Navigating the Frontier: India's Evolving Cross-Border Insolvency Regime
India's Insolvency and Bankruptcy Code, 2016 (“IBC”) was a landmark reform for the domestic insolvency landscape
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The globalisation of commerce has rendered national borders porous to financial distress, creating complex cross-border insolvency scenarios where a debtor's assets, creditors, and operations are spread across multiple jurisdictions. India's Insolvency and Bankruptcy Code, 2016 (“IBC”) was a landmark reform for the domestic insolvency landscape, but its initial framework for cross-border issues was conspicuously underdeveloped.
Statutory Vacuum & Judicial Precedents: Navigating without a Compass
The existing regime, confined to Sections 234 and 235 of the IBC, is largely aspirational. Section 234 empowers the Central Government to enter into bilateral agreements with foreign countries, while Section 235 allows for issuing Letters of Request to courts in those countries.
However, in the years since the IBC's enactment, not a single bilateral agreement has been concluded, rendering these provisions effectively inoperative and creating a statutory vacuum. This has resulted in significant gaps, including the absence of a mechanism to recognise foreign proceedings, no provision for an automatic stay on creditor actions in a cross-border context, and a lack of a clear mandate for judicial cooperation.
Judicial Innovation: Bridging the Gap
Indian courts have had to navigate this legislative void using principles of judicial comity and innovation, as seen in several key cases. The IBC signals a legislative evolution towards creating an equitable framework that aligns with the principles of economic globalisation by providing a more predictable and efficient resolution mechanism, which has grown to be particularly inclusive of foreign creditors
Prioritizing Substance over Form
In Macquarie Bank v. Shilpi Cable Technologies Ltd., the Supreme Court established that procedural requirements for initiating insolvency proceedings by foreign creditors were directory, not mandatory, thereby prioritising substance over form and removing significant obstacles for foreign petitioners.
Similarly, in Stanbic Bank Ghana v. Rajkumar Impex Private Limited, the National Company Law Tribunal (“NCLT”) admitted the Corporate Insolvency Resolution Process (“CIRP”) of the corporate debtor on a petition filed by a foreign creditor based on a guarantee for an overseas subsidiary, showcasing the IBC's capacity to address complex cross-border financing issues and its extraterritorial application. These cases exemplify the judiciary's progressive interpretation of the IBC, ensuring foreign creditors have effective access to the Indian insolvency framework.
Cross-Border Insolvency Protocol and Its Limits
The insolvency of Jet Airways (India) Limited was India's first major cross-border case, involving parallel proceedings in India and the Netherlands. Initially, the NCLT Mumbai asserted exclusive jurisdiction and declared the Dutch proceedings a nullity. However, the National Company Law Appellate Tribunal (“NCLAT”) adopted a more progressive stance, directing the Indian Resolution Professional and the Dutch administrator to negotiate a cooperation framework.
The resulting Cross-Border Insolvency Protocol (“CBIP”) was a first for an Indian court, providing for mutual recognition, information sharing, and coordinated actions. While the case ultimately ended in liquidation, it highlighted the urgent need for a structured legislative framework, as the entire cooperative effort was based on ad-hoc judicial discretion rather than statutory certainty.
The insolvency of the Videocon Group further exposed the limitations of the IBC. The NCLT was unable to enforce its orders over the company's overseas assets, particularly valuable oil and gas interests in Indonesia and Brazil. This case starkly illustrated the lack of extra-territorial reach of Indian insolvency proceedings under the current law. The resolution applicant was forced to rely on contractual mechanisms and private negotiations with foreign counterparties rather than being able to use the force of Indian court orders to secure these assets, leading to potential value erosion for creditors.
Foreign Recognition of Indian CIRP
A pivotal development occurred in December 2024 when the High Court of Singapore, in the case of Compuage Infocom Limited, formally recognised an ongoing Indian CIRP as a "foreign proceeding" under its UNCITRAL Model Law-based framework. The Singapore Court recognised the Indian Resolution Professional (“RP”) as a "foreign representative" and granted him access to the company's Singapore-based bank accounts. This was the first instance of a foreign court formally recognising an Indian CIRP, demonstrating that India could benefit from international cooperation even before enacting a reciprocal domestic law.
The IBC Amendment Bill, 2025
To address the existing lacunae, the IBC Amendment Bill, 2025, proposes to introduce a comprehensive cross-border insolvency framework based on the UNCITRAL Model Law. The key features of the proposed amendments include:
Recognition of Foreign Proceedings: The NCLT will be empowered to formally recognise foreign insolvency proceedings as either "main" (where the debtor has its Centre of Main Interests) or "non-main".
Automatic Stay: Recognition of a foreign main proceeding will trigger an automatic moratorium on actions against the debtor's assets in India, similar to the domestic stay under Section 14 of the IBC.
Access for Foreign Representatives: Foreign insolvency practitioners will have direct access (locus standi) to appear before the NCLT to seek recognition and relief.
Codification of COMI: The concept of Centre of Main Interests (“COMI”) will be codified, with a rebuttable presumption that it is the debtor's place of registered office.
Mandatory Cooperation: The framework will impose a duty on the NCLT and Indian insolvency professionals to cooperate to the maximum extent possible with foreign courts and representatives.
Public Policy Safeguard: The NCLT can refuse to take an action if it is "manifestly contrary to the public policy of India," a standard safeguard in international recognition regimes.
The proposed Indian framework aligns with the global standard set by the UNCITRAL Model Law on Cross-Border Insolvency (1997), which has been adopted by over 60 jurisdictions. The Model Law is built on four pillars: Access, Recognition, Relief, and Cooperation.
Roadblocks and the Way Forward
Despite the clear benefits, the path to a streamlined cross-border insolvency regime is riddled with challenges. The recommendations by the Insolvency Law Committee were made as early as 2018, and the delay in enacting the framework creates continued uncertainty. Some of India's major trading partners and neighbouring countries have not adopted the Model Law, which may limit the network effects of the reform, causing practical difficulties in streamlining the cross-border insolvencies.
The NCLT and Insolvency Professionals will require specialised training and resources to handle the complexities of international cases. The creation of cross-border insolvency dedicated benches is the need of the hour. Effective implementation will require seamless coordination with other sectoral regulators like the Reserve Bank of India and the Securities and Exchange Board of India, particularly concerning foreign exchange laws. The most urgent priority is the swift enactment of the proposed amendments. This legislative step, supported by institutional capacity building and international outreach, will transform India's insolvency regime from a domestic-focused system into one that is internationally credible and fully integrated into the global commercial order.