been provided with a wider ambit. Thus, if one were to assume that the issues submitted under clause (c) are to be exclusively decided by the NCLT, the same would provide a clearer view of jurisdiction between the NCLT and the arbitral tribunal. Yet, the wide ambit of clause (a) would still lead to a confusion about this division of jurisdiction. For establishing a conclusive principle, it is imperative to draw a connection between the principles of waiver, and Sec. 60(5) of IBC. A waiver

 [by Arzoo Kedia] The author is a student of Hidayatullah National Law University.   Introduction On 4th July, 2025, the Insolvency and Bankruptcy Board of India (‘IBBI’) notified the IBBI (Insolvency Resolution Process for Corporate Persons) (Fifth Amendment) Regulations 2025, whereby avoidance transactions must be disclosed upfront in the Information Memorandum (‘IM’) prepared by the corporate debtor’s resolution professional. According to the new norm, all avoidance transactions covered under Sections 43 to 51 and 66 of the Insolvency and Bankruptcy Code (‘IBC’) must now be explicitly identified and disclosed in the IM. This contains information about applications that have previously been submitted to the Adjudicating Authority, as well as any avoidance, preferential, undervalued, extortionate credit or fraudulent activities. Additionally, it states that the value of any avoidance transaction should not be assigned by debt resolution plans unless it was revealed in the prospectus and communicated to all potential investors in accordance with Regulation 35A(3A), prior to the deadline for bid submission. The IM must also be kept updated and shared with the Committee of Creditors (‘CoC’) at regular intervals, ensuring continuous transparency. However, the amendment is not free from challenges and requires further clarification. This blog discusses the amendment’s key provisions, the problems it seeks to address, persistent challenges, and possible reforms to ensure effective implementation. Previous Challenges and What the Amendment Resolves The main goals of this amendment are to improve the resolution processes’ transparency and enable better price discovery. This amendment aims to solve the problem of material irregularity being swept under the rug during resolution procedures. Previously, insider knowledge of avoidance transactions allowed resolution applicants to suggest recovery tactics that others were not aware of. Creditors are better equipped to assess resolution plans with greater knowledge when early disclosure of contentious transactions is required, which increases the amount of collective decision-making under Section 30(4). Prior to the amendment, the framework for dealing with avoidance transactions was lacking clarity. Regulation 39(2) of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 required RPs to place resolution plans before CoC along with information regarding any avoidance transactions and orders passed there in, if any. Similarly, Form H, the RPs’ compliance certificate, merely required disclosure of pending avoidance applications at the time of submitting the resolution plan for final approval. These gaps in regulation usually keep material irregularities hidden until resolution, hindering informed decision-making. Aligning more closely with the UNCITRAL Legislative Guide on Insolvency Law, the amendment represents a progressive shift in India’s insolvency framework. However, it still faces certain unresolved challenges. Remaining Gaps and Concerns Although a welcome step, the amendment highlights a critical ambiguity. The criteria for transactions to be identified as “avoidant” remain unclear. The RP’s determination of the same is preliminary until the adjudicating authority passes an order. Additionally, there is no look-back period for fraudulent transactions, and the 3-year period under the limitation act does not apply. Hence, the RPs may look back at any time preceding the insolvency commencement and get a substantial volume of transactions to examine, still however, RPs may sometimes fail to recognise certain transactions as avoidant. For instance, in the case of Shinhan Bank v. Sugnil India Pvt. Ltd., the RP failed to characterise unsecured loans provided at an interest rate of 65% per annum as extortionate. Yet, the NCLT Allahabad considered the transactions on an independent basis and ruled that a percentage rate of interest that was considered exorbitant constituted extortionate credit under Section 50 of the IBC. The Tribunal went ahead and waived the debt, highlighting the need for a clear set of criteria. Additionally, there is judicial uncertainty in the application of preferential transactions under Section 43 of the IBC, with various forums having taken different views on structurally similar transactions. For example, in IDBI Bank Ltd. v. Jaypee Infratech Ltd., the NCLAT ruled that payments to financial creditors on the eve of the insolvency commencement date did not constitute preferential transactions on the grounds that the payments were made in the ordinary course of business and hence exempt. But in Anuj Jain v. Axis Bank Ltd., the Supreme Court considered that mortgages entered into by Jaypee Infratech to secure its parent company’s loans were preferential since they conveyed interest in property for the advantage of a related party and were not in the ordinary course of business. These inconsistent applications of the “ordinary course of