RESOURCE PAPER - 22

Mergers and Acquisitions
under the Insolvency andBankruptcy Code 2016

A.K Mylsamy & Associates LLPRESOURCE PAPER - 22

Mergers and Acquisitions
under the Insolvency andBankruptcy Code 2016

A.K Mylsamy & Associates LLPIn the recent past, the improvement in the Ease of Doing Business
Rankings in India and the implementation of various structural reforms
has facilitated the investment climate in India. The Insolvency andBankruptcy Code 2016 (Code) was introduced with the objective ofpromoting resolution in timebound manner. The Legislative
framework and the operation of the Code so far has provided for arenewed mode of acquisition with many benefits to the acquirer.
This Resource Paper on Mergers and Acquisitions under the
Insolvency and Bankruptcy Code 2016 is intended to be an
introduction to the framework of acquisition under the Code.
The authors are :1. Mr. K K Balu is a Corporate Lawyer and Senior Advisor at
A.K Mylsamy & Associates LLP, Attorneys-At-Law. He has over
50 years of Legal, Teaching and Judicial experience. He was theFormerly Vice-Chairman [Judge] of the Company Law Board[which has now been replaced by the National Company Law
Tribunal] for over 12 years. He acts as an Arbitrator, Conciliatorand Mediator. He has obtained training in India and Abroad on
matters relating to Banking, Housing, Micro-Finance and Tax
planning. He has held senior positions in the National Housing
Bank and Syndicate Bank between 1978 and 1996 and was a Legal
Advisor for various Banks while practicing law.
2. Ms. Josephine Shreela G is a Bachelor of Commerce and Bachelorof Law, and is an Associate at A.K Mylsamy & Associates LLP.
I am confident that our readers would find this Resource Paper highly
informative and useful. IJCCI would deem it a pleasure and a great
privilege to assist the Japanese business community in understanding
matters relating to Acquisitions under the Code.
st

31 December 2018

Suguna Ramamoorthy
Secretary GeneralMergers and Acquisitions under the
Insolvency and Bankruptcy Code 2016

The Insolvency and Bankruptcy Code, 2016 (Code) was enactedwith the objective of promoting resolution and not recovery. The
National Company Law Appellate Tribunal (NCLAT) in the caseof Poweress International Pvt Ltd held that “it is clear that
Insolvency Resolution Process is not a recovery proceeding torecover the dues of the creditors. I&B Code is an Act relating toreorganization and insolvency resolution of corporate persons.”
As already stated in our previous Resource Paper, the Codeprovides for an opportunity for resolution of distressed assets.
The mechanism of resolution adopted under the Code is timebound and efficient and is further facilitated by the recent
Reserve Bank of India (RBI) Notification dated 12.02.2018
which has provided that the route under the Code as the mode ofrestructuring the stressed assets. The RBI vide the notification
mentioned above, has withdrawn the existent debt restructuring
schemes such as the Strategic Debt Restructuring (SDR),
Scheme for sustainable structuring of stressed assets (S4 A),
Corporate Debt Restructuring (CDR) etc. The RBI has also
provided a specific timeline within which the resolution ofstressed assets should occur, failing which action under the Codewill have to be initiated.
The statistical data relating to the list of resolution plansapproved till September 2018 by the National Company Law
1Tribunal (NCLT) are as follows:1

Source: IBBI Quarterly Newsletter July- September 2018 Vol 8.

5617-08-2017 10-07-2018 FC

03-08-2017 10-07-2018 FC
03-08-2017 17-07-2018 FC
18-09-2017 19-07-2018 OC 533.38

20-11-2017 20-07-2018 OC 49.73

3 Keti Highway
No
Developers Private Ltd.

No

4 Zion Steel Ltd.

5 Adhunik Metaliks Ltd. No

6 The Sirpur Paper Mills Yes
Ltd.

7 Stesalit Ltd.

04-08-2017 25-07-2018 FC

9 Concord Hospitality
Pvt. LtdNo

18-07-2017 24-07-2018 FC

8 Monnet Ispat & Energy No
Ltd.

No

03-11-2017 05-07-2018 FC

No

2 A Power Himalayas
Ltd.

47.86

11014.91

5371.235367.02

76.57

55.60

20-03-2017 02-07-2018 CD 120.58

Yes

1 Marmagoa Steel Ltd.

Date of
CIRP Total
Approval of initia Admitted
Resolution ted Claims
Planby of FCs

Not Going Date ofConcern/ Commen
Erstwhile cement
BIFR
of CIRP

Sl. Name of CDNo.

