REVIEW OF ARTICLES RELATED

TO CORPORATE LAW

DONE BY: R. SAI KUMARI

1820680

DUE DATE:7 JULY 2019

WORD COUNT:2143
Ballooning Non-Performing Assets in Indian Banking and Insolvency and
Bankruptcy Code: Resolution Plans and Cases
INTRODUCTION

Banks are important to the nation’s financial health. Robust Banking represent safety
and status and confidence in this service sector. For a sustainable growth in the
Banking sector proper disciplinary measures have to be taken for credit creation,
credit disbursement, credit monitoring and compliance. Unfortunately, over these
years Non-performing assets and stressed assets have mopped up the Banks eroding
the capital and thus the balance sheets are at risk. The Bad Loans and restructuring
have not helped in reducing the bad loans. Insolvency and the Bankruptcy Code came
in 2016 but has to surface a here way in NPA resolutions. The Public sector Banks
NPA accounts valuation at around 90% and value Rs 4,00,000 CR (US$61.5 Million)
and rest 10% is only the Private Sector Banking.

PROBLEM

The Indian Banking sector is witnessing a phenomenal deterioration of asset quality,

raising potential losses for not making enough provisions or setting aside capital to
combat the non-performing assets. The aftermath of this is that the sustainability of
robust banking is becoming a big question. Over the period of time, NPAs and bad
loans have adding to a spiralling manner in Indian Banks. In this data-driven banking,
various frauds have occurred due to lapses in operational risk, and non-adherence to
procedures.

CONCLUSION

The performance ofscheduled commercial banks haslargely been influenced by the

public sector banks of the country and because of that reason when the NPAs of
public sector bank started increasing from 2011-12 till date, overall NPAs of
scheduled commercial banks also start moving at an upward rate.It is also evident that
the private banks Strong credit appraisals should be conducted at various levels which
would bring out the true picture about the credit worthiness of the borrower. Even at
times of high economic growth possibility, focus should be on the borrower’s
repaying capacity rather than on disbursing maximum loans. This would prevent
creation of bad loans in the economy.

'Even If a Party Has a Change of Heart': A Framework for Enforcement of

Courthouse-Steps Settlements in Cases and Proceedings in the Texas Bankruptcy
Courts

INTRODUCTION

Settlements are a key means by which cases and related proceedings, or discrete
issues within them, are resolved in bankruptcy courts. For the lawyers involved, there
is strong incentive to compromise on issues and to resolve disputes, to obtain certainty
and to protect against worse outcomes were the matter to go to a court’s decision after
a contested, evidentiary hearing. Often in such matters, the bankruptcy lawyers reach
settlements on behalf of their clients “on the courthouse steps,” that is, just moments
before the court would otherwise commence such a hearing.

PROBLEM

The appellate courts and the bankruptcy courts are in harmony in urging parties to
settle their disputes, and the courts have shown a strong interest in making such deals
effective. When a courthouse-steps settlement is reached, the courts normally require
that the parties’ counsel announce the terms of the deal “on the record” or “in open
court.” Such announcement serves the purposes of assuring the court that there is
indeed a good reason not to commence the scheduled hearing and of preventing the
parties from later seeking to escape the deal made. Most courthouse-steps settlements
are approved by the court and performed by the parties. But from time to time one
settling party will develop a significant regret about the terms or discover that it is
financially incapable of paying an agreed amount. Such reneging or default on the
announced deal creates problems for everyone, the judge, the lawyers, and the
parties.An underappreciated Fifth Circuit Court of Appeals case of a quarter century
ago is the landmark. The decision, Omni Video, directs that bankruptcy courts in
Texas apply an unusual rule — formally a rule of Texas state court procedure but
actually of substantive state contract law — to deal with the default of a
courthouse-steps settlement. That rule, Texas Rule of Civil Procedure 11, provides
that “no agreement between attorneys or parties touching any suit pending will be
enforced . . . unless it be made in open court and entered of record.” The Texas cases
interpret Texas Rule 11 to require both an oral announcement by both lawyers on the
record and the finding by the court of a resulting contract. In Omni Video, the Fifth
Circuit affirmed a bankruptcy court decision that had matter-of-factly enforced just
such a courthouse-steps settlement over later objections that the parties had been
unable to document and to perform the deal that was announced.

