Cross-Border Insolvency Under the IBC and the Current Framework

Vikrant D. Shetty

Sep 21

11 min read

Updated: Oct 21

Cross-Border Insolvency Under IBC: Current Framework and the Model Law Gap

India's Insolvency and Bankruptcy Code, 2016 has no dedicated cross-border insolvency framework; Sections 234 and 235 only let the Central Government sign bilateral agreements and let the National Company Law Tribunal issue letters of request to foreign courts. India has not adopted the UNCITRAL Model Law on Cross-Border Insolvency, though the Insolvency Law Committee has recommended inserting a Part Z modelled on it. The National Company Law Appellate Tribunal filled this gap in the Jet Airways insolvency by directing cooperation between the Indian resolution professional and the Dutch trustee. This article sets out the current framework, the proposed Part Z, and the position for foreign creditors and assets.

What Do Sections 234 and 235 of the IBC Actually Provide?

Section 234 of the IBC empowers the Central Government to enter into bilateral agreements with foreign countries for the enforcement of provisions of the Code. The provision is enabling in nature: it creates a mechanism but does not itself establish a relationship with any foreign jurisdiction. As of 2025, no such agreement has been notified. The section has remained dormant since the IBC's commencement.

Section 235 provides that where an Adjudicating Authority (the NCLT) requires evidence or action from a foreign court in relation to assets situated outside India, it may issue a letter of request to a court or authority in that country. This is a one-directional provision, it allows the NCLT to seek assistance outward but contains no mechanism for a foreign court or insolvency representative to seek recognition or relief from the NCLT. A foreign insolvency practitioner seeking to protect or administer assets located in India has no express statutory route into the Indian insolvency framework.

The UNCITRAL Model Law and India's Proposed Part Z

The UNCITRAL Model Law on Cross-Border Insolvency (1997) provides a widely-adopted legislative template for cross-border insolvency cooperation. As of 2025, over 60 jurisdictions, including the United States, United Kingdom, Singapore, Japan, South Korea, and Australia, have adopted the Model Law in domestic legislation. Its core features are: access for foreign representatives to courts of the enacting state; recognition of foreign proceedings as either 'main' (where the debtor's Centre of Main Interests, or COMI, is located) or 'non-main'; automatic and discretionary relief upon recognition; and a framework for court-to-court cooperation and concurrent proceedings.

In October 2018, the Insolvency Law Committee (ILC) recommended that India adopt the UNCITRAL Model Law with modifications suited to the domestic legal context. The ILC proposed inserting a new 'Part Z' into the IBC, consisting of 29 sections addressing access, recognition, relief, cooperation between Indian and foreign courts, and concurrent proceedings. On 23 January 2020, the Ministry of Corporate Affairs constituted the Cross-Border Insolvency Rules/Regulations Committee (CBIRC) to develop rules that would operationalise Part Z. Neither Part Z nor the CBIRC's rules have been enacted as of the date of this article.

Feature	UNCITRAL Model Law (adopted)	IBC Sections 234-235 (current)
Foreign representative access to courts	Yes, express right of access	No express mechanism
Recognition of foreign proceedings	Yes, main and non-main proceedings	No recognition framework
Automatic stay/moratorium upon recognition	Yes, for main proceedings	No
Court-to-court cooperation	Yes, express obligation	No
COMI determination	Yes, rebuttable presumption	No
Bilateral agreements required	No, multilateral adoption	Yes, but none concluded

The Jet Airways Case: Courts Fill the Statutory Gap

The practical inadequacy of Sections 234 and 235 became starkly visible in the Jet Airways insolvency proceedings. When Jet Airways filed for insolvency in the Netherlands on 21 May 2019, a Dutch court appointed an administrator. At the same time, CIRP proceedings were underway before the NCLT Mumbai Bench. The NCLT initially declared the Dutch proceedings a nullity in relation to Jet Airways' Indian assets, emphasising the absence of cross-border insolvency legislation.