107.722365.00

15.06

202.76431.50

14.55

10.28

6.31

34.54

47.86

2892.1219.28

340.00410.00

15.00

18.50

23.13

31.05

100.00

26.26

38.77

63.74

7.63

0.28

24.16

41.60

25.75

44.43

122.29128.02167.6995.02

103.09179.96366.5689.90

Liquidation Realisation Realisation Realisation
Value
by FCsby FCs as by FCs as% of their % of
ClaimsLiquidation
Admitted Value

7

Yes

No

Yes

No

No

No

Yes

No

11 Amit Spinning
Industries Ltd.

12 Jalan Intercontinental
Hotels Pvt. Ltd.

13 ArceeIspat Udyog Ltd.

14 Malabar Hotels Pvt.
Ltd.

15 Orchid Pharma Ltd.

16 Assam Company India
Ltd.

17 Dooteriah & Kalej
Valley Tea Estate
Pvt. Ltd.

18 Rajpur Hydro Power
Pvt. Ltd.

Total

No

10 Amtek Auto Ltd.

64.03

167.1085.9512605.00

1379.17

11-07-2017 27-09-2018 FC

40404.56

75.23

12-12-2017 26-09-2018 OC 15.89

26-10-2017 20-09-2018 FC

17-08-2017 17-09-2018 OC 3341.55

16-08-2017 17-09-2018 OC 33.76

30-08-2017 30-08-2018 FC

29-08-2017 24-08-2018 FC

01-08-2017 31-07-2018 FC

24-07-2017 25-07-2018 FC

9248.18

31.95

4.228

359.911309.49

89.93

6.99

103.0025.964129.00

10617.32

9.45

15.89

884

1292.22138.8615.10

108.8222.04

4334.00

26.28

12.56

100.00

64.10

38.67

411.32

23.58

65.12

25.64

34.38

114.8029.58

375.83245.62

98.68

154.41216.02105.6584.90

104.96

8

Rejection of the Plan by the Tribunal under Section 31
for non-compliance of requirements

Receipt of intimation from resolution Professional
about the decision of the committee of creditors toliquidate the corporate debtor

Sec 33 (1) (b)Section33 (2)Ashish Makhija “Insolvency and Bankruptcy Code” (2018).

2

No resolution Plan is received by the NCLT
before the expiry of time permitted for corporate
insolvency resolution process under Section 12 andfor fast track corporate insolvency resolution process
under Section 56.

Sec 33 (1) (a)Section 33 (3) Contravention of approved Resolution Plan by
the Corporate Debtor.

CIRCUMSTANCESECTIONAny person other than thecorporate debtor whose interests
are prejudicially affected by suchcontravention.

No Application Required

No Application Required

No Application Required

APPLICANTThe Liquidation Process envisaged under the Code also provides opportunities for acquisition. The
following are the circumstances under which a liquidation order is passed by the NCLT. 2

Acquisitions under the Liquidation Process of Insolvency and Bankruptcy Code 2016

9

ABXL Retail Pvt. Ltd.

HDO Technologies Ltd.

Hindustan Dorr-Oliver Ltd.

Sanjay Strips Pvt. Ltd.

Arrow Resources Pvt. Ltd.

Confident Solar Pvt. Ltd.

Emmanuel Engineering Pvt. Ltd.

Mayfair Capital Pvt. Ltd.

Pier One Constructions Pvt. Ltd.

2

3

4

5

6

7

8

9

10

Source: IBBI July September 2018 Vol 8

Apex Engineering Solution & Services
Pvt. Ltd.

1

3

Name of Corporate Dealer

Sl.
No.

Yes

Yes

Yes

No

No

No

No

No

Yes

Yes

OC

FC

OC

FC

FC

OC

FC

FC

FC

OC

21-11-2017

27-06-2017

31-08-2017

05-01-2018

07-08-2017

13-11-2017

21-04-2017

28-04-2017

19-09-2017

19-07-2017

04-07-2018

04-07-2018

04-07-2018

04-07-2018

04-07-2018

02-07-2018

02-07-2018

02-07-2018

02-07-2018

19-06-2018

Not Going Concern / Initiated by Date of Commencement Date of Liquidtation
Erstwhile BIFR
of CIRPOrder

The statistical data pertaining to the list of liquidation orders passed by the NCLT till September
2018 is as below:3

10Samtel Color Ltd.

Karuturi Foods Pvt. Ltd.

Aegan Batteries Ltd.

Aegan Industries Pvt. Ltd.

BM Jain Metallik Pvt. Ltd.

Getit Grocery Pvt. Ltd.

Moka Technologies Pvt. Ltd.

BCC Estate Pvt. Ltd.

