In the Corporate Insolvency Resolution Process (CIRP) of Jet Airways (India) Ltd., the question came up for discussion on the validity and priority of the Insolvency proceedings being conducted at a country outside India, where the CIRP for Jet Airways is already initiated under Indian Insolvency Code, 2016. Jet Airways has properties in India and outside India as well. When CIRP against Jet Airways started under the Code in India where Registered Office of the ‘Corporate Debtor’ is situated and similar proceedings were already started at Netherland (North-Holland), where the Regional Hub of the ‘Corporate Debtor’ is situated.
Precisely, two parallel insolvency proceedings are being carried out in case of Jet Airways (Corporate Debtor) in India, and in Netherland based on different territorial jurisdiction. In Netherland, Jet Airways was declared bankrupt in response to a complaint filed by two European creditors where a Dutch court administrator is appointed who approached its Indian counterpart for access to the financials as well as assets of the Corporate Debtor.
When Mumbai bench of NCLT vide its Order dated 20th June, 2019 declared the overseas bankruptcy proceedings against Jet Airway as null and void, the Dutch Court Administrator filed a petition at NCLAT against the order of the Mumbai NCLT.
In this case, Two questions came up before NCLAT for consideration:
- Whether separate proceeding(s) in CIRP against common ‘Corporate Debtor’ can proceed in two different countries, one having no territorial jurisdiction over the other.
- Whether by a Joint Agreement or understanding between the ‘Resolution Professional’ of Jet Airway (Indian Resolution Professional) and Administrator in Holland (Netherland)( Dutch court administrator) as may be approved by NCLAT, can proceed for maximization of the asset of Jet Airways and balancing all the stakeholders, including the Indian/Offshore Creditors/ Lenders.
Based on this Petition, NCLAT stayed the orders of NCLT and said that it will clarify the law on action to be taken when there are two insolvency petitions filed against the Same Corporate Debtor. NCLAT directed that:
- the Resolution Professional of Jet Airways to cooperate with the Dutch Court Administrator.
- it will be open to Dutch court administrator to collate the claims of Offshore Creditors including ‘Financial Creditors’, ‘Operational Creditors’ and other stakeholders and forward their details to the Indian Resolution Professional for the purpose of preparing the Information Memorandum with the approval of the COC.
- Dutch court administrator will not sell, alienate, transfer, lease or create any third party interest on the offshore movable and immovable assets of the ‘Corporate Debtor’, which are or may be taken in his possession.
- Indian Resolution Professional will ensure that ‘Corporate Debtor’ remains a going concern and will take assistance of the (suspended) Board of Directors, paid Director and the employees.
- During the pendency of this Appeal before NCLAT, Dutch court administrator may negotiate the matter with Indian Resolution Professional, who in consultation with the COC may reach a terms of settlement with the Dutch court administrator in the best interest of the ‘Corporate Debtor’ and all the stakeholders.
Subsequently at next hearing on 21st August, 2019 , when it was informed to the NCLAT that COC of the Corporate Debtor is not cooperating to the Dutch court administrator, NCLAT asked for confirmation from the COC whether they will so cooperate and will intend to give same treatment as given to the similarly situated Foreign Creditors, who otherwise, are also eligible to file claim before the Indian Resolution Professional and then he may collate with the Dutch court administrator and forward it. NCLAT also asked COC to confirm by way of Affidavit as to who will bear the fee and cost of the Dutch court administrator as NCLAT intends to have a joint ‘Corporate Insolvency Resolution Process.
Jet Airways case shows there is need for amending the existing code by adopting various provisions of the UNCITRAL Model Law.
Subsequently at next hearing on 4th September, 2019, for Indian Resolution Professional to accept the claims & to take control and custody of the assets, at domestic and international level, NCLAT directed the Indian Resolution Professional to enter into arrangement / agreement with the Dutch court administrator on the terms agreed by him and put the draft agreement before NCLAT for consideration. NCLAT also directed COC to cooperate with the Indian Resolution Professional, in this regard.
Accordingly, at the next hearing on 26th September, 2019, both the Dutch court administrator and Indian Resolution Professional filed before NCLAT ‘Terms & Conditions’ of agreement termed as “Cross Border Insolvency Protocol’. NCLAT held that the Dutch court administrator will have right to attend COC meetings though he cannot vote thereat. It denied the COC’s stand of objecting the Dutch court administrator to participate in COC meeting stating that COC has no role to play since the Agreement is reached between the Dutch court administrator and Indian Resolution Professional.
This shows there a need for adopting & implementing required provisions of UNCITRAL Model Law on Cross-Border Insolvency, 1997 by making require amendments in Section 234 & 235 of the Code inter-alia. Jet Airways case shows that judiciary has to see practical implementation of the code as NCLAT did here in view of appreciating the spirit of the Insolvency & Bankruptcy Code as to maximize wealth recovery of the stakeholders and of the global economy as a whole. Here NCLAT attempted for a balanced justice by allowing participation of the Dutch court administrator in COC meeting on one hand and restricting him from transferring the property in his possession till the matter is decided.
Where Sec 234 & 235 implies that Central Govt. or Judiciary to initiate the process to resolve cross border insolvency issues, this direction of NCLAT requiring the Insolvency Professionals/Administrators of respective countries to initiate the process by mutually entering into the Agreement under the observations of NCLAT is a welcome step. This will save time and cost of the stakeholders in future. Sec 234 & 235 of the Code if amended in this fashion will be of great help.
On other hand, this will bring additional responsibility on Indian Insolvency Professionals to understand and implement various terms of the Cross Border Agreements. If legislature also comes out with model agreements/terms and conditions, for IPs to enter within case of cross border transactions, this will help the Indian and Foreign Administrators to immediately enter into such kind of Agreements in earliest possible. Of course, this will always be subject to the cooperation offered by other country administrators in a case to case basis.
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