Cross-Border Trade Defaults and Insolvency Proceedings: Legal Challenges under the Insolvency and Bankruptcy Code, 2016

Cross-border trade is quite dependent upon credit, documentary payments, and banking guarantees - these are the tools that make international business possible, even though the parties involved are separated by physical distance and different legal systems. Yet, if one party fails to make payment in a transaction related to import-export, it normally results in insolvency cases going through different countries, with multiple creditors and different legal systems being involved. This paper discusses the connection between trade defaults and insolvency under the Insolvency and Bankruptcy Code, 2016 (IBC) of India. It points out the flaws in the cross-border insolvency regime of India, especially the treatment of foreign creditors. Apart from that, it also studies the problems related to letters of credit and bank guarantees that arise in cases of insolvency. India's system appears to be quite far behind the international standards level, especially when compared to countries that have implemented the UNCITRAL Model Law. The existing system is generating a lot of doubts among lenders, and on top of that, it does not have properly defined procedures for dealing with foreign claims. In short, there is a requirement to carry out reforms if we are to have faith and get Indian practices aligned with the rest of the world.