On hold: Plan to bring in cross-border, individual insolvency frameworks

The government has put plans to introduce a cross-border insolvency framework and an out-of-court individual delinquency mechanism on the back burner, people familiar with the matter told ET.

These provisions won't be part of the proposed amendments to the Insolvency and Bankruptcy Code (IBC) that the government intends to introduce this year, they said. However, both these frameworks could be explored at a later stage, based on fresh assessments of their necessity. "After extensive deliberations, it's decided that the cross-border and individual insolvency frameworks would be taken up later when the time is right. The focus currently should be on how to speed up and improve upon the corporate insolvency resolution process," said one of the persons, who did not wish to be identified.

A cross-border insolvency framework under the IBC, which was to be tailored around a model United Nations law, aims to ensure easier access for creditors to overseas assets of stressed companies. It is supposed to enable India to seek cooperation from foreign countries to bring defaulters' assets there under consideration for insolvency proceedings. Under the individual insolvency framework, a so-called "fresh-start process" for indebted poor people was to be launched.


The Centre fears the cross-border framework may be misused by Indian defaulters, who may invoke insolvency proceedings in a foreign country where the bankruptcy regime is more lax and suits their purpose better to short-change creditors' interests, according to the people.