Introduction
Cross-border insolvency is no longer a peripheral concern within India’s commercial and corporate landscape. Indian enterprises increasingly raise capital overseas, own assets and subsidiaries across multiple jurisdictions, and engage with counterparties located beyond national borders. Consequently, when financial distress arises, insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC) are confronted with complex questions relating to recognition of foreign proceedings, inter-jurisdictional coordination, and maximisation of asset value.
This article undertakes a critical examination of India’s existing framework for cross-border insolvency. It traces the doctrinal foundations of the regime in the competing theories of territorialism, universalism, and modified universalism, and evaluates how these principles are reflected-albeit imperfectly-in Sections 234 and 235 of the IBC. The analysis further maps the judicial evolution of cross-border insolvency in India, with particular emphasis on the coordination-oriented approach adopted in Jet Airways (India) Ltd., which marked a significant, though limited, step towards international cooperation.
Despite these developments, substantial gaps persist, most notably the absence of a comprehensive statutory mechanism for recognition of foreign insolvency proceedings. The article therefore examines ongoing reform proposals aimed at harmonising Indian insolvency law with the UNCITRAL Model Law on Cross-Border Insolvency. It concludes by offering a set of practical, implementation-ready recommendations tailored to India’s institutional capacities, creditor composition, and broader economic and development objectives.
The globalization of business has transformed how companies operate, with multinational enterprises routinely conducting operations across multiple jurisdictions. When such entities face financial distress, the resulting insolvency proceedings become exponentially more complex, involving multiple legal systems, diverse creditor bases, and assets scattered across different countries. For India, a rapidly growing economy increasingly integrated into global markets, cross-border insolvency presents both challenges and opportunities that demand sophisticated legal frameworks and judicial innovation.
Cross-border insolvency arises in three primary scenarios: when foreign creditors have claims against an Indian corporate debtor whose assets are located in multiple jurisdictions; when an Indian corporate debtor operates branches or businesses in different countries with assets in those jurisdictions; or when an Indian company has foreign subsidiaries or parent entities creating a web of interconnected insolvency proceedings. Each scenario raises fundamental questions about jurisdiction, applicable law, recognition of foreign proceedings, and coordination between different legal systems.
Current Legal Framework in India
The Insolvency and Bankruptcy Code, 2016
India’s primary legislation governing insolvency matters is the Insolvency and Bankruptcy Code, 2016 (IBC), which came into force to consolidate and amend laws relating to reorganization and insolvency resolution of corporate persons, partnership firms, and individuals. The IBC established specialized tribunals-the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT)-to adjudicate insolvency matters with speed and expertise.
However, the IBC’s provisions on cross-border insolvency remain notably limited. The Code contains only two provisions specifically addressing international insolvency matters:
Section 234: Bilateral Agreements with Other Countries
This section empowers the Central Government to enter into bilateral agreements with foreign countries for enforcing provisions of the IBC. It allows the government to declare that the provisions of the Code shall apply to any country outside India with which reciprocal arrangements have been made. Despite this enabling provision, India has not yet entered into any significant bilateral agreements dedicated to recognition and enforcement of cross-border insolvency proceedings. This absence leaves a substantial gap in India’s ability to coordinate with foreign jurisdictions on insolvency matters through formal governmental channels.
Section 235: Letters of Request to Courts in Foreign Countries
This provision allows the NCLT to issue letters of request to courts in countries with which bilateral agreements exist under Section 234, seeking cooperation in matters relating to assets of corporate debtors located abroad. The section envisions judicial cooperation for evidence gathering and asset recovery in foreign jurisdictions. However, its utility remains theoretical given the absence of bilateral treaties that would provide the foundation for such cooperation.
These skeletal provisions reflect the drafters’ recognition that cross-border insolvency required special treatment, but they stopped short of creating a comprehensive framework. The result is a legislative structure that acknowledges international dimensions of insolvency without providing meaningful tools to address them.
Constitutional and Jurisdictional Provisions
Section 60 of the IBC establishes territorial jurisdiction for insolvency proceedings. It mandates that applications must be filed before the NCLT where the corporate debtor’s registered office is situated. This provision creates clarity for domestic proceedings but raises questions when a corporate debtor’s center of main interests may lie outside India, or when substantial operations occur in multiple jurisdictions.
The Indian courts have consistently held that insolvency proceedings constitute “legal proceedings” subject to jurisdictional limitations. This characterization has important implications for enforcement of exclusive jurisdiction clauses and recognition of foreign insolvency orders.
The Draft Part Z Framework
Recognizing the inadequacy of existing provisions, the Insolvency Law Committee submitted a comprehensive report in October 2018 recommending adoption of the UNCITRAL Model Law on Cross-Border Insolvency, 1997, with modifications suited to Indian circumstances. This recommendation led to the drafting of “Part Z” as a proposed amendment to the IBC, which remains pending implementation.
Draft Part Z incorporates key concepts from the Model Law including:
Foreign Representatives: The draft recognizes persons appointed in foreign insolvency proceedings to administer reorganization or liquidation of a debtor’s assets, allowing them to access Indian courts.
Recognition of Foreign Proceedings: The framework distinguishes between “foreign main proceedings” (where the corporate debtor has its centre of main interests) and “foreign non-main proceedings” (where the debtor has an establishment but not its main interests). This distinction determines the extent of relief available and the automatic effects of recognition.
Relief and Cooperation: Upon recognition of foreign proceedings, the draft provides for various forms of relief including stays on actions against the debtor, appointment of representatives to manage assets, examination of witnesses, and delivery of information concerning the debtor. It also mandates cooperation between Indian courts and foreign courts, and between insolvency professionals of different jurisdictions.
Centre of Main Interests (COMI): The draft presumes that a corporate debtor’s COMI is at its registered office unless evidence demonstrates otherwise. This rebuttable presumption provides predictability while allowing flexibility when a debtor’s actual operations centre elsewhere.
