{"id":150389,"date":"2025-01-06T20:12:58","date_gmt":"2025-01-06T14:42:58","guid":{"rendered":"https:\/\/pwonlyias.com\/stage\/?post_type=current-affairs&#038;p=150389"},"modified":"2025-02-13T15:57:55","modified_gmt":"2025-02-13T10:27:55","slug":"cross-border-insolvency-in-india","status":"publish","type":"current-affairs","link":"https:\/\/pwonlyias.com\/stage\/current-affairs\/cross-border-insolvency-in-india","title":{"rendered":"Cross-Border Insolvency in India"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">The growth in international trade has amplified <\/span><b>cross-border insolvency challenges<\/b><span style=\"font-weight: 400;\">, highlighting the need for effective regulation.\u00a0<\/span><\/p>\n<h2><span style=\"font-size: 18pt;\"><b>About Cross-Border Insolvency<\/b><\/span><\/h2>\n<ul>\n<li><span style=\"font-weight: 400;\">Insolvency is a <\/span><b>financial state<\/b><span style=\"font-weight: 400;\"> where a person or company is <\/span><b>unable to pay back their debts<\/b><span style=\"font-weight: 400;\"> on time.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Cross-border insolvency deals with<\/span><b> cases<\/b><span style=\"font-weight: 400;\"> where an<\/span><b> insolvent debtor has assets or creditors in more than one jurisdiction.<\/b><\/li>\n<li><span style=\"font-weight: 400;\">Essential for effective regulation in a globalized economy to:<\/span>\n<ul>\n<li><span style=\"font-weight: 400;\">Facilitate<\/span><b> corporate restructuring<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li><b>Attract foreign investments and economic stability<\/b><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p style=\"text-align: center;\"><span class=\"vc_button\"><a href=\"https:\/\/www.pw.live\/batches\/upsc?utm_source=seo+upsc+batch&#038;utm_medium=seo+upsc&#038;utm_campaign=seo&#038;utm_id=upsc\" target=\"_blank\" rel=\"noopener\">Enroll now for UPSC Online Course<\/a><\/span><\/p>\n<h2><span style=\"font-size: 18pt;\"><b>Historical Background of Cross-Border Insolvency in India<\/b><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Pre-Independence Era<\/b><span style=\"font-weight: 400;\">:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Indian Insolvency Act, 1848<\/b><span style=\"font-weight: 400;\">: First insolvency law introduced under British rule, focusing only on domestic insolvencies.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Presidency-Towns Insolvency Act, 1909<\/b><span style=\"font-weight: 400;\">: Applied to major cities (Calcutta, Bombay, and Madras).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Provincial Insolvency Act, 1920<\/b><span style=\"font-weight: 400;\">: Governed insolvencies in mofussil (rural) regions.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"3\"><b>Limitation<\/b><span style=\"font-weight: 400;\">: These laws failed to address cross-border insolvency complexities as the focus was only on domestic insolvency issues\u200b.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Post-Independence Era<\/b><span style=\"font-weight: 400;\">:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Insolvency laws from the British era <\/span><b>continued without substantial amendments<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Third Law Commission\u2019s 26th Report (1964)<\/b><span style=\"font-weight: 400;\">: Recommended modernizing insolvency laws to keep up with economic developments, but no concrete steps were taken\u200b.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>1990s Economic Liberalization<\/b><span style=\"font-weight: 400;\">:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Globalization<\/b><span style=\"font-weight: 400;\"> led to an increase in cross-border trade and investment.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">The need for a <\/span><b>comprehensive insolvency law<\/b><span style=\"font-weight: 400;\"> to manage cross-border cases became apparent.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Committees like the <\/span><b>Eradi Committee (2000)<\/b><span style=\"font-weight: 400;\">, <\/span><b>Mitra Committee (2001)<\/b><span style=\"font-weight: 400;\">, and <\/span><b>Irani Committee (2005)<\/b><span style=\"font-weight: 400;\"> recommended adopting the <\/span><b>UNCITRAL Model Law on Cross-Border Insolvency (1997)<\/b><span style=\"font-weight: 400;\">\u200b.