This article is written by Ramanuj Mukherjee, CEO and Yavanika Shah, Associate Consultant, LawSikho.

The newspapers these days show desolating statistics. Some of the prominent headlines:

“India’s (GDP) growth has dropped to 4.5% in the July-September quarter of 2019-20” 

“The monthly collection of GST stuck below the Rs 1 lakh crore mark since May, “

“Nation’s GDP struggling at a 26-quarter low.“

And the list goes on…

But did you read these reports about the Indian legal sector? Despite this major economic slowdown, legal sector increased its fee income by more than 62% in two years at $2.1 billion, which is about Rs 15,000 crore.

The report further iterates about two-thirds of the legal sector’s earnings in FY19 came from Indian corporate clients, with about $700 million from foreign companies doing business in the country. 

But who are these corporate clients still willing to pay humongous paychecks to the Indian Lawyers?

One major area of work that made a lot of money for lawyers in 2019 and will continue to make other lawyers jealous is insolvency and bankruptcy – thanks to IBC and NCLT.

One of the main reasons why Indian economy is suffering is a suffocating credit problem is that banks and NBFCs are suffering from NPAs/ bad debts and some are even facing an existential crisis. To rescue them, government has been banking on IBC, which is expected to rapidly and efficiently deal with bad debts and insolvent companies.

Biggest corporations in India have been dragged to the NCLT under IBC, and the process has sent shockwaves through the business sector. It’s not only banks and financial creditors, but operational creditors and even home buyers who did not get their promised real estate delivered on time who have been dragging the debtors to NCLT, and it is changing how businesses function in India altogether. 

The stringent application of the Insolvency and Bankruptcy Code in India has been pretty successful in terms of dealing efficiently with failing companies, buying back businesses out of bankruptcy, increasing compliance with contracts etc. 

The set target period of nine-months to complete the entire process makes it one of the world’s fastest insolvency and bankruptcy law, striking a marked contrast with the sluggish pace of other Indian legal processes.

Anyway, as a result of major corporate houses being dragged to the NCLT for insolvency, there is plenty of non-IBC work also being generated for all sorts of lawyers. For example, most of the biggest M&As happened in 2019, thanks to IBC, when distressed companies changed hands via insolvency. Similarly, tax lawyers, real estate lawyers, IP lawyers and everyone else has suddenly started to see work coming through the doors that have something or the other to do with IBC. 

The demand of lawyers who have expertise on IBC is at an all-time high. However, lawyers who do not describe themselves as insolvency lawyers are also realising that there is a great deal of advantage in learning about IBC and insolvency. 

We are listing down the various kinds of lawyers who can benefit the most from this flourishing IBC-NCLT ecosystem by understanding the nuances of Insolvency and Bankruptcy laws in India, even though they may not wish to specialise in IBC or NCLT.

#1 M&A / Corporate Transactions Lawyers

M&A and IBC go hand in hand. There have been numerous instances where billion-dollar mergers and acquisitions deals have taken place on the basis of the commencement of the insolvency proceedings.

An example from the recent past is when the debt-ridden edible oil company Ruchi Soya which owed 9000 crores plus to the banks got acquired by Patanjali after several rounds of bids submitted by Adani Wilmar and Patanjali. 

This acquisition deal with Patanjali which was initiated on the grounds of insolvency proceedings has made Patanjali one of the biggest players in the edible oil sector with predictions from the experts to boost its growth even further in the next FY!

M&A lawyers with a good understanding of the NCLT and IBC process has a tremendous advantage in large M&As arising out of insolvency process, which is going to be a regular source of M&A deals going forward.

Going forward, corporate/transactional lawyers will play a major role in assisting and facilitating resolution professionals and resolution applicants.

As a transactional lawyer, there are a plethora of situations where specialized knowledge about IBC can be beneficial to you. A few of them are:

• due diligence of the stressed asset, i.e. the company undergoing insolvency proceedings to evaluate whether your client (resolution applicant) would be interested in investing;
• structuring of transaction in order to formulate the best model for investing in the stressed asset;
• drafting of the resolution plan;
• discussion and negotiation with the committee of creditors on the resolution plan;
• drafting expression of interests and ensuring compliances of company law for the resolution professional.

#2 Banking and Finance Lawyers

Banking and Finance employs a great number of lawyers all over the country, and not only for transactional roles but litigation as well. Vast majority of lawyers in India with good practices prefer to have banking and finance industry work because of the steady stream of work that these clients provide.

While drafting agreement for banks or finance companies, you have to keep in mind how they are going to recover the debt in case of default, which is their biggest concern. Since IBC fundamentally impacts how these financial creditors recover their bad loans, it has significantly impacted the clauses in the contracts, as well as what is negotiated during lending money. 

Every major decision in an IBC case or an amendment may require subtle but significant changes in the finance and loan agreements. IBC has certainly made the job of finance lawyers even more specialized, complex and sensitive, but when does a lawyer complain if their work gets more difficult? That’s when clients open up their purse strings after all!

Not learning the IBC thoroughly is not at all an option for a banking and finance lawyer who wishes to stay ahead. Learning it in more details than other finance lawyers can provide you even more advantage!

However, more than transactional lawyers, those who are doing litigation for banks and financial creditors are even more affected by the IBC. To start with, a lot of the litigation has shifted to NCLT anyway! For banking and finance litigators, IBC is now bread and butter.

#3 In-house Counsels

In-house counsels of every business in India suddenly find themselves in the need to learn about the IBC, because any default in payment to either operational creditors or financial creditors is likely to lead to a quick notice under IBC. This is a super high priority work because no business can afford to let the company be dragged to insolvency court, as it greatly impairs its reputation. If insolvency proceedings are initiated, the promoters and directors lose control of the company, which is a grave situation and hard to come back from.