business” and “financial position worsening” tests have generated uncertainty for RPs, who are required to make early determinations in the face of developing and sometimes conflicting judicial standards. Secondly, the amendment clubs Section 66 with other avoidance provisions, but the apex court has held that applications filed under Section 66 cannot be treated as avoidance transactions. There is no guidance on how to differentiate and treat fraudulent behaviour beyond disclosure. Thirdly, fraudulent transactions are often handled by external agencies, such as the Serious Fraud Investigation Office (‘SFIO’). The investigation for these cases may drag on for years, extending well beyond the CIRP period. Accordingly, the pre-emptive compulsory disclosure of these transactions in the IM, while intended to enhance transparency, can create commercial uncertainty for potential resolution applicants. The threat of outstanding investigations and subsequent post-resolution liabilities can discourage bidders or result in under-valuation of distressed assets. This grey area becomes especially contentious when resolution applicants are compelled to take pricing and strategic decisions in the absence of understanding how far or what the consequences are of possibly avoidant transactions. Pre-mature disclosures—particularly, if made based on an RP’s initial and not final estimate—may discourage applicants from bidding entirely, fearing potential future litigations or contingent liabilities. This is particularly so in the absence of final adjudication by the National Company Law Tribunal (NCLT), which tends to come after resolution or in liquidation. Statistics released by the IBBI in 2024 highlight the disparity between the identification of avoidance transactions and their subsequent enforcement. Up to September 2024, 1,326 applications that involved claims totalling ₹3.76 lakh crore had been made to the Adjudicating Authority.

[By Atharva Kulkarni] The author is a student of Maharashtra National Law University, Mumbai.   Introduction On 24 December 2024, the National Company Law Appellate Tribunal (NCLAT) pronounced its decision in NCC Ltd. V. Golden Jubilee Hotels Pvt. Ltd. Through this order, the tribunal has tackled a long-standing debate on inter-se classifications of Operational Creditors (“OCs”) and has permitted the Committee of Creditors (“CoC”) to conduct such classifications provided doing so is crucial for the existence of a Corporate Debtor (“CD”). This article aims to deconstruct the order in light of the pre-existing jurisprudence on sub-classification of OCs and the supremacy of the ‘Commercial Wisdom’ as employed by the CoC while modifying and approving a resolution plan (“RP”). Facts Golden Jubilee Hotels Pvt. Ltd. had leased land from Telangana State Tourism Corporation Limited and Shilparam Arts & Crafts Society Ltd. (hereinafter “Special OCs”) for the construction of a Hotel Trident in Hyderabad. After being admitted into CIRP, the CoC through the Successful Resolution Applicant (“SRA”) had determined that the liquidation value (“LV”) of the OCs as per Section 53 of the Insolvency & Bankruptcy Code 2016 (hereinafter “IBC”) was nil and thus their original submitted claims were not admitted by the SRA. As per the RP, FCs were allocated Rs. 949 Crores which was almost the entirety of their claims, whereas the claims of the OCs were Rs. 112 Crores, of which only Rs. 50.02 Crores were admitted, everyone except Special OCs was allocated nil payments, and the latter ones were paid their entire claim. However, in the approved RP, special OCs had been allotted all of their payments. Leading to the plan being challenged in NCLT, which in turn upheld the RP and rejected the challenges lodged. Following this order multiple petitions were filed in the NCLAT against the RP primarily by the OCs. The NCLAT bench clubbed all these petitions together and adjudicated on them in the present case. The gravamen of the allegations of NCC Ltd. lies in the RP allocation, they argue that such a differential allocation of payments among the OCs is invalid under law, and that there is no provision in the code approving the existence of special OCs or the discrimination suffered by them. Deconstructing the Order The bench noted that Section 21 makes the CoC the primary supervising body managing the insolvency resolution process of a corporate debtor, under Section 30(4) it is also empowered to approve, reject or modify a resolution plan as submitted by the resolution applicant. In Swiss Ribbons v. Union of India, the apex court had observed that the CoC exclusively consist of FCs who, as per the Court’s rationale, are better equipped at governing the insolvency resolution of a corporate debtor owing to their vested interest in keeping the its business a going concern. The OCs on the other hand are not privy to the workings of the CoC, therefore, to safeguard their interests, Section 30(2)(b) mandates the allocation of minimum payments to such OCs which are proportional to their LV as detailed under Section 53. The bench observed that as per Section 5(21) of IBC, an ‘operational debt’ is any claim spawning out of trade credits, employment dues, or any other dues owed to the state or Central government whereas under Section 5(8) financial debt arises when money is disbursed against consideration of time value of money. It cited the judgement of the SC in Pratap Technocrats v Monitoring Committee of Reliance