On appeal, the National Company Law Appellate Tribunal (NCLAT) took a more pragmatic course. In Jet Airways (India) Limited v. State Bank of India & Anr, decided on 26 September 2019, the NCLAT directed the Indian Resolution Professional and the Dutch Trustee to enter into a Cross-Border Insolvency Protocol, acknowledging India as the Centre of Main Interests (COMI) of Jet Airways, designating the Indian CIRP as the main proceeding, and the Dutch proceeding as a non-main proceeding. The Protocol was a court-endorsed contractual arrangement, not a statutory mechanism, born of necessity in the absence of legislation. It demonstrated both what cooperation can achieve in a cross-border context and how fragile ad hoc protocols are as a substitute for structured law.

The COMI Concept and Its Relevance to Indian Practice

The Centre of Main Interests is the pivot around which the UNCITRAL Model Law's recognition framework turns. A foreign proceeding in the country where the debtor's COMI is located qualifies as a 'main proceeding,' triggering automatic relief upon recognition. A proceeding in a country where the debtor has an 'establishment' (a fixed place of business from which non-transitory economic activity is conducted) qualifies as a 'non-main proceeding,' receiving more limited relief.

India's proposed Part Z adopts this distinction. For Indian companies with offshore operations, subsidiaries registered abroad, offshore holding structures, or assets held through SPVs in foreign jurisdictions, COMI analysis will determine whether an Indian CIRP is recognised as a main proceeding in an adopting jurisdiction, and conversely whether a foreign proceeding is entitled to recognition and relief in India. Practitioners structuring resolution plans that involve foreign assets, or advising foreign creditors of Indian corporate debtors, should be familiar with COMI analysis even though Part Z has not yet been enacted.

Practical Challenges Without a Model Law Framework

The absence of a formal cross-border insolvency framework creates several distinct operational problems for practitioners.

How Can an Indian Resolution Professional Recover Assets Held Abroad?

An Indian Resolution Professional seeking to take control of assets held by the corporate debtor in a foreign jurisdiction has no domestic statutory mechanism to seek recognition abroad, unless the foreign jurisdiction has its own recognition rules under which the Indian CIRP could be brought. In practice, RPs have resorted to bilateral cooperation, foreign counsel appointments, and negotiated protocols, all of which are time-consuming and uncertain.

Foreign Creditors in Indian Proceedings

Foreign financial creditors may file claims in a CIRP under the general framework of the IBC. The IBC does not discriminate between domestic and foreign financial creditors at the claims admission stage. However, foreign operational creditors face the same limitation period requirements and submission procedures as domestic creditors, and the absence of any formal notification mechanism under the IBC for creditors located abroad can result in claims being missed, particularly where the corporate debtor's records do not identify foreign creditors.

What Happens When Insolvency Proceedings Run in Parallel in Two Countries?

Where a corporate debtor is the subject of simultaneous insolvency proceedings in India and another jurisdiction, the absence of a coordination mechanism means that the Section 14 moratorium operates only with respect to proceedings in India. An Indian CIRP moratorium does not automatically stop enforcement proceedings against the debtor's assets in a foreign jurisdiction. Conversely, a foreign moratorium does not operate against the debtor's Indian assets. Without the UNCITRAL Model Law's framework for concurrent proceedings, resolution plans that depend on the ring-fencing of a global asset pool are structurally compromised.

The Legislative Gap in 2025

Part Z and the CBIRC rules remain unenacted as of 2025. The delay reflects a combination of drafting complexity, inter-ministerial coordination challenges, and a legislative queue in which insolvency reform has competed with other priorities. Several consultations and drafts have circulated but no bill incorporating Part Z has been introduced in Parliament.

Until Part Z is enacted, the operative framework for cross-border insolvency in India remains Sections 234 and 235, supplemented by the inherent jurisdiction of the NCLT to take note of foreign proceedings and by the comity-based approach that the NCLAT demonstrated in the Jet Airways case. Practitioners must rely on negotiated protocols, foreign law advice, and, where possible, contractual choice-of-law and choice-of-forum provisions that anticipate cross-border insolvency scenarios before they arise.

