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Evaluating the need for Sectoral Insolvency Frameworks in India: The Telecom Sector as a Case Study

Debanshu Mukherjee and Karan Gulati

Ever since the enactment of the Insolvency and Bankruptcy Code in 2016 - a unified legislation regarding insolvency resolution - demands for sectoral insolvency frameworks have emerged without clear analytical underpinning. Undoubtedly, a downturn or crisis in a particular sector affecting companies’ ability to pay debts may necessitate evaluating the possibility of such frameworks. However, such frameworks can also result in unequal standards and principles being applied to businesses. This paper investigates the conditions under which sectoral insolvency frameworks might be necessary or appropriate. In particular, they may be required when (i) there is a large volume of insolvency processes in a sector, (ii) the corporate debtor has sectorally distinct characteristics, and there are (iii) delays in the insolvency process in that sector. Given its strategic importance, complex regulatory nature, and the most recent call for a sectoral framework, we apply this framework to the Indian telecom sector. We find that the necessary requirements are not met for the telecom sector, suggesting that there may not be a need for a sectoral insolvency framework at this point. We hope that our framework and methodology for arriving at this conclusion will serve as a useful reference point for future legal analysis, policy formulation, and scholarly inquiry on this issue.

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