where the court had held that a standard of fairness and equity needs to be employed while distributing payments to the OCs in a resolution plan, as per the explanation 1 attached to Section 30(2), distribution of payments in accordance with the LV of OCs would be considered to be fair and equitable. NCC Ltd. relied on the ratio of Akashganga Processors v Ravindra Kumar Goyal to argue that such a subclassification of OCs is invalid, the tribunal had held that inter se classifications among the OCs who are similarly placed cannot be made in a resolution plan, this as per the tribunal was in keeping with the principles laid down in Committee of Creditors of Essar Steel v Satish Kumar Gupta & Ors (Essar Steel). However, the NCLAT ended up disagreeing with the objections of NCC Ltd. and upheld the RP, thereby approving the subclassification. Analysis In Binani Industries v Bank of Baroda the apex court observed that no subclassification and its resultant differential treatment can be allowed among similarly placed OCs as the objective of the IBC is not sole profit and asset maximization of the CD but also to satisfy the interests of all the stakeholders involved in the debt-ridden CD. The aforesaid bar is applicable to creditors who are similarly placed. An identical stance was echoed by the NCLT in the recent case of Amit Goel v Piyush Shelters India Pvt. Ltd. where it observed that creditors in similar situations cannot be discriminated against in RP. Implying that the CoC is allowed to make such differential payments to OCs not similarly placed. The criterion for such a differentiation is the capacity of the creditor to keep the CD a going concern. Although the IBC does not explicitly categorize OCs into classes, it does recognize the existence of separate classes among them on the basis of their claims. It has also been argued that such classes of creditors are distinct even within the definition of OCs. The NCLAT in Gail India v Ajay Joshi used this reasoning to argue that the Code does not inflict an embargo on the CoC from classifying OCs in separate classes in order to determine the distribution and priority of payments. It is up to the ‘collective commercial wisdom’ of the CoC to determine the method and quantum of payments to the creditors, even in this case, the CoC chose to pay in full the dues which were essential for the corporate debtor to remain a going concern. In Essar Steel the court observed a

[By Aakriti Rikhi] The author is a student of National Law School of India University, Bengaluru.   Introduction Section 30(2) of the IBC provides that the resolution plan must provide for a certain minimum amount to the operational creditors and dissenting financial creditors (‘FCs’). For the latter, it states that they must be paid at least the amount that they would have received, had the corporate debtor been undergoing liquidation under section 53. However, the interpretation of minimum liquidation value has been a contentious issue when it comes to payment to dissenting secured FCs. There are two positions as of now. First is that dissenting secured FCs are entitled to receive a payout as per the resolution plan and it is not necessary to pay them the value of their security interest. This position was laid down in India Resurgence Pvt. Ltd. v. M/s Amit Metaliks Ltd. & Anr. The Court here held that the amount to be paid to such creditors is to be decided by the commercial wisdom of the Committee of Creditors (‘CoC’) and a dissenting secured FC cannot claim a higher amount based on the value of their security interest.  The second position is that dissenting secured FCs must be paid the value of their specific security interest as minimum value. This position was laid down in DBS Bank Ltd. v. Ruchi Soya Industries Ltd. & Anr. The Court here held that section 30(2) ensures that dissenting creditors receive the payment of the value of their security interests as that was the legislative intent behind introducing this minimum value through the 2019 amendment. Both the decisions are conflicting and have been referred to a larger bench for consideration. To that end, this paper analyses the issue of minimum payout to dissenting secured FCs from a law and economics perspective. It uses the Cathedral Model to argue that dissenting secured FCs have an entitlement that is protected by a liability-rule where their consent is not necessary for the relinquishment of their security interest when a plan is approved under section 30(4). Since the liability-rule mandates the payment of an objective fair value as compensation, by paying the dissenting secured FCs below this value (i.e., their security interest), Amit Metaliks has created an anomaly within the IBC framework. If not paid this value, there will be high social costs and a failure of the distributive goal envisaged by the introduction of section 30(2). Approaching section 30(2) through the Cathedral Lens To put forth this argument, this paper has been divided into two parts. It first lays down the framework proposed by Calabresi and Melamed and then, applies this framework to section 30(2) in a way that is consistent with the overall objective of the IBC i.e., balancing the interests of all stakeholders. I. Laying down the basics: The type of entitlements and their general application The Cathedral Model was developed to help decide that in a dispute between parties having conflicting interests, which interest should be entitled to