The Survey has called for a standardised framework for cross-border insolvency to plug a loophole in the existing Insolvency and Bankruptcy Code.

The survey suggested the adoption of United Nations Commission on International Trade Law (UNCITRAL) with certain modifications .

UNCITRAL on cross-border insolvency, 1997, is the most widely accepted legal framework . It has been adopted by 49 countries such as Singapore, UK, US, South Africa and Korea .

The need to frame a robust cross-border insolvency framework has been highlighted already in the report of the Insolvency Law Committee in October 2018. The committee had recommended the adoption of UNCITRAL.

While foreign creditors can make claims against a domestic company, the IBC does not allow for the automatic recognition of any insolvency proceedings in other countries.

The Survey notes that current provisions of IBC to deal with the matter is ad-hoc in nature.

“Cross border insolvency is regulated by Section 234 and 235 of IBC. Section 234 empowers the central government to enter into bilateral agreements with other countries to resolve situations about cross-border insolvency,” the Survey noted.

Further, the adjudicating authority can issue a letter of request to a court or an authority (under Section 235) competent to deal with a request for evidence or action in connection with insolvency proceedings under the Code in countries with the agreement (under Section 234), it added.

However, these procedures can sometimes be time consuming and vexatious, creating uncertainty for creditors.

The matter was highlighted during the Jet Airways trial at NCLT, Mumbai, when it was found that insolvency proceedings against the corporate debtor have already been initiated before a district court in Netherlands.

There are four principal issues that a standardised framework can address. They are: 1) the extent to which an insolvency administrator may obtain access to assets held in a foreign country.

2) Priority of payments- whether local creditors may have access to local assets before funds go to the foreign administration or not.

3) Recognition of the claims of local creditors in a foreign administration.

4) Recognition and enforcement of local securities, taxation system over local assets where a foreign administrator is appointed.