Recently, pursuant to its decision in Ebix Singapore Private Limited v Committee of Creditors of Educomp Solutions Limited and Anr., the Supreme Court of India extensively analyzed the status of a resolution plan approved by the Committee of Creditors but pending approval of the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016. The Supreme Court observed that such a resolution plan binds the Committee of Creditors and the Resolution Applicant and reinforced the strength of the decision of the Committee of Creditors in favor of a resolution plan. The Supreme Court also, once again, clarified the scope of scrutiny, at the stage of approval of a resolution plan, by the National Company Law Tribunal and consequently by the National Company Law Appellate Tribunal.
The recent amendment to the Insolvency and Bankruptcy Code, 2016 (“IBC”) replaces an ordinance promulgated earlier this year, and provides for a pre-packaged insolvency resolution process (“PIRP”) for micro, small and medium enterprises (“MSMEs”). The PIRP comes in the backdrop of the financial stress caused by COVID-19 and aims to cause minimal disruption to business and to ensure job preservation. While the PIRP is well intended, how effective it will be in resolving stress on corporate debtors in the MSME sector will come down to how it is implemented and if required, fine tuning its design.