T
he ever-evolving landscape of technology, commerce, and the corporate sector has played a significant role in the growth of multinational corporations, facilitating a seamless connection between nations and businesses without geographical boundaries. As the scope of trading expands beyond individual jurisdictions, the intricacies of insolvency procedures become more challenging due to the interplay of multiple laws and actions. Cross-border bankruptcy, also known as international insolvency, occurs when a debtor who is unable to meet their financial obligations has creditors and debtors located in multiple jurisdictions. In the matters of the business the debtor generally specified as a corporate debtor
, whereas the creditors are categorised under two types they are financial creditors
and operational creditors
, however, the difference is determined by the kind of debt
they are ought to be paid by the corporate debtor. It is evident from the significant case decided by the Supreme Court of India that there exists an intelligible differentia between financial creditors and operational creditors.
The (IBC) is a significant legislation in India that governs insolvency and bankruptcy matters. Notwithstanding the progress made in aligning the domestic bankruptcy process, the Insolvency and Bankruptcy Code currently lacks a comprehensive framework for effectively regulating cross-border insolvency procedures. In response to the identified gap, the Ministry of Corporate Affairs (MCA) took the initiative to establish the Insolvency Law Committee on Cross-Border Insolvency (ILC) with the purpose of assessing the implementation of the Code. The Insolvency Law Committee has suggested a reevaluation of the current insolvency framework and the adoption of the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency, 1997 (Model Law) as a means to effectively address cross-border insolvency issues in India.
The examination of UNCITRAL Model Laws on Cross-Border Insolvency, 1997
The UNCITRAL Model Law on Cross-Border Insolvency, which was enacted in 1997, plays a vital role in providing nations with a framework to develop their insolvency laws in order to effectively address challenges that arise from cross-border proceedings. The Model Law, which aims to promote an effective, equitable, and economically viable method for managing transnational insolvency cases, has been adopted by approximately 59 countries. These countries include significant global economies such as the United States, Canada, Australia, Japan, Singapore, and South Africa.
The United Nations Commission on International Trade Law (UNCITRAL) has been actively advocating for the adoption of the Model Law in various jurisdictions. This effort has involved collaborations with esteemed international organisations such as the Asian Development Bank, World Bank, International Bar Association, and the International Association of Restructuring, Insolvency and Bankruptcy Professionals. The World Bank’s principles for effective insolvency and creditor/debtor regimes make specific mention of the Model Law, highlighting the importance of aligning with the UNCITRAL Legislative Guide on Insolvency Law. The UNCITRAL Legislative Guide plays a crucial role in supporting nations in the development or revision of their domestic insolvency laws. It extensively references the Model Law and promotes its broad implementation.
The Model Law has a comprehensive range that includes all categories of debtors. It includes provisions that permit the exclusion of entities such as banks or insurance companies that are subject to unique insolvency regimes in their respective jurisdictions. Although reciprocity is not mandated by the Model Law, several countries, such as the British Virgin Islands, Mexico, and South Africa, have chosen to adopt it either formally or informally.
The Model Law encompasses significant components, one of which is the concept of “access”. This provision allows foreign creditors to exercise their entitlement to seek support from the courts of the enacting State during insolvency proceedings. The concept of “recognition” refers to the ability to acknowledge foreign proceedings as either the primary or secondary proceeding, thereby simplifying the process through designated application procedures as outlined in Articles 15-17 of the UNCITRAL Model Law. The Model Law also offers provisions for “relief”, which encompass interim measures designed to safeguard the interests of creditors, as well as automatic reliefs that come into effect upon the recognition of a foreign main proceeding under UNCITRAL Model Law, Articles 19-20. Finally, the concept of “cooperation and coordination” enables courts to establish direct communication and coordinate with foreign courts in cases of simultaneous proceedings as outlined in Articles 25-30 of the UNCITRAL Model Law on Cross-Border Insolvency Law, 1997.