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Insolvency and Bankruptcy Code (IBC), 2016<\/b><span style=\"font-weight: 400;\">:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">In 2015, the<\/span><b> Bankruptcy Law Reform Committee,<\/b><span style=\"font-weight: 400;\"> drafted the<\/span><b> Insolvency and Bankruptcy Code (IBC) Bill<\/b><span style=\"font-weight: 400;\">, focusing on domestic insolvencies.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Aimed to <\/span><b>consolidate and modernize insolvency laws<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Included <\/span><b>Section 234<\/b><span style=\"font-weight: 400;\"> (reciprocal agreements) and <\/span><b>Section 235<\/b><span style=\"font-weight: 400;\"> (requests to foreign courts) for cross-border insolvency.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Limitation<\/b><span style=\"font-weight: 400;\">: These sections remain <\/span><b>unenforceable<\/b><span style=\"font-weight: 400;\"> due to the <\/span><b>lack of reciprocal agreements and slow policy implementation\u200b\u200b.<\/b><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<div class=\"vc_table_green\"><\/p>\n<table style=\"width: 99.7979%;\">\n<tbody>\n<tr>\n<th style=\"width: 100%; border-style: solid; border-color: #000000; background-color: rgba(184, 165, 217, 0.53); text-align: left; vertical-align: middle;\">\n<h4><span style=\"font-size: 15pt; color: #000000;\"><b>Expert Recommendations<\/b><\/span><\/h4>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"color: #000000;\"><b>Committees<\/b><span style=\"font-weight: 400;\">:<\/span><\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"color: #000000;\"><b>Eradi Committee (2000)<\/b><span style=\"font-weight: 400;\">, <\/span><b>Mitra Committee (2001)<\/b><span style=\"font-weight: 400;\">, and <\/span><b>Irani Committee (2005)<\/b><span style=\"font-weight: 400;\"> recommended adopting <\/span><b>UNCITRAL Model Law on Cross-Border Insolvency<\/b><span style=\"font-weight: 400;\"> (1997).<\/span><\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"color: #000000;\"><b>Insolvency Law Committee (2018)<\/b><span style=\"font-weight: 400;\"> and <\/span><b>Cross-Border Insolvency Rules\/Regulation Committee (2020)<\/b><span style=\"font-weight: 400;\"> reinforced this recommendation.<\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"color: #000000;\"><b>Parliamentary Reports<\/b><span style=\"font-weight: 400;\">:<\/span><\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"color: #000000;\"><b>Thirty-Second Report (2021)<\/b><span style=\"font-weight: 400;\"> and <\/span><b>Sixty-Seventh Report (2024)<\/b><span style=\"font-weight: 400;\"> stressed the urgent need for a structured cross-border insolvency framework.<\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/th>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><\/div>\n<h2><span style=\"font-size: 18pt;\"><b>Insolvency and Bankruptcy Code (IBC), 2016<\/b><\/span><\/h2>\n<ul>\n<li><b>IBC, 2016<\/b><span style=\"font-weight: 400;\"> was enacted to consolidate and amend laws relating to insolvency and bankruptcy for:<\/span>\n<ul>\n<li><b>Corporate entities.<\/b><\/li>\n<li><b>Partnership firms.<\/b><\/li>\n<li><b>Individuals.<\/b><\/li>\n<\/ul>\n<\/li>\n<li><b>Goal:<\/b><span style=\"font-weight: 400;\"> To resolve insolvency in a time-bound manner, ensuring creditor protection and debt recovery.<\/span><\/li>\n<li><b>Objectives<\/b>\n<ul>\n<li><b>Time-Bound Process<\/b><span style=\"font-weight: 400;\">: Resolves insolvency within 180 days (extendable by 90 days).<\/span><\/li>\n<li><b>Maximization of Asset Value<\/b><span style=\"font-weight: 400;\">: Avoids unnecessary asset depletion during proceedings.<\/span><\/li>\n<li><b>Promoting Entrepreneurship<\/b><span style=\"font-weight: 400;\">: Facilitates easy exit for failed businesses.<\/span><\/li>\n<li><b>Ease of Doing Business<\/b><span style=\"font-weight: 400;\">: Improves India&#8217;s global ranking by creating a predictable insolvency framework.<\/span><\/li>\n<li><b>Creditor Confidence<\/b><span style=\"font-weight: 400;\">: Ensures transparency and fairness in debt recovery.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>Key Features<\/b>\n<ul>\n<li><b>Adjudicating Authorities<\/b><span style=\"font-weight: 400;\">:<\/span>\n<ul>\n<li><b>National Company Law Tribunal (NCLT)<\/b><span style=\"font-weight: 400;\">: Handles corporate insolvency.<\/span><\/li>\n<li><b>Debt Recovery Tribunal (DRT)<\/b><span style=\"font-weight: 400;\">: Handles insolvency for individuals and partnership firms.