IBC Distribution Waterfall

Renewed Challenges to the IBC Distribution Waterfall

The Insolvency and Bankruptcy Code, 2016 (“IBC”) ushered in a new era in the Indian insolvency regime by introducing a distribution waterfall mechanism under Section 53 of the IBC. The waterfall mechanism prioritizes dues owed to financial creditors over dues owed to operational creditors and government authorities.
The waterfall mechanism in the IBC is based on the recommendations of the Bankruptcy Law Reforms Committee. The preamble to the IBC also highlights its objective of balancing the interests of the stakeholders, including by alteration in the order of priority of payment of government dues.
There has recently been a rising trend of courts and tribunals seeking to deviate from the distribution waterfall under the IBC. Unfortunately, this tends to put the success of an insolvency resolution process at risk. In this note, we examine three recent examples and discuss why any such deviation could disturb the delicate balance sought to be achieved under the IBC.


free trade agreements

Bilateral Courts: Wooing Europe with Investor-friendly Free Trade Deal

Negotiations between the EU and India in respect of a significant trade and investment deal are currently ongoing. This EU-India deal involves three separate agreements: (1) a free trade agreement (FTA), (2) an investment protection agreement (IPA), and (3) an agreement on geographical indications. Of particular interest is the proposed investment court system (ICS) in the IPA. Although ICS marks a break from standard dispute-resolution mechanisms under investment treaties, it has been used by the EU in the past across FTA-plus deals signed with Canada, Vietnam, and Singapore. Previously, investor-state arbitration (ISA) was the standard template for resolving international investment disputes. Now, the EU wants to include ICS in all its future treaties. While it remains to be seen whether ICS offers a superior paradigm relative to ISA, the EU itself has argued, including before UNCITRAL, that ICS will ensure a more consistent jurisprudence and improve judicial accountability. Nevertheless, as India looks to export more capital in the future, whether ICS will be able to protect investors better in the long run is something that India needs to think about.


rules of overseas investment

Liberalized Rules for Overseas Investment by Indian Entities: Laying the “Round Tripping” Ghost to Rest (or not just yet)

Although the objectives of the erstwhile restriction on “round tripping” were laudable, such restriction had an unintended chilling effect on legitimate transactions. The new overseas investment regime introduced in August 2022 eases such restriction to a large extent. However, certain interpretational issues remain.


Indian Renewables

How Green is Your Money? Capitalizing on Indian Renewables

Consistent with India’s ambitious climate-related targets, significant investments are being made in the domestic renewable energy sector, driven largely by private sector activity. Acquisitions and bonds represent a large portion of this capital, along with foreign equity, traditional loans, and mezzanine financing. Enabled by an encouraging FDI regime as well as locally-targeted regulatory schemes – such as incentives introduced by the government to bolster domestic capacity and manufacturing – self-sufficiency and foreign capital now constitute an integrated ecosystem. Along with conventional means of financing, newer frameworks such as infrastructure investment trusts specifically set up in the renewables space could be better explored in the future, especially in light of the urgency with which India needs to catch up towards its climate targets. Legislative changes in respect of the power markets – such as those related to trading in renewable energy certificates (RECs) – may also be curated by appropriate regulatory bodies to expand upon existing revenue streams.


India’s place in the International Investment Regime

The Elephant in the Room: India’s Place in the International Investment Regime

On August 29, 2022, the Delhi High Court set aside an arbitral award from 2015 issued by the International Chamber of Commerce in the Antrix-Devas dispute. While the High Court’s verdict is being hailed as a significant win for the Indian government, it is also time that India became more proactive in global debates related to foreign investment and learnt how to avoid such defensive situations in the first place. This note discusses why India should start asserting itself as a key player in the international investment regime and identifies the areas in which it has been falling short in this regard, including, in particular, in respect of its corresponding dispute resolution system.


overseas investment regime in india

New Overseas Investments Regime in India

On August 22, 2022, the Government of India notified the new regime for overseas investments by Indian entities and individuals. The new regime is a mixed bag of liberalizations, new restrictions and clarifications, and signals the revised thinking of the Reserve Bank of India in certain respects, particularly in relation to the scope of overseas investments and round tripping. This note discusses the changes introduced by the new regime and its impact on cross border transactions.


Material Adverse Effect

Renewed Spotlight on Material Adverse Effect Clauses following Covid-19 and the Musk-Twitter Dispute

Material Adverse Effect (“MAE”) clauses are once again in focus with the recent Musk-Twitter dispute arising from the termination of the transaction related to the acquisition of Twitter on MAE grounds. This note discusses certain issues relating to MAE clauses from a practical perspective in an M&A setting and how these clauses have been interpreted by courts in the past.


Competition Amendment Bill 2022

Competition Amendment Bill, 2022: Key Changes to the Competition Act, 2002

On August 5, 2022, the Competition (Amendment) Bill, 2022 (the “Bill”), to amend the Competition Act, 2002 (the “Competition Act”), was introduced in the Indian Parliament. The timing of approval of the Bill, and its coming into effect, is uncertain at present. The Bill introduces certain new concepts into the field of Indian competition law, including Deal Value Thresholds, the changes to the definition of ‘control’, and mechanisms to settle certain violations of the Competition Act. It also provides for practical and much-needed updates to the Indian competition law regime, including relaxations for implementation of stock exchange purchases, proposed publication of guidelines for fines, and reduction of timeframes for the Competition Commission of India’s approval. This note provides detailed description of the changes proposed by the Bill.


IPL franchise

Transactions involving IPL Franchises: Legal Due Diligence

With the recent auction and sale of media rights of the Indian Premier League (“IPL”) by the Board of Control for Cricket in India (“BCCI”) for over INR 480 billion (approximately USD  6 billion), IPL franchises are in the spotlight. Reports suggest that certain IPL franchise owners may look to capitalize on an improved valuation, and either sell a part (or all) of their shareholding in the legal entity that has bid for and owns the IPL franchise, or may even consider a public listing of such legal entity.  In this note, we look at key legal due diligence issues that may arise in connection with transactions involving IPL franchises.


Private Equity in Sports Franchises in India

With the recent expansion of the IPL to include two new teams, CVC Capital Partners, a leading international private equity firm, acquired the Ahmedabad franchise – this is the first instance of a significant private equity investment in professional sports in India. We discuss the opportunities and potential challenges that lie ahead for private equity investment in sports franchises in the attached note.