Indian Insolvency Regime in Practice

While there is much anecdotal evidence on the abysmal track record of courts and tribunals in resolving insolvency proceedings, there have to date been few empirical studies of how the Indian insolvency regime functions in practice. This paper is based on an analysis of select high court and tribunal judgments with the aim of gaining a better understanding of the existing insolvency resolution process for companies and to identify where the delays and bottlenecks lie. Three themes that emerged from this exploratory study are: (i) the significant inefficiencies and conflicts that have resulted from having a number of different laws and legal forums to govern companies in distress, (ii) various judicial innovations and weak institutions that have contributed to enormous delays in insolvency proceedings, and (iii) misinterpretations of the law by debt recovery tribunals when considering cases of debt enforcement under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act. As India moves towards enacting a new insolvency and bankruptcy legislation, it is hoped that this study will be helpful in understanding the urgent need for reform and in providing initial insights on the direction the new law should take.