nclt: India plans special NCLT bench for cross-border insolvency cases to speed up resolutions

New Delhi: India is planning to set up a special bench of the National Company Law Tribunal (NCLT) with trained manpower to handle cross-border insolvency cases and expedite proceedings once new insolvency rules are notified, people aware of the matter said.

The cross-border framework, approved last month as part of amendments to the Insolvency and Bankruptcy Code (IBC), will be based on a model UN law with amendments to suit the Indian context.

It aims to give creditors easier access to overseas assets of distressed companies and allow India to seek cooperation from foreign courts in subjecting such assets to insolvency proceedings.

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The need for such a framework emerged during insolvency proceedings involving Amtek Auto, Videocon Industries, Essar Steel and Jet Airways, where issues such as asset location and complex cross-border procedures delayed resolution.

The company affairs ministry will soon start framing cross-border insolvency rules. To ensure parliamentary oversight, under the amended IBC, a draft of each rule will have to be submitted to each House of Parliament.

“Special bench is necessary for time-bound insolvency proceedings,” one of the people told ET. “We cannot face a situation where a foreign jurisdiction hearing the bankruptcy case acts quickly and we are left behind,” he said. Developed jurisdictions, including Singapore, are known for their time-bound resolutions.

The proposed NCLT bench will have members trained in cross-border insolvency resolution, the person said.

Model UN frame

The United Nations Commission on International Trade Law (UNCITRAL) on cross-border insolvency solutions has been adopted by more than 50 jurisdictions.

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It is based on principles such as access of resolution professionals to domestic and foreign courts, recognition of foreign cases, cooperation between courts and coordination of multiple concurrent bankruptcy cases. Ratifying countries are allowed to make rules based on this model law, depending on their particular context.

“A special board will lead to faster resolution of cross-border insolvency cases. This will also increase the chances of recovery for creditors,” said Yogendra Aldak, managing partner of Lakshmikumaran & Sridharan lawyers.

Earlier, IBC provided cross-border insolvency through bilateral agreements and demand letters to foreign courts under Section 234 of the NCLT. However, this mechanism was temporary and prone to delays and uncertainty.