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    Uncitral Model Law

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    yalini tholgappian
    The document discusses cross-border insolvency between countries and the need for a unified international law to address it. It notes that while some countries have adopted the UNCITRAL Model Law, India has only reciprocal arrangements in its Insolvency and Bankruptcy Code and has not adopted the Model Law. This is seen as a flaw and impediment to effective resolution of cross-border insolvency cases involving Indian companies. The document argues that adopting the Model Law would help coordinate proceedings and satisfy interests across multiple countries more satisfactorily.

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    Uncitral Model Law

    Uploaded by

    yalini tholgappian
    43 views3 pages
    The document discusses cross-border insolvency between countries and the need for a unified international law to address it. It notes that while some countries have adopted the UNCITRAL Model Law, India has only reciprocal arrangements in its Insolvency and Bankruptcy Code and has not adopted the Model Law. This is seen as a flaw and impediment to effective resolution of cross-border insolvency cases involving Indian companies. The document argues that adopting the Model Law would help coordinate proceedings and satisfy interests across multiple countries more satisfactorily.

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    The document discusses cross-border insolvency between countries and the need for a unified international law to address it. It notes that while some countries have adopted the UNCITRAL Model Law, India has only reciprocal arrangements in its Insolvency and Bankruptcy Code and has not adopted the Model Law. This is seen as a flaw and impediment to effective resolution of cross-border insolvency cases involving Indian companies. The document argues that adopting the Model Law would help coordinate proceedings and satisfy interests across multiple countries more satisfactorily.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    43 views3 pages

    Uncitral Model Law

    Uploaded by

    yalini tholgappian
    The document discusses cross-border insolvency between countries and the need for a unified international law to address it. It notes that while some countries have adopted the UNCITRAL Model Law, India has only reciprocal arrangements in its Insolvency and Bankruptcy Code and has not adopted the Model Law. This is seen as a flaw and impediment to effective resolution of cross-border insolvency cases involving Indian companies. The document argues that adopting the Model Law would help coordinate proceedings and satisfy interests across multiple countries more satisfactorily.

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    © All Rights Reserved
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    of 3

    The I&B Code does not envisage the adoption of any law, including the UNCITRAL

    Model law, but only reciprocal arrangements with countries. This is perhaps the
    biggest flaw in the current insolvency regime in India.
    Cross-border insolvency is one where the insolvent debtor has assets in more than one
    State or where some creditors of the debtor are not from the State where the insolvency
    proceeding is taking place.

    The number of cross-border insolvency cases have increased rapidly since the 1990s
    due to globalisation and privatisation, but countries are yet to adopt a singular and
    amicable international law which is essential for disposal of such cases without conflict
    of interest of interested entities.

    The absence of such unified international law results in dis-satisfactory and inadequate
    approaches in cases pertaining to cross-border insolvency. This is due to jurisdictional
    and coordination issues between two or more countries. Companies and individuals fear
    to tread within a country, where no such unified international laws prevail and this
    arrangement simultaneously affects the economy and progress of the respective
    country.

    There is an imperative need for cross-border insolvency law in every country which
    deals with international trade, investments, and other financial activities : firstly, due to
    enforcement of principles of the law and justice and secondly, the corporate sector only
    believes in profit-making whether inside or outside national borders.

    Illustration, it will be impossible to deal with an insolvent company lawfully if that


    company has its headquarters in country A, creditors in country B, and assets and
    operations in another country C. In case of discrepancy this arrangement will become a
    nightmare for interested parties as well as for the countries which swear to protect the
    interests of their citizens, unless every country submits to international cross- border
    insolvency law.

    Present Situation
    In India the cross- border insolvency is dealt under sections 234 and 235 of the
    Insolvency and Bankruptcy Code, 2016, which were introduced only in 2015. IBC
    requires the respective countries to enter into a bilateral agreement for administering the
    cross- border insolvency proceedings. This works on the doctrine of reciprocity, and
    requests for such arrangements may be made via official letters by the National
    Company Law Tribunal (NCLT) or by a court having competent jurisdiction to a foreign
    court or tribunal under whose jurisdiction the assets of the corporate debtor are located.
    Thus far, India has signed, no such bilateral treaty with any other nation to accord the
    same.

    Progressive countries such as United States of America, United Kingdom, Australia, and
    many others have already adopted uniform international cross-border insolvency law,
    unfortunately India, even after repeated recommendations from several government-
    constituted expert committees (viz. Balkrishna Eradi Committee, NL Mitra Committee, JJ
    Irani Committee) is yet to, introduce a unified international law. However, the Insolvency
    and Bankruptcy Code, 2016 which is based on UNCITRAL Model Law has introduced
    direct provisions relating to cross-border insolvency.

    The national interest of India is also hampered because of the non-acceptance of a


    unified international cross-border insolvency law as foreign creditors would be hesitant to
    invest in Indian companies as their assets/debts, during insolvency would not be
    recoverable. It cannot be even assessed how much investment India has lost due to the
    failure of the Indian government to introduce and implement such cross-border
    insolvency laws.

