26 March 2019: India will provide adequate carve-outs to protect domestic interests in the crossborder insolvency regime which is under consideration by the government, a senior government official said.
Such provisions may mean that a portion of the debtor’s assets may be kept aside to pay domestic creditors, according to the Insolvency and Bankruptcy Code (IBC).
“One thing we can be sure is that we will have all carve-outs that are required to safeguard domestic interests. We can’t adopt internationalism at the cost of domestic interests,” corporate affairs secretary Injeti Srinivas said at a conference, organised by the Confederation of Indian Industry.
Srinivas said the law would initially only give jurisdictional access on the basis of reciprocity and that the reform would give foreign investors greater confidence.
“We will go step by step and look at reciprocity initially. We need not open it up to every country; we will say every country which will reciprocate, we will only give them this facility,” said Srinivas.
While large insolvency cases have taken more than 270 days under IBC, the outcomes of such cases have been positive, Srinivas said.
“For such very large cases, there would be some amount of litigation and it (the time taken) is not too long, especially if you compare it with the average of four-and-ahalf years under the previous regime” Srinivas said, adding that the size of the loans that were being resolved and the quantum of the recoveries constituted an “extraordinary result”.
Srinivas said the IL&FS (Infrastructure Leasing and Financial Services) group entities that had been classified as “red” because of their inability to service debt obligations were not necessarily beyond revival.
“Today almost 50% of the assets (of the IL&FS group) have been put on the block. I think in the coming 2-3 months we should be able to see 50% of the IL&FS portfolio being resolved,” he said.
Of the 169 domestic IL&FS group companies, 50 entities have been classified as ‘green’. Another 13 have been classified as ‘amber’ and 80 as ‘red’.
The National Company Law Appellate Tribunal has directed all ‘green’ companies to service their debt obligations. However, ‘amber’ and ‘red’ companies continue to enjoy a moratorium on all claims against them, granted by the NCLAT in October 2018.