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>Insolvency Professionals (IPs)<\/b><span style=\"font-weight: 400;\">: Act as intermediaries managing the insolvency resolution process (IRP).<\/span>\n<ul>\n<li><span style=\"font-weight: 400;\">Appointed by the <\/span><b>Insolvency and Bankruptcy Board of India (IBBI)<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>Corporate Insolvency Resolution Process (CIRP)<\/b><span style=\"font-weight: 400;\">: Initiated by creditors or debtors for corporate entities.<\/span>\n<ul>\n<li><span style=\"font-weight: 400;\">Resolution plan to be approved by the Committee of Creditors (CoC).<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>Time-Bound Resolution<\/b><span style=\"font-weight: 400;\">: <\/span><b>180-day<\/b><span style=\"font-weight: 400;\"> resolution period with an extension of 90 days in exceptional cases.<\/span><\/li>\n<li><b>Moratorium<\/b><span style=\"font-weight: 400;\">: Provides a legal stay on claims and actions against the debtor during insolvency proceedings.<\/span><\/li>\n<li><b>Liquidation Process<\/b><span style=\"font-weight: 400;\">: Initiated if no resolution is achieved within the <\/span><b>stipulated timeline<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li><b>Waterfall Mechanism<\/b><span style=\"font-weight: 400;\">: A prioritized repayment structure under IBC where insolvency resolution costs are paid first, followed by <\/span><b>secured creditors, workmen dues, unsecured creditors, government dues, and lastly equity shareholders.<\/b><span style=\"font-weight: 400;\">\u00a0<\/span>\n<ul>\n<li><span style=\"font-weight: 400;\">It ensures orderly distribution of proceeds during liquidation.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li><b>Key Provisions<\/b>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Section 7<\/b><span style=\"font-weight: 400;\">: Financial creditors can file an application to initiate the Corporate Insolvency Resolution Process (CIRP).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Section 9<\/b><span style=\"font-weight: 400;\">: Operational creditors can file an application to initiate CIRP after delivering a demand notice to the debtor.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Section 10<\/b><span style=\"font-weight: 400;\">: Debtors themselves can voluntarily initiate CIRP by filing an application.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Section 29A<\/b><span style=\"font-weight: 400;\">: Disqualifies willful defaulters, promoters of defaulting companies, and related persons from submitting a resolution plan.<\/span>\n<ul>\n<li><span style=\"font-weight: 400;\">Prevents misuse of the process by defaulting promoters.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p style=\"text-align: center;\"><span class=\"vc_button\"><a href=\"https:\/\/store.pw.live\/govt-entrance-exams\/upsc-books?utm_source=SEO&#038;utm_medium=PW+Live&#038;utm_campaign=UPSC+CSE+Books\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Check Out UPSC CSE Books From PW Store<\/span><\/a><\/span><\/p>\n<div class=\"vc_table_green\"><\/p>\n<table>\n<tbody>\n<tr>\n<th style=\"border-style: solid; border-color: #000000; background-color: rgba(184, 165, 217, 0.53); text-align: left; vertical-align: middle;\"><span style=\"color: #000000;\"><b>Reciprocal Agreements<\/b><span style=\"font-weight: 400;\">: Bilateral arrangements between countries under <\/span><b>Section 234 of the IBC<\/b><span style=\"font-weight: 400;\"> to mutually recognize and enforce insolvency proceedings.\u00a0<\/span><\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400; color: #000000;\">These agreements enable cooperation between jurisdictions for handling cross-border insolvency cases effectively.<\/span><\/li>\n<\/ul>\n<\/th>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><\/div>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li><b>Cross-Border Insolvency: <\/b><span style=\"font-weight: 400;\">Added in 2018 <\/span><b>on the recommendations of The Bankruptcy Law Reforms Committee (BLRC).<\/b>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Section 234<\/b><span style=\"font-weight: 400;\">: Reciprocal agreements with foreign countries for cross-border insolvency proceedings.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Section 235<\/b><span style=\"font-weight: 400;\">: Enables Indian adjudicating authorities to request assistance from foreign courts.