The Insolvency and Bankruptcy Code, 2016 suspends the board of directors of a company in insolvency, and such a company is managed by a resolution professional and a committee of creditors (CoC). The CoC determines the fate of the company. It can choose to liquidate or accept a resolution plan from a “resolution applicant” (essentially, an acquirer) for revival of the company. Given these wide powers, how the CoC arrives at its decisions assumes importance.
The members of the CoC are financial creditors, mostly banks. However, the CoC cannot take any decision that it finds commercially beneficial, and is constrained by the same public law standards as are applicable to state instrumentalities.
COC: INSTRUMENTALITY OF STATE
The Supreme Court of India has considered the issue of instrumentality of state in several cases, the most prominent being Ramana Dayaram Shetty v The International Airport Authority (1979) where the Supreme Court prescribed a non-exhaustive list of factors that confer the status of instrumentality of state.
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SHARDUL S SHROFF is executive chairman, AMBARISH is a partner, and ROMA DAS is a senior associate at Shardul Amarchand Mangaldas
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