Inefficacy Of Cross Border Insolvency Framework In India

Bhavi Shah & Shaivi Awasthy, B.A.LL.B, ILS Law College, Pune

ABSTRACT

When the government liberalized the Indian economy in the 1990s, many Multinational Companies began to look at India as a viable market to lend to Indian corporations which lead to an inflow of foreign direct investments in India. With the increasing trend of globalization in the international market of business and trade, the extent and magnitude of interconnectedness in financial markets and institutions has evolved now more than ever leading to transmission of systemic risks for the foreign investors and ensuing decay in the markets. In this research paper, we will attempt to decipher the risks in the cross border regime and how important it is for the Indian government to address the issues of cross border insolvency and protect the foreign investors. Moreover, it will go into the depths of the Indian law-making on cross border insolvency and will summarize the reports which dealt with the issue of absence of provisions relating to cross border insolvency. Furthermore, this paper also calls for the short comings/challenges of the existing provisions on cross border insolvency. In the light of these challenges/shortcomings, it is essential for the government to consider adopting the UNCITRAL Model Law which provides for a procedural and universal framework in regards to insolvency for efficiency in the administration. The Central Question around which this paper revolves: how the existing framework of cross border insolvency in India is highly inefficient and fails to protect the interest of both domestic as well as foreign creditors and why India should adopt the UNCITRAL Model Law on Cross Border Insolvency?

Additional, the paper summaries the findings related to the above question and how it came to a conclusion. Cross-border insolvency is a notion that is gathering a lot of attention in the recent unprecedented times owing to the rise in insolvency all over the world. Pandemic has brought the economic activities to a halt. Bankruptcies are to become more common and many multinational companies are forced into insolvency proceedings. The Insolvency and Bankruptcy Code, 2016 and its revival plans will prove to be less effective due to the absence of recognition of cross border insolvency laws. Accordingly, there is a need for robustness of cross border insolvency laws. Therefore, this research paper overall contemplates how India should incorporate/adopt the UNCITRAL Model Law on Cross Border Insolvency and the issues to be considered if India were to adopt a version of the Model law.