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<div class=\"vc_table_green\"><\/p>\n<table style=\"width: 99.8996%;\">\n<tbody>\n<tr>\n<th style=\"width: 100%; border-style: solid; border-color: #000000; background-color: rgba(184, 165, 217, 0.53); text-align: left; vertical-align: middle;\"><span style=\"color: #000000;\"><b>Part Z<\/b><span style=\"font-weight: 400;\">: A proposed framework under the IBC, 2016, incorporating the <\/span><b>UNCITRAL Model Law on Cross-Border Insolvency<\/b><span style=\"font-weight: 400;\"> to govern recognition, cooperation, and resolution of international insolvency cases.<\/span><\/span><\/th>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><\/div>\n<h4><span style=\"font-size: 15pt;\"><b>Recent developments<\/b><\/span><\/h4>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>2018<\/b><span style=\"font-weight: 400;\">: The <\/span><b>Insolvency Law Committee (ILC)<\/b><span style=\"font-weight: 400;\"> recommended the adoption of the <\/span><b>UNCITRAL Model Law on Cross-Border Insolvency, 1997<\/b><span style=\"font-weight: 400;\">, and proposed a new framework called <\/span><b>Part Z<\/b><span style=\"font-weight: 400;\"> to comprehensively address cross-border insolvency issues.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>2020<\/b><span style=\"font-weight: 400;\">: The <\/span><b>Cross-Border Insolvency Rules\/Regulation Committee (CBIRC)<\/b><span style=\"font-weight: 400;\"> was constituted to propose rules and regulations for implementing Part Z.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Current Status<\/b><span style=\"font-weight: 400;\">: Cross-border insolvency provisions are <\/span><b>yet to be fully implemented<\/b><span style=\"font-weight: 400;\">, and <\/span><b>Sections 234 and 235 remain non-functional<\/b><span style=\"font-weight: 400;\"> due to the absence of reciprocal agreements and required notifications.\u00a0<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Legislative efforts to adopt the UNCITRAL Model Law<\/b><span style=\"font-weight: 400;\"> and operationalize cross-border insolvency are ongoing.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p style=\"text-align: center;\"><span class=\"vc_button\"><a href=\"https:\/\/store.pw.live\/govt-entrance-exams\/upsc-books\/upsc-textbooks?utm_source=SEO&#038;utm_medium=PW+Live&#038;utm_campaign=UPSC+Textbooks\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Check Out UPSC NCERT Textbooks From PW Store<\/span><\/a><\/span><\/p>\n<h2><span style=\"font-size: 18pt;\"><b>Need for Cross-Border Insolvency in India:<\/b><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Increasing Global Trade and Investments<\/b><span style=\"font-weight: 400;\">: India&#8217;s growing global economic integration requires a robust framework for handling insolvency involving multinational companies.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">India has been executing <\/span><b>Free Trade Agreements (FTAs), Comprehensive Economic Corporation Agreements (CECAs), Comprehensive Economic Partnership Agreements (CEPAs)<\/b><span style=\"font-weight: 400;\"> and their equivalents.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">As per the Commerce Ministry, India has signed such agreements with <\/span><b>more than 54 countries.<\/b><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Protection of Creditor Interests<\/b><span style=\"font-weight: 400;\">: Ensures equitable treatment of domestic and foreign creditors, fostering investor confidence.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Efficient Asset Recovery<\/b><span style=\"font-weight: 400;\">: Enables retrieval of assets spread across multiple jurisdictions, reducing delays and asset value loss.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Addressing Jurisdictional Conflicts<\/b><span style=\"font-weight: 400;\">: Provides clarity on the <\/span><b>Centre of Main Interest (COMI)<\/b><span style=\"font-weight: 400;\"> to resolve disputes and prevent overlapping proceedings.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Alignment with Global Standards<\/b><span style=\"font-weight: 400;\">: Adoption of the <\/span><b>UNCITRAL Model Law<\/b><span style=\"font-weight: 400;\"> will place India on par with countries like the USA, UK, and Singapore, attracting foreign investments.