Sharon Aneja
Comparative Analysis Of Insolvency And Bankruptcy Code, 2016 (IBC, 2016) With International Bankruptcy Laws
ABSTRACT
The paper aims at studying the insolvency and bankruptcy code, 2016 along with the international bankruptcy laws and drawing a comparative analysis between the two. The insolvency and bankruptcy code, 2016 was proposed as a legal framework to address the challenges faced in the insolvency and bankruptcy proceedings. It aims to streamline and accelerate the resolution process for distressed enterprises, resulting in a more efficient and healthy ecosystem for creditors, debtors, and other stakeholders. The UNCITRAL Model Law on Cross-Border Insolvency (1997) is intended to help states build a contemporary, harmonized, and equitable insolvency system in order to resolve cross-border procedures effectively, involving debtors in serious financial distress or insolvency.
Historical evolution of insolvency and bankruptcy code, 2016
The Insolvency and Bankruptcy Code was adopted on May 5, 2016. The Indian Insolvency Act, 1848, was passed but was determined to be insufficient to meet changing situations. The Presidency-towns Insolvency Act of 1909 replaced the Act of 1848. Both the Provincial Insolvency Act of 1920 and the Presidency Towns Insolvency Act of 1909 deal with personal insolvency. Their jurisdictional jurisdictions differ, notwithstanding the similarity of their content. While all of India’s provinces were covered by the Provincial Insolvency Act of 1920, the Presidency Towns Insolvency Act of 1909 pertained to Presidency towns like Kolkata, Mumbai, and Chennai.
Historical evolution of UNCITRAL Model law on cross border insolvency
As globalization increased, the necessity for a framework to assist collaboration and coordination in cross-border insolvency proceedings became more obvious, leading to the enactment of the UNCITRAL Model Law on Cross-Border Insolvency (1997). The United Nations General Assembly established the United Nations Commission on International Trade Law (UNCITRAL) in 1966 with the goal of harmonizing and unifying international trade law. As part of its purpose to modernize and harmonize international commercial law, UNCITRAL began to investigate developing a model legislation on cross-border insolvency in the early 1980s. UNCITRAL began working on the Model Law on Cross-Border Insolvency in the mid-1980s. UNCITRAL enacted the Model Law on Cross-Border Insolvency in 1997, following several years of development and consultations. The Model Law sought to offer a legislative framework for the recognition and enforcement of foreign insolvency processes, as well as their collaboration and coordination across countries. The UNCITRAL Model Law on Cross-Border Insolvency has significantly influenced the evolution of international insolvency law and practice.
The insolvency and bankruptcy code was introduced as the primary legislation governing insolvency and bankruptcy in India. Despite efforts to harmonize the Indian insolvency process, the insolvency and bankruptcy code was not able to provide adequate procedures for the regulation of cross-border insolvency proceedings. As a result, the model law on cross-border insolvency emerged.
Access, Recognition, Cooperation, and Coordination are the four fundamental pillars of Cross-Border Insolvency that the ILC outlined in their Report and around which the Model Law is built.
ACCESS– access to foreign representatives suggests that, until cross-border insolvency in India develops, it could be preferable to take a cautious approach to granting foreign representatives’ access to domestic courts. It says that there might be a rule of conduct that applies to foreign representatives. This could be defined by the IBBI and subject to a penalty clause akin to the one the Code applies to domestic insolvency professionals.
RECOGNITION AND RELIEF- The Model Law’s “Recognition of Foreign Proceedings and Relief” section suggests that foreign representatives may ask a domestic court to recognise a foreign proceeding in order to get the necessary remedies. This includes documentation of the international proceeding’s existence, the appointment of the foreign representative in that proceeding, and any current foreign actions taken against the debtor.
COOPERATION– Cooperation and communication between adjudicating authorities and foreign courts in cross-border insolvency matters should be based on a framework to be notified by the Central Government in consultation with the adjudicating authority in the interest of all stakeholders, according to the recommendation made in cooperation with foreign courts and foreign representatives during the early stages of the Model Law’s introduction.
The Committee suggested that in order to help the adjudicating body facilitate notices and other communications between itself and foreign courts, the Central Government might notify a suitable authority. Adjudicating Authorities and foreign courts may directly conduct the simultaneous hearings in concurrent processes.
PROCEDURE INVOLVED IN INSOLVENCY AND BANKRUPTCY CODE, 2016 AND UNCITRAL MODEL LAW ON CROSS BORDER INSOLVENCY
Through improved coordination in asset distribution and collection, the focus of proceedings, the avoidance of redundant insolvency proceedings and court applications, as well as possibly incongruous court orders, this framework increases efficiency and reduces costs, which can raise the return for creditors.
This also makes it more likely that long-term viable debtors who are experiencing short-term financial difficulties will be able to emerge from their problems and carry on as usual under reorganized corporate structures. This ultimately serves the interests of all creditors and supports investment security and job preservation.
Comparative analysis
Countries can adopt or incorporate the UNCITRAL Model Law as a framework to govern cross-border insolvency matters into their local legislation. In order to enable the effective management of cross-border insolvency cases, it offers procedures for foreign insolvency proceedings to be acknowledged and enforced by courts in other jurisdictions. It also encourages collaboration and coordination between courts, insolvency professionals, and creditors in various jurisdictions. A procedural framework for handling cross-border insolvency is provided by the UNCITRAL Model Law. This framework includes guidelines for the acknowledgment of foreign actions, stakeholder collaboration and communication, and the coordinating of asset sales or distributions. Many nations around the world have accepted or integrated the UNCITRAL Model Law into their legal systems, which encourages uniformity and predictability in cross-border bankruptcy procedures.
The bankruptcy and insolvency laws that apply in India are governed by the Indian Bankruptcy Code (IBC). The acknowledgment of overseas insolvency procedures is not expressly covered under the IBC. It does, however, include clauses that, under certain conditions, allow for cooperation with foreign courts and agencies. India’s domestic insolvency proceedings are the main focus of the IBC. It does, however, include clauses allowing for collaboration with foreign agencies and courts in situations involving assets or creditors across borders. A thorough procedural framework for insolvency resolution and bankruptcy procedures is established by the Indian Bankruptcy Code (IBC). This framework covers the appointment of insolvency experts, the resolution and liquidation of insolvent enterprises, and the processes for starting insolvency proceedings. The Indian Bankruptcy Code (IBC) is unique to India and largely impacts domestic insolvency processes in that nation. Its execution and effects, however, might have an effect on foreign creditors and investors doing business in India.
In conclusion, while both the UNCITRAL Model Law on Cross-Border Insolvency and the Insolvency and Bankruptcy Code, 2016 seek to address concerns linked to insolvency, their functions and operating environments are distinct. The Indian Bankruptcy Code (IBC) is unique to India and regulates domestic bankruptcy processes within the nation, whereas the UNCITRAL Model Law concentrates on promoting collaboration and coordination in cross-border bankruptcy cases.
