Cross Border:

Appellant:

It is humbly submitted before the Hon’ble Tribunal that the application filed by the Foreign

Representative i.e., Ms. Wilson for the recognition of the US Insolvency proceedings against

BUI under chapter 11 of the US Bankruptcy Code is viable because the Centre of Main

Interest (hereinafter COMI) lies in US and according to Clause 2(e) of the Draft Part Z 1,

foreign main proceedings are those proceedings which take place in the state where the

corporate debtor has its COMI.

According to Clause 142 of the Draft Part Z, the registered office of the Corporate Debtor is

presumed to be the COMI. The registered office also must not have been shifted to another

state/place within three months prior to the commencement of the insolvency proceedings in

that state.3 Also, the COMI is the place/location that is readily ascertainable by the creditors.

In the paragraph eleven of the proposition, it is mentioned that BUI was incorporated in the

United States, having its registered office situated in New York. Also, majority of the

creditors of BUI are situated in US i.e., the consortium led by the Bank of Miami and

DealTrade Inc., the registered office at New York is the location which is readily

ascertainable by the creditors. Even for the Indian creditors, the location which is readily

ascertainable is New York only because the company has major functions in US only and the

registered office and the place of incorporation is New York. So, it is prima facie clear that

the COMI of BUI is in US only and hence it is undoubtable that the US insolvency

proceedings should be the “Foreign Main Proceedings”.

The place of registration to be considered as the COMI is a rebuttable presumption which is

adopted by all the major rules and regulation relating to the cross-border Insolvency issue.

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UNCITRAL Model Law, EC amended regulation (Recast regulations), US Insolvency and

Bankruptcy Code, all back the rebuttable presumption of COMI to be the place of the

registered office and the location which is readily ascertainable by the creditors.

In the recent Jet Airways insolvency case 4, India was considered as the COMI because the

registered office of Jet Airways is in India and it is the place which the creditors can easily

ascertain. The rebuttable presumption of COMI and the Objective Third Party5 test is also

followed in major international insolvency cases such as the Eurofood case, Re Stanford

case. In these cases, it was held that in absence of any proof to the contrary, the debtor’s

registered office and what is objective and ascertainable to third parties, is to be considered

the COMI of the corporate debtor.

Some factors as have been laid down in the above cases which are to be considered when this

presumption can be rebutted are as follows:

1. who are the company's creditors / customers and where are they based?

2. where is its head office?

3. where it is readily ascertainable by the creditors?

4. where are the majority of its assets based?

5. where are the main bank accounts of the company based?

6. where do its banking relationships take place?

7. Contract pricing control.

It is humbly submitted before the Hon’ble tribunal that US as the COMI can be easily

ascertained based on the rebuttable presumption, but even if for more clarity and better

analysis of the situation, the factors when the presumption can be rebutted, it cannot be

denied that the US is the COMI and hence the US insolvency proceedings be considered as

5
the “foreign main proceedings” for the benefit of the majority stakeholders as well as the

corporate debtor. The majority of the company’s creditors are based in US i.e., the

consortium of banks led by the Bank of Miami (US $1B) and DealTrade. It is also mentioned

in the paragraph 11 of the proposition that BUI was started considering the development of

telecommunications in USA. Its head office is based in New York. It is readily ascertainable

to the majority of creditors that New York is the COMI. Its majority assets are based in the

US only including the four R&D centres in New York, Houston, Las Vegas and Manchester.

It controls the contract pricing in the US itself.

So, it is clearly viable that the US Insolvency proceedings be considered as the “Foreign

Main Proceedings”.

Respondents:

It is humbly submitted before the Hon’ble Tribunal that the application filed by the Foreign

Representative i.e., Ms. Wilson for the recognition of the US Insolvency proceedings against

BUI under chapter 11 of the US Bankruptcy Code is not viable because the Centre of Main
Interest (hereinafter COMI) lies in US and according to Clause 2(e) of the Draft Part Z 6,

foreign main proceedings are those proceedings which take place in the state where the

corporate debtor has its COMI which in the current case, lies in India.

According to Clause 147 of the Draft Part Z, the registered office of the Corporate Debtor is

presumed to be the COMI, unless proof to the contrary is presented.

UNCITRAL Model Law, EC amended regulation (Recast regulations), US Insolvency and

Bankruptcy Code, all have the provisions that is a rebuttable presumption that the COMI is

the place of the registered office of the corporate debtor. The phrase rebuttable presumption

itself clears everything that as soon as proof to the contrary is provided the place of registered

office holds not much importance. The proper interpretation of the Model Law and Chap. 15

of the US Bankruptcy Code should give only limited weight to the presumption of the

jurisdiction of incorporation as the COMI.8

In Re Lennox Holdings case9, it was held that notwithstanding the location of the registered

offices, it is to be considered where are the strategic operational and financial management.

In the current case, as is mentioned in the paragraph 15 of the proposition 10, the company

carries its accounting and other administrative functions from the Indian branch only.

Even in the cases like Eurofood case, Re Enron Directo SA, and Re Stanford case, where the

rebuttable presumption of the registered office was considered to be a major factor in

deciding the COMI, it was held that is can be rebutted and following factors are needed to be

considered in determining the COMI:

1. where are its employees based?

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Neil hannan
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2. where are directors based?

3. where are shareholders based?

4. where is its management based?

5. where do board meetings take place?

6. where are administrative and accounting functions carried out?

7. where are the annual accounts filed? Where are the auditors based?

8. General Supervision.

9. Corporate identity and branding.

Now, if the facts of the current case are considered, there are several factors on the basis of

which the presumption can be easily rebutted. As it is a wholly-owned subsidiary, its 100

percent shareholder is BEPL, so it can be said that its 100 percent shareholders are based in

India, in the paragraph 15 of the proposition it is written that BUI also has a branch office in

India as the Board of Directors takes majority of the company’s operation and management

decisions from the Indian branch office. So, the Test of Nerve Centre/Principal place of

Business is satisfied. It also satisfies the Mind of Management test which holds

considerable value in determining the COMI. The general supervision is done from the Indian

Branch only. The company also carries its accounting and other administrative functions

from the Indian branch only. The management is domiciled in India only.

Based upon all of the above factor or in the current sense proof, the presumption of the

registered office can easily be rebutted and the ‘Foreign Main Proceedings’ should be the

Indian ones.

The above-mentioned factors are also considered by the Adjudicating Authority also and

hence it also considered the foreign proceedings as the ‘Foreign Main Proceedings” and in

the US the company has Establishment11 only and not the COMI.
11