Introduction

The Insolvency and Bankruptcy Code, 2016 (“the Code”), was designed to prioritize time-bound rehabilitation and maximization of asset value, explicitly seeking to revive businesses rather than merely collect debts. Despite these goals, the Code’s implementation has faced criticisms. Many cases drag on, and average creditor recoveries have remained modest. Stakeholders have therefore pressed for reforms to make the process more efficient and creditor-friendly.

One such reform was the pre-packaged insolvency resolution process (“PPIRP”) for micro, small and medium enterprises (“MSMEs”), introduced in April 2021. However, by September 2024, only 13 pre-pack cases had been admitted. Even though there were many reasons why pre-pack failed, one of the major drawbacks of the system was the inclusion of “Swiss Challenge” in the PPIRP.

The latest IBC Amendment Bill (2025) (“the proposed Amendments”) introduces sweeping changes. Alongside new rules for group and cross-border insolvency, the most notable is a brand-new Creditor-Initiated Insolvency Resolution Process (CIIRP). The proposed amendments however do not include the Swiss Challenge mechanism in the CIIRP, which had been a hallmark feature of the PPIRP.

In this article, we analyse Swiss Challenge in Insolvency focusing on why it failed in PPIRP but is exactly what CIIRP needs. The article also makes policy recommendations for embedding Swiss Challenge in a more efficient manner in the Code.

What is Swiss Challenge?

The Swiss Challenge has been regarded as a competitive bidding process where the authority receives a bid from a party and reserves it as the “base plan”. Then other applicants are encouraged to make an offer to the authority, which is supposed to be better than the base plan. If a competing bid is superior, the original proponent is usually given a “right to match”. This allows them to revise their offer and retain the project if they can meet or exceed the best alternative.

The idea behind Swiss Challenge is to balance innovation with fairness. It incentivizes private parties to bring forward ideas but also ensures that such ideas are not accepted without market testing. It is intended to maximize value and ensure transparency, thereby preventing collusive or preferential allocations of assets in both insolvency and public procurement.

This was introduced to the Indian insolvency domain, when PPRIP was added to the Code.

Swiss Challenge and Pre-Pack: Why did it fail?

Under PPRIP, the insolvent MSME, the Corporate Debtor (“CD”) if eligible under section 29A, is allowed to submit the base resolution plan (“BRP”) to the Resolution Professional (“RP”) which is then exposed to challenge for value maximisation. According to the Insolvency and Bankruptcy Board of India (“IBBI”), this safeguard is intended to maintain the level of stakeholder protection afforded in a standard corporate insolvency resolution process (“CIRP”) while preventing the process from being exploited for strategic advantage. The Committee of Creditors (“CoC”) then compares the BRP with other resolution plans submitted by interested third parties.

The core of the Swiss Challenge is that a third party can submit a better resolution plan. If the original promoter, often the current owner, cannot or does not match the improved plan, they risk losing their company to a new bidder.

However, several features of the Swiss Challenge sit uneasily with PPIRP’s goals. PPIRP was envisaged as a promoter-led speedy mechanism based on the Debtor-in-Possession model (“DIP”). A Swiss challenge introduces delays, litigation risk, and strategic bidding by opportunistic players who have no stake in continuity of the business. This undermines a primary goal of PPRIP, which is time compression.

PPRIP is essentially a pre-negotiated agreement between the CD and its creditors in an attempt to revive the insolvent MSME. A Swiss Challenge turns this negotiated process into an auction, defeating the primary purpose of reviving the CD’s business. The primary objective of the Code is reviving businesses, not selling them off for the purpose of recovery.

Overall, Swiss Challenge appears structurally misaligned with PPIRP. It erodes speed and confidentiality and conflicts with the debtor-friendly bargain that underpins a DIP-style pre-pack.

Is it the missing piece to complete CIIRP?

CIIRP is a recent out-of-court insolvency framework allowing a certain class of specifically notified Financial Creditors (“FC”) to initiate and oversee the entire resolution process without immediately involving the Adjudicating Authority (“AA”).

This new mechanism can be thought of as a ‘private treaty’ for insolvency resolution, as it empowers the creditors and the CD to negotiate and implement a resolution plan outside the AA’s admission process. Such a process mirrors the DIP model of the United States, which allows the CD to retain control of the operations while going through insolvency. The only instance when the doors of the AA  are knocked is for essential approvals, such as a moratorium or execution of the resolution plan, and/or as a fallback option if the process fails.

Under the CIIRP, if the initiating creditor is to place a BRP at the outset, it raises several concerns as to whether the valuation is correct? Could the asset attract as better bidder? Are other market participants being crowded out? These questions strike at the Code’s very objective which is aimed at value maximization and revival of the business. Thus, these questions cannot be answered merely by internal creditor deliberations and hence, the Swiss Challenge arrives as the missing piece of the puzzle.

By exposing BRP to 3^rd party improvement, the Swiss Challenge restores balance to CIIRP’s commitment to speed and a transparent, market-tested model. Through creditor control, mandatory disclosure and statutory timelines, it would allow a single-round and time-boxed Swiss Challenge to be conducted with minimal friction.

Additionally, such external challenges protect minority creditors as it ensures that the OCs are paid in full, increases bidder confidence while safeguarding against speculations of insider preference or strategic underbidding.

At the outset, CIIRP provides the very ingredients where PPRIP lacked, such as an open solicitation framework, creditor-driven governance and strict timelines. These collectively cure the misalignments that caused the challenge to fail in PPRIP. Thus, the Swiss Challenge within the CIIRP allows the creditors to seek a fair value of their debts promptly.

Therefore, the Swiss Challenge does not derail the CIIRP but in actuality, completes it. It supplies the competitive tension required for value maximization while consequently enabling the process to be fast, credible and efficient.

Policy Recommendations

At the initial stage, the BRP shall mirror the Pre-Pack subcommittee’s recommendation that the same shall be ready before commencement of the resolution process, and all the material information shall be disclosed by the RP in a “Standard Information Memorandum”.

Once the BRP is filed, the RP shall open a limited window for inviting competing bids, which shall be a single invitation that shall be received within 7 business days, keeping the statutory timeline strict and efficient. After the CoC identifies the highest-scoring challenger, an improvement cycle of 24-48 hrs. shall begin, allowing each bidder to enhance its previous offer. This single invitation and short-bid cycle prevents drawn-out auctions, which the ILC had warned against while keeping the speedy resolution process intact.

Additionally, to choose the best plan, objective scoring with creditor voting shall be established, which aids in reducing subjective bias and ensures value maximization rather than a purely political outcome. Each of the submitted plans shall be evaluated on predefined criteria (shall be notified by the government), such as cash offered, financial viability and management continuity that shall be evaluated by a committee consisting of the RP along with 1 expert advisor and 1 industry expert (also to be notified by the government).

Subsequently, WAS shall be computed for each plan, and such shall also be placed before the CoC for approval. This hybrid approach ensures that the 66% CoC approval and their commercial wisdom are utilized for selecting the best plan rather than just metrics.

Conclusion

There is a structural gap in the current scheme of CIIRP that cannot be solved internally and creates a risk of unilateral valuation, limited competition, and hence a potential for underpricing. The introduction of Swiss Challenge within the model CIIRP would allow a transparent and swift mechanism as contemplated by the Code rather than leaning towards a private settlement.

Unlike in PPRIP, in which the Swiss Challenge is in conflict with the DIP model and thus delays the process, the challenge within the CIIRP subjects the BRP to a discipline, single-round, competitive process that tests creditor-proposed plans against superior 3rd party plans.

Additionally, the creditor-control, mandatory disclosures, and strict timelines under CIIRP thus create an ideal environment for a controlled process that is value-maximizing and functions efficiently. Therefore, the Swiss Challenge does not only become the missing piece but also reinforces the legitimacy of CIIRP as a credible resolution

INTRODUCTION

The creator economy, which is centred on individual content creators, influencers, and digital entrepreneurs, has brought about a shift in the manner in which value is created and monetized in the current market scenario. As a result, attention and audience trust have become the new currency. The value of the creator economy, as estimated by Goldman Sachs, is projected to reach $480 billion by 2027. The Merger and Acquisition (“M&A”) activity in this sector has recorded a significant 73% rise on a year-over-year basis over the first half of 2025, as private equity players and major media houses merge and acquire new entrants focused on the creator economy.

Building on the momentum, a central question arises regarding how valuation and liability should be determined, where the distinction between a creator’s personal brand and a company’s goodwill is blurred. The blog examines how traditional M&A frameworks fare in this new era of creator-driven businesses, where personal influence is the essential asset for business. It analyzes the legal uncertainties involved in personality-based intangible assets, specifically goodwill, including ownership, transfer, and valuation. In the end,  it offers a practical way to integrate the M&A framework in India, aiming to achieve parity between legal certainty and the dynamics of personal influence and digital goodwill in the creator economy.

The New Face of Goodwill

Conventional corporate goodwill is established from consistent performance, customer trust, and brand recognition developed through an organization’s operations. It is intangible and transferable through valuation, sale, or fusion. On the contrary, a creator’s goodwill is penetratingly personal established in authenticity, individual expression, and emotional significance with their audience. The primary asset becomes audience loyalty. Stepping back of influencer can dodge the acquired goodwill overnight.

Here, the ‘brand’ often is the person. A creator’s market value depends on their identity, voice, and engagement with followers. This has been a gradual movement away from company-based goodwill to personality-based goodwill, where the commercial worth of a venture is tied to its founder’s digital presence and public insight. Unlike earlier businesses that could survive leadership changes, creator-driven ventures face the constant risk of value destruction if the creator decides to withdraw or lose their relevance.

Legal and Commercial Complexities

The challenges surrounding creator-led acquisitions are multifaceted. Primarily, under the current framework of M&A, goodwill is recognized as a transferable commercial right linked with the continuation of business. Under Indian Accounting Standard (Ind AS) 38, goodwill is recognised as an intangible measurable asset. However, in creator economy, the acquirer along with purchasing a company also purchases the persona driving its market worth. Goodwill thus becomes inseparable from the creator’s identity. Assigning an independent monetary value or treating it as a company-owned asset for the purposes of combination becomes difficult.