prevail. It has divided entitlements into three categories: entitlements protected by property rules, entitlements protected by liability rules and inalienable entitlements. For the purposes of this paper, the first two entitlements are relevant. A property-type entitlement is one where someone who wishes to remove the entitlement from its owner must buy it by bargaining with the holder of the entitlement. It requires the consent of both the parties on the value of the entitlement. An entitlement protected by the liability rule, on the other hand, is one where someone may take away the entitlement if she is willing to pay an objectively determined value for it. This objectively determined value is determined not by the parties but by one of the organs of the state. The application of each type of entitlement depends on economic efficiency, distributional goals and “other justice reasons”. Economic efficiency entails an outcome consistent with Pareto optimality. Pareto optimality asks that the rule that we follow should lead to such an allocation of resources that a further change could not improve the condition of those who have gained by such an allocation, that they could compensate those who have lost from it and still be better off than before. In other words, it is the most optimal situation, assuming that it is not possible to make someone better off, without making the other worse off. So, Pareto optimality’s goal is to minimize the aggregate social costs, which is the sum of damages incurred as a consequence of harm and the costs incurred in preventing this harm. The Cathedral Model does so by putting the costs on the party which can most cheaply avoid them. However, since markets do not function ideally, we do have transaction costs. In light of these transaction costs, the Model presents us with two options: market transactions or collective fiat. Either of these have to be chosen keeping in mind the economically efficient outcome. The second factor is distributional goals. These are grounds which decide the distribution of entitlements. These grounds vary with the purposes that a society seeks to achieve. Lastly, “other justice reasons” includes those reasons which cannot be described in efficiency or distributional terms but are linked with both. Using these factors, the authors contend that when the cost of establishing the value of an entitlement by negotiation is high, then a voluntary transaction will not be able to occur due to high transaction costs. In such a scenario, it is better that collective fiat should prevail, instead of a mutually beneficial transfer. While this provides us with the economic justification for preferring a liability rule over a property rule, there are distributional reasons for doing so as well. As per the authors, the choice of a liability rule is often made because “it facilitates a combination of efficiency and distributive results”[iv]. Distributional reasons play an integral role in deciding the compensation value in a liability-rule as we shall see in the next section. Keeping the above framework

[By Aashka Zaveri & Aditya Panuganti] The authors are students of Symbiosis Law School, Pune and National Law School of India University (NLSIU) respectively.   Introduction India’s first International Financial Services Centre (“IFSC”) was set up in 2015, in Gandhinagar, Gujarat, and christened Gujarat International Financial Tec-City (“GIFT City”). The IFSC was established to transform India into a global financial services hub. While the Union has taken steps to ensure that GIFT City enjoys a predictable and simple regulatory framework, the lack of a robust cross-border insolvency regime in India is a striking lacuna in empowering India’s IFSC.  In this piece, the authors will analyse the current insolvency regime in GIFT-City and highlight the shortcomings inherent in the same. Subsequently, the authors compare the regulatory regimes in Dubai and Hong Kong before arguing for the adoption of a more robust framework in India.   Current Regulatory Regime Section 31 of the International Financial Services Centre Authority Act (“IFSCA”) gives the Union government the power to exempt financial products, financial services or financial institutions in an IFSC from the application of any other Act, Rules or Regulations passed by the Union. Since the IFSCA has not notified any special provisions relating to insolvency or the bankruptcy process, the Insolvency Bankruptcy Code, 2016 (“IBC”) will apply in IFSCs until specified otherwise.   The IBC is not fully capable of addressing the needs of entities situated within the IFSC. Unlike other jurisdictions, the Indian IFSC neither enjoys a designated insolvency court or tribunal that has exclusive jurisdiction over the Centre, nor a robust cross-border insolvency regime, but continues to rely on the IBC process. Sections 234 and 235 of the IBC provide for bilateral or multilateral arrangements with other countries to bring transnational assets belonging to the corporate debtor within the Code’s purview. This is a far cry from the UNCITRAL Model Law on Cross Border Insolvency framework that was recommended by the Insolvency Law Committee. Uncertainty surrounding the treatment of foreign creditors and the discretion-based system of cross-border insolvency that prevails in India may potentially deter cross-border investment, defeating the IFSC’s stated purpose of being a business-friendly regulatory zone.  