As businesses expand across jurisdictions, financial distress rarely remains confined to one country. A company may be incorporated in India, hold assets in Singapore, borrow from lenders in London, and operate subsidiaries across the Middle East. When such a business becomes insolvent, the legal questions extend far beyond domestic insolvency proceedings. Which country’s court should take the lead? How should creditors in different jurisdictions be treated? Can an insolvency professional appointed in one country exercise authority elsewhere?
These questions have become increasingly relevant for India as cross-border investments continue to grow and multinational businesses establish deeper commercial ties with the country. While the Insolvency and Bankruptcy Code, 2016 (IBC) transformed domestic insolvency resolution, its framework for handling cross-border insolvency remains limited. Recent policy developments, including discussions around specialised National Company Law Tribunal (NCLT) benches and renewed focus on adopting the UNCITRAL Model Law on Cross-Border Insolvency, indicate that India may finally be moving towards a more comprehensive system.
For lenders, foreign investors, insolvency professionals and distressed asset funds, these developments deserve close attention.
Why Cross-Border Insolvency Matters
Cross-border insolvency arises when an insolvent debtor has assets, creditors, operations or legal proceedings spread across multiple jurisdictions. Unlike purely domestic insolvency, such situations require cooperation between courts, insolvency professionals and regulators in different countries.
Without an established legal framework, parallel proceedings may commence in multiple jurisdictions, resulting in conflicting court orders, duplication of efforts, delays in asset realisation and uncertainty for creditors.
Modern economies increasingly rely on coordinated insolvency systems because fragmented proceedings often diminish asset value and reduce recovery for stakeholders.
For India, which has become an important destination for foreign investment and international financing, an efficient cross-border insolvency framework is no longer merely desirable. It is becoming an economic necessity.
The Current Position Under the Insolvency and Bankruptcy Code
The IBC presently contains only two provisions dealing with cross-border insolvency.
Section 234 empowers the Central Government to enter into reciprocal agreements with foreign countries for enforcing certain provisions of the Code.
Section 235 enables the resolution professional or liquidator to seek assistance from courts in countries with which such reciprocal arrangements exist.
In practice, however, these provisions have seen almost no meaningful implementation. India has not established an extensive network of reciprocal arrangements, leaving insolvency professionals with limited legal mechanisms to secure recognition of Indian proceedings abroad or obtain assistance from foreign courts.
Consequently, courts have often relied upon judicial cooperation, principles of comity and case-specific arrangements instead of a structured legislative framework.
The Jet Airways Case: A Turning Point
Any discussion on cross-border insolvency in India inevitably begins with the Jet Airways insolvency proceedings.
Jet Airways became the first major Indian insolvency matter involving concurrent proceedings in two jurisdictions. While insolvency proceedings were initiated before the NCLT in India, separate bankruptcy proceedings had already commenced in the Netherlands because the airline maintained assets there.
Initially, conflicting proceedings created uncertainty regarding control over assets and administration of the insolvency process.
Recognising the practical difficulties, the Indian Resolution Professional and the Dutch bankruptcy trustee eventually entered into a Cross-Border Insolvency Protocol. The protocol established a cooperative framework allowing information sharing, coordinated decision-making and recognition of each other’s proceedings.
Although the arrangement represented a significant achievement, it was largely based on judicial innovation rather than statutory authority.
The Jet Airways matter demonstrated both the willingness of Indian courts to cooperate internationally and the pressing need for clear legislation governing such cooperation.
Understanding the UNCITRAL Model Law
The UNCITRAL Model Law on Cross-Border Insolvency was adopted by the United Nations Commission on International Trade Law in 1997 to promote cooperation between courts across jurisdictions.
More than 60 jurisdictions, including the United States, United Kingdom, Australia, Singapore, Japan and South Africa, have adopted versions of the Model Law.
Rather than creating a single global insolvency law, it establishes procedural mechanisms enabling courts to cooperate while respecting domestic legal systems.
