Effective Cross-Border Insolvency Regulation
Global trade growth has intensified cross-border insolvency issues, requiring a robust legal framework.
A predictable insolvency system is vital for economic stability, attracting foreign investments, and supporting corporate restructuring
Historical Development of Insolvency Laws in India
India's first insolvency law was the Indian Insolvency Act of 1848, followed by the Presidency-Towns Insolvency Act (1909) and the Provincial Insolvency Act (1920), which didn't address cross-border insolvencies.
Post-Independence, laws remained outdated, despite recommendations for modernization in the 1964 Third Law Commission Report.
Evolution of Cross-Border Insolvency Provisions
Economic liberalization in the 1990s triggered discussions on cross-border insolvency.
Committees like the Eradi (2000), Mitra (2001), and Irani (2005) recommended adopting the United Nations Commission On International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency.
The Insolvency and Bankruptcy Code (IBC) of 2016 focused on domestic insolvencies, later incorporating provisions for cross-border cases with Sections 234 and 235 for reciprocal agreements and foreign court assistance.
Challenges in Cross-Border Insolvency Framework
The Jet Airways case (2019) highlighted gaps: no reciprocal agreement with the Netherlands and unenforceable Sections 234 and 235, making them effectively useless.
Expert committees like the Insolvency Law Committee (2018) and Cross-Border Insolvency Rules Committee (2020) recommended adopting the UNCITRAL Model Law, but progress remains slow.
The Need for Structural Reforms
Ad hoc protocols have been used to address cases, but they are inefficient, leading to high costs and delays.
Judicial communication between Indian and foreign courts needs modernization to enhance efficiency.
Adoption of Judicial Insolvency Network (JIN) Guidelines (2016) is suggested.
The National Company Law Tribunal's (NCLT) limited powers prevent it from recognizing or enforcing foreign judgments, creating barriers in handling cross-border insolvency effectively.
Expanding the NCLT's powers is crucial for improving the enforcement of cross-border insolvency decisions.
Recommendations for Strengthening Cross-Border Insolvency Management
Adopting the UNCITRAL Model Law and modernizing court-to-court communication methods
Expanding NCLT's powers and ensuring timely rule implementations
Implementing these reforms would create a strong, sustainable insolvency framework, crucial for India's participation in global trade and investment.
COMMENTS