It also challenges the established principles of ownership, valuation and transferability under Indian company law. In the Good Glamm–POPxo deal, the valuation was largely determined by digital reach and personality-led content, raising concerns about how much goodwill truly belonged to the enterprise and its creators.

Secondly, deal involving a creator’s name, likeness, or endorsement rights fall under personality or publicity rights. These are governed by privacy and intellectual property frameworks. Courts have prohibited exploitation of such rights without consent. It creates a dilemma where acquirer may purchase the business, but unless the creator contracts to license the commercial use of their identity, the goodwill attached to that persona does not legally pass to the acquirer. Besides that, Section 27 of the Indian Contract Act, 1872, provides a restraint on trade, making clauses unenforceable if it is perpetual or overly restrictive. Accordingly, the acquirer’s rights remain conditional on the creator’s continued participation, exposing the deal to reputational and financial risk.

Thirdly, creator-driven enterprise involves registered trademark involving creator’s name or likeliness. Section 37 of the Trademarks Act, 1999 allows assignment and transmission of trademarks. Nonetheless, the transfers mentioned in Sections 40-42 are those that would deceive the public or create confusion regarding the brand’s identity or continuity. In case the creator steps back from the company after the acquisition, they still cannot be a part of the brand with their name which would encroach upon their rights under these provisions.

Additionally, the commercialization of the brand comes with complexities. Traditional transactions are based on point-to-point valuations, whereas in this case, the value is established through various metrics, such as the number of people interacting with the brand, the loyalty of followers, and their perception of the brand. The metrics used for the latter do not correspond to any standard assessments covered by the existing financial regulations. Skilful auditors and due diligence practitioners are obligated to make judgments on the evolving digital metrics that may not pass the objectivity test, according to the Institute of Chartered Accountants of India (ICAI) guidelines, thus making the risk assessment very much dependent on these metrics.

Furthermore, the creator’s activities that result in contingent liabilities, such as defamation lawsuits, breaches of sponsorship agreements, or online controversies, may not be reflected in the financial statements but can significantly influence the post-acquisition value. The absence of statutory regulations on treatment of risks associated with the brand’s reputation continues to cast dounts among buyers and investors. For example, the talks between MrBeast and Night Media regarding the splitting of equity were said to have dragged on due to differing views on the valuation of MrBeast’s personal brand in 2022.

Subsequently, the Competition Commission of India (“CCI”) applies the merger analysis of appreciable adverse effect on the competition under Sections 5 and 6 of the Competition Act, 2002, taking its cue from the merger of facts and market shares. In the creator economy, the upper hand does not have to rely on financial means, but it can be simply through social influence and capturing the audience. Numerous followers of a single influencer might actually have more power than an entire company when it comes to shaping consumer attitudes and perceptions of the brand. This scenario creates regulatory grey areas, where the true effects of such partnerships on digital markets and consumer freedom are difficult to evaluate.

Liability is yet another complication arising from these matters. Would the liability fall on the acquirer if the creator becomes involved in a controversy after the acquisition and the brand suffers? On the other hand, if a company’s loss is caused by the personal actions of the creator, can it seek protection? Such scenarios highlight the presence of a grey area between individual behavior and corporate accountability.

SUGGESTIONS AND CONCLUSION

The existing M&A frameworks are not applicable to the assets of personal or social capital. In assessing the current regulation, several issues can be raised. One of them is that legal reforms and doctrinal clarity can be achieved by treating goodwill as a business, related to intangible assets. The framework should clearly indicate the recognition of personality-driven goodwill, which comes from the reputation, influence, and trust of the audience as a valuable asset. Amendments to the Companies Act, 2013 and Ind AS 38 could specify criteria for identification, valuation, and transfer.

Moreover, Section 57A should be inserted in Trademark Act including Recognition and Protection of Personality Rights. For the said purpose, “personality rights” mean the exclusive rights of an individual over their name, likeness, voice, signature, image, or any other distinctive aspect of identity having commercial value. It shall be deemed to be recognised as intangible property capable of assignment, licensing, or transfer, subject to the limitations prescribed under this Act and any other law for the time being in force. Any commercial use may be recorded with the Registrar of Trademarks for public notice. Additionally, when acquiring a creator-driven entity, it should be mandatory to obtain explicit written consent, specifying the duration, scope, and mode of continued use of the creator’s name, likeness, or persona. Legal clarity is also required on whether acquirers bear vicarious liability for a creator’s post-acquisition misconduct or controversies. The main goal of the positive judicial guidance and model clauses is to create a balanced distribution of responsibility among the business and creator involved.

In addition to this, in conjunction with trends in commercialization and valuation innovations, promoters should also factor in social capital aspects, such as engagement rates, the integrity of the followers, sentiment integrity over time, and audience retention when estimating the creator’s worth. These metrics reveal the degree and power of the creator’s relationship with the audience, thus giving the main predictors for the post-acquisition value of a creator. The ICAI may turn this initiative into an opportunity to formulate specific guidance notes on how to regulate these indicators, which they can then employ as part of the due diligence process, while also planning for future assessments of fair value, thereby maintaining the comparability and audit reliability.

Another important aspect of the creator and the buyer’s agreement is the division of risks as per contract terms.

1. Earn-out clauses can provide the buyer with a structure for payments that ties the compensation to the creator’s ongoing brand success, mitigating the likelihood of an inflated valuation caused by temporary hype.
2. Morality clauses protect the acquirers by safeguarding the brand’s reputation from damage during controversies that impact the public’s perception of the brand and erode market confidence.

• License-back agreements provide the creator with continued control over personal identity attributes such as name, voice, or likeness. Collectively, these tools aim to achieve a fair and appropriate balance between creative autonomy and commercial certainty.

Additionally, dynamic valuation and audit disclosure systems should be merged into accounting practices. Creator-linked goodwill is subject to fluctuations according to the audience’s sentiment, changes in social media algorithms, or reordering of the content. Bringing such valuations into the scope of Ind AS 36 (Impairment of Assets) would enable periodic re-evaluation that properly records the reputation changes almost in real-time. This ensures that the investors and the regulators can together look through the mist, hence the valuations will be as fluid and driven by persona as the creator enterprises.

Furthermore, the institutional regulatory approach should be in line with the situation of an economy where the market power is influential. The CCI would have to broaden its analytical framework to include, amongst other things, the parameter of ‘dominance based on influence’, where for example, the creator-led conglomerate restricts the consumer’s choice and controls the digital traffic patterns. At the same time, the SEBI may consider a situation where personality-linked dependencies are disclosed as part of the filings by listed entities, especially in cases where the valuation or revenue of a company is very much reliant on individual creators. This sort of transparency would enable the investors to evaluate the risks of concentration and the possible governance exposure linked to personal brands.

In that direction, there is a parallel necessity for a strong inter-agency system. The Ministry of Corporate Affairs (MCA), SEBI, CCI, and Intellectual Property authorities may collaborate to issue comprehensive guidance for assessing, recording, and controlling personality-based transactions. The joint system mentioned above may be supported through the introduction of multi-disciplinary training and certification programs for valuers, auditors, and legal experts, which will thus contribute to greater standardization of practice and consistency at the regulatory level.

The regulatory approach, therefore, needs to shift its focus and move towards a human-centric M&A framework, where human capital, digital footprint, and reputation are recognized as legitimate and measurable factors of enterprise value. In this vein, India can offer a well-defined, futuristic policy framework that connects legal accuracy with the vibrant and ever-changing nature of the new digital marketplace.

INTRODUCTION: SILENCE UNDER THE INFORMATION UTILITY

In a recent case of Air Wave Technocrafts Private Limited vs Voltas Limited, the NCLAT refused the claim of the creditor, since the debts were time-barred, undermining the role of IU in the insolvency proceedings. The Insolvency and Bankruptcy Code, 2016 ( hereinafter “The Code”) was introduced with the objective of consolidating all the insolvency proceedings under one roof for both corporate and individuals with the aim of maximising the value of the assets. Section 9 of the Code clarifies the process by which a creditor initiates the corporate insolvency resolution process when the corporate debtor is unable to make timely payments. Later, Information Utility (hereinafter IU) was introduced to address the issue of the non-availability of financial information. The IU acts as a repository of the information that helps in preventing disputes and delays in the proceedings. However, there is a procedural gap where the debtor can withhold confirmation on financial information about the debt uploaded by the creditor, which can defeat the very objective of IU, to provide swift insolvency proceedings.

Can a mechanism within the institution that is limited to verification but lacks any legally meaningful effect contribute substantively to being the evidentiary basis of an insolvency system?

This blog will Firstly, critically examine the limited role of IU under the insolvency proceedings, Secondly, analyse how the IU confirmation gap enables the debtor from defeating the core promises of swift insolvency proceedings, Thirdly, global comparison of the framework regarding debt acknowledgement, Lastly, it suggests reforms to give IU authentication a legal and meaningful effect without hampering the debtor’s right.

