Author: Aditi Sinha


Insolvency is a state or position where once liabilities exceed once realizable assets and thereby by making the person unable to pay his debts. With the world being a globalized one it is common for companies to have assets in more than one country thus leading to the issue of cross-border insolvency. According to Professor Ian Fletcher, a renowned scholar on aspects of commercial insolvency, “‘cross-border insolvency’ should be considered as a situation‘…in which an insolvency occurs in circumstances which in some way transcend the confines of a single legal system, so that a single set of domestic insolvency law provisions cannot be immediately and exclusively applied without regard to the issues raised by the foreign elements of the case.[1]The economies are expanding rapidly and cross-border trade is no longer limited to big companies only, therefore, with growing international business the problem of companies becoming insolvent has a cross-border implication.


Since the issue of cross-border insolvency does not fall under any one particular jurisdiction, a more effective way of dealing with such cases was devised. This law is known as ‘UNCITRAL Model Law on Cross Border Insolvency,1997’. This model law does not require the Government of a country that is adopting it to unify it with the domestic law of their country. This law recommends four components to help solve the cross-border insolvency issue, that is, access, recognition, relief, and cooperation.[2]According to World Bank, insolvency procedures have global implications and thus the laws pertaining to them must have the scope of inclusion of provisions of the foreign jurisdiction. It must recognize foreign judgments and promote cooperation among its courts. The implementation of the model law is also supported by IMF as it believes that implementing them would prove to be an effective way of promoting collaboration and coordination across different nations’ courts and bureaucrats. India was a member of the Commission and participated in the consultations and preparation of the Model Law, thus questions of legality are minimal. However, there is a real worry that worldwide consensus on the framework has yet to be reached. For starters, large economies that are crucial in terms of economic importance to India have not implemented the Model Law. These nations include large European economies such as Germany and France, as well as important emerging economies such as Brazil, Russia, and China. Second, even nations that have accepted the Model Law have done so with tailored amendments to promote their economic interests, which may be difficult to deal with at the bilateral level.


In 2016, several laws dealing with insolvency were consolidated and codified under the Insolvency and Bankruptcy Code,2016. Ever since its consolidation, this code has been evolving and undergoing new amendments. While this code is quite vast, it contains only two provisions related to cross-border insolvency, that is, Section 234 and 235.

Sec. 234[3] addresses the agreement with foreign governments. To enforce various provisions of the code, the government of India may enter into an agreement with the government of other countries. The government may determine that the implementation of the IBC to the corporate debtor’s or debtor’s assets located in a nation outside India with whom reciprocal agreements have been formed be subject to the criteria specified.

Section 235[4] deals with letters of request to countries situated outside India in certain cases.[5] According to this section, “…in the course of the insolvency resolution process, or liquidation or bankruptcy proceedings, as the case may be, under this Code, the resolution professional, liquidator or bankruptcy trustee, as the case may be, is of the opinion that assets of the corporate debtor or debtor, including a personal guarantor of a corporate debtor, are situated in a country outside India with which reciprocal arrangements have been made under section 234, he may make an application to the Adjudicating Authority that evidence or action relating to such assets is required in connection with such process or proceeding.”

While these two provisions deal with cross-border insolvency there are certain challenges on their part. Firstly while section 234 talks about the government entering into bilateral agreements with the countries it fails to consider that sometimes it may be practically impossible for the government to enter into such agreements with one or more different countries. Moreover, while entering into such agreements it is highly possible that the government of different countries may incorporate their terms and provisions into the agreement thus leading to the fragmentation or lack of uniformity in India’s insolvency regime. Lastly, it is possible that one company has its assets in more than two countries in that situation it implies that the assets of the companies lie under more than two jurisdictions thus making the insolvency resolution process difficult as the country may have different provisions in different bilateral agreements.

While section 235 talks about cooperation between the Indian Court and the foreign authorities, just like section 234 it has its own sets of limitations. Firstly, there is no discussion about the manner in which this cooperation was to be achieved between the two concerned authorities. Secondly, this cooperation depends on the ‘letter of request’ which takes time to reach the concerned authorities since it has to go through the long official channels, and thus, it may be quite bothersome for the affected creditors.[6]


In 2019, an insolvency resolution process was initiated for Jet Airways (India) Limited. This was filed by the State Bank of India under section 7 of IBC. However, later it was found out that a similar proceeding had already been initiated in the Dutch court as well. While the resolution professionals in India had appointed an ‘asset preservation team’, back in the Netherlands’ the court had appointed a ‘Bankruptcy Trustee’. The Dutch authorities were allowed to join the committee of creditors by the NCLAT but they do not have any voting rights. The resolution professional and the committee of creditors were directed to co-operate with the Dutch Trustee and enter into an agreement for such cooperation in order to jointly conduct the insolvency resolution process. Following the order of NCLAT, both sides entered into ‘Cross-Border Insolvency Protocol’. According to this protocol, both sides, that is, the resolution professionals and the Dutch trustees could collate the claims under their own jurisdiction and then review other’s processes based on the information received. While this protocol seems to work fine till date, what is yet to be seen is whether this protocol is flexible enough to accommodate other countries to be a part of it.


At present, India lacks a proper legal framework to deal with cross-border insolvency. The negative impact of the absence of such a framework can be felt in the case of Nirav Modi, where in order to avoid Indian laws, he filed for bankruptcy in the US. While in another recent case of Jet Airways, NCLAT gave certain instructions that can be considered as a roadmap to future development in the judicial proceedings related to cross-border insolvency resolutions yet, such cases must be treated as a wake-up call for the government.

[1] Ian F. Fletcher, Insolvency in Private International Law: National and International Approaches, Nordic Journal of International Law 69, 4, 527-528, [Accessed 12 August 2021].

[2]  United Nation Commission on International Trade Law, (last visited on Aug 12,2021).

[3] Insolvency and Bankruptcy Code, 2016, § 234.

[4] Insolvency and Bankruptcy Code, 2016, § 235.

[5] Isihita Das, The Need for Implementing a Cross-Border Insolvency Regime within the Insolvency and Bankruptcy Code, 2016 Vikalpa, 45(2), pp. 104–114. (2020).

[6] ibid