Its four foundational principles are:
- Access for foreign insolvency representatives to domestic courts.
- Recognition of foreign insolvency proceedings.
- Cooperation between courts and insolvency professionals.
- Coordination of concurrent insolvency proceedings involving the same debtor.
The Model Law distinguishes between a “foreign main proceeding,” generally initiated where the debtor has its centre of main interests (COMI), and “foreign non-main proceedings” commenced in jurisdictions where the debtor maintains an establishment.
This distinction helps determine the extent of relief available and reduces conflicts between multiple insolvency proceedings.
India’s Journey Towards Adoption
The Insolvency Law Committee first recommended adopting the UNCITRAL Model Law in 2018 after recognising the limitations of Sections 234 and 235.
Subsequently, draft provisions were prepared proposing a new chapter within the IBC largely based on the Model Law, while incorporating certain safeguards suited to India’s legal and economic environment.
These proposals contemplated recognition of foreign proceedings, appointment of foreign representatives, judicial cooperation and coordination between domestic and overseas insolvency proceedings.
Although legislative amendments have not yet been enacted, policy discussions have regained momentum.
Recent reports indicate that the Government is considering specialised NCLT benches dedicated to complex cross-border insolvency matters. Such specialised forums could develop institutional expertise, improve consistency in judicial decisions and reduce delays in multinational insolvency cases.
If implemented alongside Model Law-based amendments, these reforms could substantially strengthen India’s cross-border insolvency framework.
Benefits for Foreign Investors and Creditors
A predictable cross-border insolvency regime offers significant commercial advantages.
Foreign lenders often evaluate enforcement risk before extending credit. If insolvency proceedings across jurisdictions remain uncertain or fragmented, financing costs inevitably increase.
Recognition of foreign insolvency proceedings can enable quicker preservation of assets, coordinated restructuring efforts and more efficient recoveries.
Similarly, distressed asset funds frequently invest in businesses with operations spanning multiple countries. Investors require certainty regarding asset ownership, competing proceedings and enforcement rights before committing capital.
An internationally recognised insolvency framework could therefore enhance investor confidence and improve India’s attractiveness as an investment destination.
Challenges That Still Need Resolution
Despite broad support for adopting the UNCITRAL Model Law, several important issues require careful consideration.
One concern relates to determining a debtor’s Centre of Main Interests (COMI). Multinational corporate groups often have complex structures, making it difficult to identify the jurisdiction where principal management and business operations are conducted.
Another challenge involves balancing judicial cooperation with India’s public policy considerations. Indian courts would likely retain discretion to refuse recognition where foreign proceedings conflict with domestic law or public interest.
Cross-border insolvency involving financial service providers may also require separate treatment because banks, insurance companies and certain regulated entities remain subject to specialised regulatory frameworks.
Data sharing, confidentiality obligations, differing creditor priorities and inconsistent restructuring mechanisms across jurisdictions further complicate coordinated insolvency proceedings.
Accordingly, legislative reform must strike an appropriate balance between international cooperation and domestic regulatory autonomy.
The Road Ahead
India’s insolvency regime has evolved considerably since the enactment of the IBC. However, the increasing internationalisation of commerce means that domestic insolvency reform alone is no longer sufficient.
The lessons from the Jet Airways proceedings, combined with growing foreign investment and cross-border financing activity, have reinforced the need for a structured legal framework capable of handling multinational insolvencies efficiently.
Adopting the UNCITRAL Model Law, supported by specialised NCLT benches and clear procedural guidance, would represent an important step towards aligning India’s insolvency regime with internationally accepted standards.
While questions regarding implementation, judicial capacity and regulatory safeguards remain, the direction of reform appears increasingly clear.
For businesses operating internationally, foreign creditors, insolvency professionals and investors, the coming years could mark a significant shift in how India manages cross-border financial distress. If the proposed reforms materialise, India will be better positioned to deliver greater certainty, faster coordination and more effective resolution of multinational insolvency proceedings, strengthening confidence in its broader commercial and investment ecosystem.
