A foreign-owned manufacturing group with significant Indian operations entered distress when two of its largest domestic lenders filed simultaneous claims. The claims totalled a substantial portion of the group's consolidated debt. Domestic creditors, overseas bondholders, and a minority equity partner each held conflicting priorities. Without a coordinated strategy, insolvency proceedings before the National Company Law Tribunal (NCLT) – India's primary insolvency adjudicator – were imminent. The window for a negotiated restructuring plan was closing fast.
Corporate restructuring in India under the insolvency and bankruptcy legislative regime requires early engagement with all creditor classes before a formal NCLT admission triggers the statutory moratorium. A resolution applicant typically has 180 days – extendable to 270 days – to secure approval of a restructuring plan from the committee of creditors. Failing that window, the matter proceeds to liquidation, at which point recoveries for all parties diminish sharply.
This case study outlines the challenge the client faced, the legal strategy adopted, the milestones achieved, and the three transferable lessons that practitioners handling similar cross-border insolvency matters should carry forward.
Client profile and the challenge
The client was a mid-sized industrial manufacturer incorporated under Indian corporate legislation – specifically the Companies Act 2013 – with a European parent holding a majority stake. Its capital structure included term loans from two domestic scheduled banks, a listed non-convertible debenture programme regulated by SEBI (Securities and Exchange Board of India). Additionally. A working capital facility subject to RBI (Reserve Bank of India) prudential norms.
When revenues contracted sharply over two consecutive quarters, the domestic banks classified the accounts as non-performing. Each lender independently filed a proof of debt and initiated steps to convene a creditors meeting under the insolvency legislative regime. The debenture trustee, acting on behalf of retail bondholders, threatened a parallel enforcement action.
The core difficulty was fragmentation. No single creditor held sufficient voting weight to control the committee of creditors. The European parent risked losing its entire equity position if the matter escalated to a liquidator-led process. A pre-insolvency restructuring plan offered the only realistic path to preserving value – but it required all creditor classes to act in concert within a compressed timeline.
Our insolvency and restructuring practice in India was engaged to design and coordinate that strategy.
Legal strategy and rationale
The strategy centred on three sequenced steps. First, secure a voluntary standstill from the two dominant bank creditors. Second, establish a common negotiating table before any formal NCLT admission. Third, structure a restructuring plan that addressed the distinct legal concerns of each creditor class.
The banks were approached through their respective legal advisers. Both institutions recognised that a negotiated recovery would exceed what a liquidator could distribute. This commercial calculus underpinned the standstill agreement. The debenture trustee required separate treatment: SEBI's debt securities legislation imposes specific disclosure and bondholder-consent obligations that sit outside the standard insolvency legislative process. Meeting those requirements in parallel – without triggering public disclosure prematurely – demanded careful sequencing.
The restructuring plan itself rested on Indian corporate legislation, which permits a range of instruments: debt-to-equity conversion, extended repayment schedules, and partial haircuts subject to creditor approval thresholds. The plan also incorporated an arbitration clause referencing the Arbitration and Conciliation Act – India's primary arbitration legislation – to manage any residual inter-creditor disputes outside of court proceedings.
A cross-border dimension arose because the European parent intended to inject fresh equity. That injection required RBI approval under foreign direct investment rules. Coordinating the RBI approval timeline with the NCLT procedural calendar required precise project management. Delays at either end would have unravelled the standstill.
For practitioners advising on related disputes, our corporate disputes practice in India addresses the litigation risks that can emerge when inter-creditor negotiations break down.
Key milestones and complications
The matter moved through five distinct milestones over approximately seven months.
Months one and two: creditor mapping and standstill negotiation. Identifying the full creditor universe took longer than anticipated. A supplier had registered a charge that did not appear in the initial debt schedule. Discovering this late would have altered the voting arithmetic at the creditors meeting. Early due diligence on the charge registry prevented that complication.
Month three: the administrator – appointed informally as an independent financial adviser at the request of the lead bank – produced a restructuring feasibility report. Its conclusions were contested by the debenture trustee, who argued that the projected cash flows were optimistic. A revised model was agreed after two rounds of negotiation.
Months four and five: the restructuring plan was circulated to all creditor classes. The committee of creditors required a supermajority approval by value. The banks voted in favour. The debenture trustee, representing retail bondholders, initially withheld consent pending a haircut revision. A modest improvement to the bondholder recovery ratio resolved the impasse.
Month six: RBI approval for the equity injection was obtained. This was the most time-sensitive milestone. Any delay beyond the standstill expiry would have allowed the dissenting bank to file an insolvency application before the NCLT.
Month seven: the restructuring plan was filed with the NCLT for approval. The insolvency proceedings were formally stayed. The liquidation pathway was avoided.
A significant complication arose mid-process when one of the domestic banks sought to enforce a personal guarantee provided by the company's promoter. Enforcement of that guarantee would have destabilised the negotiating environment. The guarantee enforcement was deferred through a separate negotiated standstill, contingent on the main restructuring plan being approved.
To understand how similar strategies have been deployed in a parallel high-growth market, the corporate restructuring case study from the UAE offers a useful comparative perspective on multi-creditor dynamics in civil law-influenced systems.
To explore how a tailored restructuring strategy could apply to your situation in India, contact us at info@ferrazwhitmore.com.
Transferable lessons
Lesson one: map the full creditor universe before engaging any single lender. In Indian insolvency proceedings, a creditor discovered late can disrupt voting thresholds at the creditors meeting. A systematic proof of debt review – covering registered charges, unsecured trade creditors, and contingent liabilities – should precede any standstill approach. The cost of that exercise is modest. The cost of an incomplete creditor map is not.
Lesson two: treat the regulatory calendar as a hard constraint, not a variable. RBI approval timelines, SEBI disclosure obligations, and NCLT procedural windows operate independently. A restructuring plan that assumes these processes can be aligned without specialist coordination routinely fails at the execution stage. In this matter, the RBI approval was tracked as a critical path item from the outset. That discipline preserved the standstill.
Lesson three: separate the inter-creditor dispute mechanism from the restructuring plan itself. Embedding an arbitration clause under the Arbitration and Conciliation Act legislative regime. rather than leaving residual disputes to NCLT discretion. gave creditors a faster and more confidential route to resolve disagreements after plan approval. This reduced the perceived risk of post-restructuring litigation, which in turn made it easier to achieve the supermajority consent required under insolvency legislation.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions. Our insolvency and restructuring practice covers multi-creditor workouts, NCLT proceedings, and cross-border debt restructuring in India and across Asia-Pacific markets. We work with international investors, European parent companies, and in-house legal teams navigating the intersection of Indian insolvency legislation, RBI regulatory requirements, and foreign capital structures. As an international law firm in India advisory matters, we combine civil law structuring expertise with common law enforcement experience – a combination that proves critical when creditor classes span multiple legal systems. Our attorneys have advised on insolvency proceedings and restructuring plan negotiations across both civil and common law jurisdictions. To discuss your restructuring challenge in India, contact us at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.