This article delves into the concept of cross-border bankruptcy proceedings, where a debtor holds assets, creditors, or both in multiple jurisdictions, leading to insolvency issues that transcend the boundaries of a single legal system. Recent high-profile cases involving companies such as Videocon Industries and Essar Steel underscore the pressing need for a comprehensive statute in India to effectively address these challenges. These cases have brought to light various difficulties, including complications in asset disbursement, procedural intricacies, and prolonged legal processes, resulting in significant losses for corporations.
To tackle these complexities and enhance efficiency, the article proposes adopting a legal framework for cross-border bankruptcy, facilitating a single consolidated insolvency process across jurisdictions. This becomes crucial in light of India's growing prominence as a major global player and its efforts to attract foreign investment through initiatives like Make-in-India and FDI regulatory relaxations. Ensuring protection and procedural fairness for all stakeholders involved in cross-border insolvency cases is paramount to encouraging business activities in India.
The article also examines the UNCITRAL Model Law as a potential solution to India's cross-border insolvency challenges. The Model Law aims to provide an efficient framework for governments to address insolvency issues and harmonize different legal systems and the promotion of collaboration between national and international courts and insolvency specialists. Additionally, it emphasizes the recommendations made by the Insolvency Committee, suggesting the inclusion of a chapter on cross-border insolvency, inspired by the Model Law, into India's legislative framework.
Despite the potential benefits, the article acknowledges several challenges, such as the need to negotiate bilateral agreements with other countries, address procedural and legal complexities, and consider the suggestion of adopting the Model Law on a Reciprocal Bargain.