There has been a consistent call for adopting the UNCITRAL Model since it is a credible framework that has been widely adopted globally. The UNCITRAL Model Law is founded upon the doctrine of modified universalism– a belief that a court should cooperate in the distribution of a debtor’s assets on a worldwide basis in a single judicial proceeding, subject to such proceedings being consistent with territorial law and public policy   The Model Law would bring about a sense of predictability and certainty for both foreign and domestic creditors. A consolidated Insolvency regime that incorporates the UNCITRAL Model law is essential to bring GIFT City on par with other global financial hubs, and perhaps even surpass them.   A Comparative Perspective Dubai The Dubai International Financial Centre (“DIFC”) enacted the DIFC Insolvency Law, Law No. 1 of 2019 to bring about a comprehensive and singular insolvency regime for the DIFC. The new legislation was adopted in the wake of Abraaj Capital’s collapse. The Venture Capital firm, based in Dubai and registered in the DIFC, entered into liquidation in 2019. The firm once managed $14 billion in assets in many emerging markets around the world. After it entered into liquidation in the Cayman Islands, cross-border cooperation allowed the firm to consolidate its assets and preserve their value, ensuring the maximum payout to its creditors.   Dubai adopted the UNCITRAL Model Law in Part 7 of the Insolvency Law in 2019, a year after the Abraaj scandal. It is, however, interesting to note the 2023 Bankruptcy Law applicable to the United Arab Emirates at large, does not include these provisions. This amounts to a situation where the UAE’s onshore insolvency law and its offshore DIFC insolvency regime are different. Such a situation allowed foreign investors and businesses to shed the stigma attached to failed businesses and the insolvency process in the onshore insolvency regime. This allows the UAE to hold off on recognising the principle of comity inherent in the Model Law for onshore insolvency proceedings but ensures that the DIFC enjoys a regulatory regime that improves the ease of doing business and is considered to be a global best practice.   Hong Kong The Companies (Winding Up and Miscellaneous Provisions) Ordinance (“CWUMPO”) is the applicable Insolvency statute in Hong Kong. The region has not adopted the UNCITRAL Model Law and creditors must rely on the courts’ discretion to apply common law principles to give effect to foreign insolvency proceedings. In Re CEFC Shanghai International Group Ltd, the Court laid down the test for recognising cross-border insolvency proceedings, and Hong Kong courts have also recognized cross-border restructuring proceedings, thus adopting the common law doctrine of universalism in liquidation proceedings.  However, courts can aid foreign insolvency proceedings only to the extent that Hong Kong law allows them to do so. In Joint Administrators of African Minerals Ltd v Madison Pacific Trust Ltd, the administrators of a company sought the recognition of English insolvency proceedings and a stay on the enforcement of securities held by a Hong Kong security trustee. The court affirmed the principles of modified universalism and indicated the courts’ ‘generous’ attitude in recognizing and assisting foreign liquidation proceedings. However, it noted that the relief sought by the UK-based administrators could not be granted. The Court held that since no Hong Kong legislation or common law principle provides an equivalent to ‘administration’, the relief could not be granted. The administrators had not argued their case on the principles of equity but rather sought the court’s recognition and assistance under the principles of modified universalism.   Article 21 read with Article 25 of the UNCITRAL framework provides courts with the power to order a stay on the execution of a debtor’s assets upon a request by a foreign representative. Had Hong Kong adopted the Model Law, Madison could have been decided differently- an outcome that would have given effect to the principle

[By Yash Raj] The author is a student of Dr. Ram Manohar Lohiya National Law University.   Introduction India has witnessed an unprecedented surge in startup activity, with the ecosystem booming across the country. The exponential growth of startups in India can be attributed to various governmental schemes and initiatives like the Startup India Action Plan (SIAP) and the National Initiative for Developing and Harnessing Innovations (NIDHI) launched by the Government of India. Today, India has the world’s third-largest startup ecosystem after China and the US.  