The Model Law is a noteworthy and feasible measure in addressing cross-border insolvency matters. However, there are some areas that require further clarification, including the determination of the corporate debtor’s Centre of Main Interest (COMI), procedural due process, recognition of foreign discharges, and choice of law. However, it remains an essential tool for effectively managing the intricacies of cross-border insolvency cases.
In the year 2018, the Insolvency Law Committee put forth a proposal to integrate the UNCITRAL Model Law into the current Code, leading to the creation of the Draft Part Z. The Committee made modifications to the Model Law with the objective of aligning it with the Indian context, specifically addressing the needs of corporate debtors who have assets and creditors in multiple jurisdictions. The key provisions of Draft Part Z pertain to corporate debtors with cross-border elements. It aims to facilitate the involvement of foreign creditors in domestic insolvency proceedings, as outlined in Sections 234 and 235. However, the participation of foreign creditors is contingent upon the existence of reciprocal agreements. The proposed draft aims to address the existing deficiencies in the Code by streamlining the process for Indian creditors to access foreign debtor assets with the assistance of resolution professionals. Additionally, it offers guidance on identifying the focal point of primary interest and establishment, which is essential in determining the jurisdiction for both primary and non-primary insolvency proceedings. Furthermore, it includes a provision regarding public policy exceptions, which grants the adjudicating authority the discretion to decline the recognition of a foreign proceeding.
The Draft Part Z demonstrates a positive progression, but there are challenges that need to be addressed regarding the practical feasibility of the bilateral reciprocal agreements outlined in Section 234 of the . The absence of signed agreements in India may be attributed to procedural complexities. The author through this study opines that the draft should take into account the inclusion of clauses regarding automatic reliefs and mechanisms for resolving jurisdictional deadlocks. This is especially important given that each jurisdiction may invoke separate bilateral agreements, which could result in potential conflicts. The current provisions in Section 235 of the do not provide sufficient guidance on the procedures for concurrent proceedings. As a result, it is important to establish clear and equitable agreements between domestic and foreign authorities in order to ensure clarity and fairness in such cases going forward.
Although Draft Z exhibits potential, it is imperative for legislative authorities to enact amendments and subordinate legislations that offer comprehensive elucidation on cross-border insolvency procedures. It is imperative to release guidelines or a code of conduct for insolvency professionals and foreign representatives in order to establish clear procedural guidelines. It is crucial to consider the time-limit for resolving cases, particularly those involving multiple parallel proceedings. It is imperative to conduct a re-evaluation of the existing time-limit for courts to effectively dispose of such matters in order to enhance the efficiency of legal proceedings. Furthermore, it is imperative to include explicit provisions that clearly state that the application of the Code will cease if the center of the main interest of an Indian debtor is located in a foreign jurisdiction. This provision is necessary to prevent any potential jurisdictional disputes.
In summary, it is crucial to give due consideration to practical considerations, procedural intricacies, and necessary amendments to address specific challenges in order to ensure the successful implementation and effectiveness of Draft Part Z in enhancing cross-border insolvency frameworks in India. This is essential for achieving the desired outcome of reforming the current insolvency laws.
Analysing the contemporary legal framework in India: Examination of legislations, and Committee reports
Legal regime in India
The current Insolvency and Bankruptcy Code in India does not have a strong framework in place to effectively deal with cross-border insolvency cases. As a result, India heavily depends on bilateral agreements with other countries to address such situations. The current provisions in Sections 234 and 235 of the IBC, specifically in its “Miscellaneous” section, are inadequate for dealing with the complexities that arise in the growing number of multinational insolvency cases.
According to Section 234 of the it grants the Central Government the authority to establish agreements with foreign nations in order to address cross-border insolvency. This provision grants the Central Government the authority to enforce the provisions of the Insolvency and Bankruptcy Code in foreign jurisdictions, but only in cases where reciprocal arrangements are in place. Section 235 enables Indian insolvency professionals to request assistance from foreign courts or authorities through a letter of request when managing the assets of an Indian corporate debtor located overseas.
