RECOGNITION OF CROSS BORDER INSOLVENCY IN INDIA

In India, the framework for insolvency and bankruptcy resolution is primarily governed by the Insolvency and Bankruptcy Code, 2016 (“the Code” or “IBC”). The said Code is a comprehensive legislation aimed at consolidating and amending existing laws relating to insolvency resolution of companies, limited liability entities, partnerships, and individuals.

The Code introduced a paradigm shift from a debtor-in-possession to a creditor-in-control model. Its objective is to ensure timely resolution of distressed assets, promote entrepreneurship, and balance the interests of all stakeholders. It provides a time bound resolution process wherein the management of the debtor company is transferred to an insolvency professional under the supervision of the National Company Law Tribunal (“NCLT”).

However, as Indian corporations increasingly expand across borders and foreign investors acquire stakes in Indian entities, the challenge of dealing with cross border insolvency, where the debtor or its assets and creditors are situated in multiple jurisdictions, has become increasingly significant.

Indian Courts, on several occasions, declined to recognize foreign insolvency proceedings due to the absence of a formal cross border insolvency framework. For instance in the case of Mahmood Hussain Khan v. Madam Canisia Ceizar[1], the Telangana High Court acknowledged the existence of foreign insolvency proceedings but refrained from granting relief, highlighting the lack of a statutory mechanism for such recognition.

The Hon’ble Court recognized aspects of Swiss insolvency proceedings concerning the sale of Indian properties. It was held that such foreign proceedings could be given effect in India for specific matters, including property sales, thereby providing a legal basis for cross border cooperation.

Similarly, in October 2024, the Calcutta High Court in Glas Trust Corporation v. BYJU Raveendran & Ors.[2], the Hon’ble Court held that without a comprehensive cross-border insolvency framework Indian courts do not recognize or enforce moratorium orders to stay ongoing countries, such as the US, and thus, are not obligated to stay ongoing suits due to such foreign proceedings.

These decisions illustrate the cautious approach adopted by Indian courts in the absence of a statutory mechanism, highlighting the need for a comprehensive legal framework.

At present, India does not have a fully developed legal framework to address cross border insolvency issues comprehensively. Nevertheless, Section 234 and 235 of the IBC provide a limited mechanism for international cooperation.

Section 234 empowers the Central Government to enter into bilateral agreements with foreign countries to enforce the provisions of the IBC in relation to assets or debtors situated outside India.

Section 235 allows the resolution professional or liquidator to make an application to the Hon’ble NCLT seeking a letter of request to a foreign court or authority for evidence taking or action relating to the assets of the debtor located abroad.

Despite their inclusion, these provisions remain largely unimplemented due to the absence of bilateral treaties or reciprocal arrangements. Consequently, Indian courts rely on judicial comity and cooperation in cross border cases. Notwithstanding these limitations, Indian courts and foreign jurisdictions have begun to recognize cross border insolvency proceedings.

In the landmark case of Jet Airways (India) Limited (Offshore Regional Hub) v. State Bank of India & Anr.[3], the Hon’ble National Company Law Appellate Tribunal answered whether separate proceeding(s) in corporate insolvency resolution process against common debtor can proceed in two different countries, one having no territorial jurisdiction over the other.  The Hon’ble tribunal recognized parallel insolvency proceedings in the Netherlands and permitted the Dutch administrator to participate in the Committee of Creditor’s meetings as an observer. This decision, though not rooted in explicit statutory authority, marked a significant step towards acknowledging cross border cooperation.

Another significant milestone in India’s cross border insolvency jurisprudence was when the US Bankruptcy Code for the District of Delaware recognized the insolvency proceedings of SBI v. SEL Manufacturing Company Limited[4] pending before the NCLT, Chandigarh Bench, as a foreign main proceeding under Section 1502(40) of the US Bankruptcy Code, marking the first recognition of the IBC in the US. The Hon’ble Court held that recognition did not violate US public policy and granted the foreign representatives and foreign debtor reliefs under Section 1520, protecting assets and creditor’s interest. This recognition facilitates cross border asset recovery, particularly for Indian banks’s NPAs, while ensuring relief aligns with US bankruptcy principles.

In a recent case of the Hon’ble Delhi High Court on Toshiaki Aiba as Bankruptcy Trustee v. Vipan Kumar Sharma[5], the High Court has considered India’s Jurisdiction to enforce foreign bankruptcy and insolvency orders.

The Hon’ble Court held that “it is contended on behalf of the defendants that Japan is not a reciprocating territory in respect of Section 44A of the CPC, so there cannot be any proceedings for execution of the decree of a Japanese Court. 18. In the opinion of this Court and as stated above, by the way of the present suit, the plaintiff is not seeking execution of the decree of the Japanese Court. The suit has been filed to administer the suit properties of the bankrupt defendant no. 1 towards realization of monies. Therefore, Section 44A of the CPC would have no application. In this regard, reference may be made to Sections 13 and 14 of the CPC, which deal with foreign judgments”

Further, In Re Compuage Infocom Ltd.[6], the Singapore High Court has recognized the Corporate Insolvency Resolution Process (“CIRP”) of an Indian company under the IBC as a foreign main proceeding. The Hon’ble Court acknowledged the Indian Resolution Professional as a foreign representative and treated the NCLT as the foreign court, allowing the Indian insolvency proceedings to be given effect in Singapore. This landmark decision illustrates that Indian insolvency proceedings can obtain recognition abroad, facilitating cross border administration of assets and providing a framework for cooperation between jurisdictions in insolvency matters.

