CROSS BORDER INSOLVENCY IN INDIA
AUTHORS – MITALI TIKYANI & AJINKYA RAJPUT, STUDENT AT ILS LAW COLLEGE, PUNE
BEST CITATION – MITALI TIKYANI & AJINKYA RAJPUT, CROSS BORDER INSOLVENCY IN INDIA, INDIAN JOURNAL OF LEGAL REVIEW (IJLR), 4 (2) OF 2024, PG. 552-558, APIS – 3920 – 0001 & ISSN – 2583-2344.
ABSTRACT
The insolvency and bankruptcy landscape has changed dramatically in recent years, with legislative reforms and judicial interventions aimed at improving the efficiency and efficacy of the resolution process. In many jurisdictions, like India, the fundamental goal of these changes has been to establish a balance between creditor rights and debtor rehabilitation, while also encouraging economic growth and financial stability. In certain circumstances, the corporate debtor’s promoters were successful resolution applicants for their own company, RBI bank ltd . v. mbl infrastructure ltd (promoter disqualification sec 29A)[1] it was held that, the intention of the legislature is no to disqualify the promoters as a class but to rather exclude that class of persons who may affect the credibility of the resolution process given their antecedents allowing them to reclaim control of it. The Government of India (“GOI”) viewed the promoters” re-entry’ as unjust and contrary to the aim of the IBC, “the Ordinance aims at putting in place safeguards to prevent unscrupulous, undesirable persons from misusing or vitiating the provisions of the Code”. The press release goes on to state that “the amendments aim to keep-out such persons who have willfully defaulted, are associated with non-performing assets, or are habitually non-compliant and, therefore, are likely to be a risk to successful resolution of insolvency of a company”[2].This essay demonstrates some of the most significant advancements in insolvency and bankruptcy legislation that have occurred recently, which include Cross-border insolvency in India, The relationship between the Insolvency and Bankruptcy Code and the Competition Commission of India, and the NCLT’s inherent ability to recall an Insolvency Resolution Plan. By implementing such laws, societies establish debt resolution methods that ensure both debtors and creditors are treated fairly. These rules enhance economic stability by allowing struggling businesses to restructure debts or dispose of assets in an orderly manner, preventing widespread financial disasters. They also promote entrepreneurship and risk-taking by providing a safety net for individuals and enterprises, transforming the societal perception of financial failure from stigma to rehabilitation. Furthermore, strong insolvency and bankruptcy rules promote international trade and investment by creating trust in investors and creditors, which contributes to economic growth and stability.The Insolvency and Bankruptcy Code (IBC) is a comprehensive piece of legislation that aims to resolve insolvency concerns in a timely way, promote entrepreneurship, and balance the interests of creditors and debtors. Its goal is to consolidate and alter legislation governing corporate reorganisation and insolvency resolution for businesses, partnerships, and individuals. The IBC’s structure includes several key features, including the establishment of the Insolvency and Bankruptcy Board of India (IBBI) to regulate insolvency professionals and insolvency professional agencies, the establishment of the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) for adjudicating insolvency cases, and the creation of a corporate insolvency resolution process (CIRP) and a fast-track insolvency resolution process for small and medium-sized businesses. Creditors, debtors, resolution specialists, and regulatory agencies such as the IBBI, NCLT, and NCLAT all have a role in ensuring the smooth and effective settlement of insolvency matters.
[1] Rbl bank ltd . v. Mbl infrastructure ltd Company petition 170/2017 https://taxguru.in/corporate-law/analysis-section-29a-insolvency-bankruptcy-code-2016.html
[2] Under Article 123 of the Constitution of India, the President of India has the power to promulgate ordinances when neither the Lok Sabha nor the Rajya Sabha are in session if there are circumstances which render it necessary to take immediate action. Every such Ordinance is required to be laid before both Houses of Parliament and shall cease to operate at the expiration of 6 (six) weeks from the reassembly of Parliament.