Inland Facilities Management Pvt. Ltd.

Associated Cylinders & Accessories
Pvt. Ltd.

Auromira Bio Power India Pvt. Ltd.

Free Culture Apparels Pvt. Ltd.

Virtual Logic Systems Pvt. Ltd.

11

12

13

14

15

16

17

18

19

20

21

22

23

Yes

Yes

Yes

Yes

Yes

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

OC

OC

OC

OC

OC

CD

OC

OC

CD

FC

FC

OC

FC

22-01-2018

01-09-2017

01-09-2017

10-01-2018

05-12-2017

06-09-2017

21-07-2017

08-01-2018

18-10-2017

18-08-2017

18-08-2017

10-10-2017

07-09-2017

17-07-2018

16-07-2018

16-07-2018

16-07-2018

13-07-2018

13-07-2018

10-07-2018

09-07-2018

09-07-2018

06-07-2018

06-07-2018

05-07-2018

04-07-2018

11

Oasis Agro Infra Ltd.

Kandla Steel Pvt. Ltd.

Kutch Engineering Pvt. Ltd.

Sanaa Syntex Pvt. Ltd.

Linkson International Ltd.

Shree Coke Manufacturing Co. Pvt. Ltd.

YMS Mobitech Pvt. Ltd.

SECL Industries Pvt. Ltd.

Western India Shipyard Ltd.

Kakatiya Engineering Equipment
Pvt. Ltd.

VNM Components Pvt. Ltd.

P&S Jewellery Ltd.

Carnation Auto India Ltd.

24

25

26

27

28

29

30

31

32

33

34

35

36

No

Yes

Yes

Yes

Yes

Yes

No

Yes

Yes

No

Yes

Yes

Yes

FC

CD

FC

FC

FC

CD

OC

FC

FC

FC

OC

OC

CD

25-09-2017

29-05-2017

07-02-2018

23-02-2018

12-12-2017

25-10-2017

23-10-2017

22-12-2017

06-10-2017

22-08-2017

20-07-2017

10-07-2017

22-09-2017

01-08-2018

30-07-2018

27-07-2018

27-07-2018

26-07-2018

24-07-2018

20-07-2018

20-07-2018

20-07-2018

19-07-2018

19-07-2018

19-07-2018

18-07-2018

12

Lukup Media Pvt. Ltd.

Rathna Stores Pvt. Ltd.

Anil Tradecom Ltd.

Hallmark Living Space Pvt. Ltd.

47

48

49

50

Supreme Tex Mart Ltd.

43

Bluplast Industries Ltd.

LCS City Makers Pvt. Ltd.

42

46

Alipurduar Enterprises Ltd.

41

Prag Distillery Pvt. Ltd.

Vasavi Housing Infrastructure Ltd.

40

45

Akshaya Imaging Systems Pvt. Ltd.

39

Pandit Automotive Pvt. Ltd.

G B Engineering Enterprises Pvt. Ltd.

38

44

Parerhat Gas Industries Ltd.

37

Yes

Yes

No

Yes

No

No

Yes

No

No

Yes

Yes

Yes

No

No

OC

OC

FC

FC

FC

FC

FC

FC

CD

OC

FC

FC

CD

FC

26-09-2017

22-12-2017

03-11-2017

17-01-2018

15-10-2017

27-06-2017

12-03-2018

29-09-2017

20-04-2018

07-02-2018

29-09-2017

31-05-2018

25-01-2018

03-11-2017

17-08-2018

17-08-2018

14-08-2018

10-08-2018

10-08-2018

09-08-2018

09-08-2018

08-08-2018

08-08-2018

08-08-2018

07-08-2018

07-08-2018

06-08-2018

02-08-2018

13

Conros Steels Pvt. Ltd.

Eastern Gases Ltd.

Energo Engineering Projects Ltd.

Brown Kraft Industries Ltd.

Lanco Infratech Ltd.

Bajrangbali Alloys Pvt. Ltd.

Gupta Global Resources Pvt. Ltd.

Global Proserv Ltd.

Abhijeet MADC Nagpur Energy
Pvt. Ltd.

Ghotaringa Minerals Ltd.

Techno Fab Manufacturing Ltd.

JDS Apparels Pvt. Ltd.

Tirupati Inks Ltd.

