The banking and finance sector was struggling due to the lack of a clear framework in India with regards to cross-border insolvency despite the recent Insolvency and Bankruptcy Code, 2016. In order to address the concerns of the sector the Ministry of Corporate Affairs constituted the Insolvency Law Committee. The committee’s report, submitted on 16 October 2018, recommended a comprehensive framework based on the UNCITRAL Model Law on Cross-border Insolvency, 1997, be added as a part of the code to align with the best practices adopted globally.
This report is a significant step as it paves the way for India’s accession to the Model Law rather than the alternative of entering into bilateral arrangements with other jurisdictions and will help in increasing foreign investment, maintaining flexibility relating to the differences among national insolvency laws, protection of domestic interests, priority to domestic insolvency proceedings and providing a mechanism for cooperation between courts, foreign bodies and insolvency professionals.
The major concern of the banking and finance sector was regarding the enforcement of a creditor’s right over the assets of the debtor. These assets can either be of an Indian debtor located overseas, of a foreign debtor located in India or of a foreign debtor located in a foreign jurisdiction. One of the key recommendations of the committee was to authorize domestic insolvency representatives in the enacting country to access foreign courts or act in a foreign country in relation to insolvency proceedings against the debtor, subject to the regulations framed by the Insolvency and Bankruptcy Board of India.
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Soumyajit Mitra is a principal associate at SNG & Partners.
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