Cross-Border Insolvency in India – By Aditi Avashia


Aditi Avashia
5th year student, GLS Law College, Ahmedabad 

A situation pertaining to cross-border insolvency occurs when an insolvent debtor has creditors or assets in various jurisdictions or when simultaneous insolvency proceedings are initiated in more than one jurisdiction. Majorly, the concept focuses on insolvency proceedings beyond the scope of domestic jurisdiction. Cross-border insolvency entails the following aspects: 

i) where the insolvent debtor is the subject of insolvency proceedings in one or more jurisdictions simultaneously;

ii) where the insolvent debtor has branches or assets in multiple jurisdictions, including one where the insolvency proceedings are pending; and 

iii) where foreign creditors have claims or rights on the insolvent debtor’s assets in another jurisdiction where insolvency proceedings are pending.

Need for a comprehensive mechanism

With rapid globalization, cross-border business and investment transactions have seen a surge too. This has made economies of the world quite dependent on each other. Thus, the insolvency of any business entity in such a globalised market has ramifications extending to multiple jurisdictions. There needs to be in existence a mechanism which ensures equal protection of interests of domestic and foreign creditors, maximises the valuation of debtor’s assets which are situated in different jurisdictions, helps in the coordination of functions courts and judicial authorities of different jurisdictions to seek the common goal and avoids circumstances of conflict of law. 

Existing legal regime

At the forefront of such a law, lies the aspect of recognition of foreign insolvency proceeding(s). The Code of Civil Procedure, 1908 recognises foreign decrees and judgments of reciprocating territories. [i]

The Insolvency and Bankruptcy Code, 2016 (IBC) in its initial draft was silent on the aspect of cross-border insolvency. It was only on the recommendations of The Bankruptcy Law Reforms Committee (BLRC) a draft bill was prepared which was subsequently reviewed by The Joint Parliamentary Committee in 2016 that a mechanism for cross-border insolvency was implemented in the Code.  Thereafter two provisions dealing with the aspect were added to the bill: section 234 and section 235. The former empowers the Central Government to enter into bilateral agreements with other countries to enforce Code[ii] and the latter empowers the adjudicating authority under the Code to issue a letter of request to a court in a country in which an agreement under Section 234 has been entered into, to deal with assets situated in that country in a specified manner. [iii]

Limitations of the existing legal regime

The Civil Procedure Code, 1908 although provides for enforcement of foreign decrees and judgements, it fails to take into account insolvency proceedings related to reorganization and administrative orders. The current framework also lags behind in addressing issues of parallel proceedings, cooperation and coordination of judicial and law-making authorities with respect to cross-border insolvency. 

Further, sections 234 and 235 haven’t been notified yet, they’re still inoperable thus the concept of a cross-border insolvency regime is unresolved. To ensure the operation of these sections also there needs to be quite a lot of prerequisites to be performed by the Centre. Entering into and negotiating a successful bilateral agreement with other jurisdiction(s) is quite a cumbersome and time and resource-consuming process. Also, entering into different reciprocal agreements with different jurisdictions may overcomplicate things instead of streamlining them. 

There is no system in place to deal with issues of cross-border insolvency where the debtor’s assets or creditors are located in a jurisdiction with which no bilateral treaty has been signed. 


The UNCTRAL Model Law on Cross-Border Insolvency, 1997 stands as one of the most widely recognized guidelines on cross-border insolvency. The Model Law provides a legislative framework which can be adopted by countries with modifications subject to their domestic legal framework. The five main pillars of the Model Law are 

i) Access: The Model Law empowers foreign creditors and insolvency officials to directly access domestic courts and to initiate and participate in domestic insolvency proceedings against a debtor.

ii) Recognition: The Model Law accounts for recognition of foreign court proceedings by the domestic courts and empowers the latter to grant relief based on the foreign proceedings. If the domestic courts arrive at a conclusion that the debtor has its centre of main interests (COMI) in a foreign state, the proceedings there would be then termed as the main proceedings. If the debtor does not have a COMI in a foreign state, the proceedings there would be considered non-main proceedings. In case, the foreign proceedings are recognized as main proceedings, a moratorium would be imposed on the domestic proceedings and the foreign representative will be granted higher powers to deal with the assets of the debtor. If the foreign proceedings are recognized as non-main proceedings, the domestic court then has the discretion to grant any such relief it pleases. 

