Status as on- 07/02/2023
IBC provides two provisions that assist in cross-border insolvency disputes i.e., Section 234 and Section 235 of the Insolvency Bankruptcy Code.
Section 234 of the IBC empowers the Central Government to enter into bilateral agreements with foreign jurisdictions in order to resolve the issues of cross-border insolvency.
The Model Law stipulates the legislative guidance for states on cross-border insolvency. The UNCITRAL Model Law has been strongly recommended for providing a wide-ranging solution for resolving cross-border insolvency issues. The World Bank has acknowledged the international aspects of insolvency proceedings and has observed that the laws for international insolvency should provide rules with respect to choice of law, jurisdiction, recognition of foreign judgments, and cooperation among the Courts of various countries.
The International Monetary Fund (IMF) is another body that encourages the adoption of the Model Law in order to provide an effective means of reducing the difficulties faced in cross-border disputes thereby achieving cooperation and coordination amongst courts and concerned authorities in different jurisdictions.
The need for having a robust framework addressing all niche issues pertaining to cross-border insolvency was long felt. Although various committees have presented their reports on cross-border insolvency, the present framework comprising Section 234 and 235 IBC is inadequate to cover all aspects of insolvency.
The Model Law is a constructive step taken toward building such a mechanism but it is also not independent of its own shortcomings. In the Indian perspective, reciprocity is one of the biggest concerns amongst all apart from infrastructural inefficiencies in India for the implementation and adoption of the Model Law.
However, subsequent to overcoming the obstacles and shortcomings, the Model Law may be able to assure collaboration and communication across different jurisdictions, as well as successfully resolve cross-border conflicts involving India.
Although bilateral agreements are a time-consuming, expensive, and not conclusive source of reliance due to the multiple layers of negotiation involved, these provisions at least shine a light on the issue of cross-border insolvency in IBC.
However, as highlighted above, presently there exists not much of a legal framework for addressing cross-border insolvency disputes in India. Even if the two provisions as provided in the Code are notified and implemented, they suffer from various shortcomings and would not be able to provide a comprehensive mechanism for cross-border insolvency proceedings. As such, eventually, the draft chapter recommended by the Committee would have to be adapted and included in the Code, thereby resulting in the introduction of various amendments and rules to accommodate the draft chapter.
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