Cross-Border Insolvency: India and the World

Manshaa Nagpaal

Cross-border bankruptcy refers to a scenario in which an insolvent debtor owns assets in more than one jurisdiction or when part of the debtor’s creditors is located outside of the country in which the insolvency procedures were filed. Professor Ian Fletcher, a well-known expert on commercial insolvency, proposes that “cross-border insolvency” be defined as a situation “in which an insolvency occurs in circumstances that in some way transcend the confines of a single legal system, such that a single set of domestic insolvency law provisions cannot be applied immediately and exclusively without regard to the issues raised by the foreign elements of the case.[1] By fairly preserving their interests and guaranteeing legal certainty of trade and investment, cross-border insolvency law ensures an effective restructuring process for both creditors and corporate debtors. Cross-border trade is no longer the exclusive domain of huge multinational businesses, thanks to advances in commercial technology. Companies have been enticed to expand their operations beyond their native jurisdictions, arranging their activities across national borders, as economies have grown. Businesses are confronted with a wide range of legal systems because of the rising globalization of commercial operations. As a result, when global corporations go bankrupt, it is no surprise that their insolvencies have international ramifications.

The failure of Lehman Brothers in September 2008, a company that did business in over forty countries using 650 legal companies outside the US, is the finest example of the magnitude, complexity, and financial importance of cross-border bankruptcy. As a result of this scenario, there are conflicts between competing national laws on issues such as the recognition of security interests, asset disbursement mechanisms, and various policy objectives underpinning the protection of distinct types of creditors.

A degree of harmonization of insolvency legislation across various countries might be one answer to these issues. Because there are several significant variations across countries’ legal systems, the objective of harmonization must be pursued.[2] 


The Jet Airways Saga

While insolvency proceedings against the corporate debtor had already been initiated before the NOORD – Holland District Court, the National Company Law Tribunal (“NCLT”) in Mumbai expressly stated in the insolvency proceedings of Jet Airways (India) Private Limited[3] that “there is no provision and mechanism in the I&B Code, at this time, to recognize the judgement of an insolvency court of any country.” As a result, even if the Foreign Court’s decision is reviewed and found to be right, we are unable to record this judgement due to the relevant paragraph in the I&B Code. Due to non-payment of dues to a European Cargo firm, a Jet Airways plane was forced to land in Amsterdam. Meanwhile, the Jet group has been facing insolvency proceedings in both the Netherlands and India. The court-appointed administrator in charge of the Dutch proceedings petitioned the NCLT (Mumbai) to recognise the Dutch proceedings. After the NCLT refused to recognise Jet Airways’ bankruptcy proceedings in the Netherlands, the Dutch administrator filed a petition with the National Company Law Appellate Tribunal (“NCLAT”).

The NCLAT asked Jet Airways’ creditors to produce a statement of facts declaring if they are willing to engage with the Dutch Administrator, pay his fees, and give overseas creditors the same rights as Indian creditors on August 21, 2019.

In response to the NCLAT’s directions, the Dutch Court Administrator and Resolution Professional agreed to a “Cross Border Insolvency Protocol” in which India was identified as the “Centre of important interests” and the Dutch proceedings as “non-main insolvency proceedings.” The Resolution Professional and the Dutch Court Administrator have agreed on terms and conditions under which they will participate in the ongoing bankruptcy process through this Protocol, with the exception of the Dutch Administrator’s participation in Committee of Creditors meetings. The Resolution Professional and the Dutch Court Administrator have agreed on terms and conditions under which they will collaborate in the ongoing insolvency process through this Protocol, with the exception of the Dutch Administrator’s attendance at Committee of Creditors meetings. The NCLAT allowed the Administrator to attend Committee of Creditors sessions as an observer only to avoid a conflict of authority. The NCLAT also overruled a decision by the NCLT’s Mumbai bench, which said the Dutch court administrator lacked jurisdiction in India and hence could not attend Jet Airways’ CoC meetings or make claims against the airline’s assets. They were unable to attend Board of Directors meetings of Jet Airways or make claims against the airline’s assets in India. The Jet Airways case is only one of several that highlight the need for a system that can handle situations where a corporate debtor’s creditors and assets are spread across multiple jurisdictions. Videocon Industries had requested that the NCLT include its foreign assets in the ongoing corporate bankruptcy resolution action.

