A

PROJECT REPORT

ON
INSOLVENCY AND BANKRUPTCY CODE

“A STUDY ON INSOLVENCY AND BANKRUPTCY

CODE”
ERNST & YOUNG

“SPECIALIZATION”
FINANCE

Submitted in partial fulfillment of the requirement for the award of degree of

Master of Management Studies (MMS) under the university of Mumbai
< Font size 14>< italic>

Submitted by
SHWETA CHOUDHARY

NAME OF THE CANDIDATE:

ROLL NO: 055
BATCH: 2017-2019

Under the guidance of

Prof. Padmavathi

BharatiVidyapeeth’s
Institute of Management Studies& Research
Navi Mumbai

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 (i)
ACKNOWLEDGEMENT

A compendium is never the work of one individual – more a combinationof

ideas, suggestion and contribution involving manyhands.My debts are too
numerous to be acknowledge individually. A large number of individuals have
contributed directly and indirectly in the completion of this project. I am
extremely thankful to Prof.Padmavathi. It is pleasure to express my gratitude
for the assistance received from them. Hence I would like to take this
opportunity to thank them wholehearted for helping me in preparing
thisproject.

Signature of the student

ShwetaChoudhary

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 (ii)
PLEASE PASTE HERE THE CERTIFICATE FROM THE COMPANY

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 CERTIFICATE

This is to certify that the Summer Project titled “ Insolvency and bankruptcy code ” is
successfully done by Ms. Shweta Choudhary, a student of BharatiVidyapeeth’s Institute of
Management Studies and Research, submitted in partial fulfillment of Master of
Management Studies under the University of Mumbai during the academic year 2018-
2019from 2nd May to30thJune 2018 at Ernst & Young.

Date :___________

_____________________ _________________
Prof._____________ Dr.Anjal;iKalse
Project Guide I/c Director
BVIMSR BVIMSR

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 (iv)
EXECUTIVE SUMMARY
“The Code seeks to achieve certainty for recovery and enforcement proceedings and to this
extent, it will specifically be a useful tool for creditors and investors. It would be of specific
interest to international creditors and investors, who are generally looking at Indian
opportunities.”
“Global institutions are continuing to grow their investments in India and in this context they
are increasing their exposure to Indian entities. Over the years, many concerns have been
existing and / or raised amongst international investors on the regulatory and country
riskswhile providing financing to and/or investing in India. The time taken for resolution has
been a major point of debate. This Code in specific will, when implemented in letter and
spirit, provide a major boost to the India economy, especially on account of timely resolution
and certainty in recovery.”
“In contrast to the current regulatory landscape, the Code does not make any distinction
between the rights of international and domestic creditors or between classes of financial
institutions. Specific attention is to be drawn to the rights of unsecured and secured creditors
in the priority of their claims and therefore the level playing field for their access to an
effective insolvency resolution.”
“The strict timelines for resolution of insolvency and liquidation proceedings would
definitely be an incentive and provide the requisite impetus for economic growth.”
“The Code as a new law, replacing over a dozen laws, when implemented post the
infrastructure being put in place, will prove to be the most important step in changing the
legislative landscape of India by removing the negativity attached to litigation time and ease
of recovery.”
• The Insolvency and Bankruptcy Code signals the beginning of an epoch in bankruptcy
resolution in India by ushering in a creditor-in-control system of bankruptcy resolution, a
paradigm shift from the status quo of debtor-in-control system.
• The new regime promises efficient bankruptcy resolution, incentivizes entrepreneurship
and maximizes value of assets; clearly, it is a positive development for corporate governance
in the country.
• The governance mechanisms built into the Code checks opportunistic and strategic action
by corporates nearing the zone of insolvency by holding the directors accountable for such
actions and thereby creating strong deterrence.
• A critical feature of the Code is the low default threshold for initiation of insolvency
proceedings. Once a company is rendered insolvent, the Code empowers the creditors of the
corporate debtor to control the management and affairs of the corporate debtor.
• By putting in place appropriate incentives, the Code seeks to maximize the probability of
revival of insolvent companies, which is in the interest of all shareholders.

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 TABLE OF CONTENTS

Chapter Particulars Page No.

No.
Acknowledgement (i)

Certificates (ii)

Executive Summary (iii)

Table of Contents (iv)

1. Introduction of the Project 7

1.1 Concept & Significance of the Study 11

1.2 Objective of the Study 13

1.3 Scope of code 14

1.4 Introduction to the topic 15

1.5 Literature Review 32

1.6 Credit ratings: Meaning and definition 37

2. Introduction to the Company 39

3. Data Analysis 54

4. Conclusion 59

5. Learning Experience from the project 61

Bibliography

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 CHAPTER 1

INTRODUCTION

The term insolvency is used for both individuals and organizations. For individuals, it is
known as bankruptcy and for corporate it is called corporate insolvency.
Insolvency is a situation which arises due to inability to pay off the debts due to insufficient
assets.
Entities that can initiate proceedings that will lead to Liquidation are:
a. The Regulatory Bodies
b. The Directors of a Company
c. The Shareholders of a Company
d. An Unpaid Creditor of a Company

Merits of Insolvency and Bankruptcy Code, 2016:

a. It consolidates multiple existing laws
b. Fixes time to complete the process (180 days)
c. One Window Clearance of all applications
d. Protects interests of Workmen (It excludes dues payable to workmen under provident
fund, pension fund and gratuity fund from the debtor’s assets during liquidation)
FIVE Pillars of Insolvency and Bankruptcy Code, 2016:
1. Insolvency Professionals
2. Insolvency Professional Agencies
3. Information Utilities
4. Insolvency and Bankruptcy Board of India
5. Adjudicating Authority
Applicability of the Code
a. All Companies
b. All LLPs
Definition of Person in the Code includes
a. an individual b. HUF c. Company d. Trust e. Partnership f. LLP

Corporate Insolvency Resolution Process

The process of insolvency is triggered by occurrence of a payment default, which shall be
Rs.1 Lakh or more. The Insolvency process can be initiated by any of these:
a. A Financial Creditor
b. An Operational Creditor
c. The Corporate Debtor (Company itself)
[Initiation of corporate insolvency resolution process by Financial Creditor]

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 A financial creditor either by itself or jointly with other financial creditors may file an
application for initiating corporate insolvency resolution process to the adjudicating
authority.
The Adjudicating Authority shall, within fourteen days of the receipt of the application,
ascertain the existence of a default.
If the Adjudicating Authority decides that a default has occurred, it shall admit the
application. Or else, if will reject it. This shall be communicated within 7 days.
The corporate insolvency resolution process shall commence from the date of admission of
the application
[Insolvency resolution by Operational Creditor]
On the occurrence of default, an operational creditor shall first send a demand notice and a
copy of invoice to the corporate debtor (Company).
The corporate debtor (Company) shall, within a period of ten days of the receipt of the
demand notice, revert back to the OC.
If the Company fails to pay the debt within those 10 days, the Operational Creditor will
commence the Insolvency Resolution Process, by filing of application with the Adjudicating
Authority.
Along with the application, the OC shall attach documents like copy of invoices, an
Affidavit, a Certificate from Financial Institutions showing the amount in default.
If the Adjudicating Authority decides that a default has occurred, it shall admit the
application. Or else, if will reject it. This shall be communicated within 7 days.
The corporate insolvency resolution process shall commence from the date of admission of
the application.
[Initiation of corporate insolvency resolution process by Corporate Applicant]
The Company (Corporate Debtor) can itself file an application with the AA for the
insolvency process.
While filing the application, it shall specify who is going to be appointed as the Resolution
Professional.
The AA shall admit the application and insolvency process starts immediately. Or Reject, if
the Application is incomplete.
The following persons shall not be entitled to make an application to initiate corporate
insolvency resolution process:
a. A corporate debtor undergoing a corporate insolvency resolution process
b. A corporate debtor having completed corporate insolvency resolution process twelve
months preceding the date of making of the application
c. A corporate debtor or a financial creditor who has violated any of the terms of resolution
plan which was approved twelve months before the date of making of an application under
this Chapter
The corporate insolvency resolution process shall be completed within a period of 180 days
from the date of admission of the application to initiate such process. The resolution
professional can file an application to the Adjudicating Authority to extend the period of the

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corporate insolvency beyond 180 days. The AA shall grant extension for a period not
exceeding 90 days. The Adjudicating Authority, after admission of the application, shall
a. declare a moratorium
b. Cause a public announcement
c. appoint an interim resolution professional
What is Moratorium
During the above mentioned 180 days, all suits and legal proceedings against the company
shall be temporarily suspended. This is called Moratorium Period. As soon as AA gives an
order to Liquidate, the Moratorium period shall cease.
Roles of an Interim Resolution Professional
a. Issuance of public notice of the Corporate Insolvency
b. Resolution process
c. Collation of claims received
d. Constitution of the Committee of Creditors
e. Conduct of the first meeting of the Committee of Creditors
What does a public announcement include:
a. Name and Address of the Company
b. Details of interim resolution Professional
c. Penalties for false or misleading Claims
d. The last date for the submission of the claims
e. The date on which the Corporate Insolvency Resolution Process ends

Committee of Creditors
The Interim Resolution Professional shall constitute a Committee of Creditors of the
company. The committee of creditors shall comprise of all financial creditors only (No
Operational Creditors).The members of the committee of creditors may meet in person or by
such electronic means. During meeting, Creditors shall be given voting power based on their
loans to the company. The resolution professional shall convene a meeting of the committee
of creditors and seek the vote of the creditors prior to taking any of the actions. No action
shall be approved by the committee of creditors unless approved by a vote of 75% of the
voting shares.