India’s globalization and the growing participation of creditors from across the globe in Indian insolvency cases highlights the need of cross border insolvency framework. Hence, taking in account of such matters, the Insolvency Law Committee (“Committee”), on October 2018, recommended the adoption of a dedicated framework based on the UNCITRAL Model Law (“Model Law”) on Cross Border Insolvency, 1997[7], known as Draft Law on cross border insolvency[8].

DRAFT LAW

The Committee, in its report, recommended adoption of the Model Law with certain modifications. The proposed draft is also called as “draft Part Z” (hereinafter referred to as “Draft Law” or “Part Z”). It is pertinent to note that certain amendments in the provisions of the IBC are necessary to include draft Part Z in the Code. For instance, section 234 and 235 may be amended to exclude corporate debtors; Section 60 may be amended to allow transfer of domestic proceedings to the Adjudicating Authority notified under the draft Part Z in relevant matters, the inspection and investigating powers of the Insolvency and Bankruptcy Board of India (hereinafter referred to as “IBBI”) may need to be amended to include a suitable mechanism for investigation and adjudication of penalties against foreign representatives, section 196 may be amended to include regulation of foreign representatives within the functions of the IBBI; and additional rule and regulation making power will need to be incorporated in sections 239 and 240, respectively; the 11th Schedule may be amended based on the decision to amend 15 section 375(3)(b) of the Companies Act (hereinafter referred to as “2013 Act”), lastly, preamble to the Code may be amended to reflect inclusion of cross-border insolvency under the Code. Suitable amendments to subordinate legislations under the Code may also be required.

OBJECTIVES OF DRAFT PART Z

The objectives specified in the report provided by the Committee mirror the core principles of the Model Law but are contextualized for India’s institutional environment.

1. Recognition of Foreign Insolvency Proceedings – To enable foreign court orders or foreign insolvency administrators to seek recognition in India.
2. Relief and Assistance – To grant domestic relief on recognition, for instance moratorium, asset control to facilitate coordination
3. Access and Participation – To allow foreign representatives and creditors direct access, subject to controls, to Indian courts and proceedings.
4. Cooperation & Communication – To promote direct or guided collaboration between Indian courts, foreign courts, and insolvency professionals.
5. Coordination of Concurrent Proceedings – To ensure that insolvency matters are harmonized to avoid conflicts, duplication, and inequitable outcomes.
6. Protection of Domestic Public Policy – To preserve a “public policy” exception to deny recognition or relief that is manifestly contrary to Indian policy.

CONCLUSION

The Insolvency and Bankruptcy Code, 2016 (“IBC”) has transformed India’s insolvency landscape, introducing a time-bound, creditor-driven framework to resolve corporate, partnership, and individual insolvencies. By transferring control from debtors to insolvency professionals under the supervision of the NCLT, the Code ensures efficient management of distressed assets while balancing stakeholder interests.

With the globalization of Indian businesses and the involvement of foreign creditors, cross-border insolvency has emerged as a critical challenge. Indian courts have historically taken a cautious approach, sometimes recognizing foreign proceedings partially, as in Mahmood Hussain Khan v. Madam Canisia Ceizar, or declining recognition altogether, as seen in Glas Trust Corporation v. BYJU Raveendran & Ors.

However, positive developments as seen in landmark cases like Jet Airways v. State Bank of India, facilitating parallel proceedings in the Netherlands, and SBI v. SEL Manufacturing Co. Ltd. which included recognition of IBC under the U.S. Bankruptcy Code, demonstrate growing judicial willingness to facilitate cross-border cooperation and asset recovery.

Cases like Toshiaki Aiba v. Vipan Kumar Sharma and Re Compuage Infocom Ltd. further underscore that Indian insolvency proceedings are increasingly recognized abroad.

To address the absence of a formal cross-border framework, the Insolvency Law Committee recommended the adoption of a dedicated regime based on the UNCITRAL Model Law (“Draft Part Z”).

Its objectives include recognition of foreign proceedings, provision of relief such as moratoriums, participation rights for foreign representatives, coordination of concurrent proceedings, and protection of domestic public policy.

Once operationalized, Draft Part Z promises to align India with international standards, facilitate efficient cross-border asset recovery, and strengthen India as a predictable jurisdiction for global commerce.

In essence, while challenges remain, the combination of judicial developments and a prospective statutory framework positions India on a path toward a robust and globally compatible cross-border insolvency regime.

[1] CCCA No.47 of 2021

[2] Civil Appeal No. 9986 of 2024

[3] Company Appeal (AT) (Insolvency) No. 707 of 2019

[4] CP (IB) No. 114/Chd/Pb/2017, National Company Law Tribunal, Chandigarh.

[5] 2022 SCC OnLine Del 1260

[6] (2025) SGHC 49

[7] https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/insolvency-e.pdf

[8] https://ibbi.gov.in/uploads/resources/Report_on_Cross%20Border_Insolvency.pdf

Authored by Ms. Jyotsna Chaturvedi, Head – Corporate Practice and Ms. Navya Saxena, Associate