India: Insolvency/Bankruptcy/Re-Structuring

In M/s ASJ Finsolutions Pvt. Ltd. v. Vikram Bajaj, the Supreme Court considered whether the Earnest Money Deposit (EMD) and other amounts paid by a successful bidder in a liquidation auction can be forfeited where the e-auction notice expressly so provides, even though the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (the “Regulations”) do not expressly provide for forfeiture.

The Insolvency and Bankruptcy Code, 2016 (IBC) was originally built as a monolithic architecture. Its primary mandate was clear: when a company defaults, the entirety of its corporate entity must be pulled into the Corporate Insolvency Resolution Process (CIRP). While this unified entity approach worked seamlessly for manufacturing units or simple corporate structures, its application to the real estate sector triggered catastrophic systemic failures. In real estate, a single developer frequently manages dozens of independent housing projects across varying stages of lifecycle, funding, and construction.

Diverging creditor timelines are what turn one company’s cash shortfall into several separate fights at once. Once suppliers, lenders and a personal guarantor are each entitled to act on their own schedule, one creditor moving first can reshape what’s left for everyone else which is a worse situation than the funding gap that started it.