Appointment of liquidator
Once the Adjudicating Authority passes an order for liquidation, the Interim Resolution
Professional shall act as the Liquidator, unless the AA replaces him with someone else. On
the appointment of a liquidator, all powers of the BOD, KMP and the partners of the
corporate debtor, as the case may be, shall cease to have effect and shall be vested with the
liquidator. The fees for the conduct of the liquidation proceedings shall be paid to the
liquidator from the proceeds of the liquidation estate.

Powers and duties of liquidator :

a. Verify creditor claims
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b. evaluate assets
c. sell movable and immovable properties
d. Draw or accept Negotiable Instruments
e. Settle Claims
f. Investigate Financial Affairs. The date on which the Corporate Insolvency Resolution
Process ends

Assets included in liquidation estate

a. Tangible assets whether movable or immovable
b. Assets subject to the determination of ownership by the court
c. intangible assets including but not limited to intellectual property, securities

Assets NOT included in liquidation estate

A. assets owned by a third party
B. assets in security collateral held by financial services providers
C. personal assets of any shareholder or partner of a corporate debtor
D. assets of any Indian or foreign subsidiary

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 1.1. CONCEPT & SIGNIFICANCE

Why was the Code needed?

 Reduce the time taken to resolve insolvency.

 Develop investor confidence.
 Eliminate confusion caused by a complex judicial framework.
 Address the NPA situation decisively.
 Develop the credit and bond market

What does the code intend to change?

 Create a single insolvency and bankruptcy framework Set up a clear and

unambiguous process to be followed by all stakeholders in a time-bound
manner.
 Provide a commercial solution to a commercial issue.
 Allow genuine business failures a second chance.
 Clear and unambiguous process to be followed by all stakeholders in a time-
bound manner.
 Provide confidence to lenders of their rights and their enforcement

What does it change for the lenders?

 Right to control the borrower upon default and maximize recovery.

 Option to initiate the process even if the default is in respect of the debt of
another lender.
 Need for more robust monitoring systems to enable judicious exercise of
powers.
 Lack of lender consensus on resolution plan can push the borrower into
liquidation.
 Clear priority of distribution (waterfall) upon liquidation; government dues
subservient to those of secured creditors and unsecured financial creditors.

What does it change for the borrowers?

 Any creditor can file insolvency petition on a default of INR 1 lakh or more.
 Insolvency professional to takeover the management and operations of the
borrower during the corporate insolvency resolution process.
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  Borrowers to focus on liquidity- ensure tight cash flow forecasting and
monitoring to stay current on payments.
 Need to be proactive in identifying issues, communicating with lenders and
developing/implementing a turnaround plan.
 In case of fraudulent diversion of assets, personal contribution can be sought;
Imprisonment possible.

How can the Code help fast-track resolution?

 Lenders inertia during the CIRP would mean liquidation – invariably an

economically inferior outcome as compared to resolution.
 Clarity on the insolvency framework will attract investors to invest into
stressed/distressed situations.
 Moratorium clause to ensure smooth insolvency-resolution process.
 An open floor for submission of resolution plans should facilitate the approval of
the best plan.
 The framework defines the role of judiciary and leaves limited scope for a legal
delay/deferral of the problem.

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 1.2. OBJECTIVE
 To study the practice and procedure, principles involved in Insolvency & Bankruptcy
Code across the globe.
 To study the solution in Bankruptcy & Insolvency Code proposed in India.
 To understand the criteria responsible for getting the ratings from the credit rating
agencies.
 To understand the impact of credit rating after downfall in the business ratings.

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\

1.3. SCOPE OF THE study

The provisions of this Code shall apply to

a) any company incorporated under the Companies Act, 2013 or under any previous
company law

b) any other company governed by any special act for the time being in force, except in so
far as the said provisions are inconsistent with the provisions of such special Act;

c) any Limited Liability Partnership incorporated under the Limited Liability Partnership
Act, 2008;

d) such other body incorporated under any law for the time being in force, as the Central
Government may, by notification, specify in this behalf; and

e) partnership firms and individuals, in relation to their insolvency, liquidation, voluntary

liquidation or bankruptcy, as the case may be. This Code is applicable to whole of India
except Part III which provides the provisions for Partnership firms and Individual not
applicable for the State of Jammu and Kashmir.

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 1.4. INTRODUCTION

Background of the code

The Insolvency and Bankruptcy Code, 2016 is based on the report submitted by Bankruptcy
Law Reforms Committee chaired by Dr. TK Viswanathan, former Secretary General,
LokSabha and former Union Law Secretary. It was formed on 22nd August, 2014 to study
the corporate bankruptcy legal framework in India and submit a report. The Union Finance
Minister, Shri ArunJaitley, during his Budget Speech of 2014-15 announced that an
entrepreneur friendly legal bankruptcy framework would be developed for SMEs to enable
easy exit. The Committee submitted its interim report on 5th February, 2015 and the
Comments were invited till 20th February, 2015. Then the committee submitted its final
report on 4th November, 2015. This report was in two parts: 1. Rationale and
Design/Recommendations 2. A comprehensive draft Insolvency and Bankruptcy Bill
covering all entities Draft bill titled ‘The Insolvency and Bankruptcy Code, 2015’ was
introduced in Parliament on 21st December, 2015 and referred to a Joint Parliamentary
Committee on 23rd December, 2015. Joint Parliamentary Committee invited comments on
the Draft bill (The Insolvency and Bankruptcy Code, 2015) on 22nd January, 2016 and the
report of Joint committee on the Insolvency and Bankruptcy Code, 2015 presented to
LokSabha and laid in RajyaSabha on 28th April, 2016. The Bill was passed by LokSabha on
5th May, 2016 and was passed by RajyaSabha on 11th May, 2016. The Bill received the
President’s assent on 28th May, 2016. Sections of the IBC were first notified on 5th August,
2016.

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 Process Flow under the Code

To achieve early resolution of distress, the Code prescribes certain ‘early detection’ triggers
which can be activated on first signs of stress. The corporate insolvency resolution process
(CIRP) under the code may be initiated by either a financial creditor or a operational
creditor or even the debtor itself by applying to NCLT in case the debtor commits a default
of atleast Rs.100,000. Within 14 days of receiving the application, the NCLT shall ascertain
the existence of an undisputed default. After this, the NCLT may admit the application
resulting in commencement of CIRP and simultaneously (a) appoint an Interim Resolution
Professional (IRP) who will manage the affairs of the corporate debtor until completion of
the resolution process and (b) declare a moratorium that will operate for a period of 180 days
from the commencement of the resolution process. At this point, the existing board of
directors, which in normal times act as the lynchpin of corporate governance, vacates office
and cedes the entire control of the affairs of the company to the IRP. The IRP will collate all
claims and constitute a Committee of Creditors (CoC). A ‘resolution plan’ (i.e., a turnaround
plan for financial restructuring, operational improvement and sale of assets) is required to be
designed and approved by the Committee of Creditors by majority of 75% voting. The
resolution plan also requires a final approval from NCLT. Failure to approve the resolution
plan (by a majority of 75% voting) within 180 days will cause initiation of liquidation. The
RP acts as the liquidator, and exercises all powers of the Board of Directors. The liquidator
shall form an estate of the assets, and consolidate, verify, admit and determine value of
creditors’ claims. As regards the distribution of assets of the liquidated company, there is a
clearly defined ‘order of priority’ or the waterfall mechanism, which is same as the one
provided under the Companies Act 2013, with some minor exceptions. It is noteworthy that
the waterfall renders government dues junior to most others. Further, unsecured portion of
secured creditors rank lower than other unsecured creditors.

The Code and Corporate Governance

Corporate governance measures are typically designed for situations when a company is
solvent. In such situations, the directors of a solvent company owe fiduciary obligations to
stakeholders such as the corporation and its shareholders, but not to the creditors, because of
the latter’s powers to contractually protect themselves by way of debt covenants. However,
when a company is insolvent certain common law jurisdictions prescribe that the interests of
16
the shareholders must be reduced in importance as compared to those of the creditors. Even
when corporations are in the ‘zone of insolvency’, its directors of are required to attempt to
reach a fair and efficient result, without the fear of a fiduciary breach to shareholders whose
interests, considered alone, would force excessively risky “bet the ranch, go for broke”
decisions. The Code has ushered in a regime in line with this thought process by requiring
the creditors’ interest to be protected not only when a company is rendered insolvent by the
NCLT (i.e., when CIRP has been initiated), but also in the period prior to that (when the
company is heading towards financial insolvency).