The UNICITRAL Solution

The model law was approved at UNCITRAL’s [4](United Nations Commission on International Trade Law) thirteenth session, which was held in Vienna. States might adopt the Model Law into their domestic legislation to aid in cross-border bankruptcy coordination and resolution. The Model Law, unlike a United Nations convention, does not require a state to notify the UN (United Nations) or other countries of its intent to implement it. At the time of writing, 44 states have adopted Model Law to varying degrees into their domestic legal systems.

Surprisingly, the Model Law does not oblige the States that use it to harmonise their substantive domestic laws. The Model Law covers general principles, foreign representatives’ and creditors’ access to a state’s courts, recognition of foreign actions and remedies, coordination with foreign courts and foreign representatives, and dealing with concurrent procedures. The Model Law recognises two types of procedures: international main proceeding and international non-main proceeding. A foreign main proceeding takes place in the state where the debtor’s ‘principal interests’ are concentrated. A foreign non-major proceeding is one in which the debtor has a “establishment” but is not the same as the foreign main proceedings. The Model Law describes how to locate the “pivotal point of primary interests.”[5]

The Model Law also defines a ‘establishment’ as a place of business where the debtor participates in non-transitory economic activity involving human resources, products, or services for the purpose of recognising a foreign non-main proceeding.[6] In addition, the Model Law contains a public policy exception, which specifies that if an action covered by the Model Law is’manifestly adverse to the public policy’ of that State, the courts in that State may refuse to take it.

In Singapore’s domestic legislation, the word’manifestly’ is excluded, while it is included in the domestic legislation of the United States of America and the United Kingdom under the public policy exemption. The Insolvency and Bankruptcy Code, 2016 (the “Code”) comes into force on December 15, 2016, bringing together a slew of insolvency laws for corporations, partnerships, and individuals.

The Procedural Legality Involved in India

The Central Government may enter into an agreement with the government of another country to enforce the requirements of the Code, according to Section 234 of the Code. Furthermore, the Central Government may direct the application of the Code’s provisions to assets or property of a corporate debtor or an individual, including a corporate debtor’s personal guarantor, located outside India under a reciprocal arrangement.

The resolution professional, liquidator, or bankruptcy trustee can file an application with the NCLT under the provisions of the Insolvency Act when proof or action relevant to assets of a corporate debtor situated outside of India is required as part of the insolvency resolution process.

If the NCLT finds it essential, it may send a letter of request to a court or an authority of a nation with which a reciprocal agreement has been created under Section 234 of the Code. Despite the fact that Sections 234 and 235 of the law were added to make cross-border insolvencies easier to resolve, it was determined that no attempt had been taken to fully implement the intergovernmental agreements.[7]

At this time, an NCLT decision in a cross-border bankruptcy case is not instantly recognised or enforced in any other country. Proceedings under the Code can only be initiated if the corporate debtor has assets in India.Foreign creditors are already classified as creditors under the Code as it currently stands, allowing them to initiate and participate in an insolvency resolution process in India.[8] A reciprocity requirement is included in the Draft Provisions for proceedings that originate outside of India. As a result, they would apply to other countries that have adopted the Model Law into their legal systems. In addition, the Draft Provisions give the Central Government the power to impose a code of behaviour on foreign representatives.

Furthermore, if the foreign representative violates the Draft Provisions or any rules or regulations made under it, the Insolvency and Bankruptcy Board of India (IBBI) may levy a penalty or issue any other order authorised by the Code against an insolvency practitioner. If the reciprocity criteria are met, a resolution professional or liquidator who is recognised and authorised under the Code may be authorised to act on behalf of a Code-governed procedure in another nation.

A foreign proceeding is a judicial or administrative process linked to insolvency that takes place in another country. In a foreign action, a foreign court controls or supervises the assets and affairs of the corporate debtor in order to restructure or liquidate it.