Under the Model Law, COMI is an undefined concept but a debtor’s COMI is presumed to be its place of registered business or place of habitual residence unless proof is provided to the contrary.[iv]

iii) Coordination: The Model Law provides a framework for coordinating two or more concurrent proceedings in multiple jurisdictions. In short, a domestic insolvency proceeding can be commenced irrespective of foreign insolvency proceedings already being commenced, and vice-versa.

iv) Cooperation: The Model Law provides for direct cooperation between domestic and foreign courts, domestic and foreign insolvency professionals/officials, domestic courts and foreign insolvency professionals/officials and foreign courts and domestic insolvency professionals/officials.

v) Public Policy: The Model Law gives the public policy of a country paramount importance and thus empowers the domestic courts to reject or modify a foreign judgment or proceeding if it stands inconsistent with the public policy of the country. 

India’s Draft Guidelines

Based on the UNCITRAL Model Law, in 2018 the Insolvency Law Committee recommended draft provisions on cross-border insolvency (Draft Part Z) to be inserted in the IBC. It comprises 29 sections and includes aspects of access, recognition and relief, cooperation and coordination, public policy exception, etc. With a few modifications to the Model Law, Draft Part Z has the following main features: 

i) The chapter applies only to corporate debtors and excludes within its ambit personal insolvencies and individual debtors. It further does not apply to pre-packaged insolvency and personal guarantors. Further, clause 1(3) of the draft empowers Central Government to exempt certain classes of entities from the applicability of these provisions.

ii) In terms of reciprocity, it applies only to jurisdictions that have adopted UNCITRAL Model Law.

iii) With respect to COMI, Draft Part Z presumes it to be the place of the debtor’s registered office provided it is not relocated within three months of the date of commencement of insolvency proceedings.[v] It further places the onus upon the adjudicating authority to assess the place of the central administration of the debtor to find its COMI. The assessment should be done in a manner prescribed by the Central Government and should be ascertainable by third parties.[vi]

Jet Airways (India) Ltd. vs. State Bank of India and Anr.

This case stands as the first case wherein the court was burdened with questions of parallel proceedings of insolvency in India and foreign jurisdictions and determination of debtor’s COMI. 

The State Bank of India filed an application u/s 7 of the IBC, 2016 against Jet Airways and consequently CIRP of Jet Airways commenced in the month of June 2019. A month before this, the company was pushed into bankruptcy in the Netherlands, hence a trustee appointed by the Dutch Court approached Indian courts to recognize the Dutch proceedings and halt the Indian proceedings. NCLT, Mumbai referring to sections 234 and 235 of the IBC and also the absence of any sure-shot legal regime on cross-border insolvency declared the Dutch proceedings null and void. 

The NCLAT in its appeal allowed a cross-border insolvency protocol arranged between the two officials based on Model Law. The COMI of Jet Airways was recognized to be India as the company was incorporated and had primary business operations in India. This was India’s first cross-border insolvency case, setting up a precedent for the upcoming cases. 


The IBC comparatively being a newer law is ever-evolving. With the increasing globalization and communication technology, there needs to be a legal framework to regulate cross-border insolvency not just in India but in every possible jurisdiction which seeks to globalize its economy. 

It is important for the Indian legal framework to be in sync not just with the Model Law but also with the countries which have adopted the Model Law on cross-border insolvency so as to reduce probable conflicts. 



[i] Section 44A, Code of Civil Procedure, 1908

[ii] Section 234, The Insolvency and Bankruptcy Code, 2016

[iii] Section 235, The Insolvency and Bankruptcy Code, 2016

[iv] Article 16(3) UNCITRAL, Model Law on Cross- Border Insolvency. 1997

[v] Clause 14(2) Draft Part Z

[vi] Clause 14(3) Draft Part Z


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