<\/span><\/li>\n<\/ul>\n<div class=\"vc_table_green\"><\/p>\n<table style=\"width: 99.7992%;\">\n<tbody>\n<tr>\n<th style=\"width: 100%; border-style: solid; border-color: #000000; background-color: rgba(184, 165, 217, 0.53); text-align: left; vertical-align: middle;\">\n<h2><span style=\"font-size: 18pt; color: #000000;\"><b>Key Cases of Cross-Border Insolvency<\/b><\/span><\/h2>\n<p><span style=\"color: #000000;\"><b>Jet Airways (India) Limited Case (2019)<\/b><\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"color: #000000;\"><span style=\"font-weight: 400;\">Jet Airways faced<\/span><b> insolvency proceedings in India and the Netherlands<\/b><span style=\"font-weight: 400;\"> simultaneously.<\/span><\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"color: #000000;\"><span style=\"font-weight: 400;\">Dutch bankruptcy administrators sought<\/span><b> recognition of the Netherlands proceedings by the National Company Law Tribunal (NCLT)<\/b><span style=\"font-weight: 400;\">, Mumbai.<\/span><\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"color: #000000;\"><b>Key Issues<\/b><span style=\"font-weight: 400;\">:<\/span><\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"color: #000000;\"><b>No reciprocal agreement<\/b><span style=\"font-weight: 400;\"> under Sections 234 and 235 of IBC.<\/span><\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"color: #000000;\"><b>Jurisdictional conflict<\/b><span style=\"font-weight: 400;\"> between Indian and Dutch courts.<\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"color: #000000;\"><b>Outcome<\/b><span style=\"font-weight: 400;\">:<\/span><\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"color: #000000;\"><span style=\"font-weight: 400;\">The <\/span><b>National Company Law Appellate Tribunal (NCLAT)<\/b><span style=\"font-weight: 400;\"> directed joint insolvency resolution proceedings in India and the Netherlands under a <\/span><b>Cross-Border Insolvency Protocol<\/b><span style=\"font-weight: 400;\">.<\/span><\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"color: #000000;\"><span style=\"font-weight: 400;\">Recognized the <\/span><b>Centre of Main Interest (COMI)<\/b><span style=\"font-weight: 400;\"> in India and Dutch proceedings as secondary.<\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><span style=\"color: #000000;\"><b>Videocon Industries Limited Case (2019)<\/b><\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"color: #000000;\"><span style=\"font-weight: 400;\">Videocon Group\u2019s insolvency proceedings involved <\/span><b>domestic subsidiaries and foreign assets <\/b><span style=\"font-weight: 400;\">across multiple jurisdictions.<\/span><\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"color: #000000;\"><b>Key Issues<\/b><span style=\"font-weight: 400;\">:<\/span><\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400; color: #000000;\">Whether foreign subsidiaries\u2019 assets should be included in Indian insolvency proceedings.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"color: #000000;\"><span style=\"font-weight: 400;\">Lack of clarity on<\/span><b> group insolvency and cross-border<\/b><span style=\"font-weight: 400;\"> frameworks.<\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"color: #000000;\"><b>Outcome<\/b><span style=\"font-weight: 400;\">:<\/span><\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"color: #000000;\"><span style=\"font-weight: 400;\">NCLT ordered the inclusion of <\/span><b>foreign subsidiaries&#8217; assets under the resolution plan<\/b><span style=\"font-weight: 400;\">.<\/span><\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"color: #000000;\"><span style=\"font-weight: 400;\">Emphasized the<\/span><b> need for legal provisions <\/b><span style=\"font-weight: 400;\">addressing group insolvency and cross-border disputes.<\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/th>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><\/div>\n<div class=\"vc_table_green\"><\/p>\n<table style=\"width: 99.7979%;\">\n<tbody>\n<tr>\n<th style=\"width: 100%; border-style: solid; border-color: #000000; background-color: rgba(184, 165, 217, 0.53); text-align: left; vertical-align: middle;\">\n<h2><span style=\"font-size: 18pt; color: #000000;\"><b>UNCITRAL Model Law on Cross-Border Insolvency<\/b><\/span><\/h2>\n<ul>\n<li><span style=\"color: #000000;\"><span style=\"font-weight: 400;\">Adopted by the <\/span><b>United Nations Commission on International Trade Law (UNCITRAL)<\/b><span style=\"font-weight: 400;\"> in <\/span><b>1997<\/b><span style=\"font-weight: 400;\">.<\/span><\/span><\/li>\n<li><span style=\"color: #000000;\"><span style=\"font-weight: 400;\">Provides a framework for <\/span><b>managing cross-border insolvency cases<\/b><span style=\"font-weight: 400;\"> to facilitate cooperation between countries.