Cross border insolvency: will this bring a paradigm shift in doing businesses beyond the Indian borders?

Abstract

After the advent of Insolvency and Bankruptcy Code (“IBC”), it has undergone many changes and challenges. The law brought in major change in ease of doing business ranking for India since foreign investors could now see a robust regulated mechanism for exiting an investment in case of business failures. The country has witnessed major shift in age old laws/regulations dealing with Non-Performing Assets / Stressed Assets like Presidency Towns Insolvency Act, 1909, Provincial Insolvency Act,1920, Sick Industrial Companies Act, 1985, Recovery of Debts due to Banks and Financial Institutions, 1993, Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, RBI regulations / schemes like Corporate Debt Restructuring, Strategic Debt Restructuring, Joint Lenders Forum, Scheme for Sustainable Structuring of Stressed Assets (S4A), etc. While IBC has seen some major cases like Essar Steel Ltd , Bhushan Steel Ltd, etc getting resolved and lenders having recovered a significant amount of their debt, it had its own challenges while it was evolving since its implementation. One of the key challenges lying before us as country is to bring the businesses and assets of those defaulting companies who operate in multiple jurisdictions and are regulated by laws of different land. Hence, it is critical to have bilateral agreements with countries to give access to countries to each other’s judicial bodies and have enforcement of domestic laws pertaining to insolvency in the other country.