WHEN VERIFICATION FELL SHORT: THE IU DISCONNECT

The introduction of the Information Utility under the Insolvency and Bankruptcy Code, 2016, demonstrates a deliberate effort by the legislation to mitigate information asymmetry in insolvency proceedings. Sections 213 to 216 of the code regulate the submission of the information and its method of submission, as well as the rights and obligations of the person uploading the information. However, the statutory language indicates that the information utility was not intended to function as a determining authority but as a facilitator for factual clarity regarding the debt information to help the adjudicating authority regarding the proceedings under Sections 7, 9 and 10 of the Code. Regulation 21 of the IBBI (Information Utilities) Regulations, 2017 (hereinafter “The Regulations”) provides the framework to update the status of authentication of the information to be recorded by the IU.  The lacuna lies in the table given under Regulation 21 to update the status of authentication of information. At first, if the information uploaded by the creditor is confirmed by the debtor, then its status will be updated to Authenticated, and the same can be used as evidence in the proceedings. Secondly, if the debtor disputes the information, the status will be updated to Disputed. Everything seems fair till here, but at the last stage, when the debtor doesn’t respond even after three reminders, the status will be updated to deemed to be Authenticated, and the same serves no purpose in making the proceedings swift. It has been a consistent trend in tribunals, where the information having the status of deemed to be authenticated is not given much weight, and it is considered that the silence of the debtor can’t create legal consequences unless the statute explicitly provides. The information submission is a unilateral process by the creditor, and the same can’t be imposed upon the debtor. In the absence of any authoritative mechanism to require a debtor to either confirm or dispute the uploaded information by the creditor, the IU framework undermines its own objective of a participatory information mechanism and functions as a largely one-sided repository of creditor data. By allowing debtor silence to carry no legal consequence, the IU framework enables strategic delay and misuse when viewed through the lens of the Limitation law.

THE STRATEGIC USE OF NON-CONFIRMATION AND LIMITATION

While IU authentication facilitates evidentiary clarity, it cannot be equated with acknowledgement under Section 18 of the Limitation Act, 1963, unless a legislative consequence is attached. The framework governing the IU provides three options to the debtor in response to the information uploaded by the creditor: confirmation, Dispute, or Silence. While the former two options come with certain procedural outcomes, holding silence over the information has no consequences. This system enables the corporate debtor to strategically abstain from engaging in the IU proceedings by neither confirming nor disputing the debt information, thereby safeguarding the potential legal defences for the future.  The non-confirmation is used to escape from the debt liability through the provisions of the Limitation Act, 1963, as section 18 requires a written and signed acknowledgement to revive the time limit and to revive the limit under section 19, there should be payment (Half or full) or payment of interest on a debt before the expiration of the limitation time period. The debtor deliberately chooses not to respond, to ensure that no acknowledgment of the debt is created, the limitation period is not extended or revived, and a time-barred defence remains available at the stage of insolvency proceedings. In the recent case of Air Wave Technocrafts Private Limited vs Voltas Limited, the creditor had uploaded the information of the debt on the IU, but it was neither acknowledged nor disputed by the debtor. Later, during the insolvency proceedings, reliance was placed on the information uploaded on IU; however, the Hon’ble Tribunal rejected the creditor’s contention, stating that mere administrative filing of the information without an acknowledgement from the debtor does not extend the limitation period under the Limitation Act, 1963. The exploitation of non-confirmation highlights a systemic inconsistency between IU processes and the law of limitation. A brief comparative analysis highlights how consequences are attached to inaction in more mature systems.

GLOBAL COMPARISON: CONSEQUENCES OF SILENCE

Global insolvency practice suggests a clear principle: debtor silence must carry consequences. The approaches adopted in the United States and Singapore stand in sharp contrast to India’s IU regime

Under the U.S. Bankruptcy system, 11 U.S. Code § 502 states that a claim or interest is allowed after the creditor has filed proof of the claim, unless the debtor disputes it. In this system, the debtor gets a chance to dispute the claim, but there is no option of being silent on the claim without any adverse action. This keeps the debtor active in proceedings, since failure to comply with the procedure within a time frame can have significant legal consequences, such as the claim being allowed by default.

Under the Insolvency, Restructuring and Dissolution Act 2018 of Singapore, Section 312 of the act provides a 21-day timeline for the debtor to respond after a statutory demand is served by the creditor, adhering to the prescribed manner. If the debtor has neither complied with it nor applied to the court to set it aside, then the debtor is presumed to be unable to pay the debt within the meaning of Section 311 (1) c. The grounds for a bankruptcy application are given under Section 311 of the Act, and non-compliance or ignorance of the debtor regarding statutory demand can be a ground for insolvency proceedings, which enables the creditor to move forward with the insolvency proceedings.

The examination of rules regarding silence on debt from the jurisdictions of the United States and Singapore, and then juxtaposing them with Indian’s Information Utility provisions, reveals that the latter is unusual to the extent of having no consequences for silence. The framework in the US and Singapore is not similar to that of the Information Utility in India, but can be considered as a counterpart for the same.

WAY FORWARD: BRIDGING THE IU GAP

The deficiencies exposed in the current Information Utility framework call not for its abandonment, but for calibrated procedural reforms that assign meaningful consequences to debtor inaction without diluting statutory safeguards.

The first and foremost practical procedural reformation could be adding proof of the debt while submitting the information about on IU, as it will help the creditor at a later stage. In the next procedural overhaul, there should be an amendment under Regulation 21 of the IU Regulations, 2017, having certain consequences for the strategic abstention from responding to the creditor’s claim, hence compelling the debtor to either confirm or dispute the claim, leading to swift insolvency proceedings. When the debtor chooses not to respond after the definite timeline, the rebuttable presumption of correctness will be created favouring the creditor, and the same is not equated with acknowledgement within the meaning of section 18 of the Limitation Act, 1963.  The presumption is made rebuttable to safeguard the interest of the debtor, so it can be challenged by the debtor during the proceedings with substantial proof. At last, a clear judicial pronouncement will be beneficial in removing the irregularities in the current framework.

Bridging this gap is essential for the IBC to truly achieve its goal of a swift and efficient insolvency resolution process.

Introduction

India’s growth is continuously rising despite of U.S tariff on the Indian economy as recently International Monetary Fund in its World Economic Outlook report released in October 2025 has stated “India’s GDP will grow faster than estimated earlier despite the impact of US tariffs on Indian economy” also it showed “India’s GDP growth rate for 2025-26 at 6.6 percent versus 6.4 per cent earlier. But the IMF has lowered its estimates by 20 basis points to 6.2 per cent for 2026-27.” While all these geopolitical incidents are going on in background India’s insolvency landscape is witnessing a noticeable rise in technology-based companies struggling with financial distress and especially after the sharp funding slowdown across the startup ecosystem. The Insolvency and Bankruptcy Board of India (IBBI) quarterly newsletter for April-June 2025 reports that 8,492 corporate insolvency resolution processes (CIRPs) have been admitted since the Code was introduced, as per Table 1 of the newsletter, it also presents sectoral distribution data for admission, appeal, review, settled, withdrawn and resolution plans. According to the same newsletter, it shows that IT, software, digital services, and technology-enabled companies form a significant share of all admitted cases, as illustrated in Figure 3 on Page 5. Moreover, it also states the mode of closure which shows that 57% of all closed CIRPs resulted in rescue outcomes such as resolution, settlement, or withdrawal, based on Figure 2 on the same page and all these figures indicate a growing space for investors and buyers to acquire distressed companies under the Insolvency and Bankruptcy Code (IBC), 2016. With tech development, India’s startups are also growing. Still, the major concern is that over 28,000 startups in India closed their doors in 2023-2024 as a result of financial problems which indicates the severity of struggles by India’s startup ecosystem additionally 23,000 workers were laid off across by nearly 82 Indian startups as the funding winter intensified and this led to noticeable uptick in distressed technology acquisitions as more investors utilise the IBC route to acquire struggling tech companies, as distress grows and digital assets become more affordable.

Rise of Distress in Tech Companies

India’s growing financial distress in the tech industry is increasing day by day, as technology companies in India are closely linked to the slowdown in private capital and changing market conditions. As reported by Business Standard that startup funding in India dropped by 72% in 2023 by further stating that “the funding had declined across all stages, with late-stage funding dropping over 73 per cent, followed by early-stage funding (70 per cent) and seed-stage funding (60 per cent). With this, India’s global ranking also dropped a place to 5th position in the list of the highest-funded geographies globally in 2023” which marks one of the sharpest contractions in the past few years. This decline directly affected the early-stage and growth-stage of tech-driven firms, which depend heavily on external investment to sustain their business operations. With a reduced amount of capital and limited funding availability from other sources, many tech companies are struggling to meet their recurring expenses, such as cloud infrastructure costs, software development expenses, and vendor payments, which increases the risk of default. In addition to this weaker funding, the technology industry as a whole experienced strong consolidation pressure. As per the Nasscom – Startup Report 2024, “funding fell to about USD 6 billion in 2023, a drop of nearly 67%, and tech-startup M&A activity declined by around 50%”. This contention is also supported by the KPMG Startup Ecosystem Report 2024, which similarly reports that many acquisitions in 2023 happened due to financial stress and rising operational costs and these conditions made several tech firms more vulnerable to creditor action and increased their presence in the IBC process.

Role of Digital Platforms and Market Trends in IBC Tech Acquisitions

The process of acquiring distressed tech companies under the IBC has been strongly supported by digital platforms. As the IBBI’s liquidation auction portal displays over 8,300 auction related records which includes auction notices and corrigenda, which shows the extensive use of e-auction system for felling assets under insolvency. These online platforms provide transparency and help investors which includes tech focused buyers also to ascertain and put their bid for assets efficiently. At the same time, global technology deal activity has remained steady as the EY Technology Services M&A Report 2023 states that over 740 tech-services M&A transactions in 2023 by highlighting sustained investor interest even in a weak market and this digital transparency under IBC and continued global demand for tech assets have made distressed technology acquisitions more attractive to investors in India.

Why Investors Prefer Acquiring Technology Companies Through the IBC Process

Investors are increasingly preferring to acquire distressed technology companies through the IBC because it offers clarity in legal protection and lower commercial risk compared to traditional negotiations. One of the major advantages is that acquisitions under the IBC provide a “clean slate,” as the National Company Law Tribunal (NCLT) approves the resolution plan and extinguishes past liabilities unless specifically included, and this gives a buyer a greater certainty. The Grant Thornton Annual Dealtracker, 2023 report states that India recorded 1,641 deals in 2023, with a total value of about USD 65.9 billion and in which technology-linked sectors remained active despite an overall decline in deal values, which indicates that investors are interested in technology assets has stayed strong even during weaker market conditions.