There are several challenges and limitations to the current legal regime of cross border law on insolvency in India that are need to be considered they are as follows:
1. The primary challenge is that the Indian legislation is largely dependent on the bilateral agreements, current framework is dependent on bilateral agreements, which leads to a time-consuming and cumbersome process due to lengthy negotiations.
2. Negotiating individual treaties for each country involved introduces uncertainties for foreign investors and introduces legal and procedural complexities.
3. The period following the COVID-19 Pandemic has seen a significant increase in insolvency cases, particularly among multinational corporations that possess assets abroad.
4. The absence of a comprehensive cross-border insolvency law poses challenges for Indian creditors in obtaining fair agreements and preventing foreign creditors from seizing assets.
In the landmark case of Jet Airways India Ltd. v. SBI serves as a clear example of the urgent requirement for a comprehensive framework for dealing with insolvency cases that span across different countries. Simultaneous insolvency proceedings occurred in both India and the Netherlands, highlighting the intricate nature of such cases. Although it is praised as a groundbreaking precedent, it also highlights the need to establish governing principles and operational rules in a timely manner.
As per the research work employed by the author, he has identified that there are several limitations associated with the current framework:
1. Bilateral treaty dependency refers to the mutual reliance and interdependence between two countries as established through a formal agreement or treaty.
2. The requirement for bilateral treaties poses a challenge to India’s capacity to promptly respond to cross-border insolvency cases.
3. There is currently no mechanism in place to address the needs of countries that are not receiving treatment.
4. The lack of established procedures for countries that do not have bilateral treaties creates a regulatory gap.
5. Insolvency professionals are provided with limited guidance.
6. There is a lack of adequate guidance available for professionals who are involved in managing the assets of Indian debtors in foreign jurisdictions.
The permits the enforcement of foreign judgments , but it does not adequately address all insolvency orders.
The lack of a comprehensive cross-border insolvency framework in India presents significant challenges and limitations. The importance of promptly adapting to global economic changes becomes evident when considering the rising number of multinational insolvency cases. This highlights the urgent need for a well-crafted law to address this issue effectively. A strong legal framework is essential for safeguarding the interests of Indian creditors and ensuring effective management of intricate cross-border insolvency situations.
Committees reports on cross-border insolvency law in India
The Ministry of Corporate Affairs in India has made significant changes to its approach to cross-border insolvency. This transformation was achieved through the dedicated work of two important Committees — the Insolvency Law Committee (ILC) led by Mr Injeti Srinivas and the Cross-Border Insolvency Rules/Regulations Committee (CBIRC) headed by Dr K.P. Krishnan. In its second report submitted on 16-10-2018 , the ILC made significant recommendations for changes to the . The focus of these amendments was to bring the IBC in line with the UNCITRAL Model Law on Cross-Border Insolvency, 1997 .
The Insolvency Law Committee (ILC) key recommendations are as follows:
The ILC has suggested the inclusion of a “Part Z” in the IBC , which would initially apply to corporate debtors. This proposal is in line with the Model Law. The report suggests that there is a need to evaluate the provisions in the , in light of the enactment of Part Z, in order to determine whether these provisions should be retained. Reciprocity is a key aspect of the ILC’s recommendation regarding the Model Law. The ILC proposes that the initial adoption of the Model Law should be based on reciprocity, meaning that Indian courts would recognise and enforce foreign judgments only if the foreign country also reciprocates this recognition and enforcement. The report discusses the recommendation made by the ILC regarding access to foreign representatives in Indian courts. The ILC suggests that the Central Government should be given the authority to create a mechanism that allows foreign insolvency professionals to have practical access to Indian courts. The ILC proposed the inclusion of indicative factors for determining the Centre of Main Interest (COMI) through rule-making powers. This recommendation aims to establish a transparent framework for identifying foreign proceedings.
The report insists a proposal of cooperation by the ILC in relation to the evolving infrastructure of adjudicating authorities. The ILC suggests that cooperation should be subject to guidelines that are notified by the Central Government. The ILC proposed a framework for managing concurrent insolvency proceedings in various countries, drawing on provisions from the Model Law. The inclusion of an “out” clause in Part Z of the public policy considerations allows for a potential deviation from the Code in situations where it conflicts with public policy. In such instances, it is recommended that a notice be sent to the Central Government.
