Govt halts plan to adopt cross-border insolvency

The government’s current priority is to address key concerns around the operation of the bankruptcy code

- Gireesh Chandra Prasad

Foreign lenders of Indian businesses may have to wait longer before initiating bankruptcy proceedings against defaulting Indian businesses in local tribunals.

The government has shelved its plan to introduce a cross-border insolvency regime that would have integrated India with several other markets that have adopted a harmonized debt resolution regime for companies with assets spread across multiple markets.

“Only around 50 countries have adopted the UN model of cross-border insolvency, and many of them have stringent restrictions in place. Adopting this model is not on top of the agenda now," a person briefed about discussions in the government said.

The priorities now include making larger corporations eligible for an informal debt resolution scheme currently available only to small businesses, a new regime for handling insolvency of group companies as a whole, and a special carve-out for the real estate sector, the person said on the condition of anonymity. These amendments to the Insolvency and Bankruptcy Code (IBC) are expected in the monsoon session of the Parliament.