Importantly, Draft Part Z applies only to corporate debtors, not to personal insolvency, and contemplates reciprocal arrangements-its provisions would primarily apply to countries that have themselves adopted the Model Law or similar frameworks. The draft also grants the NCLT discretionary power to refuse recognition if doing so would be manifestly contrary to public policy, though this discretion is intended to be exercised narrowly.
Despite widespread recognition of its necessity and extensive stakeholder consultations, Part Z remains unenacted. Its continued postponement reflects the complex policy considerations involved, including concerns about sovereignty, protection of domestic creditors, and ensuring adequate regulatory oversight of cross-border cooperation.
The UNCITRAL Model Law Context
The UNCITRAL Model Law on Cross-Border Insolvency, adopted in 1997, provides a globally recognized framework for addressing jurisdictional conflicts and coordination challenges in international insolvency matters. Over 50 jurisdictions across 54 countries have adopted the Model Law, including major economies such as the United States, United Kingdom, Canada, Australia, Singapore, Japan, and South Korea.
The Model Law operates on four fundamental principles:
Access: Foreign insolvency representatives can directly access courts in adopting countries to seek recognition and relief, eliminating the need for separate insolvency proceedings.
Recognition: Courts in adopting countries can recognize foreign insolvency proceedings and grant appropriate relief, distinguishing between main proceedings (in the jurisdiction of the debtor’s COMI) and non-main proceedings (in jurisdictions where the debtor has an establishment).
Relief: Upon recognition, courts can grant various forms of relief to facilitate orderly administration of the insolvency, including automatic stays in the case of main proceedings and discretionary relief for both main and non-main proceedings.
Cooperation: The Model Law mandates cooperation between courts and insolvency representatives across jurisdictions, including direct communication between courts when appropriate, to promote efficient and coordinated resolution.
The Model Law deliberately avoids attempting to harmonize substantive insolvency law, recognizing that different jurisdictions maintain diverse approaches reflecting their distinct legal traditions, economic policies, and social priorities. Instead, it creates procedural bridges enabling cooperation despite substantive differences.
For India, adoption of the Model Law through Draft Part Z would signal to international investors and creditors that Indian insolvency proceedings will be conducted in accordance with globally recognized standards. This could enhance confidence in India as a destination for foreign investment and facilitate access to international capital markets for Indian businesses.
Landmark Supreme Court Judgments
Macquarie Bank Limited v. Shilpi Cable Technologies Ltd. (2017)
Citation: (2018) 2 SCC 674
Date of Judgment: December 15, 2017
This landmark judgment represents the Supreme Court’s first significant pronouncement on the role of foreign creditors in Indian insolvency proceedings and established foundational principles that continue to govern cross-border aspects of the IBC.
Facts:
Hamera International Private Limited executed an agreement with Macquarie Bank Limited, Singapore, whereby Macquarie Bank purchased the original supplier’s rights, title, and interest in a supply agreement in Favor of the respondent, Shilpi Cable Technologies Ltd. When amounts under the supply agreement became due, Macquarie Bank issued demand notices and subsequently filed an application under Section 9 of the IBC to initiate Corporate Insolvency Resolution Process (CIRP) against Shilpi Cable as an operational creditor.
The NCLT rejected the application on two grounds: first, that Macquarie Bank had failed to submit a certificate from a financial institution as required under Section 9(3)(c) of the IBC; and second, that the demand notice was issued by lawyers rather than by the operational creditor itself, which the tribunal deemed improper. The NCLAT upheld this decision, holding that Section 9(3)(c) was mandatory and that lawyers could not issue statutory notices under Section 8 on behalf of operational creditors.
Issues Before the Supreme Court:
1. Whether Section 9(3)(c) of the IBC, which requires operational creditors to provide a certificate from a financial institution confirming non-payment, is mandatory or directory in nature
2. Whether a demand notice under Section 8 can be issued by a lawyer on behalf of an operational creditor
3. Whether foreign operational creditors can initiate insolvency proceedings under the IBC
The Court’s Reasoning and Holdings:
On the first issue, the Supreme Court conducted a detailed analysis of Section 9(3)(c) in conjunction with the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules and the prescribed forms. The Court held that the certificate requirement is directory, not mandatory, reasoning that:
The term “confirming” in the provision indicates the certificate serves as evidence of default, not as a jurisdictional prerequisite. The certificate confirms what should already be established through other documentation-that the operational debt remains unpaid.
Reading the requirement as mandatory would create absurd results, particularly for foreign operational creditors whose banks may not qualify as “financial institutions” under Section 3(14) of the IBC. This would impermissibly discriminate between domestic and foreign creditors based solely on their residence.
The procedural nature of the provision, combined with the availability of other evidence to establish default, supports treating it as directory. The overriding objective of the Code is to facilitate timely insolvency resolution, which would be undermined by imposing rigid threshold requirements that serve no substantive purpose.
On the second issue, the Court held that lawyers can issue demand notices on behalf of operational creditors. The Court interpreted the phrase “in relation to the operational creditor” broadly, finding that it encompasses persons acting on behalf of or with authority from the operational creditor. This interpretation aligns with practical commercial reality where sophisticated creditors routinely engage legal representatives to handle statutory communications.
Most significantly for cross-border insolvency, the Court addressed the status of foreign creditors under the IBC. While not explicitly raised as a separate issue, the Court’s reasoning necessarily encompassed this question given Macquarie Bank’s status as a Singapore-based entity. The Court interpreted the definition of “person” under Section 3(23)(g) of the IBC to include persons resident outside India, thereby confirming that foreign creditors possess the same rights as domestic creditors to initiate and participate in insolvency proceedings under the Code.
Implications:
This judgment opened the door for foreign creditors to actively participate in Indian insolvency proceedings without discriminatory barriers. It established that the IBC should be interpreted in a manner that facilitates rather than obstructs participation by all legitimate creditors, regardless of their residence or the location of their banking relationships.
The decision also reflects the Supreme Court’s commitment to purposive interpretation of the IBC. Rather than adhering to strict literalism that would produce inequitable results, the Court adopted a construction that advances the Code’s objectives of inclusive, efficient insolvency resolution. This interpretive approach has influenced subsequent judicial decisions on various aspects of the IBC.