IBC also has given a very potent tool in the hands of businesses where they are not receiving their payments of time. Money recovery and contract enforcement is a big problem for most businesses in India and IBC has massive impact on those aspects of business, and it is therefore hard to ignore. 

In light of this, in-house counsels have to take the IBC very seriously. In-house counsels who learn IBC properly are likely to rapidly progress as they will be working on some of the most high priority matters for the management.

Of course, for in-house counsels in finance industry this has an altogether different level of significance.

#4 Projects Lawyers

Projects lawyers handle major projects and take care of different aspects, from concession agreements with government bodies, handle documentation for financing of projects, structuring deals, assisting in government policy formation, handling bid documents and RFPs, and drafting a wide variety of complex contracts including those related to Engineering, Procurement and Construction. 

So how can IBC be beneficial for project lawyers? 

Projects can go bankrupt too! Also, there has to be recourse to lenders who provide finance for developing these massive projects like ports, metro rail and highways!

For example, What happens if an airport is not making enough money that the losses accrue and lenders do not get paid? What should be the rights of any investors in such cases?

What if the seaport/ metro railway is not able to pay its dues on time leading to a debt-ridden situation?

There is already a lot of discussions about how power projects in India that have failed or underperformed must be dealt with and IBC has given a new lease of life to the discussions. 

IBC is influencing the structuring, documentation, due diligence and even conception of infrastructure projects. Private players are demanding that if projects are not brought within the purview of IBC, they would not invest!

Project lawyers are also benefiting a great deal from learning IBC.

#5 Labour and Employment Lawyers

It usually goes unnoticed but the labour and employment lawyers are an important catalyst during the IBC proceedings for settling the employees dues.

When a company turns insolvent, there are a lot of pending dues in respect of the employees. In most situations, the employees may have initiated separate claims against the company, but once the insolvency proceedings have been initiated, everything comes under the ambit of the Insolvency and Bankruptcy Code.

The committee of creditors decide for the distribution of assets in the order of priority and proportion as stipulated in Section 53 of the IBC to be appropriately mapped out for all the parties concerned.

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This is where the role of labour and employment lawyers come up. If the resolution professionals make any errors or omissions with regard to the employees dues, the same can be challenged before the NCLT by labour and employment lawyers. 

Even in instances where the committee of creditors approve of a plan for distribution of assets which does not recognise the rights of the employees in the most prudent manner, the labour and employment lawyers, or lawyers representing employees and labour unions can challenge it before the NCLT.

There are other employees centric matters during the insolvency and bankruptcy as well. This is the reason every labour and employment lawyer needs to understand the intricacies involving  IBC procedures thoroughly well in order to deal with labour and employment matters in the best way possible.

Also, whenever employees are not paid on time, and if the dues are above 1 lakh, the best way to recover the same is to take the employer to the NCLT under IBC provided that it is body corporate. 

In matters where there are significant PF dues, non-payment of gratuity or compensation for workplace injuries or even salary is not credited for several months, the dues can be best recovered through initiating insolvency proceedings which forces the employers hand to pay quickly. 

IBC is quickly becoming very, very important for lawyers who represent employees in claims against companies.

#6 Corporate Litigation lawyers

As a litigating lawyer, you can diversify your practice in insolvency law wherein you can be involved in-

• representing a financial creditor/operational creditor for initiation of insolvency before NCLT [section 7/section 9];
• representing a corporate applicant for initiation of insolvency before NCLT [section 10];
• representing a corporate debtor to avoid initiation of insolvency;
• representing creditors regarding admission/rejection of claim [section 60(5)];
• representing (interim) resolution professional regarding progress reports, other formalities under the Code requiring representation before NCLT;
• representing (interim) resolution professional against allegations of misconduct or non-compliance with the Code; and
• representing resolution applicants regarding the rejection of their resolution plans.
• Many other issues involving recovery of money.

What are the other kinds of lawyers that can cash in on this growing opportunity? Do you have any insights on the same?

IP lawyers? Technology lawyers? Media lawyers? Tax lawyers?

What law do you practice or want to practice? Can knowledge of IBC provide you an edge? What kind of opportunities are opening up for you? Do let us know your thoughts.

If you’re a law student or a lawyer confused about how to learn practical skills with respect to IBC or NCLT litigation, feel free to write to us asking for a free counseling session by our IBC and NCLT experts. We have trained over 100 practicing lawyers and insolvency professionals in the last few months, and I am quite sure that we could help you too.

Check out our courses on NCLT Litigation and IBC.

Here are a few other courses you could join in the month of January:

DIPLOMA

Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution

Diploma in Cyber Law, Fintech Regulations and Technology Contracts

Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions)

Diploma in Intellectual Property, Media and Entertainment Laws

EXECUTIVE CERTIFICATE COURSES

Certificate Course in Capital Markets, Securities Laws, Insider Trading and SEBI Litigation

Certificate Course in Prevention of Sexual Harassment at the Workplace

Certificate Course in Labour, Employment and Industrial Laws for HR Managers

Certificate Course in Advanced Criminal Litigation & Trial Advocacy

Certificate Course in Real Estate Laws

Certificate Course in Media and Entertainment Law: Contracts, Licensing and Regulations

Certificate Course in Legal Practice Development and Management

Before you leave, I am inviting you to a free session today at 9 PM with Abhyuday Agarwal, COO, LawSikho, on “What stops young lawyers from writing and talking like experts“

The link for the session will be shared one hour before the session on our WhatsApp group HERE  and Telegram group  HERE only. 

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.