Insolvency and Bankruptcy Code 2016: Impact on Markets and the Economy

Abstract

This is the text of a keynote address given at a conference with the same title held in New Delhi on 16 December 2019. In the address, I suggest that the defining feature of the approach taken by the drafters of India's new Bankruptcy Code was their decision to treat creditors as presumptively entitled to determine how the assets of an insolvent corporate debtor should be deployed, and that this represented a radical break from the old law. I suggest that there are very good reasons to favour a creditor-centric approach, but take some issue with the particular way in which creditors exercise control rights under the Code. I contrast the model of indirect creditor control we observe under English law with the more direct model of creditor control used in the Code, and suggest that direct creditor control may make it more difficult (and therefore costlier) for a third party to acquire the debtor's business. In cases in which value would be most likely to be maximised by leaving the assets in the hands of the debtor, I suggest that the decision to entrust the decision on a reorganisation plan to financial creditors sitting in a single class is potentially problematic on a number of levels, and that aspects of the treatment of non-financial creditors and senior (secured) financial creditors could be revisited. I conclude that if there is any appetite for reforms of the kind that I suggest, there is very good reason to think they could be implemented: since the Code has entered into force, it has been amended in a number of sensible ways, and it is clear that lawmakers are making every effort to ensure that the new law maximises the value of an insolvent debtor's estate for the benefit of its creditors.