The recommendation of Cross-Border Insolvency Review Committee
In accordance with the suggestions made by the Insolvency Law Committee (ILC), the Ministry of Corporate Affairs established the Cross-Border Insolvency Rules/Regulations Committee (CBIRC) in January 2020 under the Chairmanship of ex-officio IAS, Dr K.P. Krishnan. The purpose of this Committee is to examine and propose guidelines and regulations that will facilitate the efficient operation of cross-border insolvency procedures. The submission of the CBIRC’s report in June 2020 represented a notable milestone in the progress towards establishing a comprehensive framework. However, the report does not provide any specific information or context about the key contributions being referred to. The CBIRC has introduced typologies that categorise cross-border cases based on the parties involved. These typologies specifically address scenarios related to foreign assets and operations, allowing for a more detailed and nuanced understanding of these cases.
The process of determining a corporate debtor’s Centre of Main Interest (COMI) involves the establishment of clear tests and factors. This step is crucial in the resolution process. The CBIRC has put forward a set of procedural recommendations regarding foreign representatives’ access to Indian proceedings and vice versa. These recommendations highlight the importance of cooperation and communication protocols. The discussions in the report have identified the need for improved institutional capacities and mentions that the CBIRC has provided recommendations to enhance the National Company Law Tribunal (NCLT) and the Insolvency and Bankruptcy Board of India (IBBI) .
In conclusion, it is evident that the report’s text lacks analytical content and does not provide the process of adopting a comprehensive framework for cross-border insolvency in India has been carefully led by the ILC and CBIRC Committees. The nation’s impending change in insolvency laws are expected to have significant implications. The recommended changes are not only aimed at improving efficiency but also ensuring global alignment, thereby strengthening India’s standing on the international stage. The proposed changes, which are currently open for public comments, suggest that India is making significant progress towards establishing a more organised and efficient cross-border insolvency system.
Examination of the legislation of cross-border insolvency through the lens of the Jet Airways case study
In a significant legal case of 2019, SBI v. Jet Airways (India) (P) Ltd. , the complexities surrounding cross-border insolvency were prominently highlighted. The Dutch Bankruptcy Administrator has requested the Mumbai Bench (NCLT) to recognise parallel insolvency proceedings in the Netherlands. The NCLT has determined that the Dutch proceedings are null and void due to the absence of provisions in the Code that allow for the recognition of foreign court decisions. It is worth noting that Sections 234 and 235 of the Code were not in effect during that period. The Bankruptcy Administrator lodged an appeal with the National Company Law Appellate Tribunal (NCLAT) in order to contest the ruling made by the National Company Law Tribunal (NCLT). Subsequently, the NCLAT reversed the aforementioned decision. Following the decision of the National Company Law Appellate Tribunal (NCLAT), the Resolution Professional and the Dutch Bankruptcy Administrator have collaboratively developed a cross-border insolvency protocol that adheres to the principles outlined in the Model Law. This novel approach designates India and the Netherlands as the primary jurisdictions for main interest and non-main insolvency proceedings, respectively.
The Jet Airways case serves as an example of India’s judiciary effectively addressing cross-border insolvency challenges. However, it is important to note that such resolutions are not common and are contingent upon specific circumstances. The episode highlights the urgent requirement for a comprehensive legal framework pertaining to cross-border insolvency proceedings. The need for such a framework becomes apparent in the context of the Jet Airways situation. The District Court in North Holland has rendered a verdict declaring Jet Airways bankrupt following complaints raised by European creditors. The Dutch trustee, who is similar to an insolvency professional in India, requested cooperation and requested access to the airline’s assets. The act of taking possession of the aircraft located at Amsterdam’s Schiphol Airport by a creditor in the Netherlands serves as an illustration of the intricate dynamics involved in cross-border insolvency cases, where multiple legal jurisdictions come into play. The lenders-initiated sale proceedings in April due to the airline’s failure to meet its debts, highlighting the complex challenges faced by multinational corporations in financial distress.