For foreign banks and financial institutions, the judgment provided crucial clarity that they could utilize the IBC’s mechanisms without being disadvantaged relative to domestic creditors. This was particularly important given India’s increasing integration into global financial markets and the growing presence of foreign lenders in Indian corporate finance.
Related Cases on Foreign Participation
Stanbic Bank Ghana Limited v. Rajkumar Impex Private Limited (2017-2018)
NCLT Decision: CP/670/IB/2017, decided April 27, 2018
NCLAT Affirmation: Company Appeal (AT) (Insolvency) No. 213/2018, decided August 29, 2018
Supreme Court: Civil Appeal No. 9980 of 2018, decided October 12, 2018
This case expanded the principles established in Macquarie Bank by addressing whether foreign court judgments could serve as the basis for initiating insolvency proceedings in India.
Facts:
Stanbic Bank Ghana had extended a loan to Rajkumar Impex Ghana Limited, a wholly owned subsidiary of Rajkumar Impex Private Limited (an Indian company), which had guaranteed the loan. Upon default, the bank-initiated proceedings in Ghana against the subsidiary and in England against the guarantor. The English Court issued an order against the guarantor during the pendency of the Ghana proceedings.
Based on the English Court’s order, Stanbic Bank filed an application under Section 7 of the IBC before the NCLT, Mumbai, seeking to initiate CIRP against Rajkumar Impex Private Limited as a financial creditor.
The Tribunal’s Reasoning:
The NCLT observed a crucial distinction: “This Tribunal has no jurisdiction to enforce the foreign decree; however, there is no bar in it taking cognizance of the foreign decree.” This carefully worded holding established that while the NCLT cannot directly enforce foreign judgments (a power reserved to civil courts under the Code of Civil Procedure), it can treat foreign judgments as evidence of debt and default for purposes of determining whether to admit an insolvency application.
The tribunal reasoned that the foreign court order established prima facie evidence of the debt owed by the corporate debtor. The existence of a foreign judicial determination regarding the debt does not oust the NCLT’s jurisdiction under the IBC; rather, it provides credible evidence supporting the creditor’s claim.
Appellate Proceedings:
The NCLAT affirmed the NCLT’s decision, and the Supreme Court declined to interfere, observing that it found no reason to disturb the concurrent findings of the tribunals below. This three-tier affirmation established a clear precedent that foreign court orders and judgments can form the evidentiary basis for insolvency applications in India.
Implications:
This case has significant practical importance for foreign creditors who have obtained judgments or arbitral awards abroad. It provides a pathway for such creditors to utilize those determinations in Indian insolvency proceedings without necessarily requiring separate recognition proceedings under the Civil Procedure Code before approaching the NCLT.
However, the case also highlights a conceptual tension in Indian law. The NCLT’s statement that it cannot enforce but can take cognizance of foreign judgments raises questions about the proper forum for recognition. While the tribunals in this case adopted a pragmatic approach, subsequent decisions have revealed disagreement about whether the NCLT or civil courts should first determine the validity and enforceability of foreign judgments before they can be used in insolvency proceedings.
Agrocorp International Pte. Ltd. v. National Steel and Agro Industries Limited (2020)
Citation: CP IB No. 798/MB/C-IV/2019, NCLT Mumbai, decided June 9, 2020
Building on the Stanbic Bank precedent, this case addressed whether foreign arbitral awards could serve as the basis for insolvency proceedings.
Facts:
Agrocorp International, a Singapore-based company, had obtained a foreign arbitral award against National Steel and Agro Industries Limited, an Indian company. Agrocorp sought to initiate CIRP based on this award.
The Tribunal’s Holdings:
The NCLT Mumbai held that foreign arbitral awards fall within the broad definition of “debt” under the IBC and can support an insolvency application. The tribunal reasoned that arbitral awards, whether domestic or foreign, represent judicial or quasi-judicial determinations of liability that satisfy the evidentiary requirements for establishing debt and default.
The decision emphasized that restricting the use of foreign arbitral awards would undermine the IBC’s objective of maximizing asset value and providing equal treatment to all creditors, regardless of the forum in which their claims were adjudicated.
Implications:
This case extended the principle of foreign judgment recognition to arbitral awards, reflecting India’s increasingly pro-arbitration stance and its commitment to honoring international commercial arbitration. For foreign parties who have arbitrated disputes with Indian companies, this decision confirms that successful arbitration can lead directly to insolvency proceedings without requiring separate enforcement proceedings in Indian courts.
Jet Airways (India) Limited: The Cross-Border Insolvency Protocol
NCLT Mumbai: CP 2205 (IB)/MB/2019, decided June 20, 2019
NCLAT Delhi: Company Appeal (AT) (Insolvency) No. 707 of 2019, orders dated July 12, 2019, August 21, 2019, and September 26, 2019
While not a Supreme Court decision, the Jet Airways case represents the most significant judicial engagement with cross-border insolvency coordination in India’s history and warrants detailed examination.
Background:
Jet Airways, once India’s premier private airline, accumulated debts exceeding Rs. 36,000 crores to domestic and foreign creditors. The airline had substantial international operations, with a regional hub in the Netherlands for European operations. This international footprint set the stage for complex jurisdictional questions when financial collapse became inevitable.
Parallel Proceedings:
In May 2019, a Dutch court admitted Jet Airways to bankruptcy proceedings and appointed a bankruptcy administrator (trustee) to manage the airline’s assets in the Netherlands, including aircraft parked at Amsterdam’s Schiphol Airport. This followed petitions by European creditors asserting unpaid dues.
In June 2019, a consortium of Indian lenders led by State Bank of India filed an application under Section 7 of the IBC before the NCLT Mumbai, seeking to initiate CIRP against Jet Airways. The airline was admitted to insolvency proceedings on June 20, 2019, and an interim resolution professional was appointed.
