Environmental Claims under Indian Insolvency Law: Concepts and Challenges

The Insolvency and Bankruptcy Code 2016 (IBC) introduces different categories of claims as well as different categories of creditors. The IBC also introduces a moratorium on all ongoing cases once the Corporate Insolvency Reorganisation Process is initiated. The moratorium results in any ongoing claim being classified as a contingent claim. The treatment of contingent claims varies from case to case, lacking clarity. Similarly, the IBC is silent on the treatment of decree holders apart from recognizing decree-holders as creditors. The Supreme Court in Subhankar Bhowmik v Union of India (2022) refused to interfere with a Tripura High Court judgment classifying decree-holders as "other creditors". With growing environmental and climate change risks, companies may face environmental claims within the insolvency and restructuring framework. In India, the Public Liability Insurance Act 1991 mandates companies handling hazardous substances to take insurance schemes to guard against environmental liability. In this context, analyzing the treatment of environmental claims under insolvency becomes the perfect catalyst for understanding the interplay between insurance, insolvency and environmental law. This paper examines the classification of environmental claims and the treatment of environmental contingent claimants and decree holders under insolvency. As IBC is still evolving in India, the paper briefly analyses the treatment and classification of environmental claims in other jurisdictions to better inform the discussion.