<\/span><\/span><\/li>\n<li><span style=\"color: #000000;\"><span style=\"font-weight: 400;\">Focuses on <\/span><b>procedural harmonization,<\/b><span style=\"font-weight: 400;\"> not substantive insolvency laws.<\/span><\/span><\/li>\n<li><span style=\"color: #000000;\"><b>Core Principles (Four Pillars)<\/b><\/span>\n<ul>\n<li><span style=\"color: #000000;\"><b>Access<\/b><span style=\"font-weight: 400;\">: Foreign representatives can directly approach domestic courts.<\/span><\/span><\/li>\n<li><span style=\"color: #000000;\"><b>Recognition<\/b><span style=\"font-weight: 400;\">: Simplifies recognition of foreign insolvency proceedings as &#8220;main&#8221; or &#8220;non-main&#8221; proceedings.<\/span><\/span>\n<ul>\n<li><span style=\"color: #000000;\"><span style=\"font-weight: 400;\">&#8220;Main proceeding&#8221; is where the <\/span><b>Centre of Main Interest (COMI)<\/b><span style=\"font-weight: 400;\"> is located.<\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li><span style=\"color: #000000;\"><b>Relief<\/b><span style=\"font-weight: 400;\">: Provides assistance to foreign courts, including moratoriums and asset protection.<\/span><\/span><\/li>\n<li><span style=\"color: #000000;\"><b>Cooperation and Coordination<\/b><span style=\"font-weight: 400;\">: Courts and insolvency professionals must cooperate with their foreign counterparts.<\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li><span style=\"color: #000000;\"><b>Adoption by Countries<\/b><\/span><\/li>\n<li style=\"list-style-type: none;\">\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"color: #000000;\"><span style=\"font-weight: 400;\">Adopted by <\/span><b>60 countries<\/b><span style=\"font-weight: 400;\">, including the <\/span><b>USA<\/b><span style=\"font-weight: 400;\">, <\/span><b>UK<\/b><span style=\"font-weight: 400;\">, <\/span><b>Australia<\/b><span style=\"font-weight: 400;\">, <\/span><b>Japan<\/b><span style=\"font-weight: 400;\">, and <\/span><b>South Africa<\/b><span style=\"font-weight: 400;\">.<\/span><\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"color: #000000;\"><span style=\"font-weight: 400;\">India is yet to adopt the Model Law but aims to implement it through <\/span><b>Draft Part Z<\/b><span style=\"font-weight: 400;\"> of the <\/span><b>IBC, 2016<\/b><span style=\"font-weight: 400;\">.<\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/th>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><\/div>\n<p style=\"text-align: center;\"><span class=\"vc_button\"><a href=\"https:\/\/store.pw.live\/govt-entrance-exams\/upsc-books\/upsc-modules?utm_source=SEO&#038;utm_medium=PW+Live&#038;utm_campaign=UPSC+Modules\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Check Out UPSC Modules From PW Store<\/span><\/a><\/span><\/p>\n<h2><span style=\"font-size: 18pt;\"><b>Key Challenges in Cross-Border Insolvency in India<\/b><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Absence of a Comprehensive Framework<\/b><span style=\"font-weight: 400;\">: India lacks a robust legal framework for cross-border insolvency; <\/span><b>Sections 234 and 235 of the IBC<\/b><span style=\"font-weight: 400;\"> remain unenforceable due to the<\/span><b> absence of reciprocal agreements.<\/b>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">In the <\/span><b>Jet Airways (2019)<\/b><span style=\"font-weight: 400;\"> case, <\/span><b>Dutch<\/b><span style=\"font-weight: 400;\"> proceedings were stalled as no legal mechanism existed for cooperation between Indian and Dutch courts.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Jurisdictional Conflicts and COMI Determination<\/b><span style=\"font-weight: 400;\">: Determining the <\/span><b>Centre of Main Interest (COMI)<\/b><span style=\"font-weight: 400;\"> is often complex, leading to disputes.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">The <\/span><b>absence of COMI-<\/b><span style=\"font-weight: 400;\">related provisions in India hampers clarity in cross-border disputes.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Ad Hoc Protocols Instead of Structured Mechanisms<\/b><span style=\"font-weight: 400;\">: Cross-border insolvency cases are currently resolved through temporary protocols, increasing costs and delays.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Lack of Judicial and Institutional Capacity<\/b><span style=\"font-weight: 400;\">: NCLT is overburdened, with more than <\/span><b>22,000 pending cases (as of 2024)<\/b><span style=\"font-weight: 400;\">, leaving little bandwidth for cross-border matters.