Cross Border Mergers in India in the IBC Era: A Legal Inquiry

Abstract

The Insolvency and Bankruptcy Code, 2016 (IBC), since its enactment, has been a subject matter of intense deliberation, both in the trade as well as the legal fraternity. Strong opinions are polarised between those who consider it a necessary step and those who classify it as a ‘draconian legislation'. In 2018, certain provisions of the IBC were amended which introduced sweeping changes in both the substantive as well as the procedural aspects relating to the insolvency process. The Indian economy grew unprecedentedly while most economies were suffering from economic depression. This growth is attributed to the inflow of FDI into India by way of cross-border mergers & acquisitions. IBC is expected to play a significant role in establishing a solid legal platform where cross border mergers & acquisitions in India can flourish in mutual coexistence with all other laws leading to wholesome economic development. Currently, the legal framework for cross border insolvency in India concerning foreign proceedings, the participation of foreign investors, recognition of foreign courts, and uniformity in relief provided etc. is unclear and at a nascent stage. This creates many legal hassles and confusion in the finalisation of cross border merger deals and makes the business climate uncertain. The authors attempt in earnest, to critically analyse the legal framework with respect to IBC and study the complexities of cross-border insolvency in the Indian context, and set out the broad principles of the UNCITRAL Model Law and determine the relevance of Gibbs rule in the insolvency resolution process to assess on a macroeconomic level, the impact of IBC on cross border mergers and acquisitions in India.