The Draft Provisions distinguish between main and non-main foreign procedures. The goal of this distinction is to determine how much influence a jurisdiction has over the insolvency resolution process, as well as the types and breadth of relief that the NCLT can issue in international cases.

The procedures that start in the jurisdiction where the corporate debtor’s major interests (“COMI”) are located are referred to as “foreign main procedures.” One of the most problematic ideas in Model Law is the COMI. The jurisdiction in which the corporate debtor’s registered office is located is deemed to be its COMI unless proof to the contrary is provided. This assumption would only hold true if the corporate debtor’s registered office had not moved to another country three months prior to filing a bankruptcy petition there.The jurisdiction where the corporate debtor’s centre of major interests (“COMI”) is located is where the foreign main proceedings begin.

The concept of the COMI is one of the most controversial components of the Model Law. Unless there is evidence to the contrary, it is assumed that the jurisdiction where the corporate debtor’s registered office is located is its COMI. This presumption would only apply if the corporate debtor’s registered office had not moved to another nation three months before submitting an application to begin bankruptcy proceedings in that country.

A moratorium safeguards the assets of the corporate debtor during insolvency proceedings. In cross-border bankruptcy cases, obtaining a moratorium is critical since the corporate debtor’s assets may be located in more than one legal country. Establishing litigation or continuing ongoing suits or proceedings against the corporate debtor, including enforcing any judgement, decree, or decision in any court, tribunal, arbitration panel, or other body. The Central Government has been granted the authority to set rules to guarantee that the NCLT and foreign courts and representations work together. Foreign procedures may include joint hearings when they occur concurrently, in addition to guaranteeing direct communication lines between nations.

If the corporate debtor has assets in India and the action is classified as a foreign primary procedure, any process may be initiated under the Code. This action will focus on the assets of the corporate debtor in India. The framework for collaboration and coordination of processes would control this process.

If the Draft Provisions are found to be obviously against India’s national policy, the NCLT has the ability to refuse to take any action under them. On the other hand, the Draft Provisions make no mention of public policy. Based on court decisions, countries that have already implemented the Model Law have modified their public policy definitions. definitions based on court decisions. The phrase “manifestly” was not utilized in Singapore’s public policy exception. In the case of Zetta Jet Pte Ltd,[9] the Singapore High Court found that the bar for interpreting public policy grounds is significantly lower than in nations that use the term “manifestly” in their public policy exclusions. If an activity is obviously opposed to the United States’ public policy, it is exempted from the cross-border insolvency statute.

The United States Bankruptcy Court stated in the matter of In Re Qimonda AG that the public policy exemption is confined to the United States’ most basic principles and purposes lower than in jurisdictions where the term “manifestly” is included in their public policy exemptions. [10]

European Commission on Insolvency Proceedings

The EC Regulation makes no attempt to unify the bankruptcy regimes of EU countries on a national level. Instead, it aids member states in identifying jurisdiction and relevant legislation in cross-border bankruptcy procedures. It also ensures that insolvency processes are automatically recognized throughout EU member states.

The EC Regulation only applies to “collective bankruptcy procedures including the partial or whole divestiture of a debtor and the appointment of a liquidator.”

The EC Regulation distinguishes between three types of insolvency proceedings: main proceedings, in which the debtor’s primary interest is located in the EU; secondary proceedings, in which the debtor has an establishment; and territorial proceedings, in which the debtor has an establishment but main proceedings have not yet begun elsewhere.

The United States Model

To establish a consistent and coordinated legal framework for cross-border bankruptcy situations, the US interpretation must be harmonized with the interpretations offered by other nations that have embraced it as domestic law. The statute’s five tiers of goals carry this out. To begin, in cross-border bankruptcy processes, to foster coordination between US courts and interested parties, as well as other foreign courts and competent agencies. Second, additional legal clarification will be provided. Third, in order to protect the interests of all parties involved in cross-border insolvencies, fairness and efficiency must be established. Fourth, protect and maximise the debtor’s assets.