The Framework and the Object of the Code

Cross-border insolvency in India operates within the objects of the Code that the Supreme Court described in Swiss Ribbons (P) Ltd. v. Union of India [(2019) 4 SCC 17], namely the maximisation of value and the orderly resolution of distress, applied to debtors whose assets or creditors span more than one country. The current statutory tools are limited: Sections 234 and 235 of the Code allow the Central Government to enter into bilateral agreements with other countries and permit an adjudicating authority to issue letters of request to foreign courts, but they fall short of a comprehensive regime. A cross-border framework based on the UNCITRAL Model Law on Cross-Border Insolvency has been under active consideration and recommended by expert committees, and until it is enacted, cross-border cases are handled through these limited provisions and case-by-case coordination.

Frequently Asked Questions

What is the current law on cross-border insolvency in India?

Sections 234 and 235 of the IBC are the only express statutory provisions addressing cross-border insolvency. Section 234 enables bilateral agreements (none of which have been concluded). Section 235 allows the NCLT to issue outward letters of request. There is no framework for recognition of foreign proceedings or for a foreign representative to access the NCLT.

Has India adopted the UNCITRAL Model Law on Cross-Border Insolvency?

No. The Insolvency Law Committee recommended adoption in 2018 and proposed a draft 'Part Z' for the IBC. The Cross-Border Insolvency Rules/Regulations Committee was constituted in January 2020 to develop implementing rules. As of 2025, neither Part Z nor the implementing rules have been enacted.

What is COMI and why does it matter?

COMI stands for Centre of Main Interests, the place where the debtor conducts the administration of its interests on a regular basis and which is ascertainable by third parties. Under the UNCITRAL Model Law, the debtor's COMI determines whether a foreign proceeding qualifies as a 'main proceeding' (entitled to automatic relief upon recognition) or a 'non-main proceeding' (receiving more limited relief). Once India enacts Part Z, COMI analysis will become central to recognition applications before the NCLT.

What happened in the Jet Airways cross-border insolvency?

Jet Airways faced simultaneous insolvency proceedings in India (CIRP before the NCLT) and in the Netherlands (insolvency administered by a Dutch Trustee). The NCLAT in its order of 26 September 2019 directed the Indian Resolution Professional and the Dutch Trustee to enter into a Cross-Border Insolvency Protocol, treating India as Jet Airways' COMI and the Indian CIRP as the main proceeding. The Protocol was a negotiated arrangement, not a statutory recognition, a workaround developed in the absence of legislation.

Does the Section 14 moratorium apply to proceedings outside India?

No. The Section 14 moratorium under the IBC operates with respect to the corporate debtor's assets and proceedings within India. It does not extend to foreign jurisdictions. Correspondingly, a foreign moratorium does not restrict enforcement against the corporate debtor's Indian assets unless a separate Indian court order is obtained.

How can foreign creditors participate in Indian CIRP proceedings?

Foreign creditors, both financial and operational, may file proof of claim with the Resolution Professional under the same mechanism applicable to domestic creditors. The IBC does not bar foreign creditors from participation. However, foreign operational creditors should be attentive to the limitation period for submission of claims, typically aligned with the public announcement made by the RP upon CIRP commencement, as there is no specific foreign creditor notification mechanism.

Has India signed any bilateral agreement under Section 234 of the Insolvency and Bankruptcy Code, 2016?

No government notification recording a bilateral agreement under Section 234 of the Insolvency and Bankruptcy Code, 2016 had been issued as of 2025, despite the provision being in force since the Code's enactment in 2016. Section 234 only creates the power to enter such agreements; it does not itself establish cooperation with any specific country. In the absence of a notified agreement, the National Company Law Tribunal cannot rely on Section 234 for direct cooperation with a foreign court, which is one reason the Jet Airways bench turned to inherent jurisdiction and comity instead.