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18
19
 SW ANALYSIS OF IBC
STRENGTHS
 To ensure revival before liquidation
 Reduce the mounting NPAs on banks
 Need of a unified code
 To provide an easy exit for corporates

WEAKNESS
 The new law does not have provision for cooperation between Indian and foreign
courts to deal with overseas insolvency issues.
 There would be excessive government intervention with regard to appointment,
termination and inspection of insolvency professionals.
 Difficult to attract talent.
 Excessively tilted in favour of the creditors and has insufficient provisions to provide
solutions to problems faced by the debtors.

Insolvency occurs when there is

 Drop in sales
 Delay in payments
 Increasing reliance on credit cash flow
 When cash inflows are less than cash outflows.

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21
22
STATISTICS

INTERPRETATION:
As per the ease of doing business index 2017, India ranked worst i.e. at 130th position
among the BRICS nations whereas Singapore is at the best position i.e. on 2nd amongst the
BRICS nations.
As per the cost of liquidation index 2017, cost of liquidation is the highest in China i.e.
22.7% and the lowest in Singapore i.e. 4% and that of India is 13%
As per the recovery rate index 2017, recovery rate is the highest in Singapore i.e. 88.7%
and the lowest in Brazil i.e. 15.8% and that of India is 26%.
As per the time taken for liquidation index 2017, time taken for liquidation is the fastest in
Singapore and Canada i.e. 0.8 years and the slowest in India i.e. 4.3 years.
INDIA lags far behind the BRICS Nations in every aspect.

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In a move that would hasten recognition of bad loans, the Reserve Bank of India (RBI)
withdrew all existing frameworks for addressing stressed assets and came out with new
norms that require lenders to classify a loan as a non-performing asset (NPA) immediately
upon restructuring. For loans that are larger than Rs 2,000 crore, the resolution plan needs to
be completed within 180 days. Under the new norms, if a resolution plan is not implemented
within 180 days, the account must be referred to the Insolvency and Bankruptcy Code.
The new norms will bring immense pressure on stressed borrowers. If they fail to pay on
time, they will be classified defaulters as against the past when they were merely classified
as ‘stressed’ and given more time to repay. They will also need to come out with a plan to
get back on track, failing which they stand to lose their business in the insolvency court.
The series of restructuring schemes that were introduced over the last decade have been
criticized as merely allowing lenders to ‘kick the can further’. Many analysts saw these as
‘ever greening’ of loans where banks gave borrowers more money to prevent them from
defaulting.
The withdrawn schemes include — framework for revitalizing distressed assets, corporate
debt restructuring scheme (CDR), flexible structuring of long-term project loans (also known
as 5/25 scheme), strategic debt restructuring scheme (SDR), change in ownership
outside SDR, and scheme for sustainable structuring of stressed assets (S4A). The Joint
Lenders’ Forum (JLF), as an institutional mechanism for resolution of stressed accounts, also
stands discontinued. “All accounts, including such accounts where any of the schemes have
been invoked but not yet implemented, shall be governed by the revised framework,” the
RBI said.

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For accounts where lenders have an exposure of below Rs 2,000 crore and, at or above
Rs100 Crore, the RBI intends to announce, over a two-year period, reference dates for
implementing the resolution professional to ensure calibrated, time-bound resolution of all
such accounts in default.

Almost all the schemes such as the Corporate Debt Restructuring, Sustainable Structuring of
Stressed Assets or S4A, Strategic Debt Restructuring, and Flexible Structuring of Existing
Long Term Project Loans stand abolished. The Joint Lenders Forum designed to resolve
potential bad debts has also been disbanded.

``Any failure on the part of lenders in meeting the prescribed timelines or any actions by
lenders with an intent to conceal the actual status of accounts or evergreen t

IFC to fund IBBI for new insolvency reform implementation in India

IFC, a member of the World Bank Group, will support the Insolvency and Bankruptcy Board
of India (IBBI) in strengthening the implementation of India's new insolvency and
bankruptcy framework, the Insolvency and Bankruptcy Code (IBC), 2016.

The funding focuses on four key areas including capacity Building, assisting the IBBI in the
development of a comprehensive National Insolvency Professionals Program among others.

The World Bank's investment arm said the project includes $6,40,613 (around Rs 43.4
million) which is aimed at supporting the Insolvency and Bankruptcy Board of India (IBBI)
in strengthening the implementation of the Insolvency and Bankruptcy Code (IBC), 2016.

This project focuses on four key areas including building the capacity of insolvency
professionals in the country and of IBBI's own officers, through dedicated and customized
training programs that will be delivered based on the WBG's global experience in insolvency
resolution and stressed asset management

Assisting the IBBI in the development of a comprehensive National Insolvency Professionals

Program, which will incorporate international best practices, will lead to the development of
a competent and accredited cadre of insolvency professionals.

The project will also support in working with the IBBI in developing the functional and
technical specifications for an IT system that will support them in fulfilling their mandate as
the regulator for insolvency and bankruptcy in the country.

25
IFC also said that it is assisting the IBBI in development of technology standards and
identification of information and data needs for Information Utilities and provision of inputs
on draft regulations for them.

"This project is expected to contribute to the strengthening of India's new insolvency

framework. This is expected to lead to an increase in the number of stressed asset cases
coming up for resolution (or for liquidation) and the capital stuck in such cases being
reintroduced into the economy for productive use. The end result is expected to be an
increase in financing available to micro, small and medium enterprises in the country," said
the World Bank's investment arm.

Insolvency And Bankruptcy Code: One-Year Report Card

The popular discourse on the Insolvency and Bankruptcy Code has, since its enactment,
largely focused on the evolving jurisprudence in the not-so-regular cases, legislative
interventions by the Parliament, regulatory interventions by the Reserve Bank of India and
the Insolvency and Bankruptcy Board of India, and the first set of 12 large cases identified
by the RBI.
While such discourse helps in tracking the evolution of the IBC as a law, it gives us limited
visibility on how the IBC is working out for the average case. Ignoring the average case and
limiting our focus to individual developments is dangerous, as we may end up missing the
woods for the trees. Understanding the overall impact of the IBC requires us to depart from
an individual case based approach and move towards an empirical analysis of the cases being
tried under the IBC.
Such analysis will help us objectively see how the IBC is panning out for an average creditor
and an average debtor. It will help us see how the institutions are performing on average.
Finally, it will help us ground future bankruptcy policy in sound analysis backed by
systematically collected empirical evidence, and reduce the scope for relying on anecdotal
evidence. At the least, it will help us ground intuitive propositions in data.
In a modest attempt at empirically understanding the impact of the IBC, we seek to answer
two broad questions relating to the IBC: (a) its economic impact; and (b) the performance of
one of the judicial institutions under the IBC.
To understand the economic impact of the IBC, we ask questions regarding the
characteristics of persons invoking the IBC and the frequency with which cases are being
admitted or dismissed. Answering these questions facilitates an understanding of the
economic actors using or attempting to use the law. Intelligent extrapolation of this data may
also potentially throw light on the impact of the law on the credit culture in India.
In the context of (b), we focus on the performance of the National Company Law Tribunal
under the IBC. The reason for this is two-fold. First, the NCLT plays the most significant
role in the active cases under the IBC. Second, the judicial orders that are transparently
available in the public domain provide the perfect opportunity to empirically analyse the
performance of the NCLT as an institution.
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 We answer these questions by analyzing the orders passed by the NCLT since the operation
of the IBC. We hand-collect data on certain pre-identified fields of information from these
orders to build a data-set of 830 NCLT orders disposing of insolvency petitions from
December 1, 2016, up to November 30, 2017. We capture information such as who triggered
the IBC, the kind of creditors involved, the amount of debt in default, the date of filing, the
date of first hearing, the date of final disposal, outcome of the petition and where the petition
is dismissed, the reason for dismissal, etc. We limit our data to fresh filings under the IBC
(including petitions transferred from the erstwhile Board for Industrial and Financial
Reconstruction), and omit the winding-up petitions that are transferred from High Courts. A
detailed description of the data-set, the fields captured and the reason for capturing some
fields of information over others can be found here.
Observing the NCLT orders passed in one year allows us to build a time-series and see the
relative developments across four quarters. For the purpose of our analysis, we define the
quarters as under:

 Q1 = December 1, 2016 to February 28, 2017

 Q2 = March 1, 2017 to May 31, 2017
 Q3 = June 1, 2017 to August 31, 2017
 Q4 = September 1, 2017 to November 30, 2017

Insolvency may seem harsh but it can do a few things. One, it will right-size the debt and
equity invested in these projects. The repricing of liabilities should lower the servicing cost,
in turn improving project economics since fixed costs will decline.

M&A opportunities through the IBC process

The undisputed regulatory change was the continued evolution of the IBC, where a number
of cases were referred under the IBC and quite a few were decided (either revived or
liquidated). The IBC is a good way to clean up the system and to instill some discipline.
Pursuant to the recent Reserve Bank of India (RBI) notification, all debt restructuring
mechanisms - Strategic Debt Restructuring (SDR), Sustainable Structuring of Stressed
Assets (S4A), and Corporate Debt Restructuring (CDR) shall be subsumed under a revised
framework. This notification provides certain timelines and a revised framework which the
lenders have to abide – a good step to simplify the system and infuse some clarity.

