We are in the critical phase right now that would decide the efficacy and success of the Insolvency and Bankruptcy Code (IBC), where various resolution plans adopted by the Committee of Creditors (CoC) are being put to litmus test by various unsuccessful resolution applicants and operational creditors before the various benches of the National Company Law Tribunal. The challenges to the process include transparency in the resolution process to haircuts and other allied issues. One of the key features of the IBC is that timelines are sacrosanct. The resolution professionals, along with the CoC, have been given the arduous task of resolving the case within 180-270 days, failing which the company would be sent to liquidation. Considering the pressure of the timeline, one of the interpretations that was discussed initially was that since the IBC has a non-obstante clause, the resolution plan adopted by the CoC would not require approvals from other regulators like the Competition Commission of India (CCI). There were reports to suggest that representations have been made to do away with the requirement of the CCI approval in the case of transactions which are contemplated under the resolution plan.
Having said that, there was no statutory pronouncement on this issue either by the Insolvency and Bankruptcy Board of India or the government that did away with the requirement of a statutory approval from the CCI required for the transaction. Personally, it is my firm opinion that the requirement of getting the CCI approval must not be done away under any circumstances. A transaction or series of transactions contemplated under the resolution plan may have adverse effect on competition in the market. The power of the CCI to make appropriate modifications or stall such transactions must not be abrogated under any circumstances. As such, one of the key thought processes behind the noise of doing away with the CCI approval is also the time which may be taken by the CCI to review the transactions, and whether such time taken would blend with the time prescribed under the IBC, of 180 days, extendable up to 270 days. The CCI, to a great extent, has put those concerns to rest by clearing a transaction, wherein Rajputana Properties, a subsidiary of Dalmia Cement, had proposed to acquire 80% of Binani Cements. That the said transaction was cleared by the CCI within 24 days is a testament to the fact that it cleared the transaction on a fast-track mode and allayed a lot of industry concerns.
While this is great as far as timelines are concerned, it must be noted herein that the filing was done in a short-form format (Form 1 per CCI norms) and the transaction was cleared in the first phase itself. Most of the transactions involved in a resolution plan would be strategic investments rather than pure play financial investments. Considering the same, there may be cases in not-so-distant future, wherein transactions contemplated under a resolution plan may have an adverse effect on competition in the market; based on the market share of the parties involved, the parties must make a merger filing in long form (Form 2 per CCI norms) and the CCI may impose commitments on those cases. In such a case, the commitment package proposed would have to put to vote before the CoC, where a 75% vote of CoC is required to adopt the said commitment package. Also, the revised commitment package may not be agreeable to the resolution applicant, hence, he may back out from the deal in entirety. These are some of the situations which may come up that may necessitate the CCI to interpret the failing firm defence, considering the resolution process.
Advocate, Seetharaman and Associates.
Views are personal