Another report by McKinsey’s “Cracking the Digital Code” further support this trend as it notes that 71% of global executives expect digital initiatives to increase company revenues over the next three years, and nearly half report that CEOs now directly sponsor digital programs, reflecting growing strategic importance because digital capabilities which have become very essential for acquiring distressed tech firms through the IBC allows investors to obtain platforms, software, and talent at a lower cost and with greater legal certainty. This combination of legal clarity, digital demand, and investor confidence has made IBC-driven tech acquisitions increasingly attractive in India.

Key Challenges in Acquiring Distressed Technology Companies

Despite growing interest in acquiring distressed technology companies under the IBC framework comes with several difficulties like ascertaining the value digital assets. Unlike physical assets the worth of software, intellectual property, user data and algorithms depends on usage, scalability and future revenue which make valuation highly subjective case to case basis as these assets do not have fixed market value. The report by KPMG, “KPMG M&A Outlook 2025” shows that valuation gaps are one the major reason for deal failure, cited by 34% of surveyed dealmakers which highlights how difficult it is for buyers and sellers to agree on the value of technology-driven companies and this challenge becomes even sharper in distressed cases where future revenue, , user retention, and product stability are uncertain. Another major issue is retention of key employees, as distressed tech firms often lose developers, engineers and product architects during insolvency proceedings which was also highlighted by The Deloitte Tech Trends 2025 report which notes that organisations face a persistent skills gap especially in advanced digital areas like AI, cloud and cybersecurity which makes it harder for buyers to stabilise a distressed tech business after acquisition. Additionally, compliance with Digital Personal Data Protection Act, 2023 which was notified on 14 November 2025 by the government adds pressure on investors because distressed tech companies often handle sensitive user data. These challenges show that while IBC provides a structured route for acquiring distressed tech companies and buyers still need to carefully assess valuation, talent stability and regulatory risks.

Future Prospects for Distressed Technology Acquisitions in India

The outlook for the distressed technology acquisitions under the IBC is positive because both market demand for tech and deal activity support such transactions. As per NASSCOM’s Strategic Review 2025, the Indian tech industry reached about USD 282.6 billion in FY2025 (including hardware) and is expected to approach USD 300 billion by FY2026 with exports of roughly USD 224.4 billion and growing domestic tech spending as all of which keep technology assets strategically valuable for buyers. At the same time, PwC in its mid-year analysis of both global and India shows that while global M&A volumes fell 9% in H1 2025 versus H1 2024, deal values rose 15% India’s deal volumes increased around 18%, with the TMT sector remaining active which mean trend is still strong buyer interest in tech assets even in uncertain markets. Taken together these rising long term demand for digital capabilities and ongoing deal activity make the IBC an increasingly viable route for acquiring distressed tech firms and provided buyers manage valuation, talent and data risks carefully.

Conclusion

The rise in distressed technology acquisitions under the IBC reflects both the pressures and the evolving opportunities in India’s digital economy but with slowdown in fundings, valuation gaps and operational challenges have pushed many tech companies toward financial distress still IBC continues to offer a predictable and transparent route for their revival or sale. Investors are drawn to this process because it provides clearer legal protection and cleaner ownership transfer and access to valuable digital assets at more reasonable costs. Simultaneously, India’s tech sector continues to grow and supported by long-term digital demand highlighted in recent NASSCOM reviews and global deal activity remains steady even amid uncertainty as shown in PwC’s 2025 outlook. We need improvements in digital auctions, better information systems and stronger regulatory oversight for making IBC transactions more efficient. While another challenge like employee retention, digital-asset valuation and data-compliance risks remain but overall ecosystem is becoming more investor-friendly and distressed technology acquisitions under the IBC are likely to play an increasingly important role in future market consolidation and technological development.

Introduction
The concept of corporate personality is one of the principles of corporate law, which recognizes a corporation as a separate legal personality independent of its shareholders. One of the first representatives of this doctrine can be traced in the judgment of Solomon v. Solomon & Co. Ltd. The doctrine places emphasis on the concept of limited liability and eases capital formation. However, at times of corporate separateness, which is used to distort trust, avoid liability, and commit fraud, the courts can lift the veil of incorporation to determine the actual culprits. The main issue of the modern practice is how to balance the freedom that corporate structures provide with the necessity of accountability, especially in multinationals and financial institutions that use complex corporate structures to evade liability.

The decision made by the Bombay High Court in Anil Ambani v. State Bank of India (SBI) has brought back this debate. The Court affirmed that SBI had correctly ruled that Reliance Communications and its chairman at the time, Anil Ambani, were defraudulent borrowers. It reiterated that promotion cannot be held responsible in cases where the lenders have been misled using the corporate structures when the promoters have limited liability. The following paper aims at tracing the development of the doctrine, examining the rationale of the court and evaluating the current applicability of these doctrines in the context of the Companies Act, 2013. It also strives to depict the changing corporate governance situation in India.

Evolution of the Corporate Veil
The corporate veil doctrine originated in the case of Solomon, which held that once a company is incorporated, it attains a legal personality which is distinct from its members. Indian jurisprudence has also adopted this stance by incorporating several amendments and judicial pronouncements. In addition to this, the Indian courts have long recognised the exceptions where the concept of justice demands the lifting of the veil. In State of UP v. Renusagar Power Co., the court treated Renusagar and Hindalco as a single economic entity for taxation, placing its reliance on the need to prevent artificial separation.

Various provisions in the Companies Act, 2013, have codified provisions where the directors and officers may be held liable, specifically recognising the veil-lifting principles. Section 2(60) defines “officer in default” covering those persons who give consent or take part in misconduct. Section 339 provides for personal liability in case of fraudulent conduct of business during winding up, while Section 447 places punishment for fraud. Further, Rule 11 of the Companies (Accounts) Rules, 2014 mandates that a detailed disclosure of related-party transactions must be provided to curb the misuse of complex corporate webs. Thus, while the corporate veil remains a functional safety to hide behind, statutory developments have widened its scope in cases where the veil can be pierced. This is done particularly in the cases of fraud, public interest and misuse of limited liability.

The Anil Ambani v. State Bank of India Case
In Anil Ambani v. State Bank of India, the petitioner challenged the decision of SBI to declare Reliance Communications (RCom) and the petitioner as a fraudulent borrower under the Master Directions on Frauds, 2016 issued by the Reserve Bank of India. SBI accused RCom of misrepresenting and stealing money that was sanctioned to the company and breaking the covenant of the loan agreement. Ambani argued that the classification breached the natural justice and unjustly charged him with the misconduct of the corporation, even though the legal entity called RCom was independent.

The Division Bench of Justices Nitin Jamdar and M.M. Sathaye rejected the petition as their classification relied on an in-house forensic audit that revealed that there was substantial misrepresentation. The Court observed that in the role of a chairman and guarantor, Ambani could not dissociate himself with the actions of the corporate body in which the decision-making process was signed and monitored by him. The case decision was similar to the pattern used in Delhi Development Authority v. Skipper Construction Co., in which the Supreme Court determined that the veil can be lifted when the corporate form is employed to avoid the will of the people or commit fraud.

Notably, the logic of the High Court went beyond the technicality of the proceedings. It has not seen the doctrine of limited liability as a promoter shield, but as an obligation bound by disclosure and honesty in financial transactions. It is a demonstration of judicial restraint and accountability in the corporate realm, and the Court declining to intervene in the judgment of the bank and instead leaving regulatory autonomy to regulators.

Critical Analysis

1. Increasing the Functional Scope of Veil-Lifting.
   The Court implicitly accepted that the two issues of promoter actions and corporate governance failures are inseparable by admitting the legality of the fraud categorization. This operational model adopted that a company being distinct does not imply that its officers should not be liable to the acts committed on their knowledge or consent. The rationale of the High Court in this case is in line with Section 339(1) of Companies Act that allows courts to pronounce all those who knowingly carry on business with the view of defrauding as personally liable to company debts.

   In this connection, the Anil Ambani case can be interpreted as a case of de facto interpretation of Section 339, but in the context of banking regulation. The ruling is also in touch with Section 447 of the fraud and Section 36(c) of the RBI Act, 1934, which gives the bank the authority to take action against any fraudulent transaction.

2. Accountability Gap and Corporate Governance.
   India has faced numerous criticisms on its corporate landscape that remain timeless, the so-called, promoter-based model of governance in which management and ownership are frequently confused. In conglomerates such as the Reliance Group, authority on making decisions is highly concentrated on the promoter family hence it is hard to distinguish between personal and corporate will. The position of the Court fills this accountability void in that where promoters act directly to affect financial decision-making and enjoy the fruits of such decision-making, they cannot claim corporate veil to escape analysis.

   This reading is in line with the English Court of Appeal case of Gilford Motor Co. v. Horne, when the English Court of Appeal lifted the veil to allow a director to avoid the non-compete covenant by the company. In a similar case of New Horizons Ltd. v. Union of India, the Supreme court of India also discussed the actual character of a consortium company to ascertain the control and responsibility. These precedents argue in favor of the fact that form should be subservient to substance where the corporate organization is only a facade.

3. Implications and Due Process Concerns Regulations.
   Although the ruling enhances accountability, it also brings up the issue of procedural fairness in the classification of fraud. RBI Master Directions permit the banks to label borrowers as fraudulent by a judicial ruling, which impacts reputations and credit access. Criticisms state that such powers might result in overreach, which highers the presumption of innocence. Nevertheless, the fact that the Court did not review the decision of SBI vigorously highlights the fact that judicial system acknowledges that the regulator is well-informed in avoiding large-scale defaults to the banking system.

Contemporary Relevance
The ruling is also made when financial regulators in India are under mounting pressure to deal with willful defaults and misconduct of promoters. Certain big business entities were put under the microscope in 2024 alone, in terms of the Insolvency and Bankruptcy Code (IBC) and the Prevention of Money Laundering Act (PMLA). The Anil Ambani case is a decision that conforms to the judicial logic to a wider policy discourse of the government to exercise responsive capitalism.