The ‘epidemic’, if one could call it so, of non-performing assets (NPAs) having spread its
tentacles over varied sectors, one can expect the IBC to be key driving force in fostering the
M&A activities. The cardinal reason being that the entities under IBC provides a conducive
environment for the financially healthy entities to look for inorganic growth opportunities –
good proposition for the healthy companies to load their shopping bags with some ‘good
stuff’ during this ‘insolvency sale’ phase, if one tries to look at it on a lighter note, – akin to
those extended grocery sale days as seen on national holidays or end of season sale days.

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The list of entities referred by RBI under IBC includes good number of steel sector entities
and thus one can expect some activity here. The pharma sector is not the one to be left
behind and so deals could sprout here as well. Real Estate sector was the one which was
talked about a lot considering various grievances of home buyers (which in turn affected
some celebrity endorsements) not getting their possession of their houses and the issue of
their protection was raised both under RERA as well as IBC with the IBC being modified to
some extent to enable the home buyers to file their claims – although the uncertainty vis-a-
vis the hierarchy of their dispute resolution continues to be there. Thus, some M&A activity
could be witnessed in the real estate sector as well.

With good number of bidders coming up to buy the distressed assets, IBC was modified with
a view to filter down the genuine bidders from those promoters/ related party entities trying
to get a back door entry to the distressed company under IBC. Despite the regulatory
amendment, the controversy continues and one can expect some substantial development
here as this ‘ineligibility’ requirement have shaken up some of the largest corporate houses
in India, one of them having presence in the Steel and Power sectors and being one of the
widely discussed recent cases in the realm of IBC.

As reported, the Tata Group is vying for Paper Boat (Hector Beverages) and Walmart
looking to invest in Flipkart. Thus, retail sector could also see some ‘WHOLE-SALE’
activities.

Upon witnessing the trend of activities happening in the M&A space, largely the insolvency
regime being the catalyst, one can expect good amount of restructuring activities in the
M&A space and it may be not be incorrect to suggest that we are all set to experience a new
renaissance in the M&A and the restructuring horizon.

KPMG’s M&A play in India has been largely limited to a series of small-ticket deals. Its Big
Four brethren EY is one of the M&A leaders in India, often leading the league tables by the
sheer number of deals. Between April 1, 2017, and March 21, 2018, for example, KPMG had
advised on 16 deals against EY’s 28. KPMG’s deals by value added up to a little more than
Rs 3,000 crore, while EY’s was more than Rs 36,000 crore in 2017.
EY, too, is anticipating a surge in mergers and acquisitions. Ajay Arora, partner and head of
M&A transaction advisory at EY, says: “There is a strong undercurrent for M&A right now.
Many conversations are happening, even if the deal news has not been announced.” Players
such as EY aims for deals across the spectrum.

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29
 Insolvency and Bankruptcy Code:
India did not have a single bankruptcy code. What we had were age-old laws which are in
conflict with each other. Lack of an insolvency and bankruptcy code had proved costly for
the creditors (mainly banks) in many cases like the recent Kingfisher Airlines case. The
Insolvency and Bankruptcy Code seeks to create a unified framework to resolve insolvency
and bankruptcy in India.
The Code covers insolvency, liquidation, voluntary liquidation and bankruptcy. The bill
makes it easier for weak companies to exit or restructure their businesses. The code seeks to
amend 11 laws, including the Companies Act, 2013 and the Sick Industrial Companies
(Special Provisions) Repeal Act, 2003.

Why do we need it now?

1. Such a unified code is essential because currently the issue is handled under at least 13
different laws. This code seeks to replace the Presidency Towns Insolvency Act, 1909
and Provincial Insolvency Act, 1920. In addition, it seeks to amend 11 laws, including
the Companies Act, 2013, Recovery of Debts Due to Banks and Financial Institutions
Act, 1993 and Sick Industrial Companies (Special Provisions) Repeal Act, 2003, among
others.
2. Earlier, if a company defaults, there were at least four different legal routes available to
the debtors and creditors. This could lead to multiple negotiations, multiple penalties
etc. for the debtor, compounding his plight.
3. Such parallel proceedings had also given rise to numerous instances of conflict between
the laws. Four different agencies, the high courts, the Company Law Board, the Board
for Industrial and Financial Reconstruction (BIFR), and the Debt Recovery Tribunals
(DRTs) have overlapping jurisdiction, giving rise to the potential of systemic delays and
complexities in the process. This new bill addresses these issues, by bringing in a new
uniform Code.
4. Current insolvency proceedings take months, if not years (average time: 4 years). This
delay can acutely devalue the assets involved, thus making the insolvency negotiations
redundant.

30
5. The current disposition involves the institution of official liquidator, which is prone to
red-tapeism, chronic corruption, and nepotism. The new code seeks to keep the role of
the adjudicator to the minimum.
6. Currently, only 25% of the asset value is recovered by the creditors even after the
liquidation process.
7. All these compounded to the pitiable position our Public Sector Banks find themselves
in. Rising NPAs and mounting Stressed Assets have also eroded their profits, as the
recent SBI reports point out. The easing of liquidation process can help the banks
recover a lot of bad debts.
8. India fares poorly in the Ease of Doing Business index of World Bank. Easiness of Exit
is an important parameter in this index. The present morass of laws doesn’t help in
easing the exit of trouble-prone entities.
9. According to World Bank data, it takes more than four years to wind up an ailing
company in India, almost twice as long as it does in China.
10. Just like the US Bankruptcy Code that provides for fairly quick liquidation or
reorganisation of business, India too need a new code which will prevent the economy
from tumbling southwards.

31
 CHAPTER 5

LITERATURE REVIEW

The Insolvency and Bankruptcy Code, 2016: Insolvency Professional

Agency

The IBC 2016 is a landmark development in the dynamic world of resolution of stressed
assets laws in our country. The economy is straddled with humongous NPAs in the financial
sector and the twin balance-sheet deficit problem is plaguing the banking sector no end. It’s
one of the largest legal move in the country’s war to clean up around $117 billion of stressed
assets in the economy.

In this situation the IBC, 2016 provides for resolution in a time bound manner, promotes
entrepreneurship which will lead to an improvement in credit availability and would balance
interest of all stakeholders, the IBC envisages to minimize the role of Adjudicating Authority
and tackles laws of 100-year vintage like the The Presidency Towns Insolvency Act, 1909
and Sick Industrial Companies (Special Provisions) Repeal Act, 2003.

The present paper is a commentary on the Insolvency Professional Agency framework that is
the bulwark of the IBC in terms of the procedural and regulatory ambit of the code. The
authors have endeavored to explain the concept of Insolvency Professional Agency along
with the role and scope of the Insolvency and Bankruptcy Code, 2016.

OVERVIEW OF THE INSOLVENCY AND BANKRUPTCY CODE, 2016

The Code is a landmark piece of legislation providing a major facelift to the existing regime
relating to restructuring and insolvency and bankruptcy in India. It promises to provide the
one big missing piece in the existing jigsaw of laws in the form of establishing a framework
for time–bound resolution for delinquent debts. India now has a bankruptcy and insolvency
framework which is comparable with international standards and while this will go a long
way in bringing an element of certainty and predictability to commercial transactions in the
country and facilitating the ease of doing business, the litmus test for its success will be in
how it is implemented. In particular, various practical, logistical and legal hurdles will need
to be overcome and the coming months will be crucial with a lot resting on the nuts and bolts
of the rules which are now expected to be notified under the Code.

32
METHOD OF SOLUTION

CIRP( Corporate Insolvency Resolution Process ) – PHASE I

CIRP( Corporate Insolvency Resolution Process ) – PHASE II

33
 Advantages of the New Code
1. The bill seeks to shift from revival/recovery to resolution. This will ensure maximum
assets recovered from the debtor, thus helping the balance sheets of the creditor. This
would go a long way in helping the NPA-situation of the banks.
2. The new bill proposes to speed up both recoveries and restructuring procedures. There is
significant a curb on the time involved, a maximum of 270 days. This will expedite the
insolvency process. Time is important as the value of the assets corrodes very rapidly,
when the firm is precariously placed.
3. The bill aims at promoting investments, freeing up banks’ resources for other productive
uses, boosting credit markets and improving ease of doing business in India, thus
making a cumulative positive impact on the economy
4. The fixed time-period and predictable procedural methods will encourage creditors to
join the collective insolvency resolution, rather than initiate individual actions.
5. By keeping the role of the adjudicator to a minimum, the bill ensures that delays arising
from the bottlenecks in court proceedings are also reduced to the minimum. The
principal business decisions such as the economic viability of the debtor, will be
determined through negotiations between the debtor and creditors – an exercise that will
be facilitated by insolvency professionals. The role of the NCLT is primarily to ensure
that the procedures are complied with and no illegality or fraud has taken place.
6. The draft Bill also abolishes the institution of the official liquidator, which by all
accounts has been a failure in non-viable businesses. Instead, the functions of the
official liquidator are to be performed by insolvency professionals.
7. Industry anticipates that the change will provide an easy exit option for insolvent and
sick firms.
8. The new code will matter to private sector employees too. The Bill, by forcing failed
firms to shut shop, can lead to a survival of the fittest in the job market too.
9. Make it easy for the budding entrepreneurs to start or exit from the start-up business.
Commerce and Industry minister says it is going to make it easy to start up as much as
to get out of the start-ups because if they are not doing well, there shouldn’t be a taboo.
They would be able to get out faster, thus helping the Start-up India Stand-up India
campaign.

