How private investment can contribute to enterprise resolution, asset value preservation and a more resilient economy.
Key Takeaways
- Investors participating as prospective resolution applicants can provide the capital and implementation capacity needed to resolve distressed businesses.
- The IBC’s economic contribution depends on credible resolution plans, value preservation and timely implementation.
- These activities complement the broader ambition of Viksit Bharat 2047, without implying that any particular economic outcome has been achieved by an individual investor.
1. Why Investors Matter in the IBC
The Insolvency and Bankruptcy Code, 2016 (IBC) seeks to promote time-bound insolvency resolution and maximise asset value. A viable resolution plan requires an applicant prepared to commit capital, assess commercial risks and implement the proposed restructuring. Without a successful resolution, the process may proceed to liquidation.
Investors can therefore contribute by evaluating business viability, structuring commercially sustainable proposals and undertaking the analysis necessary to support informed decisions. The Supreme Court’s decisions in Essar Steel (2019)1 and Ghanashyam Mishra (2021)2 reinforce the importance of the committee of creditors’ commercial wisdom, subject to the statutory framework, and the binding effect of an approved resolution plan, respectively.
2. What We Do and How It Contributes to the Economy
Tsquare Capital Solutions LLP is the Investment Manager of Tsquare SSF, a Category I Alternative Investment Fund (AIF).
The economic rationale for insolvency investment extends beyond the resolution of an individual stressed enterprise. When a business encounters financial distress, capital may remain locked in an underperforming or non-operational enterprise, while its employees, suppliers, customers and other stakeholders face uncertainty. The IBC provides a framework for addressing such distress by facilitating the resolution of viable businesses and, where resolution is not feasible, the orderly liquidation of the corporate debtor. This enables productive assets and capital to be redeployed towards alternative economic uses, subject to the applicable legal framework.
Our activities are relevant to this process in three principal ways:
| Our activity | Potential contribution to the economy | Viksit Bharat 2047: Broader economic relevance |
|---|---|---|
| Participating in CIRP as a Prospective Resolution Applicant | A credible resolution applicant can bring the capital commitment and implementation capability required to pursue a viable resolution plan. Successful resolution may support business continuity, preserve productive capacity, sustain employment and maintain commercial relationships with suppliers, customers and other stakeholders. | The revival of viable enterprises can help preserve existing productive capacity, economic activity and employment. Continued business operations may also sustain supply chains and support ancillary businesses. These outcomes complement the broader ambition of building a productive, employment-generating and resilient economy. |
| Evaluating stressed assets and resolution opportunities | Commercial evaluation helps distinguish enterprises with a viable path to resolution from those where continued operations may not be economically sustainable. This supports informed decisions concerning restructuring, value preservation and, where appropriate, the potential redeployment of assets through liquidation. | Identifying viable resolution opportunities can help direct investment towards enterprises capable of generating sustainable economic value. Where revival is not feasible, orderly liquidation may facilitate the redeployment of assets towards more productive uses. This is consistent with the broader objective of improving resource utilisation, economic efficiency and long-term growth. |
| Conducting Investment, Legal and Commercial Due Diligence | Integrated analysis helps assess business viability, liabilities, legal constraints, commercial risks and implementation feasibility. It supports disciplined investment decisions and the evaluation of whether a proposed resolution is commercially and legally sustainable. | Rigorous investment, legal and commercial assessment supports informed decision-making, responsible capital allocation and compliance with the applicable insolvency framework. Such discipline complements the broader objective of strengthening institutional effectiveness, improving the business environment and fostering confidence in mechanisms for resolving financial distress. |
The broader economic significance lies in the distinction between preserving an enterprise where it remains viable and preserving economic value where it does not. Resolution can help maintain operating businesses and their associated economic activity. Where a viable resolution is not achievable, liquidation provides a legal mechanism for realising value from assets and enabling their potential redeployment elsewhere in the economy. Neither outcome is automatic; each depends on commercial viability, the applicable insolvency process and the circumstances of the enterprise.
3. Why Speed Is the Test
The proviso to Section 12(3) of the IBC establishes a 330-day outer limit for the corporate insolvency resolution process, including extensions and time spent in related legal proceedings, subject to the applicable statutory framework and judicial interpretation.
Delay can create uncertainty, increase costs and erode the value of a business. Accordingly, the effectiveness of insolvency investment must be assessed not merely by the availability of capital, but also by the quality of due diligence, feasibility of the resolution proposal and capacity for timely implementation.
Proposed or enacted legal reforms must be evaluated against their verified text, commencement notifications and practical implementation. Their effectiveness should ultimately be measured by whether they improve procedural efficiency while preserving due process and value maximisation.
Conclusion
A credible insolvency investment ecosystem can complement Viksit Bharat 2047 by supporting the resolution of viable enterprises, more efficient capital allocation and the preservation of productive economic capacity. The contribution is conditional, not automatic: sound commercial judgment, legally compliant processes and timely execution remain essential.
1 Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta & Ors., (2020) 8 SCC 531, decided on 15 November 2019, 2019 INSC 1256. The Supreme Court recognised the primacy of the Committee of Creditors’ commercial wisdom in evaluating resolution plans, subject to the requirements of the Insolvency and Bankruptcy Code, 2016.
2 Ghanashyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited & Ors., (2021) 9 SCC 657, decided on 13 April 2021, 2021 INSC 209. The Supreme Court held that, upon approval of a resolution plan, claims not forming part of the approved plan stand extinguished, and creditors cannot subsequently pursue such claims against the corporate debtor, subject to the judgment and the applicable statutory framework.