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Cross-border cases require <\/span><b>specialized knowledge<\/b><span style=\"font-weight: 400;\">, which the Indian judicial system is still developing.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Unaddressed Group Insolvency Issues<\/b><span style=\"font-weight: 400;\">: India lacks a framework for group insolvency, leading to <\/span><b>fragmentation in resolving cases<\/b><span style=\"font-weight: 400;\"> involving multinational companies.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">In <\/span><b>Videocon Industries Ltd. (2019)<\/b><span style=\"font-weight: 400;\">, the NCLT had to extend jurisdiction over foreign subsidiaries without a formal framework.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Uncertainty for Foreign Investors<\/b><span style=\"font-weight: 400;\">: The absence of <\/span><b>clear rules on cross-border insolvency<\/b><span style=\"font-weight: 400;\"> deters foreign creditors from engaging with Indian companies.<\/span><\/li>\n<\/ul>\n<h2><span style=\"font-size: 18pt;\"><b>Recommendations on Cross-Border Insolvency in India<\/b><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Adoption of the UNCITRAL Model Law<\/b><span style=\"font-weight: 400;\">: Recommended by the <\/span><b>Insolvency Law Committee (ILC, 2018)<\/b><span style=\"font-weight: 400;\"> and <\/span><b>Cross-Border Insolvency Rules\/Regulation Committee (CBIRC, 2020)<\/b><span style=\"font-weight: 400;\">.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Provides a standardized framework emphasizing cooperation, recognition of foreign proceedings, and creditor protection.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Incorporation of Draft Part Z into IBC<\/b><span style=\"font-weight: 400;\">: Proposed by the ILC to serve as India&#8217;s cross-border insolvency framework.Includes provisions for:<\/span>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"3\"><span style=\"font-weight: 400;\">Determining the <\/span><b>Centre of Main Interest (COMI)<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"3\"><span style=\"font-weight: 400;\">Simplifying recognition and cooperation processes.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Ensures streamlined management of foreign insolvency proceedings.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Empowering NCLT for Cross-Border Cases<\/b><span style=\"font-weight: 400;\">: Vest NCLT benches with jurisdiction over foreign entities and cross-border matters.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Principal Bench of the NCLT to handle foreign cases to ensure consistency.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Strengthening Judicial and Administrative Capacity<\/b><span style=\"font-weight: 400;\">: Conduct specialized training for judges and insolvency professionals to handle complex cross-border cases.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Build infrastructure for seamless international communication and coordination.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Improved Communication Mechanisms<\/b><span style=\"font-weight: 400;\">: Adopt the <\/span><b>Judicial Insolvency Network (JIN) Guidelines<\/b><span style=\"font-weight: 400;\"> for court-to-court communication.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Enable direct communication between Indian and foreign representatives for efficient resolutions.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Reciprocal Agreements<\/b><span style=\"font-weight: 400;\">: Expedite reciprocal agreements under <\/span><b>Section 234<\/b><span style=\"font-weight: 400;\"> of the IBC to facilitate cross-border recognition and enforcement.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Focus on Group Insolvency<\/b><span style=\"font-weight: 400;\">: Develop a framework for resolving group insolvency cases involving multinational corporations.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Code of Conduct for Foreign Representatives<\/b><span style=\"font-weight: 400;\">: Introduce a minimalistic code of conduct to regulate foreign representatives under IBBI\u2019s supervision.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Ensure accountability through investigation and disciplinary mechanisms.