Achieving revival through change in management

The project finance route has enabled development of projects through a risk-sharing approach while limiting the downside impact on the balance sheets of sponsors. The project-related lenders usually rely on primary security (i.e. the project’s asset base) and seek principal recourse to cash flows generated from a project, but this may be supplemented by third party support (such as sponsor support or personal or corporate guarantees or pledge of promoter shares in the borrower).

The lenders acting through a security trustee, or by themselves in a default scenario, enforce their security by sale of project-related assets in consonance with the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), Transfer of Property Act, 1882, and Indian Contract Act, 1872.

In certain kinds of enforcement action, depending on the remedy/recourse elected to be pursued, the provisions of the Code of Civil Procedure, 1908, may have to be borne in mind. In the context of enforcement of pledge of shares (that are in electronic form), the Depositories Act, 1996, and regulations framed by Securities and Exchange Board of India will also apply.

Khaitan Sud & Partners is a fast growing law firm providing specialist legal services to both domestic and international clients. Tanuj Sud is a partner and Aiswarja Mohanty is an associate at the firm.