Hanan Fathima & Muhammed Rayhaan, Gujarat National Law University
ABSTRACT
With the dalliance of globalisation and the emergence of foreign investment, the advent of cross-border insolvency poses a plethora of challenges in the modern economy, despite its virtues. This brings to question several concerning issues, such as the protection of domestic creditors due to the varied nature of global insolvency laws; drawbacks in recognition of foreign proceedings; conflicting claims in different jurisdictions; and more, all actively hampering coordination among different courts and adjudicating authorities (as understood in the case of the Hanjin Shipping Company in 2016) and necessitating striking a careful balance to maintain everyone's interests. In India, the Indian Bankruptcy Code (IBC) further exacerbates the situation with its complete lack of any mention of the term ‘cross-border insolvency’ and the absence of any structured framework or legislation in this regard. The existing arrangement, as per Sections 234 and 235 of the IBC, continues to remain largely inadequate and ineffective, breeding the aforementioned complications of recognition and coordination, as evidently observed in the collapse of Jet Airways. This often requires bilateral agreements as the only plausible solution (as per Section 234) in the current system, which fosters an atmosphere of inconsistency and delay, all of which severely need to be mitigated to alleviate the burden among different parties and pave the way for seamless insolvency procedures with India. The Insolvency Law Committee (ILC) of the Ministry of Corporate Affairs derived a similar conclusion in their October 2018 report, further analysing the United Nations Commission on International Trade Law’s (UNCITRAL) Model Law on Cross-Border Insolvency and categorically commenting on how the provisions of said Model Law may or may not be adopted by the IBC. Furthermore, the ILC report elucidates certain key advantages of implementing the Model Law and officially recommends its adoption in the form of a Draft Cross-Border Insolvency Legislation, or alternatively, Draft Part Z. For reference, the UNCITRAL Model Law sustains itself as a landmark legal framework in the matter of cross-border insolvency, enhancing cooperation, ensuring fair treatment, facilitating timely and effective resolution, and promoting legal certainty in intricate situations. The provisions of this law, such as the prevention of discrimination against foreign creditors and direct access to resources in domestic courts, significantly improve procedures and enhance cooperation, thus proving themselves as a valuable contribution to domestic insolvency regimes, specifically India, which is not part of the 51 nations that currently implement this law. This prevailing situation puts forth the necessity of a deeper analysis of the existing concerns of cross-border insolvency and, consequently, the adoption of the UNCITRAL Model Law in India, which are the objectives this paper seeks to achieve. Conjointly, the researchers' methodology involves a secondary analysis of the aspects mentioned supra in defining the nuances of this agenda and ultimately addressing the various concerns of this matter with reference to Indian laws and regulations, holistically decrypting the complex phenomenon of cross-border insolvency.
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