34
 Concerns regarding the Bill
1. The draft Bill needs careful review, particularly on how the new law would interact with
existing laws in this space, including the Sarfaesi Act and other debt recovery laws.
Since it appears that the new Code doesn’t replace the existing laws (and only amends
11 laws), there must at least be a clear demarcation of when these laws would apply and
of overriding provisions in cases of conflict with the code, if we are to avoid reverting to
the old regime of chaos and uncertainty.
2. The bill also provides for priority with regard to the distribution of proceeds following
liquidation of the company (who gets the bounty first!). In the order of priority, the first
charge will be insolvency resolution process cost and liquidation costs to be paid in full.
Liquidation proceeds will then be used to clear debts owed to secured creditors, and
then to pay workmen’s dues for 12 months, unpaid dues to employees other than
workmen, and financial dues owed to unsecured creditors, in that order. Government
taxes for two years, other debts, preference shareholders and equity shareholders will
receive last priority for payment (waterfall provision). Since equity shareholders could
include the employees’ PF, pensioners’ fund etc., giving the public money the least
importance has raised some eye brows.
3. The credit committee is to compose only of financial creditors. However, operation
creditors is to be paid out first. This could lead to a conflict of interest.
4. Only two year history is to be checked for diversion, to check for ascertaining
malfeasance. There is a suggestion that earlier history also should be taken into account.
5. The proposed Bill is also quite ambitious in the creation of a new institutional
architecture to deal with insolvency. Among other things, it proposes the establishment
of a new regulator, the creation of a new profession of insolvency professionals and the
establishment of institutions known as information utilities that are designed to provide
accurate information on defaults. These institutions and practices will take time to
establish and there need to be well thought out transitional arrangements in the interim.
Equally essential is significant training for insolvency professionals and judges if
insolvency resolution and liquidation are to be the efficient and time-bound processes
that the draft Bill envisages.
6. Promoters will have the option to buy-back the company at a certain price, with certain
debt restructuring. This has to be contemplated further to avoid bankruptcy tool from
becoming an instrument to be exploited to reduce debt and increase equity value.
7. There is also apprehension that the ease of exit, could lead to hire and fire, especially in
the private firms and start-up companies

35
 Critics of New Code

 Time-bound insolvency resolution will require establishment of several new institutional

mechanisms. The current capacity of debt recovery tribunals may be inadequate to take
the additional role.
 IPAs, regulated by the Board, will be created for regulating the functioning of IPs. This
approach of having regulated entities further regulate professionals may be contrary to the
current practice of regulating professionals.
 The Code creates an Insolvency and Bankruptcy Fund. However, it does not specify the
manner of usage of the fund. The priority being given to secured creditors relinquishing
security needs specific attention, especially on account of the same having the potential to
be misused, especially if the debtor and the secured creditor can collide and impair the
collateral.

Analysis:
 The bill has diluted some of stringent provisions of ordinance.
 It seeks to strike balance between punishing wilful defaulters and ensuring a more
effective insolvency process.
 The bill allows defaulting promoters to be part of the debt resolution process,
provided they repay dues in month to make their loan account operational and
resolution happens within overall time frame specified in the code.
 This amendment will help promoters who had submitted resolution plans, earlier
ordinance barred them from taking part in the resolution process of companies.
 It also allows asset reconstruction companies (ARCs), alternative investment funds
(AIFs) such as private equity funds and banks to participate in bidding process.

Services Success Rate

 Assurance
 Tax
 Advisory
 Transactions

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 CREDIT RATINGS: MEANING AND DEFINATION

Definitions of Credit Rating:

“A rating is an opinion on the future ability and legal obligation of the issuer to make
timely payments of principal and interest on a specific fixed income security. The rating
measures the probability that the issuer will default on the security over its life, which
depending on the instrument may be a matter of days to 30 years or more. In addition,
long term ratings incorporate an assessment of the expected monetary loss should a
default occur." Moody’s

"Credit ratings help investors by providing an easily recognizable, simple tool that
couples a possibly unknown issuer with an informative and meaningful symbol the
company's assets are sold at auction. Thus, the investor who holds title of credit quality."
Standard and Poor’s

Ratings, usually expressed in alphabetical or alphanumeric symbols, are a simple and

easily understood tool enabling the investor to differentiate between debt instruments
based on their underlying credit quality. The credit rating is thus a symbolic indicator of
the current opinion of the relative capability of the issuer to service its debt obligation in a
timely fashion, with specific reference to the instrument being rated. It is focused on
communicating to the investors, the relative ranking of the default loss probability for a
given fixed income investment, in comparison with other rated instruments.

In fact, the rating is an opinion on the future ability and legal obligation of the issuer to
make timely payments of principal and interest on a specific fixed income security. The
rating measures the probability that the issuer will default on the security over its life,
which depending on the instrument may be a matter of days to 30 years or more.
In addition, long-term rating incorporates an assessment of the expected monetary loss
should a default occur. Credit rating helps investors by providing an easily recognizable,
simple tool that couples a possible unknown issuer with an informative and meaningful
symbol of credit quality. Credit rating can be defined as an expression, through use of
symbols, of the opinion about credit quality of the issuer of security/instrument.
37
Credit rating does not amount to any recommendation to purchase, sell or hold that
security. It is concerned with an act of assigning values by estimating worth or reputation
of solvency, and honesty to repose trust in a person's ability and intention to repay.
The ratings assigned are generally regarded in the investment community as an objective
evaluation of the probability that a borrower will default on a given security issue. Default
occurs whenever a security issuer is late in making one or more payments that it is legally
obligated to make. In the case of a bond, when any interest or principal payment falls due
and is not made on time, the bond is legally in default. While many defaulted bonds
ultimately resume the payment of principal and interest, others never do, and the issuing
company winds up in bankruptcy proceedings. In most instances, holders of bonds issued
by a bankrupt company receive only a part amount on his investments, invested, once to
bankrupt bonds typically loses both principal and interest. It is no wonder, then, that
security ratings are so closely followed by investors. In fact, many investors accept the
ratings assigned by credit agencies as a substitute for their own investigation of a
security's investment quality.

38
 CHAPTER 2

INTRODUCTION OF THE COMPANY

Ernst & Young (doing business as EY) is a multinational professional services firm
headquartered in London, England. EY is one of the largest professional services firms in the
world and is one of the "Big Four" accounting firms.
EY operates as a network of member firms which are separate legal entities in individual
countries. It has 250,000 employees in over 700 offices around 150 countries in the world. It
provides assurance (including financial audit), tax, consulting and advisory services to
companies.
The firm dates back to 1849 with the founding of Harding &Pullein in England. The current
firm was formed by a merger of Ernst &Whinney and Arthur Young & Co. in 1989.It was
known as Ernst & Young until 2013, when it underwent a rebranding to EY. The acronym
"EY" was already an informal name for the firm prior to its official adoption.
In 2017, Fortune magazine ranked EY 29th on the 100 Best Companies to Work for list. In
2016, EY was the 11th largest privately owned organization in the United States.

Ernst & young, Ruby mills, Dadar (W)

39
 COMPANY PROFILE

Ernst &Youngis a global integrated professional services organization offering assurance,

tax, transaction and other advisory services including IT audits and consulting. The company
is based in London, UK, with 709 offices in 140 countries, over 70 of which are in the
United States. It employs 152,000 people worldwide. Global revenue in 2011 was $22.9
billion. Ernst & Young was founded in 1989 when Ernst &Whinney and Arthur Young
&Co.merged.

Ernst & Young is the fourth largest public accounting firm in the world. The firm was
formed in 1989 when the third largest accounting firm at the time, Ernst &Whinney (based in
Cleveland, Ohio), merged with the sixth largest firm, Arthur Young (headquartered in New
York), forming what, at the time, was the world's largest accounting firm. As of 1999 Ernst
& Young stood as one of the "Big Five" accounting firms that dominated the accounting
business. A private partnership, Ernst & Young was owned by its senior partners. Ernst &
Young provided auditing services primarily to the world's largest corporations. In addition, it
specialized in tax advice for multinational firms. In recent years, the firm increasingly moved
into the business of management consulting, providing guidance to clients in such areas as
risk management, mergers and acquisitions, and recent trends in worker-management
relations. Other service areas included consulting on information technology and legal
services.
Facts and figures

Global headquarters: London

Global Chairman and CEO: Mark Weinberger.
Number of people globally: 247,570 (as of 30 June 2017).
Global revenues: US$31.4 billion (Financial Year '17, ending 30 June 2017).
Geographic Areas: Americas; Europe, Middle East, India and Africa; Asia-Pacific; Japan.
Offices: 700+ in more than 150 countries.
Service lines: Assurance, Advisory, Tax, Transaction Advisory Services.
Founded: 1989 through the merger of Ernst &Whinney and Arthur Young & Co. Oldest
component from 1849.

