Mumbai The inclusion of cross-border insolvency, where an insolvent debtor has assets and creditors in more than one country, in India’s Insolvency and Bankruptcy Code (IBC), will help banks as foreign assets of large companies can now be brought under its ambit. could. The resolution process, improving the chances of recovery, said legal experts.
Some experts say it would benefit lenders to companies like the Videocon Group, which have huge foreign assets.
According to Nirav Shah, partner at law firm DSK Legal, India will have to adopt the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross Border Insolvency, 1997 in IBC to make cross-border insolvency effective on cross-border insolvency. . It has been adopted by 49 countries including Singapore, UK, USA, South Africa and South Korea.
Currently, cross-border insolvency is regulated under sections 234 and 235 of the IBC. The central government can enter into bilateral agreements with other countries to resolve issues related to cross-border insolvency. However, the existing provisions cause delay in recovery.
Experts said that implementing a uniform framework like UNCITRAL would be beneficial for both local and foreign creditors.
“Foreign creditors and their representatives will be able to participate in the proceedings in India. If there is a contrary order in the foreign jurisdiction, then in such event, proceedings in India would be subject to, thereby protecting the Indian creditors,” said Ashish Pyasi, associate partner of law firm Dheer & Dheer Associates.
Some said that even after the amendments are made, and even after the framework for cross-border insolvency is in place, there may be delays in accessing assets lying in other countries.
Given that insolvency resolution or liquidation are time-bound processes, it is not clear how this objective can be achieved within the statutory time frame, said Srinivas Kotni, managing partner at law firm Lexport. Overall, this is certainly an encouraging development for lenders, Kotney said.
Others pointed out that even without a uniform guideline, Indian tribunals have allowed cross-border bankruptcy in some cases.
“Jet Airways is a classic example of successful cross-border insolvency proceedings in India,” said Prashant Shivdas, partner at law firm Shivdas & Shivdas.
Jet Airways was facing bankruptcy proceedings in both India and the Netherlands. When the Dutch bankruptcy administrator made an application to the National Company Law Tribunal (NCLT) for recognition of insolvency proceedings in the Netherlands and a temporary stay on the resolution process in India, the NCLT rejected it, citing the absence of the cross. border insolvency law in india
But on a subsequent appeal to the National Company Law Appellate Tribunal (NCLAT), the tribunal’s decision was reversed, and it directed the Indian and Dutch resolution professionals to ensure coordination and cooperation through an agreement in September 2019, Shivdas said. said
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