The model law on cross-border insolvency is almost ready and is under consideration of the government, Ravi Mital, Chairman, Insolvency and Bankruptcy Board of India (IBBI) has said.
The enactment of cross-border insolvency law will make India an even more attractive destination for cross-border investments as insolvency regime in India would become predictable for foreign companies, Mital said at an international webinar on “Cross Border Insolvency and Global Lessons for India”, organised by the Indian Institute of Insolvency Professionals of ICAI (IIIPI), jointly with International Insolvency Institute, USA.
He also highlighted that as part of its ‘Make in India’ programme, the government wants to attract foreign companies to set up manufacturing facilities in India.
Mital said that Indian government is keen to introduce a globally accepted and well regulated cross-border insolvency law.
Based on UNCITRAL law
The new comprehensive framework is likely to be largely patterned on the UNCITRAL model law on cross-border insolvency, which has been adopted by the US, the UK, Japan and Singapore. The UN Model law is now proposed to be tweaked to suit the Indian context and requirements.
“There is a clear need for a cross-border insolvency framework in India. Our country is considering adapting model law (UNCITRAL model law) with certain India specific modifications. We understand the model law will have great benefits for our country”, Mital said.
Mital noted that the UNCITRAL model has emerged as the most widely accepted legal framework for dealing with insolvency issues and more than 40 countries have adopted this model law.
He highlighted that global experience demonstrates that cross-border investment decisions are influenced by insolvency laws in a particular country.
The proposed Indian law will permit the country to refuse recognition of foreign proceedings or provisions if anything is contrary to domestic public policy. Therefore, priority will be given to domestic proceedings and, thus, there will be protection of domestic creditors, he said.
‘Will guide coordination’
“It will also empower Indian insolvency representatives to access foreign jurisdictions and avail recognition and cooperation. It will enable foreign representatives to have same benefits in India. The model law will guide coordination between courts and insolvency professionals in foreign jurisdictions”, Mital said.
Mital noted that existing IBC does cover situation of cross-border issues through sections 234 and 235 of the Code. “Our adjudicating authorities have facilitated cross-border insolvency in several cases and Jet Airways is one of those cases that exemplifies the need for a regime that deals with situations where corporate debtor may have creditors and assets dispersed across various jurisdictions. We have also seen issues of cross-border in the Videocon Industries case”, he said.
Debashis Mitra, ICAI President, said that cross-border insolvency has a great future and highlighted that more than 60 per cent of insolvency professionals in India are chartered accountants. He said that IIIPI has been an active participant in the la- making process relating to cross-border insolvency.
Ashok Haldia, Chairman, IIIPI, said that the intensity of collaboration between trade and industry in India and the US extends even to small and medium enterprises. ”That being the case, there is is a desperate need for resolution of cross-border insolvency in an effective manner—fairly and transparently. IBC does provide framework for cross-border insolvency. That has, however, hardly been taken recourse to”, Haldia said.
The Corporate Affairs Ministry has already received public comments on the proposed legal framework for cross-border insolvency under the IBC.
Adoption of cross-border insolvency regime is expected to further India’s image as the most improved jurisdiction in terms of insolvency resolution.