[Rongeet Poddar is a final year B.A. LLB (Hons.) student at the West Bengal National University of Juridical Sciences]
The National Company Law Appellate Tribunal (NCLAT) has enabled a Dutch Administrator appointed by the Noord District Court in Holland to participate in the meetings of the Committee of Creditors (CoC) constituted for the corporate insolvency resolution process (CIRP) of Jet Airways. This judgement sets aside an order of the National Company Law Tribunal (NCLT), Mumbai Bench which had held that the Dutch court did not have the requisite jurisdiction to initiate offshore insolvency proceedings against the debtor company Jet Airways, a company registered in India. The NCLT had opined that cross-border insolvency was not recognized in India on the rationale that the twin provisions on the subject, sections 234 and 235 in the Insolvency and Bankruptcy Code, 2016 (IBC) had not been notified yet by the Government. Therefore, the continuation of parallel proceedings was said to vitiate the insolvency process that would commence in India.
Sections 234 and 235 of the IBC collectively allow an insolvency resolution professional to apply to the adjudicatory authority to take appropriate action for preserving the corporate debtor’s assets that may be situated outside India in a country with which India shares a bilateral cross-border insolvency agreement. With the Government failing to adopt a legal framework for cross-border insolvency, the NCLAT took the onus of giving effect to a ‘Cross-Border Insolvency Protocol’ entered into between the Dutch Administrator and the Indian Insolvency Resolution Professional in pursuance of its directions.
The goal of the IBC is to resolve the debts of a debtor company in a time-bound manner to ensure that it remains functional as a going concern. Liquidation is the last resort in the event of failure of the resolution process. The CoC consists of financial creditors and is empowered to approve the final resolution plan of the corporate debtor by a majority of 66 percent votes. The NCLAT judgement has significantly not afforded the Dutch Administrator the right to vote in the CoC constituted for the resolution process of Jet Airways. This is to ensure that there is no overlap of jurisdiction between the Indian Insolvency Resolution Professional and the Dutch Administrator. The initiation of the CIRP leads to an imposition of a moratorium against the institution or continuation of existing suits against the corporate debtor including transfer of assets due to the application of section 14 of the IBC. The Dutch Administrator would thus be duty-bound to respect Indian law in this regard and preserve the value of the assets of Jet Airways in Holland.
The Report of Insolvency Law Committee on Cross-Border Insolvency, constituted by the Ministry of Corporate Affairs had recommended the incorporation of cross-border insolvency provisions in accordance with the UNICTRAL Model Law to create an “internationally aligned and comprehensive insolvency framework for corporate debtors under the Code, which is most essential in a globalised environment.” The judgement of the NCLAT is a small but significant step towards that goal. The winter session of the Parliament presents another opportunity to the government to bring in suitable amendments to the IBC for enacting a robust cross-border insolvency regime in consonance to the global best practices.
– Rongeet Poddar