The Jurisdictional Conflict:
When the NCLT Mumbai became aware of the Dutch proceedings, the Dutch administrator appeared and requested recognition of the Netherlands bankruptcy proceedings and a stay of the Indian proceedings. The administrator argued that parallel proceedings in different jurisdictions would hamper resolution efforts, create conflicts over asset control, and ultimately harm creditor interests.
The NCLT Mumbai rejected this request in forthright terms. In paragraph 29 of its order dated June 20, 2019, the tribunal held: “The order passed by Noord Holland District Court, Netherland for the company registered in India is nullity ab-initio.” The tribunal reasoned that:
India has no cross-border insolvency law in operation, as Sections 234 and 235 of the IBC remain unnotified and unimplemented.
Jet Airways is registered and incorporated in India, with its primary assets located in India, giving the NCLT territorial jurisdiction under Section 60 of the IBC.
In the absence of bilateral agreements or implementing legislation for cross-border cooperation, the Dutch proceedings cannot be recognized in India.
The tribunal therefore declared the Indian proceedings as the sole valid insolvency process and prohibited the Dutch administrator from participating in the Indian resolution process.
The NCLAT’s Innovative Approach:
The Dutch administrator appealed to the NCLAT, which took a dramatically different approach. Through a series of orders, the NCLAT:
Stayed the NCLT’s Declaration: The NCLAT stayed that portion of the NCLT’s order declaring the Dutch proceedings as null and void, finding this declaration premature and potentially harmful to coordinated resolution efforts.
Mandated Cooperation: The tribunal directed the Indian resolution professional and the Dutch administrator to explore mechanisms for cooperation and coordination, recognizing that Jet Airways’ operations and creditor base spanned multiple jurisdictions.
Facilitated Negotiations: The NCLAT gave the parties time to negotiate a framework for joint proceedings, emphasizing that the objective should be maximization of asset value for all creditors while respecting the legal frameworks of both jurisdictions.
The Cross-Border Insolvency Protocol:
Following the NCLAT’s direction, the Indian resolution professional and Dutch administrator negotiated a comprehensive “Cross-Border Insolvency Protocol” modelled on the UNCITRAL Model Law principles. The protocol, approved by the NCLAT on September 26, 2019, contained several key provisions:
Recognition of COMI: The protocol acknowledged India as Jet Airways’ “centre of main interests,” given that the company was incorporated in India, maintained its registered office in India, conducted its primary operations from India, and was visible to creditors as an Indian entity. Consequently, the Indian proceedings were designated as “main proceedings” and the Dutch proceedings as “non-main proceedings.”
Objectives and Principles: The protocol stated its purpose as minimizing costs and maximizing asset value for all creditors through information sharing and international coordination, while respecting the independence and sovereignty of both the NCLT/NCLAT and the Dutch Bankruptcy Court.
Communication and Cooperation: The protocol established channels for regular communication between the Indian resolution professional and Dutch administrator, and contemplated direct court-to-court communication when appropriate. It required information sharing about creditor claims, asset valuations, and resolution proposals.
Asset Management: While Indian law would govern the treatment of assets in the Netherlands, the protocol provided for the Dutch administrator to preserve offshore assets pending resolution. The administrator agreed not to alienate assets without consultation with the Indian resolution professional.
Creditor Rights: The protocol allowed the Dutch administrator to attend Committee of Creditors meetings in India as an observer, though without voting rights. Foreign creditors could file claims with either the Indian resolution professional or the Dutch administrator, who would coordinate to avoid duplication.
Resolution Process: Any resolution plan would need to address claims of both domestic and foreign creditors comprehensively. The protocol contemplated that a plan approved in India would, to the extent concerning Dutch assets, require coordination with Dutch proceedings.
Amendments: The protocol could only be amended by written agreement of both parties, subject to approval by both the NCLAT and the Dutch court.
Legal and Practical Significance:
The Jet Airways protocol represents a remarkable achievement in judicial pragmatism and international cooperation. Despite the absence of formal legislative authority for cross-border insolvency cooperation, the NCLAT effectively read Model Law principles into the IBC framework, demonstrating that Indian courts can facilitate international coordination when commercial necessity demands it.
The case established several important precedents:
Judicial Flexibility: Indian insolvency tribunals possess inherent powers to facilitate cooperation with foreign proceedings when doing so serves the objectives of the IBC, even in the absence of explicit statutory authorization.
Modified Universalism: The NCLAT embraced a modified universalist approach, recognizing the primacy of main proceedings while allowing non-main proceedings to continue in coordination rather than requiring their termination.
COMI as Organizing Principle: The protocol’s recognition of India as Jet Airways’ COMI demonstrates judicial acceptance of this concept, which will be formally incorporated into Indian law if Draft Part Z is enacted.
Practical Coordination: The case showed that court-approved protocols can provide a framework for managing parallel proceedings, even across different legal systems and insolvency philosophies.
However, the case also revealed limitations of proceeding without comprehensive legislation. The negotiations were time-consuming, the legal basis for the protocol remained somewhat uncertain, and replicating such coordination in future cases without legislative guidance will be challenging. Each cross-border insolvency will require bespoke solutions rather than following established procedures.
Subsequent Developments:
The resolution plan for Jet Airways was ultimately approved by the NCLT in 2021, with the Jalan-Kalrock Consortium as the successful resolution applicant. Implementation of the plan has faced various challenges, but the cross-border protocol served its purpose of preventing asset dissipation and enabling comprehensive consideration of all creditor claims.
The Jet Airways case remains the most frequently cited example in India for why enactment of Draft Part Z and adoption of the Model Law framework are urgently needed.
Recognition of Indian Insolvency Proceedings Abroad
Compuage Infocom Limited: Singapore Recognition (2024)
A significant milestone occurred in 2024 when the Singapore High Court recognized Indian CIRP proceedings as a “foreign proceeding” under Singapore’s adoption of the UNCITRAL Model Law. This case involved Compuage Infocom Limited, an Indian IT and mobility distribution company that had entered CIRP in India with assets located in Singapore.