40
INDUSTRIES
 Automotive & Transportation
 Consumer Products & Retail
 Financial Services
o Wealth & Asset Management
o Banking & Capital Markets
o Insurance
 Government & Public Sector
 Health
 Life Sciences
 Media & Entertainment
 Mining & Metals

 Oil & Gas

 Power & Utilities
 Private Equity
 Real Estate, Hospitality & Construction

 Technology
 Telecommunications

SERVICES
 Advisory
o Actuarial
o Analytics and big data
o Customer
o Cybersecurity
o Finance
o Financial Services Risk Management
o Internal Audit
o People Advisory Services
o Program Management
o Risk Assurance
o Risk Transformation
o Strategy
o Supply Chain and Operations
o Technology
 Assurance
o About Assurance Services
o Accounting Compliance and Reporting

41
 o Center for Board Matters
o Climate Change and Sustainability Services
o Financial Accounting Advisory Services
o Financial Statement Audit
o Fraud Investigation & Dispute Services
o IFRS
o Reporting - Assurance insights
 Tax
o About Our Global Tax Services
o Country Tax Advisory
o Cross Border Tax Advisory
o Global Trade
o Global Compliance and Reporting
o Private Client Services
o Law
o People Advisory Services
o Tax Accounting
o Tax Performance Advisory
o Tax Policy and Controversy
o Transaction Tax
o VAT, GST and Other Sales Taxes
o Transfer Pricing and Operating Model Effectiveness

 Growth Markets
o EY Entrepreneurial Winning Women
 Transactions
o How can we help
o Our people
o Capital Insights
o Corporate Development
o Divestiture Advisory Services
o Lead Advisory
o Operational Transaction Services
o Restructuring
o Strategy Services
o Transaction Diligence
o Transaction Tax
o Valuation & Business Modelling

 Specialty Services
o Climate Change and Sustainability Services
o CertifyPoint

42
o CFO Agenda
o Digital
o Emerging markets
o Geostrategic business group
o Family Business Services
o Foreign direct investment
o French Business Network
o Global Business Net

43
 VISION & MISSION OF EY

VISION

As we implement Vision 2020, we will build on this proud history and our reputation to
create our future. To get there, all of our 175,000 people will be united by a new
purpose, ambition and strategy:

Our purpose: building a better working world.

Our ambition: by 2020 we will be a US$50 billion distinctive professional services

organization.

Our strategy: built on three pillars.

 Focus on winning in the market by delivering exceptional client service

and maximizing opportunities in markets and services.

 Create the highest performing teams by attracting, developing and

inspiring the best people and committing to a culture of world-class
teaming.

 Strengthen global, empower local by pressing our global advantage

and empowering local team.

Our positioning: the highest performing teams, delivering exceptional client

service,worldwide.

44
MISSION

Mission Statement at Ernst & Young, we support you in achieving your unique potential
wherever you are in the world – both personally and professionally. We give you
stretching and rewarding experiences that keep you motivated, working in an
atmosphere of integrity and teaming with some of the world's most successful
companies. And while we encourage you to take personal responsibility for your career,
we support you in your professional development in every way we can. You enjoy the
flexibility to devote time to what matters to you, in your business and personal life.
At Ernst & Young, we know it's your point of view, energy and enthusiasm that make
the difference.

CORE VALUES

Our values inspire our people and guide them to do the right thing, and our commitment to
quality is embedded in who we are and in everything we do. We are:

People who demonstrate integrity, respect, and teaming.

People with energy, enthusiasm, and the courage to lead.

People who build relationships based on doing the right thing.

45
 PRODUCTS & SERVICES OF EY

PRODUCTS

EY International acts as an extension of your business to manage all aspect of your supply
chain globally so you can focus on your Customers. EY International strives to offer the
finest service that assures customer satisfaction with cost efficient structure and shortest
delivery time possible. EY international is committed to excellent service, innovation
honesty and integrity.

A team will be assigned to focus on each customer’s requirement to professionally manage

the entire supply chain from procurement, production planning, quality assurance and
shipping.

EY International also offers additional services such as finding buyers and marketing new
products on behalf of manufacturers.

What makes EY International unique from our competitors is that we offer supply and apply
services for products the customer are not familiar with. This unique feature will reduce cost
and material wastage.

SERVICES

EY International continuing commitment to provide excellent support service to customers,

we provide aviation consulting and construction management services.

Project delivery excellence is at the heart of our business whether it is aviation or

construction. We have devoted teams with years of experience, which are pioneer in
application of modern methods in aviation and construction that save clients money,
radically reduce project risks and ensure completion on time.

Our one team approach will stream line the projects with our supply chain partners behind a
single objective and deliver top notch service for our prestigious clients

46
 DEPARTMENTS IN EY

1. Audit advisory - including finalization of yearly accounts of companies,

preparation of annual reports, limited reviews related to (statutory) audit as per
international financial reporting standards (IFRS).

2. Risk advisory - includes conducting internal (process) audits of companies,

information technology audits, developing process documents, internal audit
transformation, risk management, control self assessment etc.

3. Consulting - includes developing complex models and solutions for companies’

business improvement and monitoring. These are long gestation projects and
involve mainly engineers.

4. Tax advisory - from providing advisory suppprt on direct and indirect taxation of
companies, this service line also helps companies in transforming their tax
platforms as per the changes in statute.

5. Forensic advisory - includes solutions in areas of fraud detection and

restructuring. This is one of the growing service lines of Big 4s.

6. Mergers & Acquisitions - this is one of the most creamiest and elite service lines.
In this the professionals assist companies in conducting due diligence, solutions for
hostile takeovers, post merger solutions and restructuring.

7. Assurance -It is primarily associated with Statutory Audits, a necessary

requirement for all registered companies, which are essentially certifications on the
accuracy of the financial statements of the company.

47
MODELS FOR SHOWING PROCESSES IN EY

IT Resources

IT-Based Advisory Positions

Ernst & Young hires IT advisers and risk and assurance specialists worldwide. Ernst &
Young Advisory Services employs 18,000 people in a practice generating $4 billion in
revenue. At the time of publication, there are over 200 open positions in the US alone, in just
about every region of the country. Specializations include IT auditors, data protection
specialists, application risk and controls specialists and analysts.

IT-based advisory services are divided into two segments: IT Advisory Services and IT Risk
and Assurance Services. IT Advisory Services work with clients to develop improved
business performance in their IT systems and ensuring these systems provide a good return
on their investment costs. These services include sourcing and outsourcing, application
infrastructure optimization, and architecture consolidation, especially in the areas of financial
software, supply chain management, and client relationship management (CRM) software,
etc.

Ernst & Young also advises clients on core ERP systems, including migration management
and overseeing the work of 3rd party vendors.

IT Risk and Assurance Services assist clients in managing risk. This includes IT controls
services, which minimize risks in applications and IT infrastructure, with an emphasis today
in the risks associated with mobile technology, social media, and cloud computing..

48
The anatomy of operational excellence

 Integrated business and activity planning

At the forefront of operational performance is the need to translate long-term
business strategies into short-term and medium-term operating plans.

KEY CHALLENGES

 Sponsorship and maturity: Success in any endeavor starts with executive

sponsorship and a culture that supports and understands the objectives.
 Strategy and framework: To prevent value leakage from soloed thinking that
often occurs from increasing operational complexity, oil and gas companies
must establish clearly defined and well-understood connection and integration
points among the strategic planning levels.
 Translating strategy to operations: The enterprise strategy needs to be
effectively translated into quantitative and actionable business unit and
functional goals and targets to facilitate planning, budgeting and stewardship
processes.

 Target operating model

A target operating model describes not only how processes, people and systems
interact to support the business but also how they could be arranged and prioritized to
achieve optimum efficiency.

49
 KEY CHALLENGES

 Soloed design architecture: Functions and geographies need to be fully

integrated to promote consistency in culture, processes, controls and
technologies.
 Unclear decision governance: Decision-making and delegation of authority
underpin the operating model and should include policies, practices,
committees and rules.
 Insufficient performance management: Many organizations are lacking a
balanced set of quantitative and qualitative performance metrics necessary to
support the strategy and vision. If metrics are present, they often tend to be
inconsistently measured, managed and evaluated.

 Supplier and contractor management

Leading operators understand they must leverage their suppliers and contractors to
achieve the desired level of operational performance.

KEY CHALLENGES

 Prequalification and contracting: While supply chains and supplier networks

have become increasingly complex, prequalification requirements and
contracts have failed to capture these complexities.
 Supplier and contractor risk: With increasing impact on business and
operating performance, risks associated with these portfolios must be
adequately understood, quantified and mitigated.
 Field management and analysis: When organizations work with suppliers and
contractors whose performance is not reliable and whose service availability
is unpredictable, value can erode by as high as 10%-15% due to ongoing
inadequate management and failure to monitor performance.

