The Scheme of Arrangement as a Debt Restructuring Tool in India: Problems And Prospects

Varottil Umakanth
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Varottil Umakanth: Associate Professor, Faculty of Law, National University of Singapore. I thank (i) S.H. Bhojani, Dhananjay Kumar, Debanshu Mukherjee, Sarah Paterson, Charles Zhen Qu, Pramod Rao, Aparna Ravi, Nick Segal, Tan Cheng Han, Ignacio Tirado, Kristin van Zwieten and Wee Meng Seng for helpful conversations and suggestions on a previous draft of this article, (ii) Varnika Chawla and Neelasha Nemani for research assistance, and (iii) the Centre for Law and Business, National University of Singapore for financial support. Errors or omissions remain mine.University of SingaporeSingaporeSingapore

European Company and Financial Law Review, 2018, vol. 15, issue 3, 585-615

Abstract: The goal of this article is to analyse the scheme of arrangement as a debt restructuring tool in India and the extent to which it has been utilised. It finds that the scheme has been used sparingly for debt restructuring in India, and primarily in large and complex transactions. This is contrary to jurisdictions such as the United Kingdom and Singapore that have witnessed a rise in the use of this mechanism. This trend clearly indicates that the presence of an efficient restructuring mechanism in the legal rules is by itself inadequate to ensure its full utilisation. Apart from law on the statute books, necessary regard must be had to other legal and institutional considerations as well as a complex web of other factors, including historical and business considerations, which ultimately determine the success (or failure) of a mechanism such as the scheme of arrangement in each jurisdiction. In India, the scheme has been overshadowed by other mechanisms (both informal and formal), and that wide-ranging reforms to the law relating to corporate resolution have paid short shrift to the scheme. The article concludes with some recommendations to rejuvenate the use of schemes in India to exploit its full potential as an effective tool for debt restructuring.

Date: 2018
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DOI: 10.1515/ecfr-2018-0019

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