The Issues:
The Singapore court had to determine:
1. Whether the NCLT qualified as a “foreign court” under the Model Law
2. Whether the resolution professional appointed in India constituted a “foreign representative”
3. Whether India was the COMI for the corporate debtor
4. What relief should be granted to facilitate the Indian proceedings
The Court’s Holdings:
The Singapore High Court ruled comprehensively in favour of recognition:
NCLT as Foreign Court: The court held that the NCLT, despite being a quasi-judicial tribunal rather than a traditional court, satisfied the definition of “foreign court” under the Model Law. The key characteristics were that the NCLT is adjudicative in nature, exercises judicial powers (including power to admit or reject applications and approve or reject resolution plans), and supervises insolvency proceedings.
Resolution Professional as Foreign Representative: The court recognized the resolution professional as a “foreign representative” authorized to administer the reorganization of the corporate debtor and recognized by the NCLT.
COMI in India: The court determined that Compuage’s COMI was in India based on incorporation, registered office location, and primary business operations, making the Indian CIRP a “foreign main proceeding.”
Relief Granted: The court granted substantial relief including recognition of the proceedings, turnover of Singapore assets to the resolution professional, and cooperation in administering the insolvency.
Significance:
This judgment represents the first instance of Indian CIRP proceedings receiving formal recognition in a foreign jurisdiction that has adopted the Model Law. It demonstrates that even without India having formally adopted the Model Law, Indian insolvency proceedings can receive recognition abroad when they meet the Model Law’s criteria.
The decision validates the structure and procedures of the IBC as compatible with international standards, enhancing confidence that cross-border coordination involving Indian insolvencies can function effectively. It also creates incentive for India to formalize its cross-border framework, as reciprocal recognition becomes more important as Indian companies increasingly operate internationally.
Practical Implications for Indian Entities
For Indian Corporate Debtors
Indian companies with international operations or foreign assets face particular challenges in insolvency. Key considerations include:
Jurisdictional Planning: Companies should be aware that their registered office location in India will typically establish NCLT jurisdiction under Section 60 of the IBC, regardless of where operations primarily occur. However, foreign jurisdictions may simultaneously claim jurisdiction based on asset location or COMI principles.
Asset Protection: In the absence of automatic recognition of Indian proceedings abroad, corporate debtors must anticipate that foreign creditors may attempt to seize assets in other jurisdictions before Indian proceedings can be recognized. Proactive coordination with resolution professionals to seek recognition abroad becomes critical.
Group Insolvency: The IBC currently lacks specific provisions for enterprise group insolvency, requiring separate proceedings for each Indian entity. This can lead to inefficient piecemeal resolution. The Draft Part Z includes provisions for group coordination, but until enacted, groups must rely on contractual arrangements and voluntary coordination.
Exclusive Jurisdiction Clauses: Recent NCLT decisions have held that exclusive jurisdiction clauses in contracts generally do not override the NCLT’s jurisdiction under Section 60 of the IBC. This means that even if contracts specify foreign law and jurisdiction, creditors can still initiate proceedings in India based on the debtor’s registered office location.
For Foreign Creditors
Foreign creditors seeking to enforce claims against Indian corporate debtors should understand:
Equal Treatment Principle: The Macquarie Bank judgment confirms that foreign creditors have the same rights as domestic creditors to initiate and participate in CIRP. The IBC’s definition of “person” includes non-residents.
Evidentiary Issues: Foreign judgments and arbitral awards can serve as evidence of debt and default in CIRP applications, as established in Stanbic Bank and Agrocorp cases. However, creditors should be prepared to provide authenticated and translated documentation.
Committee of Creditors Participation: Financial creditors can participate in voting at Committee of Creditors meetings. The voting share is determined based on the amount of debt, giving foreign lenders proportionate voice in resolution decisions.
Resolution Plan Treatment: Resolution plans must address all creditor claims comprehensively. Foreign creditors should actively engage in the process to ensure their interests receive appropriate consideration, as plans approved by the CoC and NCLT are binding on all creditors.
Currency and Cross-Border Payments: Claims denominated in foreign currency are converted to Indian Rupees as of a specified date, creating potential currency risk for foreign creditors. Plans should address mechanisms for cross-border payments and currency conversion.
For Investors and Lenders
The evolving cross-border insolvency framework has important implications for investment and lending decisions:
Due Diligence: Investors should assess not only the corporate structure and asset locations of potential investees but also the implications for insolvency proceedings. Understanding where main proceedings would occur and where assets might be vulnerable to seizure informs risk assessment.
Contractual Protections: While exclusive jurisdiction clauses may not prevent NCLT proceedings, other contractual provisions (cross-default clauses, negative pledge covenants, and information rights) remain enforceable and valuable.
Security Interests: Secured creditors should ensure that security interests are properly created and perfected under both Indian law and the law of any jurisdiction where collateral is located. Different jurisdictions have varying rules on priority and enforcement of security.
Guarantee Structures: The treatment of personal and corporate guarantors in Indian insolvency proceedings has been extensively litigated. Foreign lenders should understand that approval of a resolution plan for a corporate debtor does not automatically discharge guarantor liability, creating opportunities for enforcement but also complexity in coordinated resolution.
Policy Considerations and Future Directions
The Case for Adopting Draft Part Z
The arguments for enacting comprehensive cross-border insolvency legislation are compelling:
Investor Confidence: Formal adoption of globally recognized standards signals that India is committed to transparent, predictable, and fair treatment of cross-border insolvency matters. This enhances India’s attractiveness as an investment destination.
Coordination Efficiency: A clear legislative framework reduces the transaction costs and uncertainty involved in coordinating parallel proceedings. Rather than negotiating bespoke protocols as in Jet Airways, parties can rely on established procedures.
Judicial Clarity: Explicit statutory authority for cross-border cooperation eliminates questions about the legal basis for tribunal actions and reduces the risk of inconsistent approaches across different benches.
Reciprocity: As Indian companies increasingly operate abroad, the ability to seek recognition of Indian proceedings in foreign courts becomes more important. Reciprocal frameworks facilitate such recognition.