Conclusion
The principle of the corporate veil remains one of the pillars of corporate jurisdiction; however, its invincibility is not unconditional. The decision in Anil Ambani v. State Bank of India represents a jurisprudence change of protection of entities to accountability enforcement. By placing the unveiling of the veil in the context of the wider financial regulation, the Bombay High Court has indicated that corporate structures cannot be used to absolve the promoters of the consequences of their actions. To this end, the modern-day corporate veil cannot be understood as an invulnerable shield but instead seen as a transparent veil that only protects the business as long as integrity and governance prevail in it.

Introduction
The Ministry of Corporate Affairs (“MCA”) has just expanded the Fast Track Merger (“FTM”) route under Section 233 of the Companies Act, 2013, by releasing the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025, amending Rule 25 of the 2016 rules that govern mergers and restructuring under the Act. As a result, the frameworks for Indian corporate mergers and restructuring are entering a new era of being faster, more efficient, and more transparent.

The foundation stone for the simplified FTM process in reverse flip transactions was already set by the 2024 amendment to the rules, which made the procedural requirements easy and expanded the ‘small company’ thresholds to allow Indian private holding companies to undertake FTM with their Indian subsidiary. And the 2025 reforms have made it even more business-friendly by removing the classification hurdles after expanding the FTM route open for use to newer classified entities. Moreover, by introducing the responsibilities of the auditors and companies, the amendment fosters a culture of self-regulation and disclosure in the corporate landscape.

The next sections of this article will reveal how the merger landscape in India has changed with the 2025 amendment, who can use the FTM route now, how the process has been made easier, and why the auditor is more responsible now to ensure that everything is in place correctly. It will also explain how the governance regulations of the Securities and Exchange Board of India (“SEBI”) and the Reserve Bank of India’s (“RBI”) regulations for overseas investment collectively make the merger process clearer, and how drawing a comparison with the merger models of the United Kingdom (“UK”), Singapore, and the United States (“US”) shows that the 2025 Indian reforms bring the nation closer to top international standards while fostering openness, accountability, and investor trust.

Need for the Amendment: Practical Gaps in the Existing FTM Framework
The FTM route under Section 233 was formulated as an enabling process to make merging easier, yet it was restricted to two main categories, i.e., mergers between two or more small companies and between a holding company and its wholly owned subsidiary. Because large unlisted and holding companies were left out, they had to rely on the lengthier National Company Law Tribunal (“NCLT”) route under Section 232.

Facts from recent internal restructurings of big groups like Vedanta Ltd. have already shown how procedural logjams and tribunal reliance can hold back even the most harmonious and financially healthy businesses. Similarly, in 2024, some Indian startups involved in cross-border mergers and reverse flip transactions highlighted the need for a speedy, less rigid, smaller tribunal-centric regime, and the same was reported to the MCA by an industry group known as the Startup Policy Forum (“SPF”), which represents 50 new-age companies.

In light of these industry realities, the amendment changes the rules significantly by introducing a new sub-clause to Rule 25 (1A), which is the FTM route that is now opened up to a wider set of companies. Any unlisted company, except for Section 8 companies, holding companies, and their subsidiaries, whether listed or unlisted, is now allowed to use this route if their total outstanding debt, which includes loans, debentures, or deposits, is not more than ₹200 crore and has no default on borrowings.

The Evolving Landscape of Fast-Track Mergers
The prima facie and most emphasised part of this amendment is the expanded scope of the FTM route. But the less paid-attention-to yet crucial objective of the reform is to bring accountability and transparency into it, and not just to enhance the speed and simplify the merger process. As this commendable reform substituted the long and time-consuming NCLT’s oversight with a Regional Director (“RD”) supervision, it is a transition based on professional accountability (Note: it applies to the FTM route under Section 233 only and not to all merger schemes). Instead of tribunal there is a strategic dependence on company auditors, as such auditors are given the responsibility of thoroughly checking and confirming that companies follow financial and legal regulations, thus allowing for the early identification of issues that can be dealt with beforehand, hence shareholders and creditors being more protected. This shifts the system toward self-regulation, combining faster decisions with greater accountability and transparency.

Comparative Perspective: Aligning with Global Best Practices
The restructuring frameworks at the global level have been made very simple and easy to comply with. For instance, in the UK, the merger and reconstruction processes are governed by Sections 895-901 of the Companies Act, 2006 (Part 26), and the court plays a supervisory role, which is streamlined and less time-consuming. The main idea here is to promote ease of doing business and let companies reorganise internally without going through lengthy processes. Likewise, in Singapore, Section 210 of the Companies Act 1967 contains provisions for the pre-packaged schemes, where the terms of merger are decided and agreed in advance, and the court mainly gives final approval after the required majority of the members approves the merger, which in return helps save time and cost.

In the US, specifically under Delaware law, there is a concept of short-form merger governed by Section 253 (applies when the parent owns at least 90% of the subsidiary) of the Delaware General Corporation Law (DGCL), wherein a merger between a parent company and its wholly owned subsidiary is permitted without having approval from the shareholders, making the process seamless and fast.

After doing a comparative analysis of these jurisdictions with India, it can be seen that the FTM process under section 233 of the act relies on a system that is driven by regulation at multi-tiers. Whereas in jurisdictions like the UK and Singapore, courts are involved primarily to ensure fairness; moreover, the process is simpler in Delaware, as they do not even require approval in certain situations. In contrast, in India it is required to carry out detailed inspections by the RD, Registrar of Companies, and Official Liquidators. This becomes the reason why the processes are layered since each authority goes through the mergers thoroughly from all possible perspectives before approving.

Policy Linkages and the Road Ahead for Corporate Restructuring
The scope of the expanded FTM route is going to be complemented by the parallel reforms from SEBI and RBI. Both of the regulations are quintessential in a merger process, which collectively creates a pro-business environment for domestic and cross-border transactions. Specifically, the SEBI regulations ensure that the companies using the FTM route are internally accountable, which supports the shift toward self-regulation. So, for example, as per Regulation 17(1)(c) of the (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR”), the largest 2000 listed companies now must have a board of at least six directors, including a balanced mix, meaning the board should consist of executives, non-executives, and independent directors who bring a variety of skills and experiences to the table. Executive directors can effectively manage the day-to-day operations, and the non-executive and independent directors can provide the unbiased and fair decision-making needed to propel the company in the right direction. With at least half of the board made up of non-executive directors, it is also crucial that they can step back from the hands-on management and stimulate more autonomous decision-making.

In accordance with Regulation 17(1A), shareholder consent (special resolution) is required when appointing a non-executive director who is seventy-five years old, plus Regulation 17A prohibits anyone from occupying directorship roles in multiple listed companies beyond the permitted limit of seven or three, as the case may be. This suite of regulations is intended to boost up investor faith in the company’s board and help create boards that are completely transparent and expertly manage their companies through takeovers and other strategic moves.

The recent SEBI amendments focus on Related Party Transactions (“RPT”), which are sometimes the cause for operational delays (because for every RPT, it needed multiple approvals from the audit committee and shareholders before execution). Rather than having to obtain approval for every such transaction, the revised Regulations 23 and 2(1)(zb) of the LODR allow for a more reasonable, scale-based approach. In other words, the smaller, more routine transactions will not require approval, and only the larger, more significant ones will require a vote. This reform is reasonable because it avoids needless delays in the approval process and takes investor interests into account.

Furthermore, to help companies looking to grow internationally, the RBI brought the Foreign Exchange Management (Overseas Investment) Rules, 2022, which replaced the older frameworks Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations 2004 and Foreign Exchange Management (Acquisition and Transfer of Immovable Property Outside India) Regulations, 2015. These earlier regulations outlined the ways Indian companies could invest overseas, acquire foreign businesses, establish subsidiaries or joint ventures, and buy assets outside India’s borders. The updated rules have made it easier to get approvals that used to hold up cross-border mergers and acquisitions. With this change, regulators have made it easier for Indian companies to grow internationally by striking a balance between liberalisation and appropriate oversight.

In the same manner, Regulation 9 of the Foreign Exchange Management (Cross Border Merger) Regulations, 2018, introduced by the RBI, provided the concept of “deemed approval” for mergers between Indian firms and their foreign subsidiaries. Where the conditions prescribed under these regulations are complied with, such transactions shall be deemed to have the approval of the Reserve Bank of India. It makes the process easier by allowing the RBI to clear a transaction right away as long as the specific merger guidelines are followed, removing the need for individual case-by-case approval.

Conclusion
The amendment gives businesses a very friendly but streamlined process by letting them use the FTM mechanism in Section 233. At the same time, it gives regulators and auditors greater authority by making businesses responsible for their actions. The NCLT used to have the power to supervise, but now that power is being transferred to how business works instead of staying an external force.

Besides, the amendment indicates that the frameworks connected with the ease of doing business have become attractive to domestic and foreign investors alike, which corresponds to international best practices. It is obvious that the auditors’ and regulators’ effectiveness in enforcing these provisions will be the factor that determines the success of this amendment. Good administration, coordination among authorities, and clear procedures are also some of the factors that will decide how smoothly the system works. But if the same is followed effectively, it will make it transaction-friendly, boost trust, and transform India’s corporate sector into a competitive and attractive place for investments.

Introduction
Mergers and acquisitions (M&A) are drivers of economic growth. In India, the deal-making landscape hit a record 551 deals valued at over $19 billion a 57% surge in volume, reflecting rising investor confidence. While M&A fuels corporate restructuring, growth, and expansion. Benefiting shareholders, promoters, and founders, we often overlook the most vital stakeholders in a company’s functioning, which are the employees

The employee during such a transaction often faces issues such as job insecurity, changed employment conditions, cultural differences, and for all this, there exists a limited recourse under the Indian law. The primary rights of employees during such a deal are governed by the Industrial Disputes Act 1947. There are various issues associated with the current framework which do not provide adequate protection that an employee should be given.