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p style=\"text-align: center;\"><span class=\"vc_button\"><a href=\"https:\/\/www.pw.live\/batches\/upsc\/pw-only-ias?utm_source=seo+upsc+batch&#038;utm_medium=seo+upsc&#038;utm_campaign=seo&#038;utm_id=upsc\" target=\"_blank\" rel=\"noopener\">Enroll now for UPSC Online Classes<\/a><\/span><\/p>\n<h2><span style=\"font-size: 18pt;\"><b>Conclusion<\/b><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">A robust <\/span><b>cross-border insolvency framework<\/b><span style=\"font-weight: 400;\"> is critical for India&#8217;s economic stability, global trade participation, and foreign investment. Adopting the <\/span><b>UNCITRAL Model Law through Part Z<\/b><span style=\"font-weight: 400;\"> will streamline international insolvency processes, enhance judicial cooperation, and align India with global best practices. <\/span><b>Swift implementation and capacity-building<\/b><span style=\"font-weight: 400;\"> are essential to address current challenges.<\/span><\/p>\n<div class=\"vc_table_green\"><\/p>\n<table style=\"width: 99.6375%;\">\n<tbody>\n<tr>\n<td style=\"width: 111.19%; text-align: center;\" colspan=\"2\"><span style=\"font-size: 18pt;\"><b>Also Read<\/b><\/span><\/td>\n<\/tr>\n<tr>\n<td style=\"width: 49.797%; text-align: center;\"><a href=\"https:\/\/pwonlyias.com\/stage\/editorial-analysis\/\" target=\"_blank\" rel=\"noopener\"><b>UPSC Daily Editorials<\/b><\/a><\/td>\n<td style=\"width: 61.393%; text-align: center;\"><a href=\"https:\/\/pwonlyias.com\/stage\/daily-current-affairs\/\" target=\"_blank\" rel=\"noopener\"><b>UPSC Daily Current Affairs<\/b><\/a><\/td>\n<\/tr>\n<tr>\n<td style=\"width: 49.797%; text-align: center;\"><a href=\"https:\/\/pwonlyias.com\/stage\/quiz\/\" target=\"_blank\" rel=\"noopener\"><b>Daily Current Affairs Quiz<\/b><\/a><\/td>\n<td style=\"width: 61.393%; text-align: center;\"><a href=\"https:\/\/pwonlyias.com\/stage\/mains-answer-writing\/\" target=\"_blank\" rel=\"noopener\"><b>Daily Main Answer Writing<\/b><\/a><\/td>\n<\/tr>\n<tr>\n<td style=\"width: 49.797%; text-align: center;\"><a href=\"https:\/\/store.pw.live\/govt-entrance-exams\/upsc-books\/upsc-previous-year-papers?utm_source=SEO&#038;utm_medium=PW+Live&#038;utm_campaign=UPSC+Previous+Year+Papers\" target=\"_blank\" rel=\"noopener\"><b>Check Out Previous Years Papers From PW Store<\/b><\/a><\/td>\n<td style=\"width: 61.393%; text-align: center;\"><a href=\"https:\/\/pwonlyias.com\/stage\/upsc-test-series-courses\/\" target=\"_blank\" rel=\"noopener\"><b>UPSC Test Series<\/b><\/a><\/td>\n<\/tr>\n<tr>\n<td style=\"width: 49.797%; text-align: center;\"><a href=\"https:\/\/store.pw.live\/govt-entrance-exams\/upsc-books\/upsc-textbooks?utm_source=SEO&#038;utm_medium=PW+Live&#038;utm_campaign=UPSC+Textbooks\" target=\"_blank\" rel=\"noopener\"><b>Check Out UPSC NCERT Textbooks From PW Store<\/b><\/a><\/td>\n<td style=\"width: 61.393%; text-align: center;\"><a href=\"https:\/\/store.pw.live\/govt-entrance-exams\/upsc-books\/upsc-modules?utm_source=SEO&#038;utm_medium=PW+Live&#038;utm_campaign=UPSC+Modules\" target=\"_blank\" rel=\"noopener\"><b>Check Out UPSC Modules From PW Store<\/b><\/a><b>\u00a0<\/b><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>The growth in international trade has amplified cross-border insolvency challenges, highlighting the need for effective regulation. <\/p>\n","protected":false},"author":11,"featured_media":150341,"menu_order":0,"comment_status":"open","ping_status":"open","template":"","format":"standard","meta":{"rank_math_lock_modified_date":false,"footnotes":""},"tags":[],"paper-wise":[2089],"subject":[2100],"acf":[],"_links":{"self":[{"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/current-affairs\/150389"}],"collection":[{"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/current-affairs"}],"about":[{"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/types\/current-affairs"}],"author":[{"embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/comments?post=150389"}],"version-history":[{"count":2,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/current-affairs\/150389\/revisions"}],"predecessor-version":[{"id":150393,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/current-affairs\/150389\/revisions\/150393"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/media\/150341"}],"wp:attachment":[{"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/media?parent=150389"}],"wp:term":[{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/tags?post=150389"},{"taxonomy":"paper-wise","embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/paper-wise?post=150389"},{"taxonomy":"subject","embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/subject?post=150389"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}