Asset Maximization: Effective cross-border cooperation prevents asset dissipation and forum shopping while enabling holistic resolution strategies that consider the debtor’s entire business rather than fragmenting it along jurisdictional lines.
Challenges and Concerns
Despite the strong case for adoption, several concerns explain the delay in implementing Draft Part Z:
Sovereignty Issues: Granting foreign representatives access to Indian courts and allowing foreign proceedings to affect Indian assets raises sovereignty concerns. The public policy exception in Draft Part Z provides some protection, but its scope and application remain uncertain.
Creditor Protection: Indian regulators and policymakers worry about ensuring that domestic creditors, particularly public sector banks and operational creditors such as employees, receive adequate protection when foreign proceedings interact with Indian insolvency.
Regulatory Coordination: Cross-border insolvency involving regulated entities (banks, financial institutions, airlines) requires coordination between insolvency authorities and sectoral regulators. The framework for such coordination remains underdeveloped.
Judicial Capacity: Implementing the Model Law framework will require tribunals to engage in international judicial cooperation, including possible direct communication with foreign courts. Building the institutional capacity for such engagement takes time and resources.
Reciprocity Limitations: Draft Part Z contemplates that its provisions will primarily apply to countries that have adopted the Model Law. Given that major economies including China and many European Union countries have not adopted the Model Law, the practical reach of India’s framework may be limited.
Comparative Lessons
India can learn from the experiences of other jurisdictions that have adopted the Model Law:
United States: Chapter 15 of the US Bankruptcy Code incorporates the Model Law and has been extensively used. US courts have generally interpreted recognition provisions broadly while exercising the public policy exception narrowly, creating a framework that facilitates cooperation while protecting core values.
United Kingdom: The UK adopted the Model Law while preserving traditional common law principles of recognition based on comity. This dual-track approach provides flexibility, allowing recognition through either statutory Model Law provisions or inherent judicial powers.
Singapore: As demonstrated in the Compuage case, Singapore has actively applied Model Law provisions to recognize foreign proceedings, including from non-Model Law jurisdictions when the proceedings meet substantive criteria. This pragmatic approach maximizes the framework’s utility.
Australia: Australian courts have emphasized the importance of COMI determinations and have been willing to recognize proceedings from debtors’ operational centers even when different from their registered offices, showing flexibility in applying Model Law principles to commercial realities.
The Path Forward
Several steps could advance India’s cross-border insolvency framework:
Enact Draft Part Z: This remains the most important step. The framework has been extensively consulted and debated; further delay primarily reflects policy hesitation rather than technical deficiencies.
Judicial Training: Preparing NCLT and NCLAT members for international cooperation through training programs, exchanges with foreign courts, and development of best practices guidance.
Bilateral Arrangements: While comprehensive multilateral frameworks are ideal, India could pursue bilateral agreements with key trading partners as stepping stones, particularly with jurisdictions where significant Indian business presence exists.
Regulatory Coordination: Developing clear protocols for how sectoral regulators (Reserve Bank of India, Securities and Exchange Board of India, insurance regulators, etc.) will interact with cross-border insolvency proceedings.
Stakeholder Education: Building understanding among insolvency professionals, creditors, and corporate entities about cross-border issues through professional development programs and guidance notes.
Judicial Protocols: Even before comprehensive legislation, tribunals could develop standard approaches to issues like recognition of foreign judgments, treatment of foreign creditors, and coordination with foreign proceedings, building on the Jet Airways precedent.
Conclusion
India stands at a critical juncture in the evolution of its insolvency law. The foundational framework established by the IBC has proven effective for domestic insolvency resolution, with significant improvements in resolution rates and creditor recovery compared to the pre-IBC regime. However, the Code’s cross-border dimensions remain underdeveloped, creating uncertainty and inefficiency in an increasingly globalized economy.
The Supreme Court and tribunals have shown pragmatic flexibility in addressing cross-border issues within existing constraints. The Macquarie Bank judgment opened doors for foreign creditor participation, the Stanbic Bank and Agrocorp decisions established that foreign judgments and arbitral awards can ground insolvency applications, and the Jet Airways protocol demonstrated that international cooperation is possible even without comprehensive legislation. These judicial innovations have prevented the absence of formal cross-border framework from becoming a complete barrier to international coordination.
However, judicial ingenuity cannot fully substitute for comprehensive legislation. Each cross-border case requires bespoke solutions, creating uncertainty about outcomes and increasing transaction costs. The legal basis for tribunal actions in cross-border matters remains somewhat ambiguous, potentially exposing decisions to challenge. Different benches may adopt inconsistent approaches absent clear statutory guidance.
Draft Part Z represents a carefully crafted solution that would bring India into alignment with global best practices while preserving appropriate sovereignty safeguards. Its enactment would provide certainty to investors and creditors, facilitate efficient resolution of cross-border insolvencies, and enhance India’s reputation as a jurisdiction committed to rule of law in commercial matters.
The practical implications extend beyond individual insolvency cases. As Indian companies expand their global footprint through direct foreign investment, acquisition of overseas assets, and international joint ventures, the likelihood of cross-border insolvency issues increases proportionately. Similarly, as foreign capital increasingly flows into Indian markets, foreign creditors’ interests in Indian insolvency proceedings grow. A robust cross-border framework serves the interests of all stakeholders-debtors seeking comprehensive resolution, creditors seeking efficient enforcement, and the Indian economy seeking enhanced integration into global markets.
The international context also matters. Over 50 jurisdictions have now adopted the UNCITRAL Model Law, creating a growing network of countries that can recognize and cooperate with each other’s insolvency proceedings. India’s continued absence from this network places Indian companies and creditors at a disadvantage when insolvencies touch multiple jurisdictions. Recognition of Indian proceedings abroad, as demonstrated by the Singapore decision in Compuage, remains exceptional rather than routine, creating asymmetry where foreign proceedings receive greater recognition in India (through judicial creativity) than Indian proceedings receive abroad.