 Asset reliability and integrity management

The pinnacle of great operators is their ability to reliably meet production targets and
requires them to transition capital projects into producing assets, improve day-to-day
asset uptime and minimize the impact of planned outages.

KEY CHALLENGES
 Maintenance, reliability and integrity processes: When an organization fails to
define asset strategies, identify critical risks, institute appropriate barriers of
protection, and optimize asset and personnel performance, their asset
performance suffers.
 Shutdown and turnaround management: Too often, organizations fail to
effectively plan, schedule and execute these major facility inspections/repairs
50
 in a way that ensures on-time completion, cost control and safe completion of
activities.
 Operational readiness planning: When integration and planning are inadequate,
operators face increased difficulty in reaching the new assets to anticipate
production numbers on time and on budget, without experiencing recurrent
issues that upset production.

 Cost efficiencies

The most successful organizations institute systematic approaches to identify and

then eliminate sources of value loss, targeting the highest-return areas first.

KEY CHALLENGES

 Cost drivers: Often we see organizations focused on first- and second-level

drivers without adequately understanding the third- and fourth-level drivers,
leading to the true causes of inefficiency and cost escalation to be
misdiagnosed, ultimately limiting the impact of proposed solutions.
 Production management optimization: Through production planning, a robust
management system, loss reporting and root cause analysis, production
optimization can occur. Failure to properly manage any of these areas
routinely leads to suboptimal production, directly impacting business results.

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 SWOT ANALYSIS OF EY

INTERNAL ENVIRONMENT

STRENGTHS
 EY was ranked by Forbes magazine as the 8th largest private company in the United
States
 EY have an extensive global reach covering over 140 countries
 They were ranked No. 1 in the Forbes The Best Accounting Firms to Work For
 Workforce consists of the best talent pool from across the world
 Over 150,000 employees form a formidable workforce at Ernst & Young
 EY offers expert services in assurance, tax advisory, consulting, financial advisory
and legal solutions
 Acquisitions and mergers have strengthened the brand's position in the business
 Crisp marketing campaigns directed at enterprises and corporate are a huge success
for EY brand
 Sponsorship of various global events related to sports, knowledge etc give a huge
presence to EY

WEAKNESSES
 Strong competition from other major players means growth is slow for EY

 Companies setting up their own research centers affecting business

EXTERNAL ENVIRONMENT

OPPORTUNITIES
 EY has immense opportunity in emerging economies

 The more Ernst & Young spend on infrastructure the more clients they will get

 Companies continuously looking for consulting solutions

 Acquiring smaller consulting firms can establish EY's position strongly

52
THREATS
 They have allegedly had many lawsuits filed against them e.g. they were involved in
Lehman Brothers, they were also sued by Akai Holdings etc.

 The global recession could affect EY's consulting business

 Fluctuating global currencies affects operations

 Increasing competition can reduce market share of Ernst & Young

COMPETITORS

1. McKinsey and Company

2. Accenture
3. Deloitte Consulting
4. PwC PricewaterhouseCoopers
5. KPMG
6. Boston Consulting Group BCG
7. A T Kearney
8. Booz and Company

 EY is the result of a series of mergers of ancestor organization.

 Building a new talent management model
 They make a difference by helping their people, clients and wider communities to
achieve their potential.

53
 CHAPTER 3

DATA ANALYSIS

Cases covered under RBI

Era Infra Engineering Limited

 It operates as an infrastructure development company in India. The company operates
through Contracts, Equipment Hiring and Management, Trading, and Toll Collection
segments. It undertakes engineering, procurement, and construction projects in a
range of sectors, such as roads and highways, power, railway, metro, aviation, social
across infrastructure, industrial, institutional, and related segments. The company was
formerly known as Era Constructions (India) Limited and changed its name to Era
Infra Engineering Limited in 2007. Era Infra Engineering Limited was founded in
1990 is headquartered in Noida, India.
 Era Infra Engineering Limited reported standalone unaudited earnings results for the
third quarter and nine months ended December 31, 2017. For the quarter, the
company reported total income from operations of INR 2,536.379 million against
INR 3,452.150 million for the same period previous year. Loss from operations
before other income finance cost and exceptional items was INR 2,740.279 million
against INR 948.617 million for the same period of previous year. Loss before tax
was INR 2,740.279 million against INR 3,262.620 million for the same period of
previous year. Net loss after tax was INR 2,740.279 million or INR 8.26 per basic
and diluted share compared to INR 3,262.620 million or INR 9.82 per basic and
diluted share for the same period of previous year. For the nine months, the company
reported net sales/income from operations of INR 6,842.182 million against INR
7,979.324 million for the same period previous year. Loss from operations before
other income finance cost and exceptional items was INR 9,743.818 million against
INR 3,344.966 million for the same period of previous year. Loss before tax was INR
9,743.818 million against INR 10,082.122 million for the same period of previous
year. Net loss after tax was INR 9,743.818 million or INR 29.38 per basic and diluted
share compared to INR 10,082.122 million or INR 30.25 per basic and diluted share
for the same period of previous year.

Alok industries ltd.

About 12,000 permanent employees of Alok Industries are likely to lose their jobs as
the company is heading towards liquidation.
Alok Industries is an Indian ISO 9001:2000 certified textile manufacturing company
based in Mumbai.Its main business involves weaving, knitting, processing, home
textiles, readymade garments and polyester yarns. It exports 26% of its products to
over 90 countries in the US, Europe, South America, Asia and Africa.
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Amtek auto ltd.
Amtek Auto is headquartered in New Delhi and is one of the largest integrated
automotive component manufacturers in India with a strong global presence. The
Company has world class facilities in India, Europe and North America. Amtek Auto
has significant expertise in forging, grey and ductile iron casting, gravity and high-
pressure aluminum die casting and machining and sub-assembly. The Company also
manufactures components for non-auto sectors such as the railways, specialty
vehicles, aerospace, agricultural and heavy earth moving equipment.

The objective of Amtek Auto Investor Relations is to ensure continuous and open
communication with all financial market participants.

Electrosteel steel ltd.

Electrosteel Steels Ltd. engages in Steel manufacturing. The company produces Pig
Iron, Billets, TMT Bars, Wire Rods and Ductile Iron Pipes. Electrosteel Steels
consists of a Sinter Plant, Pellet Plant, Coke Oven, Blast Furnace, Basic Oxygen
Furnace, Billet Caster, Wire Rod Mill, Bar Mill and Power Plant. Incorporated in
2006, the company is based in Kolkata

Bhushan Power & Steel Ltd.

Bhushan Power & Steel Limited (BPSL), is a fully integrated 3.5 Million TPA Steel
Making Company having turnover of INR 11,288 Crores (USD 1,858 Million) FY14.
The Company is certified to ISO 9001:2008 & TS-16949 Quality Standards and ISO
14001:2004 Environment Management Standards.
BPSL is a leading manufacturer of flat and long products and have state-ofthe-art
plants at Chandigarh, Derabassi, Kolkata and Orissa in India. These plants
manufacture value added products covering entire steel value chain right from Coal
Mining to manufacturing Pig Iron, DRI, Billets, HR Coils, CR Coils, GP/GC Sheets,
Precision Tubes, Black Pipe/GI Pipe, Cable Tapes, Tor Steel, Carbon and Special
Alloy Steel Wire Rods and Rounds conforming to IS and international standards.
The Company have successfully commissioned a 3.5 Million TPA Greenfield Steel
and Power Plant in Orissa with HR Coil making facility - First in Private Sector in
the State of Orissa. For this plant, technology and equipments were sourced from
leading world-renowned companies viz., Lurgi, ABB Ltd., SMS Siemag, SMS Meer
Danieli, LOI Tenova, Kocks etc. BPSL has a wide marketing network in both India
(comprising 35 sales offices) and abroad for selling its value added product range.

ABG Shipyard Ltd.

55
ABG Shipyard Ltd., the flagship company of ABG group was incorporated in the
year 1985 as Magdalla Shipyard Pvt. Ltd. with the main objects of carrying
Shipbuilding and Ship Repair business. In a span of 15 years from the year 1991, the
company has achieved the status of the largest private sector shipbuilding yard in
India with satisfied customer base all around the world. The registered office and the
yard are situated at Surat in the state of Gujarat and the corporate office is in
Mumbai.
Our Shipyard has state of the art, manufacturing facilities including a “Ship-lift
Facility” with a lift capacity of 4500 tons, side transfer facilities, CNC plasma cutting
machine, Bending rolls, Hydraulic press, Cold shearing machine, Frame bending
machine and steel processing machinery. The Shipyard also has blasting shop and
fabrication shop covered in 4 bays of 150 x 30 M each equipped with 20T EOT
Cranes. The manufacturing process is in line with world-class standards and the Yard
is certified by DNV for ISO 9001:2008.
During past decade, the Shipyard has constructed and delivered One Hundred
four(104) Vessels including Specialized and Sophisticated vessels like Interceptor
Boats, Self Loading and Discharging Bulk Cement Carriers, Floating Cranes,
Articouple Tugs and Flotilla, Split Barges, Bulk Carriers, Newsprint Carriers,
Offshore Supply Vessels, Dynamic Positioning Ships, Anchor Handling Tug Supply
Vessels, Multi-purpose Support Vessel, Diving Support Vessels, etc. for leading
companies in India and abroad.