The Jet Airways case highlights the importance of having a strong legal framework in place to facilitate cross-border insolvency proceedings. This framework is crucial for achieving efficient resolution and protecting the interests of all stakeholders involved. This case exemplifies the necessity of enhancing the cross-border provisions in the through the implementation of the UNCITRAL Model Law on Cross-Border Insolvency, 1997. In summary, the directive issued by the National Company Law Appellate Tribunal (NCLAT) regarding the collaboration between the Bankruptcy Administrator and Resolution Professional has significantly impacted the resolution of cross-border insolvency. The collective endeavour led to the creation of a protocol that is in accordance with the principles outlined in the Model Law. The protocol acknowledges India as the Centre of Main Interest (COMI) and designates Dutch proceedings as non-main centre proceedings. This particular case serves as a prime example of effectively implementing international frameworks, highlighting the significance of collaboration in tackling challenges related to insolvency that transcend national boundaries.
Comparative analysis of global legal frameworks: US, Singapore, Australia, and India
Legal framework in USA
The Bankruptcy Code of the United States , specifically Chapter 15, encompasses essential provisions pertaining to cross-border insolvency cases. Chapter 15 was implemented through the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, effectively replacing Section 304 of the Bankruptcy Code . This amendment was made to bring the United States’ legal framework in line with the UNCITRAL Model Law. The adoption of this measure requires a synchronised interpretation with other jurisdictions that have also adopted the Model Law, promoting a unified legal framework for cross-border insolvency cases.
The statutory objectives outlined in Chapter 15 demonstrate a comprehensive approach. The primary objective is to promote collaboration among US courts, relevant stakeholders, and foreign courts and competent authorities engaged in cross-border insolvency matters. Furthermore, it aims to establish a framework of legal certainty, foster principles of fairness and efficiency, safeguard the interests of all relevant parties, optimise the value of the debtor’s assets, and facilitate the successful recovery of financially distressed enterprises. The adoption of the UNCITRAL Model Law by the United States in October 2005 represents a noteworthy achievement. It is important to acknowledge that the United States recognises significant court hearings as ancillary, highlighting their supportive function in the primary proceeding. Chapter 15 of the United States Bankruptcy Code functions as a legal framework that promotes collaboration between US and foreign courts and their respective representatives. Its primary objective is to assist debtors in optimising the value of their assets.
The collapse of Lehman Brothers in 2008 was a significant event that triggered a global financial crisis. This crisis was ultimately addressed through the implementation of Chapter 15 Recognition in the US Bankruptcy Court . The implementation of this legal manoeuvre resulted in a more streamlined process for coordinating Lehman Brothers’ assets on a global scale, ultimately leading to a more efficient resolution. The decision, as discussed in the Indian Journal of Law and Legal Research, had significant implications for the management of the financial giant’s insolvency on a global scale. It not only allowed for a more efficient handling of the situation but also ensured a more equitable distribution of assets among creditors worldwide. Chapter 15 of the financial crisis played a crucial role in effectively managing the aftermath of Lehman Brothers’ collapse. It has emphasised the importance of a coordinated and fair approach to resolving the complex challenges posed by this unprecedented financial crisis.
However, it is important to note that there is a nuanced exception outlined in Chapter 15. The United States has expanded the scope of international cases that are eligible for recognition to include interim and non-judicial proceedings that have been authorised by a court. The provision of inclusivity enables administrators from foreign countries, who are functioning without cross-border systems, to pursue acknowledgement in the United States. In spite of its commitment to transparency, the United States upholds a position that opposes any form of discriminatory treatment towards its creditors in the absence of reciprocal recognition. This stance is in line with the public policy enshrined in Chapter 15.