Specific Recommendations
For the Government and Legislature
Priority Enactment: Draft Part Z should be enacted as a priority legislative measure. The consultation process has been extensive, stakeholder concerns have been addressed in the drafting, and further delay serves no constructive purpose. The government could phase implementation by initially applying the framework only to larger corporate debtors or specific sectors, expanding gradually as institutional capacity develops.
Bilateral Agreements: Parallel to enacting Draft Part Z, India should negotiate bilateral agreements on insolvency recognition with key trading partners, particularly countries where substantial Indian business presence exists (United Arab Emirates, United Kingdom, Singapore, United States). These agreements could provide additional certainty beyond the general Model Law framework.
Regulatory Guidance: The Insolvency and Bankruptcy Board of India (IBBI) should issue detailed regulations and guidance notes on cross-border cooperation, including standard procedures for recognition applications, requirements for foreign representatives, protocols for court communication, and treatment of foreign creditor claims. Such guidance would provide clarity for insolvency professionals and reduce inconsistency in tribunal decisions.
Sectoral Protocols: For regulated sectors such as banking, insurance, aviation, and telecommunications, specialized protocols should be developed addressing how sectoral regulators will coordinate with cross-border insolvency proceedings. These protocols should clarify information sharing, approval processes, and priority of regulatory versus insolvency objectives.
Capacity Building: Investment in training for NCLT and NCLAT members on international insolvency issues, including study tours to jurisdictions with mature cross-border frameworks, participation in international judicial conferences, and engagement with international insolvency organizations.
For the Judiciary
Consistent Interpretation: The NCLT and NCLAT should strive for consistency in interpreting provisions affecting cross-border matters. Regular coordination meetings between tribunal members, circulation of significant decisions, and development of internal best practices could promote uniformity.
Liberal Recognition: Following the Macquarie Bank precedent of purposive interpretation, tribunals should construe provisions in ways that facilitate rather than obstruct legitimate cross-border cooperation when doing so serves the IBC’s objectives.
Proactive Coordination: In cases with clear international dimensions, tribunals should proactively inquire about foreign proceedings or assets and encourage parties to develop coordination mechanisms early in the process rather than allowing conflicts to develop.
Detailed Reasoning: Given the evolving nature of cross-border jurisprudence, tribunal orders in cross-border matters should include detailed reasoning explaining the legal basis for decisions, interpretation of ambiguous provisions, and consideration of international principles. This will help build a coherent body of precedent.
For Insolvency Professionals
Early Identification: Resolution professionals should include cross-border asset identification and investigation as a standard component of preliminary due diligence, rather than discovering international complications belatedly.
International Networking: Insolvency professionals should build relationships with counterparts in other jurisdictions, potentially through international associations, to facilitate coordination when cross-border matters arise.
Specialized Expertise: The profession should develop specialists with expertise in cross-border insolvency, potentially through certification programs, specialized training, and recognition of cross-border practice as a distinct competency area.
Standard Protocols: Professional associations should develop template coordination protocols modelled on the Jet Airways precedent, which can be adapted to specific circumstances rather than negotiating from scratch in each case.
For Corporate Entities
Structural Planning: Indian companies expanding internationally should consider insolvency implications in structuring foreign operations. Decisions about whether to use branches, subsidiaries, or separate entities should factor in insolvency risks and coordination challenges.
Documentation: Companies should maintain clear documentation of corporate structure, intercompany relationships, asset ownership, and operational responsibilities. This facilitates efficient insolvency administration if financial distress occurs.
Contingency Planning: Larger corporate groups should develop contingency plans for potential insolvency scenarios, identifying where proceedings would likely be filed, which assets might be vulnerable in different jurisdictions, and how coordination would be managed.
Contractual Provisions: While exclusive jurisdiction clauses may not prevent NCLT proceedings, companies can include contractual provisions facilitating cooperation in insolvency (such as agreement to support recognition applications, information sharing commitments, and coordination obligations).
For Creditors (Domestic and Foreign)
Due Diligence: Before extending credit to entities with international operations or assets, creditors should assess cross-border insolvency risks, including where proceedings could be filed, which jurisdiction’s law would govern priority issues, and potential recovery rates in different scenarios.
Security Documentation: Secured creditors should ensure security documentation complies with requirements in all jurisdictions where collateral is located, with appropriate registrations and perfection steps completed according to local law.
Relationship Management: Creditors should monitor debtor financial health and maintain regular communication, particularly regarding cross-border operations. Early warning of distress allows proactive coordination rather than reactive crisis management.
Professional Representation: In cross-border insolvencies, creditors should retain counsel and professionals with international experience who understand both Indian and relevant foreign insolvency frameworks.
Collective Action: Foreign creditors with similar interests should consider coordinating their participation in Indian proceedings, potentially through ad hoc committees or shared representation, to increase influence and reduce individual costs.
Emerging Issues and Future Challenges
Digital Assets and Cryptocurrency
The increasing prevalence of digital assets held by corporate debtors presents novel challenges in cross-border insolvency. Cryptocurrency and other blockchain-based assets are not clearly located in any particular jurisdiction, undermining traditional concepts of territoriality. The IBC contains no specific provisions addressing digital assets, and international consensus on their treatment in insolvency is still developing.
When an Indian corporate debtor holds cryptocurrency, determining which jurisdiction’s court has authority to administer these assets, which law governs their priority and distribution, and how to secure them during insolvency proceedings raises unprecedented questions. International cooperation becomes even more critical, as digital assets can be transferred instantaneously across borders, creating risks of dissipation that traditional asset types do not present.
Climate Change and Environmental Liabilities
As environmental regulation intensifies globally, corporate debtors increasingly face environmental remediation obligations and climate-related liabilities. In cross-border insolvencies, conflicts can arise when different jurisdictions assign different priorities to environmental claims. Some countries grant environmental cleanup obligations super-priority, while others treat them as unsecured claims.
For Indian companies with operations abroad, or foreign companies with Indian operations, determining how environmental liabilities in one jurisdiction affect distributions in another presents complex legal and policy questions. The IBC’s treatment of these issues remains underdeveloped, and Draft Part Z does not specifically address environmental claim coordination.