The Singapore Guidelines

In the case of Re. Zetta, the Singapore High Court recognised actions of Zetta corporations pending in the United States as foreign main proceedings. Given the presence of Zetta enterprises in Singapore, the Court faced the issue of determining a significant interest centre. The courts dealt with this by adopting the US approach of emphasising the date of the recognition application. Judges from all around the world, including the United States of America, Australia, and other nations, make up the Judicial Insolvency Network (“JIN”). The JIN published a compilation of guidelines called “Guidelines for Communication and Cooperation Between Courts in Cross-Border Insolvency Matters.” All insolvency legislation, regulations, and procedures in Singapore are supplemented by these Guidelines. In every case involving cross-border bankruptcy or debt adjustment processes that have begun in more than one nation, these considerations should be considered.[11]


To give effect to the Draft Provisions, a slew of amendments and subordinate legislation would be needed. India, for example, no longer allows concurrent hearings with other jurisdictions. Furthermore, the Draft Provisions have left the Central Government and IBBI’s subordinate legislation with a great deal of detail. Modifications and publication of rules and regulations must accord with the Model Law’s goal and be enacted quickly to avoid uncertainty in the settlement of cross-border bankruptcy cases.

Furthermore, countries implementing the Model Law confront a number of ongoing challenges, including defining the COMI (Center of Main Interests) and unifying the numerous national bankruptcy laws. It’s uncertain how Indian courts will deal with these concerns and make consistent decisions. There is no effective legal framework in place in India to deal with cross-border bankruptcy issues.

The Committee’s Draft Provisions would have to be drafted into a Bill, which would then have to be approved, in order to be integrated into the Code as it stands now. Sections 234 and 235 of the International Business Code (IBC) provide a mechanism for dealing with international insolvencies, although its application in more practical situations is riddled with problems.

Despite the lack of a legislative framework under the IBC to deal with cross-border challenges, recent court judgements suggest a positive judicial trend toward India’s potential to build a business-friendly strategy. The entire process requires negotiating bilateral agreements with a variety of governments, each with its unique set of terms that must be ironed out over time. As a result of these effects, establishing a consistent and reliable framework, such as the Model Law, to manage cross-border bankruptcy cases becomes a requirement, as does simplifying the procedure.

About The Author

The author is a second year student of law. She is pursuing B.A(Hons.) Legal Studies followed by an LL.B at Jindal Global Law School, O.P.Jindal Global University. She draws keen interest in corporate law areas such as Insolvency law, company law, capital markets. She is eager to explore various other disciplines of law as a student and a prospective professional.




  1. Bogdan, M.,2000. Ian F. Fletcher, Insolvency in Private International Law: National and International Approaches. Nordic Journal of International Law, 69(4), pp.527-528. 

  2. Donna McKenzie, ‘International Solutions to International Insolvency: An Insoluble Problem’ (1996). University of Baltimore Law Review, 26, p.15 

  3. State Bank of India v. Jet Airways (India) Ltd [2019] NCLAT, 707 [2019]   CP (IB) 2205 (MB ).


  4. UNCITRAL Model Law on Cross-Border Insolvency with Guide to Enactment and Interpretation, 1997 

  5. UNICITRAL Model Law (1997), Article 2(b). 

  6. UNICITAL Model Law (1997), Article 2© 

  7. The Insolvency and Bankruptcy Code, 2016 (Act 31 of 2016) 

  8. The Insolvency and Bankruptcy Code, 2016 (Act 31 of 2016), s 234 

  9. Zetta Jet Pte Ltd, [2018] SGHC 16 

  10. Katie A. and Diantha H. ‘Singapore High Court issues landmark judgment on recognition of foreign insolvency proceedings under the UNCITRAL Model Law on Cross-Border Insolvency’ {2019}


  12. Fernandes, D., & Pathak, D., ‘Harmonizing UNCITRAL Model Law: A TWAIL (Third World Approaches to International Law) Analysis of Cross Border Insolvency Law’. In Lee S. & Lee H. (Eds.), <I>Asian Yearbook of International Law, Volume 24 (2018) (pp. 80-105). Accessed September 5, 2021,  

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