51

52

53

54

55

56

57

58

59

60

61

62

63

Yes

Yes

Yes

Yes

No

Yes

Yes

Yes

Yes

Yes

No

No

Yes

FC

OC

FC

FC

FC

OC

FC

FC

FC

CD

CD

FC

FC

02-11-2017

18-05-2017

16-02-2018

16-02-2018

06-10-2017

23-02-2018

04-10-2017

15-02-2018

07-08-2017

07-08-2017

05-09-2017

08-11-2017

19-12-2017

12-09-2018

12-09-2018

05-09-2018

31-08-2018

31-08-2018

29-08-2018

28-08-2018

28-08-2018

27-08-2018

27-08-2018

21-08-2018

21-08-2018

21-08-2018

14

Dream Land Realtor Pvt. Ltd.

P. K. Sales Company Pvt. Ltd.

Sandeep Axles Pvt. Ltd.

Shree Ganesh Jewellery House (I) Ltd.

Bookawheel Technologies Pvt. Ltd.

Meka Dredging Company Pvt. Ltd.

Moser Baer India Ltd.

KKK Cotspin Pvt. Ltd.

Annamalai Foods Pvt. Ltd.

Concast Steel & Power Ltd.

Inasra Technologies Pvt Ltd

Nandkishore Steel Industries Pvt. Ltd.

SnowblueTrexim Pvt. Ltd.

64

65

66

67

68

69

70

71

72

73

74

75

76

No

Yes

Yes

No

Yes

Yes

Yes

No

Yes

Yes

Yes

No

Yes

OC

CD

OC

OC

OC

FC

FC

OC

OC

FC

OC

CD

CD

11-12-2017

03-04-2018

15-09-2017

07-11-2017

25-01-2018

25-01-2018

14-11-2017

09-02-2018

05-03-2018

12-02-2018

17-10-2017

21-11-2017

21-11-2017

26-09-2018

26-09-2018

26-09-2018

26-09-2018

26-09-2018

25-09-2018

20-09-2018

20-09-2018

18-09-2018

14-09-2018

13-09-2018

13-09-2018

13-09-2018

Amendment of SEBI Regulations to Facilitate Acquisitions
Between 31 May to 01 June, the Securities and Exchange Boardof India (SEBI) amended a number of securities regulations toprovide certain relaxations for listed companies undergoing thecorporate insolvency resolution process (CIRP) under the Code.
These amendments were pursuant to SEBI's discussion paper ofMarch 2018, which laid down proposals for diluting theregulatory framework to allow listed companies to comply with
their obligations under securities laws.
This following discusses certain key points with respect to thoseamendments.
The Public Threshold Limit
Acquisitions beyond 75% of a listed company are generally
restricted because of the minimum public shareholding limits,which requires at least 25% of every listed company's shares to bein public (i.e. non-promoter) names.
The latest amendment to the SEBI (Substantial Acquisition of
Shares and Takeovers) Regulations 2011 (Takeover Code) will
permit the buyer in a resolution plan under the Code to acquire
more than 75% of the listed company that is undergoing
Corporate Insolvency Resolution Process (CIRP). This
amendment is in line with the earlier amendment in August 2017,
which exempted acquisitions pursuant to the resolution plans
under the Code from the compulsory open offer requirements foracquisition of public listed companies under the Takeover Code.
In a financial distress situation as in the case under the Code,where the value of listed company is weak, infusion of new
investment in the form of new equity, or conversion of existing
debt into equity becomes imminent. In such a scenario, one of the15most pertinent impediments for revival of the listed entity is theminimum public shareholding requirement as any new investment
would necessarily mean that the existing shareholding includingthat of the public is diluted.
With this amendment, further consolidation beyond 75% is now
permitted. In terms of acquisition this entails the resolution
applicant to consolidate its shareholding in the corporate debtor.
To add perspective, for instance, Tata Steel, which received only
72% in exchange for its initial investment into Bhushan Steel,
could have invested the additional INR 45 billion as contemplated
under its resolution plan and take it's holding to 98%.
Separately, the amendment to the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 (LODR
Regulations) specifies, that the former promoter's shareholding
will be considered as part of the public shareholding should there
be a reclassification as part of the resolution plan. Outside theambit of resolution process, such shareholding, despite
reclassification, is not treated as public to prevent promoters from
diluting the minimum public shareholding limit by reclassifying
any part of the promoter or promoter group shareholding.
Exemption from DelistingWith the latest amendments, the delisting procedure under the
SEBI (Delisting of Equity Shares) Regulations 2009 (Delisting
Regulations) will no longer apply to any delisting of equity sharespursuant to a resolution plan under the Code, if the following
conditions are satisfied:a. the plan sets out a specific delisting procedure; orb. the plan provides an exit option to existing public shareholders
at a price not less than the liquidation value, and;16