Sovereign Debt and State Enterprises
While the IBC primarily addresses private corporate insolvency, questions increasingly arise about its application to state-owned enterprises and entities with sovereign backing. Many Indian public sector undertakings operate internationally, and their insolvency would raise questions about sovereign immunity, enforceability of judgments against state-backed entities, and priority of sovereign claims.
The intersection of sovereign debt restructuring principles and corporate insolvency frameworks remains a frontier area in international law. As state enterprises play significant roles in emerging economies including India, developing clear principles for their treatment in cross-border insolvency will become increasingly important.
Pandemic and Force Majeure
The COVID-19 pandemic demonstrated how global disruptions can trigger waves of insolvencies simultaneously across multiple jurisdictions. When systemic shocks affect multiple countries simultaneously, coordination challenges multiply. Courts and insolvency systems designed for individual cases may struggle with the volume and complexity of managing numerous cross-border insolvencies concurrently.
India’s temporary suspension of certain IBC provisions during the pandemic raised questions about how such moratoria affect cross-border coordination. If one country suspends insolvency proceedings while others proceed, how should courts coordinate? These questions will become more pressing as climate change and other global challenges potentially trigger future waves of multinational corporate failures.
International Best Practices and Global Trends
UNCITRAL Model Law Updates
The UNCITRAL working groups continue to develop the Model Law framework, with recent attention to enterprise group insolvency and recognition of interim proceedings. India should monitor these developments and ensure that its eventual framework remains compatible with evolving international standards.
Judicial Cooperation Networks
International networks such as the Judicial Insolvency Network (JIN) facilitate direct communication and cooperation between judges handling cross-border insolvency cases. As of 2025, over 70 courts from approximately 35 countries participate. Indian tribunals should consider joining such networks to facilitate coordination and learn from international experience.
Regional Frameworks
Beyond the global Model Law, regional frameworks have emerged in some areas. The European Union’s Insolvency Regulation provides more detailed coordination mechanisms than the Model Law for insolvencies within Europe. As regional economic integration deepens in Asia through arrangements like RCEP, consideration could be given to enhanced regional cooperation on insolvency matters.
Corporate Group Insolvency
Modern multinational enterprises typically operate through complex group structures with numerous subsidiaries and affiliates across multiple jurisdictions. Traditional entity-by-entity insolvency often proves inefficient for resolving group-wide financial distress. Developments in enterprise group insolvency, including group coordination proceedings and potential substantive consolidation, represent an important frontier.
Draft Part Z includes provisions addressing group insolvency, but these remain optional and their implementation details require development. Indian policymakers should study how jurisdictions like Singapore and the United States handle group insolvencies to inform implementation.
Pre-Insolvency and Restructuring
International practice increasingly emphasizes early intervention and pre-insolvency restructuring to preserve viable businesses before formal insolvency becomes necessary. The EU Directive on Preventive Restructuring Frameworks and India’s Pre-Packaged Insolvency Resolution Process reflect this trend. Cross-border aspects of pre-insolvency restructuring deserve attention as the informal nature of these processes can make international coordination even more challenging than in formal insolvency.
Conclusion: A Framework for India’s Cross-Border Insolvency Future
India has made remarkable progress in insolvency reform since the enactment of the IBC in 2016. The Code has fundamentally transformed the landscape for domestic insolvency resolution, reducing timeline, improving recovery rates, and shifting the balance of power between debtors and creditors. The Supreme Court and tribunals have demonstrated creativity and pragmatism in addressing emerging issues, including cross-border dimensions.
However, comprehensive cross-border insolvency reform remains unfinished business. The skeletal provisions in Sections 234 and 235 of the IBC, the absence of bilateral agreements, and the continued non-enactment of Draft Part Z create uncertainty and inefficiency in handling insolvencies with international dimensions. While judicial decisions have ameliorated some problems-particularly through the Macquarie Bank principle of equal treatment for foreign creditors-courts cannot fully substitute for legislative frameworks.
The landmarks discussed in this article-Macquarie Bank establishing foreign creditor rights, Stanbic Bank permitting use of foreign judgments, and Jet Airways demonstrating international cooperation through protocols-represent important milestones in India’s cross-border insolvency jurisprudence. They show that Indian courts understand the importance of international coordination and will interpret existing law flexibly to facilitate it. Yet each case also highlights the limitations of proceeding without comprehensive legislation.
Enacting Draft Part Z incorporating the UNCITRAL Model Law would represent a transformative step, aligning India with over 50 other jurisdictions that have adopted this globally recognized framework. It would provide legal certainty, reduce transaction costs, facilitate judicial cooperation, and signal India’s commitment to international commercial law standards. The concerns that have delayed enactment-around sovereignty, creditor protection, and regulatory coordination-are legitimate but can be addressed through appropriate safeguards, which Draft Part Z includes.
Looking forward, India’s cross-border insolvency framework must address not only traditional issues of jurisdiction and recognition but also emerging challenges from digital assets, environmental liabilities, pandemic disruptions, and evolving corporate structures. The framework must balance competing objectives: protecting domestic interests while facilitating international cooperation, preserving sovereignty while enabling coordination, ensuring creditor equality while recognizing practical differences in situations.
The stakes are high. As Indian companies expand globally and foreign investment in India grows, the number and complexity of cross-border insolvencies will increase. The quality of India’s insolvency framework will affect its attractiveness as an investment destination, the availability and cost of capital for Indian businesses, and the country’s integration into the global economy. A modern, effective cross-border insolvency regime is not merely a technical legal matter-it is an essential component of economic infrastructure for a 21st-century emerging economy.
The judicial precedents examined in this article have laid a foundation. The Draft Part Z legislation provides a blueprint. What remains is the political will to complete the reform, transforming India’s cross-border insolvency regime from an ad hoc system dependent on judicial creativity into a comprehensive, predictable, and internationally respected framework. For India’s continued economic development and its aspirations to be a major player in the global economy, completing this transformation is not optional-it is imperative.
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