As of March 2026, India is yet to implement a comprehensive framework for cross-border insolvency under the Insolvency and Bankruptcy Code (IBC), 2016. The progress toward adopting such a framework has been slow despite recognition of its importance for managing cases involving international stakeholders. Presently, the IBC does not have a comprehensive framework related to cross border insolvency. It merely contains two provisions which are Sections 234 and 235 in its Part V titled ‘Miscellaneous’ touching on this subject. Section 234 empowers the central government to enter into an agreement with other countries to resolve situations pertaining to cross border insolvency. It provides that the Central Government may enter into an agreement with the Government of any country outside India for enforcing the provisions of the IBC. Further, the Central Government may direct the application of provisions of the IBC in relation to assets or property of corporate debtor or debtor, including a personal guarantor of a corporate debtor, situated at any place in a country outside India with which reciprocal arrangements have been made. When evidence or action relating to foreign assets of an Indian corporate debtor is required in relation to an insolvency resolution process, the resolution professional, liquidator or bankruptcy trustee, can make an application to the Adjudicating Authority pursuant to Section 235 of the Code. If the Adjudicating Authority deems it fit, it may issue a letter of request to a foreign court or an authority of a country with whom a reciprocal arrangement has been established pursuant to Section 234 of the Code.
The current cross border insolvency framework is dependent on India entering bilateral agreements with other countries. Finalization of bilateral agreements is a long-drawn process as it involves long term negotiations and thus takes a lot of time. Moreover, every treaty would be distinct and thus it would be difficult for the adjudicating authorities to enforce the agreements or treaties entered with other countries and would also create uncertainties for foreign investors. Where multiple jurisdictions are involved, bilateral treaties with each country will have to be invoked, which may create legal and procedural complexities. In the post COVID-19 period, the cases of insolvency and bankruptcy are predictably on a rise. Many multinational corporations or companies with overseas assets are likely to be impacted. In that context, lack of a comprehensive cross-border insolvency law framework may be detrimental to the interest of the Indian creditors. In view of the incipient corporate stress it would be ideal if India adopts a cross-border framework at the earliest, so that the foreign creditors do not appropriate foreign-assets of Indian companies and India based creditors get an equitable deal in recoveries. Sections 234 and 235 of the IBC allow the Central Government to enter into reciprocal agreements with foreign countries for resolving cross-border insolvency cases and provide for Indian tribunals to request assistance from foreign courts in matters related to insolvency, however these sections have not been notified or enforced and consequently they remain unutilized and ineffective. Indian courts and tribunals, like the National Company Law Tribunal (NCLT), have been handling cross-border insolvency cases on an ad hoc basis, relying on judicial interpretations and international cooperation protocols. High-profile cases such as Jet Airways (2019) exposed the need for a structured framework where the NCLT collaborated with Dutch administrators through ad hoc arrangements. India has considered adopting the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency, which provides a globally recognized framework for cooperation and recognition of cross-border insolvency proceedings including recognition of foreign proceedings, cooperation between jurisdictions, access to foreign creditors, and the concept of Center of Main Interests determining the primary jurisdiction for insolvency proceedings based on the debtor’s main place of operations. The Insolvency Law Committee Report 2018 recommended adopting the UNCITRAL Model Law with suitable modifications to align it with India’s domestic legal framework and suggested provisions for protecting public interest such as exclusions for financial service providers. The Cross-Border Insolvency Rules or Regulations Committee 2020 proposed procedural guidelines for implementing the Model Law and recommended steps to safeguard sovereignty and align cross-border insolvency processes with Indian interests. Despite extensive deliberations, amendments to the IBC to include the UNCITRAL Model Law have not been passed and the government has cited the complexity of cross-border issues and the need for further consultation as reasons for the delay. India has also not established bilateral or multilateral agreements with other countries to facilitate cross-border insolvency recognition and enforcement and in the absence of a clear framework Indian tribunals face significant challenges in managing cross-border insolvency cases leading to delays and inconsistent outcomes while stakeholders including creditors and insolvency professionals have raised concerns about the lack of clarity and predictability in cross-border insolvency matters. The Ministry of Corporate Affairs held consultations with stakeholders to finalize the proposed cross-border insolvency framework and reiterated its intent to incorporate the UNCITRAL Model Law into the IBC while courts have repeatedly emphasized the need for legislative action citing cases such as Videocon and Jet Airways as examples of the growing complexities in international insolvency disputes.
Adopting the UNCITRAL Model Law would require the government to prioritize the introduction of amendments to the IBC ensuring compatibility with Indian laws while also strengthening institutional capacity by building expertise among insolvency professionals and judicial authorities to handle cross-border insolvency effectively. International cooperation through reciprocal agreements with key trading partners would facilitate the recognition and enforcement of insolvency proceedings and public awareness among creditors, debtors and professionals would help stakeholders understand the benefits and implications of a robust cross-border insolvency regime. While India recognizes the importance of a robust cross-border insolvency framework, its enforcement remains stalled due to legislative and administrative delays. Adopting the UNCITRAL Model Law with appropriate modifications could provide much-needed clarity and predictability in resolving cross-border insolvency disputes and enhance India’s global investment climate. However, the absence of a formal framework continues to pose challenges for international cooperation and efficient resolution of cross-border insolvency cases.
CONTRIBUTED BY: ARYAN POONIA