Legal framework of Singapore
Singapore has experienced a notable transition in the field of cross-border insolvency, moving away from a territorial approach and adopting certain aspects of universalism. In accordance with the existing legal framework, a foreign unregistered company may be subject to the potential outcome of being “wound up” in Singapore under certain circumstances. These circumstances include dissolution, cessation of business operations, absence of a physical establishment in Singapore, or inability to fulfil the outstanding financial obligations. This provision remains applicable even in the event of the company’s dissolution in its country of incorporation, thereby permitting concurrent proceedings. In situations where a company registered in a foreign jurisdiction commences winding-up proceedings in its home jurisdiction, it is imperative to engage with the courts in Singapore in order to appoint a liquidator who will act as the representative in Singapore. The designated liquidator is required to notify creditors via newspaper advertisements in countries where the company operated prior to the dissolution proceedings. This notification allows creditors to assert their claims within a specified time-frame before the liquidation of assets takes place.
In spite of the territorial foundations of insolvency laws, the courts in Singapore demonstrate a readiness to accommodate foreign liquidators within the confines of the legal framework. Cases such as China Union Lines Ltd. v. American Marine Underwriters Inc. and Tohru Motobayashi v. Official Receiver serve as examples of the courts acknowledging the authority of foreign liquidators, despite potential limitations due to the lack of local insolvency proceedings. Recent legal cases, such as the Beluga Chartering and RBG Resources Plc. v. Credit Lyonnais , have provided valuable insights into the cooperative approach adopted by the courts in Singapore. The interpretation of Section 377(3)(c) in Beluga Chartering demonstrated the Courts’ dedication to fostering cooperation, as it was understood not as discretionary but as an obligatory provision. Furthermore, the case of RBG Resources Plc. v. Banque Cantonale Vaudoise provided clarification that the term “local creditors” as defined in Section 340 includes debts that are incurred in Singapore, regardless of the nationality of the creditors. This ruling effectively eliminates any discriminatory treatment between local and foreign creditors.
In the past, Singapore has consistently followed the territoriality approach to protect the interests of financial creditors in cross-border situations. Nevertheless, the transformation of the city-State into a prominent global financial market necessitated a practical transition towards a modified universalist approach. The shift, which was evident in the decision to adopt the UNCITRAL Model Law on Cross-Border Insolvency in 2017, represented a significant turning point for Singapore and the Act was passed in the year 2018. The decision was made based on a range of factors, demonstrating Singapore’s ability to adapt and respond to the evolving dynamics of transnational insolvency. In summary, the author chose to examine the cross-border insolvency legal framework of Singapore because of its transition from territoriality to universalism highlights its dedication to effective cross-border insolvency resolution. The transition effectively addresses the concerns of both local and foreign creditors, demonstrating Singapore’s proactive commitment to harmonising its legal framework with global standards.
Legal framework in Australia
Australia implemented substantial revisions to its insolvency legislation in 2008, adopting a modified rendition of the UNCITRAL Model Law. The aforementioned legal framework incorporates essential elements that bolster the nation’s approach to cross-border insolvency proceedings. One noteworthy feature is the inclusion of provisions that allow for the acknowledgement of foreign insolvency proceedings. This is a crucial measure in promoting international collaboration and standardising the handling of cases involving entities with operations spanning multiple jurisdictions.
Under this legal framework, strict eligibility criteria have been established for foreign representatives who are seeking recognition. This ensures that the recognition process is guided by explicit guidelines, thereby fostering transparency and equity. The legislation places significant importance on safeguarding the rights of creditors, with a particular emphasis on ensuring fair treatment for both domestic and international creditors. The dedication to equity demonstrated here is in accordance with global norms and aids in achieving a more consistent and equitable outcome for cross-border insolvency matters. Promoting coordination and cooperation between the courts and administrators in Australia and their international counterparts is a key feature of Australia’s cross-border insolvency laws. The focus on collaboration aims to optimise processes, reduce duplications, and enhance efficient communication across jurisdictions. Australia’s objective is to establish a legal framework that effectively addresses the intricacies of contemporary business structures and fosters an internationalised approach to matters of insolvency.
