Indian Insolvency Law
Insolvency Law Committee in 2nd Report on Cross Border Insolvency to bring Indian Insolvency Law on a par with that of matured jurisdictions has recommended adoption of the UNCITRAL Model Law of Cross Border Insolvency.

Insolvency Law Committee recommends UNCITRAL Model Law of Cross Border Insolvency 1997

The Insolvency Law Committee (ILC) constituted by the Ministry of Corporate Affairs to recommend amendments to Insolvency and Bankruptcy Code of India, 2016,  has submitted its 2nd Report to the Government, which deals with cross border insolvency.  The  Report  was  handed over on 22 October 2018 to Arun Jaitley, Minister of Finance and Corporate Affairs by  Corporate Affairs Secretary, Injeti Srinivas.

The ILC has recommended the adoption of  the UNCITRAL Model Law of Cross Border Insolvency, 1997, as it provides for  a comprehensive framework to deal with cross  border insolvency issues. The Committee has also recommended a few carve outs to ensure that there is no inconsistency between the domestic insolvency framework and the proposed Cross Border Insolvency Framework.

The UNCITRAL Model Law has been adopted in as many as 44 countries and, therefore, forms part of international best practices in dealing with cross border insolvency issues.  The advantages of the model law are the precedence given to domestic proceedings and protection of public interest. The other advantages include greater confidence generation among foreign investors, adequate flexibility for seamless integration with the domestic Insolvency Law and a robust mechanism for international cooperation.

The model law deals with four major principles of cross-border insolvency, namely  direct access to foreign insolvency professionals and foreign creditors to participate in or commence domestic insolvency proceedings against a defaulting debtor; recognition of foreign proceedings & provision of remedies; cooperation between domestic and foreign courts & domestic and foreign insolvency practioners; and coordination between two or more concurrent insolvency proceedings in different countries.  The main proceeding is determined by the concept of centre of main interest (“COMI”).

The necessity of having Cross Border Insolvency Framework  under the Insolvency and Bankruptcy Code arises from the fact that many Indian companies have a global footprint and many foreign companies have presence in multiple  countries including India.  Although the proposed Framework for Cross Border Insolvency will enable us to deal with Indian companies having foreign assets and vice versa, it still does not provide for  a framework for dealing with enterprise groups, which is still work in progress with UNCITRAL and other international bodies.  The inclusion of the Cross Border Insolvency Chapter in the Insolvency and Bankruptcy Code of India, 2016, will be a major step forward and will bring Indian Insolvency Law  on a par with that of matured jurisdictions.

News Update| 23 October 2018| IBBI notifies Insolvency and Bankruptcy Board of India (Mechanism for Issuing Regulations) Regulations, 2018

The Insolvency and Bankruptcy Code, 2016 (Code) is a modern economic legislation. Section 240 of the Code empowers the Insolvency and Bankruptcy Board of India (IBBI) to make regulations subject to the conditions that the regulations: (a) carry out the provisions of the Code, (b) are consistent with the Code and the rules made thereunder; (c) are made by a notification published in the official gazette; and (d) are laid, as soon as possible, before each House of Parliament for 30 days.

Given the importance of subordinate legislations for the various processes under the Code, it is essential that the IBBI has a structured, robust mechanism, which includes effective engagement with the stakeholders, for making regulations. Section 196 (1) (s) of the Code requires the IBBI to specify mechanisms for issuing regulations, including the conduct of public consultation processes, before notification of regulations. In sync with this philosophy and the statutory requirement, the IBBI notified the Insolvency and Bankruptcy Board of India (Mechanism for Issuing Regulations) Regulations, 2018 (Issuing Regulations) to govern the process of making regulations and consulting the public .

The Issuing Regulations provide that for the purpose of making or amending any regulations, the IBBI shall upload the following, with the approval of the Governing Board, on its website seeking comments from the public-

  • draft of proposed regulations;
  • the specific provision of the Code under which the Board proposes regulations;
  • a statement of the problem that the proposed regulation seeks to address;
  • an economic analysis of the proposed regulations;
  • a statement carrying norms advocated by international standard setting agencies and the international best practices, if any, relevant to the proposed regulation;
  • the manner of implementation of the proposed regulations; and
  • the manner, process and timelines for receiving comments from the public.

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