The learnings for better law can be derived from the EU Laws, which primarily govern cross-border M&A activities. EU law contains two of the most fundamental mechanisms that protect the rights of the employee, enshrined in the transfer of undertaking and the directive on collective redundancies. This tool provides various advantages, such right of consultation, being informed of protection against dismissal when there is our large number of employees who are absent from the Indian framework.

Firstly,​‍​‌‍​‍‌​‍​‌‍​‍‌ this paper will review the laws that secure the rights of workers during M&A in India and also sketch out some court decisions that have exposed the weaknesses of this protection in practice. After that, it will study the legal stance of the European Union concentrating on the main directives and the employee rights and compare the two legal systems to find the similarities and differences. Lastly, it will present the future roadmap by listing the changes that India could implement to develop a more friendly and cooperative M&A environment with the employees at its ​‍​‌‍​‍‌​‍​‌‍​‍‌centre.

Section 25FF: Promise Without Protection
In the Indian context, the treatment of employees during an M&A transaction is primarily governed by Section 25FF of the Industrial Disputes Act, 1947. Such​‍​‌‍​‍‌​‍​‌‍​‍‌ a provision specifies that in case a transfer of a business happens, if a worker has been working continuously for at least one year, then this employee is entitled to a compensation that is of the same nature as what is provided for in Section 25F of the same Act. The transfer is going to be considered as retrenchment, if the three cumulative conditions are not satisfied: (i) the workman’s service is interrupted because of the transfer, (ii) the post-transfer terms and conditions are of a less favourable nature, and (iii) the new employer is liable to pay the workman in case of future retrenchment, as per the contract. In case any of these conditions is not met, the transferee will be the one to pay the compensation.

At face value, the provision seems to be employee-friendly, aiming at guaranteeing a smooth transition as well as monetary protection in case continuity is disrupted. Its implementation, however, has not been successful in achieving this goal for the most ​‍​‌‍​‍‌​‍​‌‍​‍‌part.

One illustration of this is the Jet Airways merger, where employee salaries were cut, and many were sent on leave without pay. In fact, their services were not terminated, and they were later brought back, but the conditions of their return were much worse, and there was no way to appeal. Some employees who were retrenched also made a call for their rightful provident fund and gratuity payments, which were delayed for months.

The​‍​‌‍​‍‌​‍​‌‍​‍‌ case went up to the Supreme Court that supported the NCLAT’s decision giving the mandate to the company to compensate the employees with an amount exceeding ₹200 crore. The Court did not accept the company’s argument of financial distress and emphatically declared, “unpaid labour due always takes precedence.” This is a clear indication of how employees are pushed into distress because even their most basic rights are delayed, as a result of weak enforcement in such transactions, and they are forced to file a case in court to get their rights. The whole manner in which it is handled becomes lengthy and ​‍​‌‍​‍‌​‍​‌‍​‍‌tiring.

Although​‍​‌‍​‍‌​‍​‌‍​‍‌ the compensation is imposed by law, it is still met with delays and uncertainties. Affected employees are only paid a fraction of their dues or not at all if the companies are making losses during the merging process. There was a situation in the Jet Airways–Etihad acquisition, where the staff held a protest at Terminal 3 of the Delhi airport against the delayed and insufficient payment of their dues. So, as if there were no compensation arrangements, employees cannot reach it, are not informed or consulted prior to major corporate decisions, and forcibly end up on the streets to claim what belongs to ​‍​‌‍​‍‌​‍​‌‍​‍‌them.

Things​‍​‌‍​‍‌​‍​‌‍​‍‌ escalate to a level where the merger results in sudden changes in the organisation’s culture, structure, or hierarchy. The law doesn’t specify any way of dealing with these changes. It might be that everything remains the same on paper with respect to the employment contract, while in fact, the work environment changes drastically. The worker is in a situation that can be called a “no win” scenario: if he quits because of his discomfort, he jeopardizes his right to compensation; if he remains, he has to get used to a toxic or uncertain atmosphere without any help coming from the ​‍​‌‍​‍‌​‍​‌‍​‍‌institution.

The Tata Steel–Corus merger is a case in point. Employees faced cultural differences, misaligned practices, and large-scale restructuring. In​‍​‌‍​‍‌​‍​‌‍​‍‌ particular, there was a lot of disturbance among the workers, a definite cultural mismatch, absence of leadership, and poor communication between the different departments. Employees, thus, are in the middle of the fire practically, trying to get used to a system they had never heard of and in which they were not consulted and did not raise their voice.

In addition, the protection conferred by Section 25FF is only for “workmen” as per the definition given by the Act. Managerial and supervisory staff, who are also quite affected by mergers, are completely left out of this category. Consequently, a sizeable portion of the workforce is out of the reach of even the most modest legal safeguards available.

Even though India’s M&A regulations may seem to be very friendly towards employees on paper, they are lacking in terms of structure and institutional support. The limited legal scope, weak enforcement, and procedural delays that allow large sections of the workforce to be exposed during corporate dealings without any protection. A comparative analysis of the European regulatory framework in the following section will be helpful to understand how a more comprehensive and balanced employee protection regime can be implemented in ​‍​‌‍​‍‌​‍​‌‍​‍‌India.

India’s Deficient M&A Protections Through the EU Lens
The​‍​‌‍​‍‌​‍​‌‍​‍‌ EU approach to M&A agreements is much more comprehensive and transparent as compared to the Indian regulations. India labor law is still rooted in the old and limited protection perspective. In contrast, the EU legislation establishes a consistent and forward-looking juridical framework, which doesn’t see employees only as those impacted but also as co-stakeholders in the business ​‍​‌‍​‍‌​‍​‌‍​‍‌transactions.

Firstly, Article 1 of the EU TUPE Directive is relevant to any transfer of a business and it is a provision that extends protection to all employees, irrespective of their category. On the other hand, Indian law has confined such protection only to “workmen” under Section 2(s) of the Industrial Disputes Act, 1947, thus, it does not cover employees in managerial or administrative roles. Therefore, a considerable portion of the Indian workforce is left out and does not have the necessary legal protection during corporate transactions.

Secondly, the TUPE Directive ensures the preservation of employment terms after a transfer. All rights, duties, and obligations with the previous employer continue under the new one, which ensures employee security. On the other side, Section 25FF of the Industrial Disputes Act only obliges the transferee to provide “terms and conditions of service which are no less favorable” than ​‍​‌‍​‍‌​‍​‌‍​‍‌before.

The​‍​‌‍​‍‌​‍​‌‍​‍‌ expression that has been utilized here is extremely ambiguous and generally too broad, particularly if one were to make a comparison with the EU framework. The Indian rule just outlines that the conditions should not be “less favourable” but does not clarify what is considered favourable or not. As a result, this causes perplexity and gives the opportunity for considerable flexibility in the interpretation, and it is most often that such big corporate leviathans are the ones who take advantage of employees at their ​‍​‌‍​‍‌​‍​‌‍​‍‌expense.

Thirdly,​‍​‌‍​‍‌​‍​‌‍​‍‌ the TUPE system significantly limits the cases of dismissals caused by a transfer. Employers are not allowed to terminate employees solely due to the transfer, for which a very strict standard is set for dismissals that are only on “economic, technical, or organisational” (ETO) grounds, with the burden of proof on the employer.

On the contrary, Indian law does not set any particular limits for the number of dismissals. Its provisions are general, and there is no precise standard for termination. The point that is mainly focused on is the procedural aspect of the regulation, such as the giving of a notice and the payment of a compensation, rather than the reason for the dismissal being examined. The vagueness gives employers broad powers and offers very few protection to ​‍​‌‍​‍‌​‍​‌‍​‍‌employees.

Fourthly, the TUPE Directive mandates employers to inform and consult employee representatives before a business transfer. It makes the employees aware of the transfer, the changes which the transfer would bring, and how they will be affected, thereby ensuring that they are not left out. This is supported by the EU Directive on Collective Redundancies, which is closely linked with the directives and encourages active dialogue with unions to work out any solutions and measures for the employees.

Contrastingly, India does not have any mandatory consultation provision that applies to workmen or non-workmen. While Section 25N of the Industrial Disputes Act requires prior government approval for the retrenchment of over 100 workers, it does not require employers to give reasons for the transfer or to engage in an active dialogue with employees. As a result, Indian employees are often informed only after the completion of the transaction, thereby limiting their participation in the whole process.

A key example of the EU system’s strength is the British Airways–Iberia merger under IAG. Although initially raising concerns over job losses, strong TUPE enforcement and union involvement ensured employment continuity, minimal redundancies, and genuine consultations that took the interests of employees into account. This is an example of how efficiently regulated legal safeguards can be used to reconcile the needs of the business with those of the employees which are the features that Indian law is still lacking. ​‍​‌‍​‍‌​‍​‌‍​‍‌

Way forward
India​‍​‌‍​‍‌​‍​‌‍​‍‌ is not required to imitate the EU model completely; however, it should still absorb the fundamental principles of the Union. The next step involves creating a more inclusive system that offers legal protection to non-workmen categories, requires employer–employee consultations during transfers and sets out more exact dismissal criteria.

Such provisions will make sure that workers have the right to redress and access to information, thus they will be able to make their own decisions, particularly in situations where companies are mostly driven by their own profit and growth.

By supporting a participatory and rights-based legal framework, the confusion of employees during company changes will be reduced, as well as the long-term organisational positions will be strengthened, and fairer corporate governance will be ​‍​‌‍​‍‌​‍​‌‍​‍‌promoted.

Conclusion
In​‍​‌‍​‍‌​‍​‌‍​‍‌ sum, India’s present judicial framework gives minimal and mainly procedural safeguarding to staff in situations of M&A. The legislation like the Industrial Disputes Act may be in place, but it is mainly focused on “workmen” only and is deficient in aspects of explanation, inclusion, and implementation of corporate transactions. The fast-paced M&A scenario exposes a huge hole in the protection of the people who are the real contributors of economic value, i.e., the employees.

