• Legis Scriptor

Cross Border Insolvency

Authored By Devanshi Goyal

Key words: insolvency, assets of debtors, financial obligation, UNCITRAL model law.


India as proceeding towards its development has structured a complete reconstruction in the sectors of insolvency regime. The insolvency and bankruptcy code of 2016, is concentrated act relating to insolvency resolution of companies, partnerships and individual. The code is applicable to corporate persons as well as there are provisions which relates to partnerships and individuals which are yet to be notified. Although the code is recent, it has been unfolding itself through various amendments, regulations and judicial interpretation.

Insolvency is state when an organization or a person is unable to fulfill its financial obligations which are due against him. The concept of cross border insolvency signifies the treatment of financially burden debtors where the assets of debtors are in more than one country or the creditors are in more than one country.[1]

The absence of recognition of cross border insolvency law in India might create a situation where the IBC,2016 will be less effective, as it will lead to delay in admission of an applications for all suits and proceedings against the company in India during the insolvency period, a creditor would then be able to initiate proceedings outside India against the company and the insolvency professionals appointed will be forced to incur such litigation costs. Consequently the execution of decrees/order in such proceedings will be prohibited. Therefore, with the consistent changes in the regime of insolvency laws it is necessary for the government of India to draft a report addressing the issues involving cross border insolvency and its recognition while adopting the UNCITRAL model law.


The concept of cross border insolvency revolves around the financially obligated debtor where he has assets / or creditors in more than one country. Businesses interest in expansion beyond the home jurisdiction. Firms tend to engage increasingly in global scale activities, creating a chain of production inclusive of inputs that comprises national boundaries.

Generally, cross border insolvency is more attentive towards the companies who have become insolvent, that operates in more than one country rather than bankruptcy of individual.

Commonly, cross border insolvency concentrate upon three areas:

Choice of law rules

Jurisdiction law

Enforcement of judgment rules.

However, the principal focus remains the recognition of foreign insolvency officials and their powers.

The idea behind cross border insolvency majorly consists of an insolvent company having several foreign creditors who claim there protection even if they are not in the country where the insolvency proceeded. Another aspect behind cross border insolvency is the Insolvent Company which might have assets located in another jurisdictions which the creditors might access as a resort in the insolvency proceedings. The proceedings of insolvency with respect to same debtors may be commenced and ongoing in more than one country.

The cross border insolvency deals with three dimensions:

The protection of rights which the foreign creditors have on the assets of the debtors which are now in different territory wherein the insolvency proceedings are in another.

The different jurisdiction between the creditor and debtors assets, wherein the creditors wants to include the assets of debtors as a resort for protection in the insolvency proceedings.

The proceedings which are commenced on the same debtors in more than one jurisdiction.[2]

With the enhanced globalization, the mechanisms for investment of different countries have also enhanced including in India. With such advancement in investment these foreign nations should also be accorded with the advanced protection for their investment to be safe.

Insolvency and bankruptcy code have been forged by legislation of India to provide expeditious and smooth disposal of cases in regard to the insolvency and bankruptcy.

The present legislature in relation to cross border insolvency are provided under section 234 and section 235 of the IBC, 2016. Section 234 provide central government power regarding formation of agreement with the foreign countries to proceed with the insolvency proceedings.

The central government will do so with those countries with which there are reciprocal agreements.

Further under section 235 of code, states that the letter of request can be made to the authority of foreign nation with which there subsets a reciprocal agreement as per section 234. The application should be made to the adjudicating authority in the particular country specifying the evidences related to the assets of debtor in country.

These application must be made to those counties only with which we have mutual agreement only. Maintaining a reciprocal agreement with different countries is itself a bulky process taking a lot of time and as the objective of this act is expeditious procedure that would be difficult to achieve.

Also with assets in different countries will also complicate the procedure of insolvency through the reciprocal agreements. Also one of the conflicting component with reciprocal arrangements is the non-coordination of the procedure in regards with multiple jurisdictions.

Areas of conflict under the cross border insolvency

The reciprocal arrangements in the code doesn't set forth any procedure which has to be initiated in order to conduct the insolvency procedure.

As with no proper mechanism for the insolvency procedure it makes the law sketchy. By providing only the right to make the reciprocal arrangement with countries through act would not solve the issues in the cross border insolvency.

Whilst acting with the principle of transparency and justice to all, the procedure for insolvency must be equivalent for all countries which enters into reciprocal arrangement, but here there is no such procedure endorsed by the legislature of India.

To eradicate the defects and inconsistencies in the present legislation, India is ready to adopt the United Nations commission on International trade law (UNCITRAL). At present the country has to enter into bilateral agreement with other countries, different for every nation but by embracing the UNCITRAL model law the agreement would be same for all countries who have signed the treaty. This would cause improvement in the area of cross border insolvency as it will lead to increased investment by foreign nations.


India porting foreign investment, it becomes a point of concern to ensure that the rights and interests of foreign investors are protected and assured that the dues are collected in par with domestic investors.

The law in cross border insolvency increases the cooperation and reciprocity among different courts and competent authorities. The model law provides an efficient administration process in regards with insolvency. As looking into the aspect of insolvency it calls for many complex issues in several areas of law having different jurisdictions. The IBC has incorporated the issuance of public notices by the ministry of corporate affairs in order to setup a uniform mechanism followed by various countries, enhancing the cooperation between them.

With proper legal framework in field of cross border insolvency the threat to the foreign investors can be reduced and proper procedure could be established for a smooth mechanisms in cross border insolvency.


• Ministry of Corporate Affairs, Public Notice on Cross Border insolvency, available at

• Abhishek Saxena & Jyoti Singh, Cross Border Insolvency: Breaking Down The Insolvency And Bankruptcy Code 2016,


[1] Umakanth Varottil, Filling in the Gaps in the Insolvency And Bankruptcy Code-Cross Border Insolvency, India Corp Law [2] The Insolvency and Bankruptcy Code, 2016.