The Vulnerability of IP-Driven Startups In the rapidly changing business environment, startups nowadays often rely on intellectual property (IP) as their key asset, with trademarks, copyrights, patents, and other forms etc. forming the foundation of their business model. Every business, no matter how ambitious, is vulnerable to financial instability. A significant number of startups are now IP-driven startups dealing with proprietary tech, software, and various other forms of intellectual property to gain a competitive advantage in the market. Take, for example, an ed-tech company that may rely on its copyrighted content, while biotech firms could hold patents on drugs or medical devices. When such startups face insolvency, how their intellectual property is to be treated becomes a crucial issue and raises various questions regarding valuation, protection, and broader applications for the innovation ecosystem in India. The value of these companies is tied intrinsically to their intellectual property, making it a critical asset for the startup in any financial assessment done to the firm. Reports emphasize that a growing number of DeepTech startups in India rely on IP, especially patents, with over 900 patents filed by DeepTech startups since 2008. The focus on technology-driven sectors like artificial intelligence, healthcare, and blockchain has fueled this surge in patent activity, underlining the importance of IP in fostering innovation   Insolvency of companies in India is governed by the Indian Bankruptcy Code (IBC) 2016, which is applicable all over India with some exceptions relating to J&K. However, the Indian Bankruptcy Code does not have any specific provisions that deal exclusively with intellectual property (IP) rights during insolvency. It treats intellectual property as any other asset, forming part of the insolvency estate. In a significant case, Enercon (India) Ltd. v. Enercon GmbH, the importance of protecting IP rights during insolvency proceedings was highlighted. The dispute was between a German wind turbine manufacturer and its Indian subsidiary regarding the ownership and use of trademarks during Enercon India’s insolvency proceedings. This case highlights the importance of having clearly defined and well-drafted IP agreements to avoid potential disputes and protect the interests of the IP owner during insolvency.  The Problem in IP Valuation Unlike physical assets, IP assets are intangible, making their value difficult to estimate often leading to undervaluation. Undervaluation reduces creditor recovery, leading to losses and making them less likely to invest in similar startups. The ASSOCHAM and PwC reports on the Insolvency and Bankruptcy Code (IBC) highlight the poor recovery rates generally in India’s insolvency cases, attributing much of this to the absence of timely resolutions and specialized handling of intangible assets like intellectual property.  The absence of clear guidelines for valuing IP assets can result in undervaluation during insolvency, undervaluation can result in lower recovery for creditors, diminished returns for founders, and a loss of long-term growth potential, affecting the broader innovation ecosystem. When a business goes into liquidation and its assets are sold, the IP could drastically lose its value if it is not managed correctly. This is a critical issue for startups, whose most crucial value often lies in their intellectual property. New startups usually fail to acknowledge this value due to a lack of awareness and proper guidelines, leading to significant economic setbacks.   Countries like the U.S. and U.K. have specific rules in their bankruptcy laws that treat intellectual property (IP) as a unique asset. For example, the U.S. Bankruptcy Code allows licensors to maintain their licensing rights during bankruptcy (under Section 365(n)), protecting the value for startups and investors. Japan also has guidelines for valuing IP during insolvency, suggesting different strategies depending on the asset type. These approaches could serve as models for India to develop its own IP valuation frameworks.   Reforms to Address the Insolvency Challenges of IP-Driven Startups A proper approach is necessary to effectively resolve the insolvency challenges faced by IP-driven companies in India. Specific Provisions in the IBC for IP Assets The Indian Bankruptcy Code (IBC) lacks explicit provisions regarding the treatment and valuation of intellectual property during insolvency proceedings. Addressing this issue is critical for protecting the interests of both startups and creditors. A dedicated section in the IBC could bring much-needed clarity by recognizing IP as a distinct asset category with specific valuation and management protocols. The reforms should focus on:  IP as a Separate Class of Asset: Including provisions that treat IP as separate assets rather than grouping them with physical and other assets. This will allow for more tailored handling during liquidation and insolvency proceedings. Jurisdictions like Japan treat IP as a distinct asset, allowing for specialized handling separate from physical assets. Countries like the U.S and the U.K. also provide some special considerations for IP, but Japan’s approach emphasizes preserving the value and operational integrity of IP throughout the insolvency process.  Expert valuation: Mandating that intellectual property be valued by qualified IP experts during insolvency cases. This will prevent the undervaluation of these assets and ensure that creditors receive fair compensation.  Safeguarding Ownership Rights: The IBC should incorporate provisions that protect the ownership rights of intellectual property holders during insolvency. This will ensure that critical IP assets are not lost or diluted in insolvency, particularly in patent or trademark licensing cases.   Establish an IP Valuation and Insolvency Oversight Committee: This committee will guide courts and insolvency professionals on managing and valuing IP assets. Modeled after the U.S. Patent and Trademark Office (USPTO), this committee would standardize valuation practices, reduce undervaluation risks, and improve creditor recovery outcomes during insolvency. Development of Standardized Valuation Frameworks A significant