Debt

Debt financing

Allowing cross-border insolvency to bolster IBC

Mint  

The incorporation of cross-border insolvency, where an insolvent debtor has assets and creditors in more than one country, into India's Insolvency and Bankruptcy Code (IBC), is expected to aid banks, improving recovery prospects. India will have to adopt the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross Border Insolvency, 1997 into IBC to give effect to cross-border insolvency. This has been adopted by 49 countries, including Singapore, the UK, US, South Africa and South Korea. Foreign creditors and their representatives will be able to participate in proceedings in India. If there is a contrary order in a foreign jurisdiction, then in such an event, the same shall be subject to proceedings in India, thereby protecting the Indian creditors. Lenders to companies like Videocon group, which have sizable foreign assets, would stand to benefit. Jet Airways was facing insolvency proceedings in both India and the Netherlands. When the Dutch bankruptcy administrator made an application to the National Company Law Tribunal (NCLT) for the recognition of the insolvency proceedings in the Netherlands and putting a temporary hold on the resolution process in India, the NCLT rejected it, citing an absence of cross-border insolvency laws in India.