INDIA Law and Practice Contributed by: Nitin Sarin and Vistasp Irani, Sarin & Co
The corporate entity can initiate the voluntary liquida - tion process where no default has been committed. Companies incorporated in India can also be wound up by order of the National Company Law Tribunal (NCLT) under the provisions of the Companies Act, 2013 on an application being filed by the company, or in the following circumstances: • if the company has acted against the interests of the sovereignty and integrity of India, the security of the State, etc; • if the affairs of the company have been conducted in a fraudulent manner, etc; • if the company has made a default in filing its financial statements or annual returns for the immediately preceding five consecutive financial years with the Registrar; or • if the tribunal is of the opinion that it is just and equitable that the company should be wound up. 2.9.3 Co-Ordination, Recognition or Relief in Connection With Overseas Proceedings There is no clear framework for cross-border co- operation in the instance of overseas insolvency pro - ceedings under any statute in India. The provisions under the Code dealing with cross-border insolvency are based on the scheme of entering into separate bilateral agreements with the government of foreign countries and the issuance of letters of request (LOR) by the competent tribunal. However, in the CIRP of Jet Airways India Limited, which commenced in India in June 2019, it was brought to the attention of the tribunal in India that a competent court in the Netherlands had already initiated insolvency proceedings against Jet Airways, wherein a Boeing 777-300ER aircraft had been seized by a creditor at Amsterdam’s Schiphol airport. The tribunal ordered the resolution professional appointed in India to consider the prospect of co-ordinating with the Dutch trustee, and consequently a “cross-border insolvency protocol” was executed between both parties to promote co-operation and co-ordination among the two authorities in different jurisdictions on the matter.
There has been judicial activism and reports from the committee constituted by the government to make provisions under the Indian statute in line with the UNCITRAL Model Law on Cross-Border Insolvency. 2.9.4 Effect of Lessee’s Insolvency on a Deregistration Power of Attorney The Aircraft Objects Act provides for Alternative A to apply in case of a lessee’s insolvency. After the “wait - ing period”, the creditor would be able to take back possession of the aircraft. Albeit untested, it is likely that the rights under the power of attorney would be affected until then, and deregistration would not be permitted. At the time of writing, however, no regula - tions have been formulated under the Aircraft Objects Act which deal with the process to be followed in a lessee’s insolvency. 2.9.5 Other Effects of a Lessee’s Insolvency The Aircraft Objects Act provides for Alternative A to apply in case of a lessee’s insolvency. After the “wait - ing period”, the creditor would be able to take back possession of the aircraft. 2.9.6 Risks for a Lender if a Borrower, Guarantor or Security Provider Becomes Insolvent In an operating lease, the owner of the aircraft will always be recognised as the title holder. The main risk for a lender in the insolvency of the borrower, guarantor or entity providing security is the inability to recover its debt. 2.9.7 Imposition of Moratoria in Connection With Insolvency Proceedings Under the Code, the tribunal may pass an order com - mencing a corporate insolvency resolution process – this triggers a moratorium of 180 days, extendable by a maximum further period of 90 days (or any fur - ther time the tribunal may deem fit, not exceeding 330 days in total). In the recent GoFirst insolvency, the court extended the moratorium by a further 60 days beyond the 330-day period on discretionary grounds. 2.9.8 Liquidation of Domestic Lessees If the debt owed by a debtor is above INR100,000 (increased to INR10 million in March 2020, due to the COVID-19 crisis), the Code proposes two independ - ent processes:
263 CHAMBERS.COM
Powered by FlippingBook