The Indian Insolvency & Bankruptcy Code 2016: No More a “Wait And Watch” Space for Private Equity


By Ashwin Bishnoi, Khaitan & Co LLP

The Indian Insolvency & Bankruptcy Code 2016 (Code) was enacted in 2016 and the corporate resolution process has been operationalised. The Code has received a big boost with the Reserve Bank of India (RBI, India’s federal reserve) recently requiring India banks to initiate corporate insolvency resolution process against twelve of India’s largest corporate defaulters pursuant to a legislation passed in India. The jury is yet out on whether these twelve corporate debtors, given their size, complexity and operations, are best suited to be test cases under the Code. The Code comes at a time when private equity special situation and buy-out funds have raised some of the largest amounts in history to tap opportunities in the distress market. The Code is here to stay and, in this article, we discuss some of the significant opportunities the Code presents for Private Credit and Private Equity players.

But first, it is worthwhile to understand the key stakeholders and players under the Code. The creditors to the company are divided into financial creditors (such as banks and bond holders) and operational creditors (trade creditors). The insolvency process is aptly called a corporate insolvency resolution process. Any creditor with an undisputed debt of at least INR 100,000 can initiate a corporate insolvency resolution process for an Indian company by making an application to the National Company Law Tribunal (NCLT) with jurisdiction over the company. If the NCLT admits the application, the control and management of the affairs of the company automatically vests in the hands of an insolvency professional appointed by creditors.