The collapse of HIH Insurance in 2001 , a prominent Australian insurer, led to significant financial losses. The Australian Court rendered a significant decision by acknowledging foreign insolvency proceedings and promoting cooperation with foreign representatives. It facilitated the establishment of global asset pooling, thereby enhancing creditor recovery on a global level. Furthermore, the ruling established a precedent for fostering enhanced collaboration between Australian and international courts in the effective management of cross-border insolvency cases. The aforementioned pivotal ruling not only tackled the intricacies stemming from the collapse of HIH Insurance but also laid the groundwork for global cooperation in comparable financial emergencies.
In summary, author chose the Australia’s law on cross-border insolvency because of the fact that Australia’s decision to adopt the modified UNCITRAL Model Law demonstrates a proactive approach towards improving its legal framework for managing cross-border insolvency cases, which is very essential integration into the Indian law. The inclusion of these essential elements highlights a dedication to equity, collaboration, and efficient problem-solving, positioning Australia as an engaged contributor in the international insolvency arena.
Legal frameworks in India
The Indian Insolvency and Bankruptcy Code of 2016 incorporates provisions pertaining to cross-border issues; however, the Central Government has yet to enforce these provisions. Sections 234 and 235 grant the Government the authority to establish bilateral agreements aimed at enforcing provisions of the IBC in cross-border situations. Nevertheless, India has yet to establish reciprocal arrangements, highlighting the necessity for judicial interpretation due to the absence of guidelines. The lack of a comprehensive framework addressing cross-border issues is apparent, as exemplified by notable cases such as Amtek Auto Ltd. (CoC) v. Dinkar T. Venkatasubramanian , SBI v. Videocon Industries Ltd. and Jet Airways case . Sections 234 and 235 , in isolation, do not adequately encompass the intricacies encountered in cases that involve diverse manufacturing jurisdictions and oil corporations spanning multiple regions. The Jet Airways case , which is the first to bring up cross-border insolvency concerns in India, highlights the necessity for a more sophisticated approach. The judiciary has played a crucial role in influencing the legal landscape by acknowledging the limitations of the current legal framework. India implemented the Insolvency and Bankruptcy Code in 2016 ; however, due to the dynamic nature of cross-border transactions, there is a need for further measures. The incorporation of the UNCITRAL Model, customised to address India-specific concerns, has the potential to improve acknowledgement and alignment, thereby providing advantages to both Indian companies operating internationally and foreign-based Indian subsidiaries.
The recognition of substantial consolidation by the National Company Law Tribunal (NCLT) in Videocon Industries case represents a noteworthy and significant development. The implementation of this decision has enabled the initiation of group insolvency proceedings, showcasing the judiciary’s ability to adapt in the absence of dedicated legislative provisions. The inclusion of foreign-based companies in group insolvency proceedings serves to emphasise the complexities and uncertainties surrounding the extraterritorial implementation of the IBC. Countries that have not adopted the UNCITRAL Model for cross-border insolvency either do not have specific legislation in place or adhere to treaties in this matter. The incorporation of model law provisions into domestic insolvency laws is advocated by judicial decisions to enhance the effectiveness of legal systems in addressing the complexities arising from cross-border transactions. The dynamic nature of India’s Insolvency and Bankruptcy Code necessitates a persistent effort to adapt and effectively tackle the intricacies of contemporary business transactions.
Conclusion
In conclusion, the progress made towards adopting the Model Law on cross-border insolvency in the Indian context has been impressive, with careful thought and consideration. However, it must navigate through a terrain that is filled with various challenges and potential pitfalls. The inclusion of a public policy exception in the draft provisions, which mirrors the Model Law, demonstrates the careful approach that has been taken. However, the lack of a precise definition for “public policy” introduces an element of uncertainty. The way Indian courts interpret this exception is still uncertain, highlighting the importance of a clearer definition within the legislation itself. It is interesting to note that the Government has taken a measured approach in incorporating the proposed part on cross-border insolvency, which demonstrates a wise and thoughtful strategy. The reason for this hesitation seems to be that there is an understanding that introducing something too early, without providing clear guidelines, could cause confusion instead of being helpful. It is crucial to draft rules and regulations for the proposed part of the Model Law, allowing for minor adjustments, in order to align it with the overarching vision.