CONCLUSION

Dependent as it is on Texas substantive law, Omni Video is applicable in all the

bankruptcy courts of the four federal judicial districts of the state, but the Fifth Circuit
there and subsequently has not provided complete guidance, and the judges of those
bankruptcy courts have necessarily had to apply it in varying situations and to diverse
disputes in cases under both Chapters 11, 13, and 7 of the Bankruptcy Code. This
article collates all applicable bankruptcy-settlement authorities, ranging across scanty
provisions of the Bankruptcy Code, the few applicable subdivisions of Bankruptcy
Rules, the applicable legal-ethical rules, the jurisprudential standards for approval of
settlements, and considerations of notice and of court authority. Based on those
authorities, the conclusion posits a step-by-step framework by which the judges of the
bankruptcy courts in Texas may logically assess and determine the enforceability of
courthouse-steps settlements on those unhappy occasions when a party defaults or
reneges after the announcement of a deal.
Bankruptcy policy and surface transportation public-private partnerships: A
comparative analysis of the U.S. and Europe

INTRODUCTION

For governments around the world, public-private partnerships (PPPs or PPPs) offer
an alternative approach to infrastructure provision in response to tightening fiscal
conditions, concerns about risk allocation, deferred maintenance, lifecycle cost, and
project delivery. PPP approaches recognize the private sector’s resource-gathering
potential for infrastructure financing and operation, and its willingness to assume
project risks in expectation of future returns. Such risks can be substantial, however,
as became evident following the financial crisis of 2007-2008 and the lingering
effects of the subsequent Great Recession of 2009. Demand risk in particular
threatened many surface transportation PPP projects in both the US and Europe, with
low facility demand generating negative bottom lines. In response to these financial
difficulties, possible negative impacts have received particular attention.

PROBLEM

This paper explores bankruptcy legal frameworks as an explanation for perceived

differences in U.S. surface transportation PPPs (or PPPs) outcomes compared to the
European market. Through seven U.S. and eleven European PPP bankruptcy cases,
the study provides some evidence that the U.S. legal framework, either Chapter 9 or
11 of the U.S. Bankruptcy Code, favors continuous facility operation through debt
restructuring rather than asset liquidation. The case studies also highlight how
European countries, particularly France and Spain, have adopted new legal
frameworks mimicking U.S. Chapter 11, promoting debt-restructuring procedures to
diminish the fiscal impacts associated with asset liquidation.

CONCLUSION

The preceding discussion explored bankruptcy legal frameworks as an explanation for

perceived differences in U.S. surface transportation PPP outcomes compared to the
European market. First, the paper found that due to the sheer magnitude of the
potential fiscal impacts of a bailout bankruptcy legislation convergence of bankruptcy
legislation has been closely linked to PPP 24 bankruptcies. PPP bankruptcy has
promoted bankruptcy legislative reform in France and in Spain to convergence
towards the U.S. Chapter 11. Second, through seven U.S. and eleven European PPP
bankruptcy cases, the study provides some evidence that the U.S. legal framework,
particularly Chapter 11 of the U.S. Bankruptcy Code, favors continuous operation
through debt restructuring rather than asset liquidation. When this legal framework
was used no government bailout was involved. This is an important reason behind
legislative convergence across the Atlantic. The only U.S. case to employ foreclosure,
the alternative to firm reorganization, the Camino-Colombia Bypass, involved private
sector opportunism by closing the facility, eventually solved by the Texas Department
of Transportation by purchasing back the contract.

Bankruptcy spillovers

INTRODUCTION

Bankruptcy institutions play a significant role in resolving insolvency and financial

distress in the economy. Since 1980, more than 1.8 million businesses have filed for
bankruptcy in the US Most of these cases are resolved through either reorganization
(Chapter 11 under the US Bankruptcy Code), which attempts to rehabilitate the
distressed firm, or liquidation (Chapter 7 under the US Bankruptcy Code) in which
the firm ceases to exist and all assets are auctioned. Given their importance,
bankruptcy institutions have spurred a large literature that mostly focuses on how
these two regimes affect the bankrupt firms and their claim holders.1 Yet, bankruptcy
institutions may have far-reaching implications on other economically related firms
that are not represented in courts. In this paper, we explore the spillover effects these
two bankruptcy regimes, liquidation and reorganization, may impose on the local
economy.

