Cross Border Insolvency Resolution in India - Seeker's Thoughts

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Cross Border Insolvency Resolution in India

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Introduction - The government has recently released draft on 'Cross- borders insolvency resolution'
This comes with the intention of helping distressed banks/ debtors that have assets or creditors in more than one country across the globe.

What is the need? - India has emerged as global business hub where Indian businesses are having more transactions internationally. There is a requirement for a strong mechanism to resolve international creditor- debtor relationship. 
The existing Insolvency and Bankruptcy Code provides two sections 234 and 235 relating to cross border insolvency but these are not adequate to effectively deal with default cases of domestic corporate debtor having assets and operations outside India. 
The draft in cross border insolvency favors adoption of UNCITRAL ( United Nations commission on International Trade Laws) Model laws in cross Border Insolvency 1997.

More about Cross Border Insolvency - It happens when a company in financial distress has assets globally. For example - 
 An insolvent company may have a number of foreign creditors, and their rights should be protected. 
An insolvent company may have assets at foreign land; creditors want access as a part of insolvency proceedings etc.

Cross Border Insolvency Under Bankruptcy Code- It will ensure following things--
1.      According to the Cross Border Insolvency foreign and domestic creditors will not be discriminated. Foreign debtors can take part in the proceedings under the Indian Bankruptcy code
2.      Foreign Creditors will have the same right in liquidation of assets.
3.      At the same time, it will help banks access overseas assets of company undergoing resolution
4.      Similarly Indian authorities will also be required to cooperate with foreign credit to domestic company.