CROSS-BORDER INSOLVENCY: LEGAL CHALLENGES, GLOBAL FRAMEWORKS, AND THE INDIAN PERSPECTIVE

Author

Yash Patidar, Adarsh Tiwari, Srajal Sharma

Abstract

 Companies that trade across borders tend to fail across borders, and the law has been slow to follow them. This article examines the legal framework for cross-border insolvency at the international level and in India. It considers the UNCITRAL Model Law on Cross-Border Insolvency 1997 and the EU Insolvency Regulation (Recast), and traces how India’s territorial approach under the Companies Acts of 1956 and 2013 gave way, only in part, to the Insolvency and Bankruptcy Code 2016. It then follows the reform effort from the Insolvency Law Committee’s report of 2018 to section 240C, inserted by the Insolvency and Bankruptcy Code (Amendment) Act 2026, and tests the present position against the Jet Airways protocol. The article argues that section 240C settles whether India will have a cross-border regime but not what that regime will contain, and it identifies the points on which the forthcoming rules will matter most.

Keywords

cross-border insolvency; UNCITRAL Model Law; centre of main interests; Insolvency and Bankruptcy Code; section 240C; India

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Cross-border insolvency tests whether a legal system is willing to share control of a failing debtor with a foreign court. The Model Law answers that question with a procedural framework that leaves each state’s substantive law intact, and the EU Regulation answers it with binding rules for a union of states that trust one another. India’s own history points the other way. The Companies Acts of 1956 and 2013 were territorial and aimed at liquidation, Rajah of Vizianagaram admitted foreign creditors but offered no recognition of foreign proceedings, and the IBC’s sections 234 and 235 depend on treaties that have not materialised.

The Jet Airways protocol showed that tribunals can improvise when asked, but it also showed the limits of improvisation. The 2026 amendment is a real step, because it ends the position that India has no statutory basis for a cross-border regime. It stops short of providing the regime. Section 240C leaves recognition, relief and cooperation to rules that do not yet exist, and for the time being no machinery for recognition or relief is in operation.

What the rules say will decide whether the reform matters. If they adopt the Model Law’s core features in good faith, notify jurisdictions on a principled basis, and provide courts able to act quickly, India will have a regime that foreign lenders and Indian creditors can both rely on. If they are delayed, narrow or too dependent on bilateral deals, India will have repeated, in subordinate legislation, the weakness of sections 234 and 235. The choice is now with the executive, and the cost of delay falls on the creditors, employees and investors for whom the IBC was enacted.

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