How Cross-Border Bankruptcy Resolution Could Work

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Bombay : The incorporation of cross-border insolvency, where an insolvent debtor has assets and creditors in more than one country, in the Indian Insolvency and Bankruptcy Code (IBC), will help banks because assets Big business foreigners could now be subject to the resolution process, improving recovery prospects, legal experts said.

Some experts said lenders to companies like the Videocon Group, which have significant foreign assets, would benefit.

According to Nirav Shah, partner at law firm DSK Legal, India will need to enact the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency, 1997 into the IBC to give effect to cross-border insolvency. This has been adopted by 49 countries, including Singapore, the United Kingdom, the United States, South Africa and South Korea.

Currently, cross-border insolvency is governed by Sections 234 and 235 of the IBC. The Union government can enter into bilateral agreements with other countries to solve problems related to cross-border insolvency. The current provisions, however, lead to delays in collection.

Experts said that implementing a uniform framework like UNCITRAL would benefit both local and foreign creditors.

“Foreign creditors and their representatives will be able to participate in proceedings in India. If there is an order to the contrary in a foreign jurisdiction, then in such a case, it will be subject to proceedings in India, thereby protecting Indian creditors,” said Ashish Pyasi, associate partner at the law firm. lawyers Dhir and Dhir Associates.

Some said that even after the amendments are passed and the framework for cross-border insolvency comes into force, there could be delays in accessing assets located in other countries.

Since insolvency resolution or liquidation are time-limited processes, it is not clear how this goal can be achieved within the legal deadlines, said Srinivas Kotni, managing partner at law firm LexPort. . Overall, this is certainly an encouraging development for lenders, Kotni added.

Others pointed out that even without a uniform guideline, Indian courts have allowed cross-border insolvency in some cases.

“An excellent example of successful cross-border insolvency proceedings in India is that of Jet Airways,” said Prashanth Shivadass, partner at law firm Shivadass and Shivadass.

Jet Airways was facing insolvency proceedings in India and the Netherlands. When the Dutch bankruptcy administrator filed an application with the National Company Law Tribunal (NCLT) for the recognition of the insolvency proceedings in the Netherlands and the temporary stay of the resolution process in India, the NCLT dismissed, citing the lack of border insolvency laws in India.

But in a subsequent appeal to the National Company Law Appellate Tribunal (NCLAT), the tribunal’s decision was overturned and it ordered Indian and Dutch resolution professionals to coordinate and cooperate through a deal in September 2019, Shivadass said.

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