Cross-border insolvency panel recommends global UN model for framing law

Govt to internally debate matter and move Cabinet; amendment Bill to be tabled in Parliament thereafter

Foreign investors may be able to drag a defaulting Indian company into insolvency proceedings if recommendations of a panel on cross-border insolvency are accepted by the government. The same may also be true for Indian investors in foreign companies. 

The panel, headed by Corporate Affairs Secretary Injeti Srinivas, recommended using the UNCITRAL Model for cross-border insolvency. 

Cross-border insolvency norms will provide a mechanism to liquidate or recover from foreign assets of Indian companies undergoing insolvency or vice-versa. 

The model law deals with four major principles of cross-border insolvency -- 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 and provision of remedies, cooperation between domestic and foreign courts and domestic and foreign insolvency practitioners, and coordination between two or more concurrent insolvency proceedings in different countries.

Now, the government will internally debate the matter and move the Cabinet. Thereafter, an amendment Bill will be tabled in Parliament. 

Cross-border insolvency is the only segment that is yet to be implemented.

However, the government is yet to look into bankruptcy provisions, which deal with guarantors, proprietorship firms and individual bankruptcy.

Government sources say that in the 44 jurisdictions where cross-border insolvency rules already exist there will be no reciprocal arrangement. 

"In these jurisdictions, where cross-border insolvency already exists, cases can directly be filed. However, in other jurisdictions, the government will get into reciprocal arrangements," a senior corporate affairs ministry official said.

According to the recommendations, where there are proceedings against the same company in multiple jurisdictions, e-courts will be put in place for hearings.

This is the second report produced by the insolvency law committee. In the first part of the report, submitted earlier this year, the committee had omitted cross-border insolvency as it required more deliberation.