The attribute of flexibility in the Model Law is widely praised. However, an important concern arises regarding the balance between procedural flexibility and substantive harmonisation across different jurisdictions. The conflict between customisation and harmonisation presents a challenge to the overall goal of achieving global consistency. The potential challenges go beyond national borders, as there may be ongoing issues with collaboration among countries that have not adopted the Model Law. The insolvency resolution process becomes more complex when assets are spread across multiple jurisdictions. Furthermore, the lack of a standardised international contract law for international contracts in India exacerbates the existing challenges. International contractual issues can become complex when there is no standardised framework in place. These issues can include a wide range of contracts, such as sales contracts and agreements with arbitration clauses. The resolution of disputes can potentially be prolonged due to the non-ratification of the United Nations Convention on Contracts for the International Sale of Goods (CISG) , which adds further complexity to the situation. Given the imminent potential for transformative change in cross-border insolvency in India, it is crucial to prioritise capacity building. To ensure effective implementation, it is crucial for advocates, insolvency professionals, and other stakeholders to have a comprehensive understanding of the intricacies of the Model Law.
As the author have mentioned above that the Ministry of Corporate Affairs has taken a proactive approach by establishing the Cross Border Insolvency Rules/Regulations Committee (CBIRC). The collaborative effort to refine the Draft Part Z is evident through the recommendations, proposed amendments, and public consultations. The integration of these amendments into the Insolvency and Bankruptcy Code would mark a significant milestone in Indian insolvency law, bringing it in line with international standards. The adoption of the UNCITRAL Model Law is a significant milestone in India’s insolvency landscape. However, moving forward, it is crucial to strike a careful balance between being adaptable and working together harmoniously. This requires having clear and specific legislative definitions, as well as making collaborative efforts to enhance our capabilities. The author strongly believes that the upcoming changes not only have the potential to align with global practices but also to strengthen India’s position in the international insolvency arena and make a global leader.
†4th year student BBA LLB (Hons.) at Bennett University. Author can be reached at: harshithsaiboddu@gmail.com.
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“deals with the establishment and incorporation of Board, the Insolvency and Bankruptcy Board of India (IBBI) has been established as a body corporate by the Central Government through an official notification. The Insolvency and Bankruptcy Board of India (IBBI) has perpetual succession, a common seal, and the authority to acquire, manage, and dispose of both movable and immovable property. The entity possesses the ability to engage in contractual agreements and has the right to initiate or defend legal actions using its designated name. The headquarters of the Board are situated in the national capital region, as designated by the Central Government through an official notification”.
.
deals about the establishment of the National Company Law Tribunal, the establishment of the National Company Law Tribunal (NCLT) by the Central Government is notified on a specified date. The National Company Law Tribunal (NCLT) consists of a President and a specified number of judicial and technical members, who are appointed by the Central Government through a formal notification process. The Tribunal has been granted the authority to exercise and carry out powers and functions as prescribed by the applicable laws, including the specified Act, starting from the date of its establishment.
.
Ibid at 35.
United States Bankruptcy Code, 2015, Title 11.
United States Bankruptcy Code, 2015, S. 304 deals about the cases which are ancillary to foreign proceedings.
United States Bankruptcy Code, 2015, Ch. 15.
Lehman Brothers Holdings, Inc., In re, 415 BR 77 (NDNY 2009).
The US Bankruptcy Court, “are the courts created under Art. I of the United States Constitution. The current system of bankruptcy courts was created by the United States Congress in 1978, effective 1-4-1984”.
454 F. Supp. 198 (SDNY 1978).
2000 SGHC 113.
2014 SGCA 14.
Beluga Chartering GmbH v. Korea Logistics Systems Inc., 589 F. Supp. 2d 325 (SDNY 2008).
2004 SGHC 123.
2011 HCATrans 144 (2 June 2011).
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CP (IB) 2205 (MB) /2019.
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