c. Further, if the promoters are exiting at a higher price, the exit
price for public shareholders should not be less than the priceobtained by the promoters.
However, we observe that given the financial condition of mostcompanies undergoing the CIRP, the liquidation value for equity
shareholders could be zero, in which case the exit opportunity
provided to the promoters under the amendments may prove to beof no use in terms of realising the value of their shares. However,from the perspective of acquirers of public shareholding under
the Code this provision allows for better negotiations with the
public shareholding and promoter group given that theliquidation value could be zero.
Separately, the amendment provides that the details of the proposeddelisting along with procedure and price justifications should be
notified to the concerned stock exchanges. Therefore, as an acquirer
it becomes pertinent that this compliance is categorically listed in
the resolution plan. Further, this would lead to associatedcompliance costs, and mostly have to be borne by the acquirer.
Amendments to the LODR Regulations
SEBI has made the following changes to the LODR Regulations.
They are summarised as follows:• Listed companies undergoing the CIRP do not have to comply
with the provisions of the LODR Regulations with respect tothe composition and roles and responsibilities of the board of
directors and board committees. These roles andresponsibilities must now be fulfilled by the resolution
professional.

• Shareholder approval requirements will not apply in relation
to the following matters: (i) approval of material related party
17

transactions; (ii) cessation of majority shareholding in, or
exercise of control over, a material subsidiary; and (iii) transfer
or lease of more than 20% of a material subsidiary's assets (onan aggregate basis, for a given financial year).

• The stock exchange pre-clearance requirement will not apply
to any schemes of arrangement under a resolution plan
approved under the Code. This will be a hugely welcome stepfor acquirers, as the time taken to obtain pre-clearances could
have been a roadblock keeping in mind the 270-day time limit
under the Code.

• Certain provisions of the LODR Regulations dealing withpromoter reclassification (e.g. the restriction on promotershaving post-reclassification special rights) will not apply if
reclassification is contemplated under a resolution plan
approved under the Code and the promoter and promoter group
being reclassified as public shareholders do not remain incontrol of the company. The intent here may be that any
involvement of the former promoters, after a resolution plan isapproved, should be controlled by the provisions of section
29A of the Code. Therefore, acquirers in this regard have to bediligent to ensure that these special rights are negotiatedaccordingly so as to limit control of the promoter group interms of pre-negotiated rights. In this regard, SEBI's
discussion paper on control may prove to be useful.
In addition, information in relation to (b), (c) and (d) above willneed to be disclosed to the stock exchanges, in each case, within a
day of the approval of the resolution plan.
Those amendments were necessary to facilitate the timely
resolution of financially stressed listed companies. SEBI's role in18

actively pushing these amendments must also be recognised andappreciated.
Two pending proposals from SEBI's discussion paper, relating totrading restrictions and an extended timeframe (two years) for
restoring the public threshold limit is also ought to be considered.
With respect to the first proposal, temporary trading suspensions
should certainly be considered, as these can mitigate any risk ofinsider trading, or market manipulation, and are already in placein other jurisdictions (e.g. the UK). An extended timeframe forrestoring the public float limit is also a sensible proposal, but may
be the regulator wishes to first observe the outcomes of theexisting amendments.
The Code has overall made a positive impact in facilitation of
acquisitions with particular reference to the M&A market. The
Code has brought $14.3 billion worth of distressed assets to the
M&A table since becoming a law.4
Conclusion
Opportunities for acquisitions under the Code are abundant andcan be advantageous to an acquirer from several perspectives.
The Code promotes acquisitions of brownfield investments in a
timebound manner which can become highly beneficial for any
prospective acquirer. It is for such reasons that several
multinational companies from outside India have actively
participated in the acquisition process under the Code. The
participation of international companies in acquisitions under the
Code will increase foreign direct investment into India.
By making acquisitions of brownfield companies, Acquirers getan advantage of having to carry on the business of such acquiredcompanies without waiting through gestation periods which they
19

would otherwise go through in a greenfield project. Further, thescheme of the Code permits an Acquirer to structure the potential
acquisition through a ‘Resolution Plan’ in any manner that they
may deem fit as long as it meets the requirements of the Code.
Further, a successful Resolution Plan is also approved by an orderof the National Company Law Tribunal.
Every company which is admitted under the Code is put throughthe resolution process. Acquirers would benefit by actively
scouting for companies which put into the resolution process foracquisitions. Acquisitions under the Code are timebound with amere 30-day time limit to file a Resolution Plan thereby requiring
swift action, strategic planning, tax and legal support.
4
T E Narasimhan, “IBC Accounts for $14.3 billion worth of distressed assets in
M & A space: Kroll “Business Standard (Oct 29 2018).

20