Cross‐border insolvency law in India: Are the principles of comity of courts and inherent common law jurisdiction relevant?

Abstract

AbstractDeliberations are in the final stages for enacting a cross‐border insolvency law in India based on the UNCITRAL Model Law on Cross Border Insolvency 1997 (‘Model Law’). The cross‐border insolvency regime in India will provide an avenue for recognising foreign insolvency proceedings in India. Although it is a matter of time before India adopts the Model Law, it is important to examine whether there remains an independent basis in addition to the Model Law for recognising and providing assistance to cross‐border insolvency proceedings in India. This is crucial on account of the following reasons: first, the Model Law does not provide that it is the exclusive pathway for foreign creditors to seek remedies under domestic law. The Model Law, as reflected in Article 7, was intended by its drafters to be an additional gateway to those provided under local laws. The proposed Indian law in Article 5 of Draft Part Z of the Insolvency and Bankruptcy Code 2016 also does not depart expressly from this principle. Second, there may be instances where neither the ‘Centre of Main Interests’ nor an establishment of a corporate debtor is situated in India; therefore, assistance and cooperation in respect of such cross‐border insolvency proceeding can only be based on the inherent common law jurisdiction, if available. Third, the cross‐border insolvency framework in India will be premised on the requirement for reciprocity and, therefore, countries that do not meet the reciprocity requirement may find it beneficial if such an independent basis for recognition exists in India. This article argues that foreign representatives should be encouraged to explore the possibility of seeking assistance from the commercial courts in India under the common law principles governing cross‐border insolvency and that the courts in India should be open to this possibility.