The EU model under the Acquired Rights Directive is, by far, a better-structured system in this respect. It requires certain definite safeguards such as the continuation of the contract, employee consultation, and reasonable dismissal ​‍​‌‍​‍‌​‍​‌‍​‍‌criteria. Although India’s labour market differs, the core principles of participation, clarity, and fairness remain significant, which can be incorporated into India’s framework.

Introduction
According to the recent Venture Capital Report 2025, private equity (PE) and venture capital (VC) investments in India have witnessed a strong resurgence. To protect their huge investment, these PE/VC investors usually appoint a Board Observer (Observer) with an aim to keep an oversight on their investment. Observers serve a strategic function, offering investors a window into the company’s governance while maintaining a non-interfering stance. However, the person appointed as Observer might influence some decisions on the company without being liable for the same because the concept of Observer is not formally defined and runs on the contractual agreement. Recently the Reserve Bank of India’s (RBI’s) decision for Non-Banking Financial Companies (NBFCs) to replace the Observer with a director dilutes the meaning of director. This decision raises questions on the regulatory treatment of the Observer. Therefore, in light of their increased prevalence amidst booming PE/VC activity, there arises a compelling need to formally define and regulate the role, rights, and liabilities of Observers. In this blog, the issue with the current RBI directive has first been critically examined to highlight the regulatory and legal concerns arising from its approach. Thereafter, in order to provide a holistic understanding of the concept of Board Observers, a comparative analysis of international practices has been undertaken. This comparative framework has served as a foundation for formulating a balanced and practical solution tailored to the Indian context.

Problem with RBI’s directive
The RBI’s perspective is reflected through the directive, which intends to make Observers liable for the influence they exert. PE/VC investors appoint an Observer through a contractual agreement for the purpose of keeping an oversight on their investment. These appointed Observers might influence the decision through their active participation without having legal implications. Therefore, RBI has made a step that will make the Observer liable for their influence/actions. Although the RBIs directive seems to be with the right intent, they might have overstepped while doing the same.

Appointing an Observer as a Director fundamentally alters the nature of their role, subjecting them to heightened responsibilities and legal obligations under the Companies Act, 2013. It results in an increase of risk and imposition of fiduciary duties. They may be held personally liable for acts such as breach of statutory duties, mismanagement, or fraud, with significant civil and even criminal consequences. Therefore, the appointment of an Observer as director dissolves the purpose and meaning of the Observer, which is restricted to keeping oversight of the investment. A balance needs to be observed while making the Observer liable for their influence, but also at the same time not imposing extreme liabilities and duties on them.

The RBI’s directive reflects one-size-fits-all approach which is based on an assumption that all Observer will influence decision. This generalisation by RBI has disregarded the diverse structures of Non-Banking Financial Companies (NBFCs) and the passive nature of many Observer roles, which are typically governed by the private contracts. This one-size-fits-all formula has not only failed to conduct stakeholder consultation but has also undermined contractual autonomy, imposing unnecessary compliance within a complex regulatory environment will demotivate the PE/VC investors to invest in NBFCs.

Comparative Analysis
It’s now crucial to consider the perspective of other developed jurisdictions when dealing with the matter of the Observer. In the United States of America (USA), the concept of Board Observer remains obscure, as it is mostly governed through contractual agreements that delineate their rights and liabilities. Statutory and common law guidance on Board Observer remains limited. Although the US Court of Appeals, through its order in the case of Obasi Investment Limited v. Tibet Pharmaceutical, delineated the liability of Observer in case of violation of Section 11 (Sec.) of the Securities Act of 1933. The court held that the Observers are not to be treated as directors because the Observer cannot vote, has no duties towards the company, because their main aim is to protect the investment made by the investors, and an Observer cannot be removed by shareholders. Although this order was centric to Sec. 11, the significance of this order is crucial because of the lack of statutory guidance. But the USA legislative model is non-interference model, where the rights and liabilities are left on the hands of people contracting. This non- interference model is also followed by countries like Singapore and Japan , there are no explicit laws regarding Board Observers, and their conduct is governed through contracts.

In the United Kingdom (UK), it is a common practice to appoint Board Observers through contracts, though there are no statutory provisions that specifically govern them. However, they are indirectly governed by a separate concept called the  Shadow Director.  The people who are not appointed as directors of the company but on whose instructions or directions the directors of the company are required to act are known as Shadow directors. As they have influence on the company’s decisions, the UK’s Companies Act 2006 mandates that the general duties of a director apply to a shadow director as well. This is a wide provision that keeps in check the powers of the Observers, as any person may be considered as a shadow director, no matter if that person has been instructed on some business decisions or all business decisions. Thus, an Observer in the UK exercises caution, as substantial involvement in decision making results in their classification as a shadow director, thereby attracting corresponding legal duties and liabilities.

After analysing all these jurisdictions, we come to conclusion that these nations follow a similar pattern i.e., they choose contractual freedom over regulation whereas India by mandating directorship, runs counter to this global practice and imposes disproportionate burdens on investors. India is in a middle ground where he can’t let things to contract and also can’t incorporate a position like the UK, wherein every case it has to be first proved that the conduct of the Board Observer falls under Shadow Director, and then further prove that he is liable. Terming Observer as a Shadow Director will not only impose fiduciary duties on them but will also increase their risk, which brings us back to the position that the RBI is trying to make. For India, a more suitable path lies between these extremes, recognising Observers through a clear statutory framework that safeguards contractual autonomy while ensuring accountability where oversight turns into interference.

Solution
India needs a more balanced approach while dealing with this situation. We should not leave the rights and liabilities to the contractual agreement, nor should we overstep by defining them as the Director. India needs an explicit and special provision for Board Observers that differentiates them from directors and holds them liable in cases where they influence the company’s decisions.

To ensure the right balance, a four-step structured approach can be followed. Firstly, defining the concept of Observer whereby limiting the definition to financial oversight where they will not have any voting rights or fiduciary responsibilities, but they will have the right to attend meetings and going through the documents of the company. Secondly, the RBI should issue disclosure requirements that should be fulfilled by the Observer. The disclosure should not be limited to minutes of the board meeting but should extend to all the communications made by the Observers through any means of communication. Thirdly, the RBI should be appointed as an investigation body that will flag actions that they think are influencing the decision of the company. Lastly, an annual certification of compliance, which should be countersigned by the Company Secretary, should be submitted to the RBI. Non-compliance of the same should result in blacklisting under RBI norms. Through this procedure, a mechanism can be established which will make Observer liable when they overstep their responsibilities, but also at the same time not overstepping my terming them director.

Conclusion
In light of the growing presence of Observers in Indian corporate governance, it becomes crucial to regulate the framework that will address their role with clarity and precision. The RBI’s recent directive, although well-intentioned, has ended overstepping by blurring the lines between observers and directors. Internationally, countries have decided not to impose much liability on Observers; instead, they chose to be governed by the contractual terms. India, through this Directive, has gone to extremes instead of finding a middle path. Instead of following a rigid solution of terming them as a director, the RBI should follow a structured approach that differentiates between passive oversight and active interference. The RBI, by adopting a structured framework that can clearly define observers’ responsibilities, ensure transparency through disclosures, and enable proportionate regulatory oversight, can strike the right balance. This model will keep a check on the influence of the Observer and will also protect the integrity of investor relationships. Therefore, a nuanced, well-defined regulatory regime is essential to align governance standards with market realities.

 Introduction

Corporate India often feels like a long boulevard of impressive mansions. From the pavement every structure is immaculate: flood, lit façades, trimmed lawns, imported cars glinting in the porch. When you ring the bell, however, you sometimes discover rooms in disarray, unpaid contractors at the kitchen door, and the owner already on the next flight out. Each high, profile collapse, Kingfisher, Jet Airways, IL&FS (Infrastructure Leasing & Financial Services), and now Byju’s, has invited regulators, courts and an increasingly skeptical public to step past the gates and inspect the debris. The immediate clean, up usually portrays: laws are hurried through Parliament, press conferences trumpet zero, tolerance, and banks promise stringent appraisals. Yet the deeper question remains unresolved. Are these episodes pushing India toward a mature culture of corporate accountability, or have companies merely learnt to curate smarter press releases while carrying on much as before?

Kingfisher Airlines and the Fugitive Economic Offenders Turn

Vijay Mallya’s rise and fall remains the archetype. In the mid, 2000s the liquor baron’s Kingfisher Airlines embodied India’s aspirational self, image: red, uniformed cabin crew, Formula One sponsorships, after, parties that blended Bollywood glamour with Davos deal, making. Beneath the fizz sat a balance sheet drowning in short, term bank debt and chronic operating losses. By 2012 the airline had defaulted on statutory dues and salaries; by early 2013 the Directorate General of Civil Aviation had suspended its license. State, owned banks, lured by the promoter’s brand and an economy in full throttle, had rolled over loans worth more than nine thousand crore rupees. When Mallya quietly left for the United Kingdom in March 2016, the public learnt that personal guarantees were riddled with loopholes, collateral valuations were optimistic, and consortium monitoring had been perfunctory. The political backlash was fierce. Two years later Parliament enacted the Fugitive Economic Offenders Act, empowering special courts to seize domestic assets of anyone who owed more than one hundred crore and refused to return to face criminal trial. The Reserve Bank followed with tighter provisioning rules and the finance ministry ordered public banks to document credit decisions more rigorously. All of this, however, occurred only after thousands of jobs vanished and taxpayers were saddled with haircuts that restructurings under the Insolvency and Bankruptcy Code would later crystallize. The episode proved that Indian law can move quickly once outrage peaks; it did not show that red flags are heeded in real time.