PROBLEM

How do different bankruptcy approaches affect the local economy? Using US Census
microdata, we explore the spillover effects of reorganization and liquidation on
geographically proximate firms. We exploit the random assignment of bankruptcy
judges as a source of exogenous variation in the probability of liquidation. We find
that employment declines substantially in the immediate neighborhood of the
liquidated establishments, relative to reorganized establishments. The spillover effects
are highly localized and concentrate in nontradable and service sectors, consistent
with a reduction in local consumer traffic and a decline in knowledge spillovers
between firms.

CONCLUSION

The results presented in this paper show that the liquidation of bankrupt firms
imposes large negative externalities on the local economy, when compared to
reorganization, an alternative approach to resolve distress in courts. Using the random
assignment of bankruptcy judges as a source of exogenous variation in the probability
of Chapter 7 liquidation (versus Chapter 11 reorganization), we find that, within a
five-year period, employment decreases substantially in the census block of the
liquidated establishment. Most of the decline is due to lower growth of existing
establishments and, to a lesser extent, reduced entry into the area. This evidence is
inconsistent with a “creative destruction” argument, according to which liquidation
would contribute to the revitalization of the area and induce entry.

Strategic bankruptcy: A stakeholder management perspective

INTRODUCTION

A strategic bankruptcy is one that helps firms to implement strategic changes to

relationships with customers, suppliers, or other trading partners in a manner that
positively alters the likelihood of sustainable performance improvements and survival.
However, there is disagreement on whether a strategic bankruptcy is an effective
mechanism for strategic change.This literature assumes that bankruptcy is a definitive
form of failure and should be a firm's decision of last resort. This research does not
reconcile with anecdotal evidence, which indicates that firms have successfully
preserved value for all key stakeholders by proactively reorganizing under Chapter 11
of the US Bankruptcy Code.

PROBLEM
There has been growing interest in whether and when a Chapter 11 bankruptcy can be
a mechanism through which firms make strategic changes that help to preserve value
and overcome competitive disadvantages. Using a stakeholder management
perspective, this paper examines the influence of firm characteristics on the likelihood
of filing for Chapter 11, subsequently emerging from bankruptcy, and the number of
years in bankruptcy. Theoretical predictions are tested in a study of publicly traded
firms from 1980–99. Intangible assets and assets that can be efficiently sold in
bankruptcy positively influence the likelihood that a firm will file for Chapter 11 and
reorganize in a shorter number of years. Further, unfavorable executory contracts with
primary stakeholders, a previously unexplored area, positively influence a firm's
likelihood of both filing and reorganizing in bankruptcy. These findings are consistent
with a stakeholder view of strategic bankruptcy.

CONCLUSION

This study examines previously unexplored characteristics of declining firms that

likely affect a firm's propensity to file for bankruptcy and implement a timely
reorganization.

REFERENCES

1. Tandon, D., & Tandon, N. (2019). Ballooning Non-Performing Assets in Indian

Banking and Insolvency and Bankruptcy Code. International Journal of Political
Activism and Engagement, 6(1), 1–24. DOI :10.4018/ijpae.2019010101

2. Daniel III, Josiah M., 'Even If a Party Has a Change of Heart': A Framework for
Enforcement of Courthouse-Steps Settlements in Cases and Proceedings in the
Texas Bankruptcy Courts (February 7, 2019). Texas Tech Law Review,
Forthcoming. Available at SSRN: https://ssrn.com/abstract=3330367

3. Bolaños, L., Gifford, J., & Yun Kweun, J. (2019). Bankruptcy Policy and Surface
Transportation Public-Private Partnerships: A Comparative Analysis of the U.S.
and Europe. Case Studies on Transport Policy. DOI :10.1016/j.cstp.2019.04.003

4. Bernstein, S., Colonnelli, E., Giroud, X., & Iverson, B. (2018). Bankruptcy
Spillovers. Journal of Financial Economics. DOI :10.1016/j.jfineco.2018.09.010
5. James, S. D. (2016). Strategic bankruptcy: A stakeholder management perspective.
Journal of Business Research, 69(2), 492–499.
DOI:10.1016/j.jbusres.2015.05.006