LancoInfratech Ltd.
LancoInfratech (LagadapatiAmarappaNaidu and Company Infratech) is a large
Indian business conglomerate involved in construction, power, real estate, and
several other segments. In 2010, the group of companies was listed among the fastest
growing in the world. In 2011, the group became the largest private power provider
in India. Lanco was one of the first Independent Power Producers (IPP) in India.

Jyoti Structures Ltd

Jyoti Structures Limited is in the business of execution of projects relating to power
transmission and distribution. The Company is engaged in the manufacturing of
transmission line towers, sub-station structures, antenna towers/masts and railway
electrification structures. Its principal products/services include power transmission
and distribution business. Its geographical segments include within India and outside
India. It also undertakes turnkey/engineering, procurement, construction projects
involving survey, foundation, designing, fabrication, erection and stringing activities
of high voltage transmission lines and procurement of items, supply of lattice and
pipe type structures, civil works, erection, testing and commissioning of
switchyard/substations, and distribution networks. Its solutions include transmission
lines, such as engineering and construction; substations and switchyards, such as
sourcing and supply; solar power, and rural electrifications.
56
Monnet Ispat and Energy Limited
Monnet Ispat and Energy Limited manufactures and markets sponge iron, steel, and
ferro alloys in India and internationally. It operates through Iron & Steel, Power, and
Others segments. The company’s ferro alloy products include ferro manganese and
silico-manganese in various shapes and forms, including billets, ingots, powders,
fillers, and allied reinforcements. It also engages in mining of minerals, such as coal,
iron ore, and limestone; and the provision of coal washing and beneficiation for
public and private sectors, as well as coal consulting services. In addition, the
company is involved in power generation and cement businesses. It serves
infrastructure and construction industries.

Bhushan Steel Ltd.

Bhushan Steel Limited is a steel producing company. The Company is engaged in the
steel business. The Company offers various products, such as Hot Rolled Coil, Cold
Rolled Close Annealed (CRCA), Cold Rolled Full Hard (CRFH), Galvanized Coil
and Sheet, Color Coated Coils, Color Coated Tiles, High Tensile Steel Strips,
Hardened and Tempered Steel Strips, Precision Tubes, High-Frequency
Welding/Electrical Resistance Welding (HFW/ERW) pipe, Billets, Sponge Iron and
Drawn Tubes of Original Equipment Manufacturer (OEM) Grade. It also offers
Galume Coil and Sheet. It manufactures high carbon, low alloy hardened and
tempered steel with a combined production capacity of over 2,200 metric ton
(MT)/Month. The Company has steel production capacity of approximately 5.6
million ton per annum. Its plants are located at Ghaziabad, Uttar Pradesh; Raigad,
Maharashtra, and Dhenkanal, Orissa. Its subsidiaries include Bhushan Steel Madhya
Bharat Ltd. and Bhushan Steel (Australia) PTY Ltd., among others.

Essar Steel India Limited

It is an integrated steel producer, manufactures and sells steel products primarily in
India. It offers hot rolled, cold rolled, and galvanized steel products; color coated
sheets; and pipes and plates, as well as shot blasted and primed plates, factory welded
beams, burnt-to-shape plates, trapezoidal blanks, and chequered plates. The company
also processes and trades in construction materials; and extracts and prepares thermal
and metallurgical coal. It provides steel products for use in engineering, shipbuilding,
automotive, construction, railways, white goods, line pipes, wind engineering and
power generation, boilers and pressure vessels, and yellow goods.

JaypeeInfratech Limited
It engages in infrastructure development business in India. The company constructs,
operates, and maintains Yamuna Expressway, a 165 kilometer long six lane access
controlled expressway in the state of Uttar Pradesh connecting Noida and Agra. It is
also developing five townships on 25 million square meters of land for commercial,
57
 amusement, industrial, institutional, residential purposes, etc. across five locations
along the Yamuna Expressway. In addition, JaypeeInfratech Limited operates a 504
bed super specialty hospital under the name Jaypee Hospital in Noida. The company
was incorporated in 2007 and is based in Noida, India.

About the case under RBI

The Reserve Bank of India (RBI) is moving to resolve the bad loan crisis with an Internal
Advisory Committee (IAC) of the RBI having identified 12 accounts of corporate borrowers
who owe over Rs5,000Crore each — and overall involve an amount of close to Rs175,000
Crore — for insolvency proceedings under the newly enacted Insolvency and Bankruptcy
Code 2016 (IBC). The RBI committee has recommended for IBC reference all accounts with
fund and non-fund based outstanding amounts in excess of Rs5,000 Crore, with 60 per cent
or more (Rs3,000 crore or more) classified as non-performing by banks as on March 31,
2016.

58
 CHAPTER 4

CONCLUSION

The Bill has become a statute upon receiving Presidential assent. However, the Code
provides that the provisions of the Code will come into effect on the date appointed by the
Central Government and notified in this behalf. The news is that the Government has
undertaken an exercise to fill up vacancies in the National Company Law Tribunal on
priority basis. Once the tribunal is operational and the Insolvency and Bankruptcy Board is
established and functional, there will be a surge in the credit market. The passing of this
Code and implementation of the same will give a big boost to ease of doing business in
India. However, in the absence sufficient infrastructure and insolvency practitioners,
execution may take longer than anticipated.

As outlined earlier in this article, the Code not only repeals 2 statutes, but also amends 11
other statutes such as Companies Act, SICA, SARFAESI etc. for effectuating the provisions
relating to insolvency and bankruptcy of all legal and natural persons under the Code.
However, the interplay of provisions of the Code, the amended statutes and several other
statutes (such as Negotiable Instruments Act, 1881) will be an important factor in
determination of insolvency proceedings. It is of utmost importance that provisions of key
recovery laws be synchronised in order to ensure that there are no discrepancies or overlap of
jurisdictions so that multiplicity of remedies is not taken recourse to.

Perhaps, the Code has brought far too many changes at the same time, which has caused
apprehensions. In India, where any change in the legal system are hard to enforce, this Code
has proposed a massive overhaul of laws, procedures and infrastructure, whichis bound to be
subjected to hangovers of previous regimen, resistance to rapid enforcement from the
fraternity and ultimately dilution in its effectiveness. But, all this on one side, there is no
doubt that once the Code is fully implemented, it is going to be one of the best initiatives by
the legislatures and a boon to the economy in the broader sense.

59
The Code is a landmark legislation which has put India on the global map, with insolvency
laws adhering to internationally accepted standards. It overhauls the existing regime relating
to insolvency and bankruptcy in India by emphasizing a time bound resolution of
delinquent debts on one hand and eliminating the distorted incentives of the earlier
regime on the other. A critical feature of the Code is the low default threshold for initiation
of insolvency proceedings. This imposes an additional burden on the boards to monitor
their financial and operational debts. Fiduciary duties are heightened when a corporate
approaches a potential insolvency event. Since directors can never know ex-ante whether and
when the corporate debtor enters the Relevant Time (when the transactions are put
through stricter scrutiny), they would tend to be vigilant about the board’s conduct all
the time. The institutional structure and the checks and balances entailed by the Code appear
to be appropriate and incentive compatible, raising thereby the probability of resuscitating
insolvent companies, which is in the interest of all stakeholders and not just the
creditors. However, certain issues remain. For instance, the hairline trigger proposed by
the Code may lead to its misuse. Further, shareholder interest if considered subservient
to the interest of the lenders during the CIRP may not be adequately addressed in the terms
of a resolution plan. Finally, the institutional framework required for smooth functioning of
the new system may need years to develop in an economy like India.

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 CHAPTER 5

LEARNINGS

As an Interns can be substantial investments for large companies. Listening to and learning
from the full-time employees. It’s better to be helpful within the scope of what was assigned.
Got to learn and explore a totally new concept.

61
 BIBLIOGRAPHY

http://www.referenceforbusiness.com/history2/49/Ernst-Young.html

All about working of EY

http://www.ey.com/Publication/vwLUAssets/Our_vision,_values_and_impact:_UN_Global_
Compact_2013/$FILE/Our%20vision,%20values%20and%20impact%20-
%20UN%20Global%20Compact%202013
 abgindia.com
 https://www.bloomberg.com/research/stocks/private
 https://in.reuters.com/finance/stocks/company-profile/JYTS.BO
 The Insolvency & Bankruptcy Code, 2016
 The Companies Act, 2013
 https://www.legallyindia.com/views/entry/on-the-insolvency-and-bankruptcy-code
 Journals:
 Sharma Nakul and Vyas Rahul, The Insolvency and Bankruptcy Code, 2016:
Insolvency Professional Agency (December 2, 2017). International Journal of
Law, Volume 3, Issue 6, November 2017.
 Javish Valecha1 & Ankita Anupriya Xalxo, OVERVIEW OF THE
INSOLVENCY AND BANKRUPTCY CODE, 2016, Journal on
Contemporary Issues of Law Volume 3 Issue 4

62