III. Jet Airways and IL&FS: Rating Agencies, Auditors, and Reactive Correctives
The narrative repeated itself, with different characters, in 2018 and 2019. Jet Airways, the pride of liberalization, era civil aviation, had expanded too fast, financed expensive aircraft through dollar, denominated leases, and pursued network partnerships it could not afford. For years credit rating agencies, maintained investment, grade opinions even as lessors began demanding early payments. When fuel costs spiked and the rupee weakened, the cash buffer evaporated almost overnight. Lenders refused additional support unless founder Naresh Goyal relinquished control; he hesitated, the fleet was grounded, and another iconic brand headed to bankruptcy court, leaving employees unpaid and passengers stranded. Around the same time IL&FS, a labyrinthine infrastructure lender with hundreds of subsidiaries, defaulted on its commercial paper. Government officials initially described the default as a “liquidity blip”; within weeks it was clear that a ninety, thousand, crore mountain of obligations could not be rolled over because many underlying projects lacked viable cash flows. Auditors had signed clean opinions, rating agencies had slapped triple, A grades on group entities, and mutual funds had parked retired teachers’ savings in what they considered the safest of paper. Shock forced swift institutional reaction. SEBI revamped its rules on rating agencies, requiring more granular disclosure of issuer payments and sharper early, warning triggers. The National Financial Reporting Authority, only recently operational, began disciplinary proceedings against audit partners who had green, lighted IL&FS accounts. Yet, once again, the horse had bolted; reforms chased, rather than prevented, spectacular failure.

IV. Byju’s: Unicorn Vulnerabilities and the Compliance Perimeter
If Mallya embodied old, school flamboyance and Jet plus IL&FS highlighted entrenched gatekeeper complacency, Byju Raveendran’s ed, tech empire demonstrates the vulnerabilities of the twenty, first, century unicorn. Byju’s started in a Bangalore living room, riding smartphone penetration and parental anxiety into a valuation that briefly touched twenty, two billion dollars. The company bought foreign test, prep firms, funded cricket sponsorships, and promised to democratize learning. Behind the marketing sheen, financial statements began arriving late, employee counts seesawed with each acquisition, and investor memos whispered about aggressive revenue recognition. Deloitte, the statutory auditor, resigned in 2023, citing an inability to access underlying data, while board representatives of Prosus, Sequoia and the Chan Zuckerberg Initiative walked out within weeks. Losses of more than four and a half thousand crore rupees for financial year 2021 eventually emerged, a twenty, fold spike from the previous year. The Enforcement Directorate raided premises for alleged foreign, exchange violations; the Ministry of Corporate Affairs opened an inspection, noting weaknesses in internal controls though stopping short of alleging fraud. The puzzle here is novel. Byju’s is not listed, so SEBI’s elaborate continuous, disclosure regime does not apply. The Companies Act offers fewer real, time reporting obligations for private limited firms, even those that employ tens of thousands and handle global capital. In effect, a business can acquire systemic importance long before the regulatory perimeter tightens.

V. The Statutory Scaffold versus Enforcement Reality

These stories force us to parse what “corporate accountability” really means in the Indian context. On paper the country boasts one of the most sophisticated frameworks in the Global South. The Companies Act of 2013 imposes fiduciary duties on directors, mandates independent board seats, requires constitution of audit, nomination and risk committees, and threatens civil and criminal liability for false statements. SEBI’s Listing Obligations and Disclosure Requirements mesh with the Act to demand quarterly results, immediate reporting of material events, and prior shareholder approval for large related, party transactions. The Insolvency and Bankruptcy Code of 2016 reshaped creditor rights by promising resolution within 330 days and by empowering creditors, not debtors, to steer control once default occurs. Parliament even inserted a corporate social responsibility obligation, the first such statutory mandate worldwide. Taken together, the architecture seems formidable.

Yet the chasm between text and practice is wide. The National Company Law Tribunal, which adjudicates insolvency, is clogged with half, staffed benches; time, bound resolutions routinely overrun the statutory deadline, eroding recovery values. The Serious Fraud Investigation Office, the Enforcement Directorate and SEBI often open parallel investigations, but coordination among them can be patchy, leading to sequential summonses that freeze managerial attention without necessarily accelerating truth, finding. Audit regulators face resource constraints, and the professional firms they police control lucrative public, sector mandates, complicating the enforcement calculus. Bank board’s remain vulnerable to informal pressure, political, bureaucratic, or simply the cultural bias that treating a famous promoter harshly might jeopardize future business. The result is a pattern of compliance by hindsight: once a default becomes front, page news, every stakeholder behaves sternly; beforehand, skepticism is in short supply.

VI. Cultural Dimensions: From Jugaad to Governance

Culture weighs as heavily as statutes. Indian capitalism grew up in an atmosphere of jugaad, the talent for improvised fixes and personal relationships that can navigate ambiguous rules. That instinct can be commercially useful, but it also breeds tolerance for corners cut in the service of growth. Over the past decade some counter, currents have started flowing. Proxy advisory firms, once a negligible presence, routinely recommend voting against promoter salaries or reappointments when performance lags. Institutional shareholders now use social media to air grievances, and companies keen to attract global ESG money expend real effort to improve disclosures. Reputation, never trivial, has become more measurable in the age of instant outrage. Still, these positive shifts coexist with the old codes. Board packs arrive a day before meetings, many independent directors depend on promoter patronage for repeat appointments, and compliance officers sometimes treat rule, books as procedural burdens rather than ethical commitments.

VII. Comparative Insights
Comparative experience illustrates what remains to be done. After the Enron scandal, the United States enacted the Sarbanes, Oxley Act, which forces chief executives and chief financial officers to certify personally that financial statements are accurate; intentional misstatements invite prison terms. Britain’s Senior Managers and Certification Regime, aimed at banks but extending steadily into other sectors, assigns named individuals responsibility for identified risk areas, ensuring that accountability cannot be diffused across committees. In continental Europe, the new Corporate Sustainability Reporting Directive extends disclosure beyond profit to environmental and social impacts, on the theory that twenty, first, century stakeholders demand more than quarterly earnings. India has borrowed elements from each of these models yet hesitates to attach the same level of personal exposure for fear of discouraging talented professionals from taking board seats. Whether that caution is wise or indulgent is an open debate.

VIII. Prospects for Anticipatory Governance
So, what might anticipatory, rather than reactive, governance look like in the Indian setting? One strand of thought emphasizes regulatory technology. The Ministry of Corporate Affairs is rolling out MCA, 21 3.0, an online filing system capable of ingesting structured data. If designed well, the platform could flag early-warning signs, persistent negative cash flow, repeated resignation of key audit partners, or large inter-company loans unexplained by business logic, and push the information to regulators before crisis strikes. Another strand focuses on treating scale, not listing status, as the trigger for rigorous oversight. A private company that crosses, say, one thousand crore rupees in turnover or holds customer advances exceeding a threshold could automatically be classified as a “public, interest entity” and brought under quarterly reporting, tighter audit rotation and whistle, blower schemes with real protections. A third idea revives the conversation about professional liability. If engagement partners at audit firms faced significant personal penalties for negligence, the incentives to look away when major clients resist scrutiny would diminish rapidly. None of these suggestions is radical; elements exist in draft bills and discussion papers. What is missing is political clarity and bureaucratic bandwidth to weld them into an integrated regime.

IX. Conclusion

While structure matters, the soft architecture of trust perhaps matters more. Entrepreneurs often argue that punitive policies will stifle innovation; bureaucrats retort that fearless entrepreneurship cannot be built on taxpayers repeatedly absorbing private folly. The balance may lie in transparency. In markets where information flows freely and fast, participants discipline one another long before a judge or inspector steps in. Byju’s troubles became impossible to gloss over once investors published resignation letters and social media circulated them widely. Market valuation fell, prospective hires hesitated, and the company had to start negotiating earnestly with creditors. The episode suggests that civil society, financial press and online commentary now form an auxiliary regulatory layer. That pressure will be effective, however, only if primary data, audited numbers, board minutes, related, party terms, is promptly released. If secrecy persists, rumor fills the vacuum, harming companies that may merely be late, not fraudulent. A disclosure, first culture therefore protects honest promoters as much as it deters dishonest ones.

Where does this leave the original mansion metaphor? Walk down Nariman Point or Gurugram’s Cyber City today and you will still see glittering headquarters, but the doormen check identity cards more carefully, visitor registers have digital time, stamps, and fire exits are no longer padlocked during the day. These small changes matter. They show that oversight, once triggered, can embed new routines. At the same time, hidden basements have not disappeared; they have merely acquired better wallpaper. The decisive test will arrive when the next cycle of cheap capital floods in, as it almost inevitably will. If lenders, auditors and directors ask tougher questions at that moment, before defaults mount—India may finally cross the threshold from remedial governance to preventive discipline.

Legal scholars sometimes invoke the idea of “learning by catastrophe,” the notion that dramatic failure is the price societies pay for improved rules. Kingfisher, Jet, IL&FS and Byju’s supplied precisely such catastrophes. They forced Parliament to legislate faster, regulators to collaborate, and ordinary citizens to appreciate how corporate excess can ricochet into their provident, fund statements. The danger is complacency: believing that headline statutes equal solved problems. They do not. Rules harden into deterrents only when enforcement is swift, proportionate and certain, and when business culture internalizes the lesson that reputational damage can spread quicker than any lawsuit. The Indian system, today, delivers that certainty unevenly; pockets of excellence coexist with long corridors of delay.

Yet optimism is not misplaced. Few emerging economies have overhauled bankruptcy law, strengthened accounting oversight, digitized company registries and cultivated activist investors within a single decade. Momentum exists; it merely needs patience, resources and the political will to place integrity at the center of economic ambition. If those ingredients coalesce, the boulevard of corporate mansions will still host grand parties, but the hosts will remember to pay their caterers, clear fire exits and keep the neighbors on their side. Accountability will have moved from the press release to the planning spreadsheet, and Indian capitalism will have taken a decisive, if belated, step toward adulthood.