CORPORATE RESTRUCTURING UNDER THE IBC: HAS INDIA SHIFTED FROM THE LIQUIDATION CULTURE TO A RESCUE CULTURE?

The corporate insolvency system in India is an important change in the approach towards dealing with insolvency from the liquidation-based system towards the corporate rescue and the maintenance of the value of enterprises. Before the introduction of the Insolvency and Bankruptcy Code, 2016, there existed a scattered insolvency law system based on several pieces of legislation such as the Sick Industrial Companies (Special Provisions) Act, 1985, the Recovery of Debts due to Banks and Financial Institutions Act, 1993, SARFAESI, and the Companies Act. These overlapping mechanisms had jurisdictional disputes, long time periods, low recoveries and the loss of value of enterprises, ending in liquidation rather than rehabilitation. The paper aims to explore how the IBC has changed the insolvency system in India. It examines the design structure of the Code, such as creditor control, timeliness of the process, and the role of the Committee of Creditors (CoC). Besides, it assesses the impact of important Supreme Court judgments like Innoventive Industries Ltd. v. ICICI Bank, Swiss Ribbons Pvt. Ltd. v. Union of India, K. Sashidhar v. Indian Overseas Bank, and Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta on the current insolvency regime. The paper finds out that although the IBC has certainly been successful in increasing recovery ratios, reducing delays, and bringing resolution as an effective substitute to liquidation, the framework created as a result of these developments is not a rescue culture in its true sense. Rather, it is a creditor-based rescue framework wherein the decision-making about the reviving process of the corporation is mostly immune from judicial review and depends on the commercial judgment of the financial creditors.