What is the difference between the Section 234 and Section 235 route and full recognition under the UNCITRAL Model Law?

Sections 234 and 235 of the Insolvency and Bankruptcy Code, 2016 offer only two narrow tools: bilateral treaty-making power for the Central Government and a one-way letter of request procedure for the National Company Law Tribunal to seek foreign court assistance. The UNCITRAL Model Law, by contrast, provides automatic recognition of foreign proceedings, direct access for foreign representatives to the domestic court, cooperation duties between courts of different countries, and coordination of concurrent proceedings. India's current framework has no automatic recognition mechanism and depends entirely on judicial discretion and comity in each case.

Can a foreign court's insolvency order be enforced directly against assets located in India?

A foreign insolvency order has no automatic force in India under the current framework, since the Insolvency and Bankruptcy Code, 2016 does not provide for recognition of a foreign proceeding. A foreign representative seeking control of Indian assets must generally approach the National Company Law Tribunal directly, or rely on the comity-based cooperation that tribunals extended in cases such as Jet Airways, where the Dutch trustee and the Indian resolution professional worked under a protocol approved by the NCLT rather than through statutory recognition of the Dutch order itself.

Does the moratorium under Section 14 of the IBC protect an Indian company's assets located abroad?

The moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 operates within India and has no automatic extraterritorial effect on assets or creditors situated abroad, since Indian courts cannot bind foreign courts or foreign creditors enforcing their rights outside India. A creditor abroad can, in principle, continue proceedings against the corporate debtor's foreign assets even while an Indian moratorium is in force, unless the foreign jurisdiction independently recognises and gives effect to the Indian proceeding, which is precisely the gap a Model Law based framework would close.

What is Part Z and when is it expected to be enacted?

Part Z is the name given to a proposed new part of the Insolvency and Bankruptcy Code, 2016 containing roughly 29 sections that would adopt the UNCITRAL Model Law on Cross-Border Insolvency with modifications for Indian conditions, as recommended by the Insolvency Law Committee in October 2018. As of 2025, Part Z remains a draft proposal; it has not been introduced as a bill or enacted, and no official timeline for enactment has been announced, so practitioners continue to rely on Sections 234 and 235 and on judicial comity in individual cases.

Can an Indian resolution professional be appointed to act in a foreign insolvency proceeding involving the same corporate debtor?

There is no statutory mechanism under the Insolvency and Bankruptcy Code, 2016 for an Indian resolution professional to be formally recognised or appointed in a foreign insolvency proceeding, since Indian law governs only the domestic process. In practice, cooperation happens through protocols agreed between the Indian resolution professional and the foreign administrator or trustee, approved by the National Company Law Tribunal, as occurred in the Jet Airways insolvency, rather than through any cross-appointment recognised by foreign law itself.

Do Sections 234 and 235 apply to individual insolvency as well as corporate insolvency?

Sections 234 and 235 appear in Part VI of the Insolvency and Bankruptcy Code, 2016, which deals with miscellaneous provisions applicable across the Code, so their bilateral agreement and letter of request mechanisms are not confined to corporate insolvency and could in principle extend to individual insolvency proceedings once those provisions are fully operational. In practice, cross-border cooperation questions have arisen almost entirely in corporate insolvency resolution process cases, since the individual insolvency framework under the Code has seen limited implementation so far.

How does the absence of a cross-border insolvency framework affect Indian companies with subsidiaries incorporated abroad?

An Indian parent company's own insolvency under the Insolvency and Bankruptcy Code, 2016 does not automatically extend to a foreign subsidiary, since each subsidiary is typically a separate legal entity governed by the insolvency law of its place of incorporation. The practical difficulty arises where the group's assets, cash flows or security are interlinked across borders, since the Indian resolution professional has no statutory tool to compel cooperation from the foreign subsidiary's local insolvency officer, and coordination again depends on voluntary protocols rather than a binding cross-border framework.