    UNCITRAL Model Law On International Commercial Arbitration (1985)


    The Model Law is accompanied by a Guide to the Enactment and Interpretation. This is
    directed primarily to executive branches of Governments and legislators preparing the
    necessary enacting legislation but, it also provides useful insight for those in charge of
    interpretation and application of the Model Law, such as judges, and other users of the
    text, such as practitioners and academics.

    “The Judicial Perspective is designed to assist judges with questions that may arise in
    the context of an application for recognition under the UNCITRAL Model Law on Cross-
    Border Insolvency. As such it is relevant not only to judges from States that have
    enacted legislation based on the Model Law but to judges from any State likely to be
    concerned with cross-border insolvency cases. The text discusses the Model Law from a
    judge’s perspective, identifying issues that may arise on an application for recognition or
    cooperation under the Model Law and discussing the approaches that courts have taken
    in countries that have enacted legislation based on the Model Law.”

    The Model Law bifurcate foreign insolvency proceedings on the basis of:
    # Foreign main proceedings- when proceedings initiate at the place where the corporate
    debtor has his registered office also known as the “centre of main interests”.
    # Foreign non-main proceedings- proceedings initiated at any other place where the
    corporate debtor has an establishment other than the registered main office.

    Symbiosis Between UNICITRAL & IBC


    India’s inclination towards adopting the Model Law
    The Model Law simplifies and further directs the countries, and their legal machines to
    provide the requisite recognition of the insolvency proceedings commenced outside and
    in multiple jurisdictions.

    Since 2000, a number of government-appointed committees (the Eradi Committee and


    the N.L. Mitra Committee) have recommended the acceptance of UNICITRAL model of
    law for cross-border insolvency disputes, but the same is yet to be taken into
    consideration by the legislators. If India adopts the Model Law on cross- border
    insolvency, then Insolvency matters will be effectively disposed-off, keeping in mind the
    interests of various entities especially, the creditors engaged in insolvency proceeding at
    multiple jurisdictions.

    Key components of the Model Law for the orchestration of cross-border


    insolvencies:
    # Access to courts in an enacting state;
    # Recognition of foreign proceedings, as either a foreign main proceeding or a foreign
    non-main proceeding;
    # Relief that is to be given for the fair and orderly conduct of the cross-border insolvency;
    and
    # Co-operation and co-ordination between courts where the debtor’s assets are situated
    and the court in which concurrent proceedings are being carried out.

    In India, when the National Company Law Tribunal (NCLT) recognises any proceedings
    as foreign main proceedings, there is an automatic suspension of trade or moratorium
    on the assets of the corporate debtor, similar to the moratorium under the IBC. The main
    proceedings can, therefore, go on, fortified by the fact that the assets of the company
    are going nowhere. Therefore, the primacy of the foreign main proceeding under Model
    Law is hampered and becomes futile.

    India is trying to carefully tread in the sphere of cross-border insolvency, as we believe in


    the supremacy of Indian courts over foreign courts. However, we are failing to
    contemplate a situation where a unified international law if adopted on cross-border
    Insolvency proceedings there would be effective disposal of cases without the major
    intervention of Indian courts. Only after numerous recommendations by committees and
    observations made by Indian courts and when enough pressure was put on the
    legislators, did they to open their eyes with respect to cross-border insolvency.

    The Insolvency Law Committee on April 1, 2018, published a report observing that
    Sections 234 and 235 of the Code did not provide a comprehensive framework on cross-
    border insolvency matters and stated that it will attempt to formulate a framework based
    on the Model Law in a separate report. There is also a rumour of discussions with the
    United States of America for a reciprocal agreement.

    Section 234 of IB Code, 2016 empowers the Government to establish reciprocal


    agreements with other countries via a “Letter of Request” and enforce the provisions of
    the Code by the official liquidator to the authority of a country with which a reciprocal
    agreement has been signed for taking actions on the assets of the company situated in
    such country.

    Instantaneous Steps And Future Ahead


    It is important to accept that the Code does not envisage the adoption of any law,
    including the Model law, but only reciprocal arrangements with countries. This is perhaps
    the biggest flaw in the current insolvency regime in India.

    The lacunae in the Insolvency Code and Indian law in general regarding cross-border
    insolvency proceedings in India have been recognised by various government appointed
    committees while assessing the law relating to Insolvency. Justice Eradi in 2000
    recommended quick adoption of the provisions of Model law relating to insolvency
    matters. Subsequently, the NL Mitra Committee while submitting its report on the
    Advisory Group on Bankruptcy Laws again recommended the same.

    Similarly, Model Law should be adopted and India should try to contemplate any other
    future loopholes and fix them simultaneously. This can be done by introducing a new
    chapter in the IB code which deals with cross-border insolvency with a small tint of
    Indian Law and regulations. Provisions for interim relief pending the recognition of
    foreign proceedings.

    Given the pace at which our courts work, one would think such a provision is essential,
    and it’s dropping has the worrying potential to unravel the entire scheme of the new law.

    Finally, the Model Law should be adopted in order to achieve harmonization of


    insolvency laws, through international co-operation and co-ordination.

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