India’s Cross-Border Insolvency Puzzle: Between Global Integration and Domestic Hesitation

[Suprava and Aishani are students at Gujarat National Law University.]

India’s ascent as a global economic player is marked by a steady rise in both inward and outward investment flows. In FY 2024–25, the country attracted USD 81.04 billion in foreign direct investment, reflecting a 14% year-on-year increase. At the same time, Indian corporations are actively expanding their international presence, resulting in a surge of outbound investments. This growing cross-border economic integration stands in sharp contrast to the underdeveloped state of India’s mechanism for cross-border insolvency. 

India lacks a formal mechanism to address cross-border insolvency and restructuring. In practice, resolution of such matter’s hinges on ad hoc court-to-court cooperation or the recognition of foreign judgments under the Civil Procedure Code 1908. Sections 234 and 235 of the Insolvency and Bankruptcy Code 2016 (IBC), which provide for formal cooperation through bilateral agreements, have remained dormant due to the absence of any concluded treaties. This disconnect calls for urgent reform.

Legal Gaps and Case-by-Case Chaos

In the absence of India’s adoption of the UNCITRAL Model Law or execution of agreements under Section 234 of IBC, courts have had to rely on alternative tools like the Code of Civil Procedure, 1908, and the principle of judicial comity to solve cross-border insolvency matters. However, these mechanisms operate on a discretionary and case-by-case basis, resulting in a fragmentation and uncertainty. The scope for cooperation with foreign jurisdictions remains narrow, and the absence of codified procedures has often led to delays and conflicting outcomes. This section examines 4 key cases that demonstrate these challenges in practice.

In 2019, the NCLT Mumbai admitted an insolvency petition against Jet Airways despite ongoing proceedings in a Dutch court. It refused to recognize the case, citing the lack of a reciprocal arrangement under the IBC, and emphasized that Indian law applied due to Jet's assets being in India. However, the NCLAT took a more practical view and directed cooperation between the Indian Resolution Professional and the Dutch Trustee. This led to the Proposed Cooperation Model, approved in September 2019, allowing Dutch representatives to participate in Indian creditor meetings, marking India’s first instance of cross-border insolvency cooperation without a formal treaty.

Similarly, in August 2019, the NCLT allowed consolidation of insolvency proceedings for 13 Videocon Group companies under the principle of substantial consolidation. Individual resolutions had failed due to weak asset profiles, prompting the tribunal to draw from international practices and use equitable powers to treat the companies as a single entity. Later, even foreign subsidiaries were included, enhancing asset value and resolution prospects.

In the Kingfisher Airlines case, Indian banks struggled to recover dues from Vijay Mallya’s overseas assets due to the absence of reciprocal treaties and cross-border insolvency laws. Despite court orders, Mallya’s partial disclosures and offshore transfers like USD 40 million to his children's foreign trusts hindered recovery. Indian authorities lacked access to effective mechanisms such as the UNCITRAL Model Law, leaving them to rely on slow diplomatic efforts.

In another case, Sumkin Bussan sought to enforce an Indian court decree against King Shing Enterprises' Indian assets, despite the company being declared bankrupt in Singapore. The Bombay High Court refused to halt the execution, noting there was no treaty with Singapore and prioritizing Indian law and local creditor rights. Since the attachment of assets had occurred before the foreign bankruptcy order, execution was allowed, reaffirming the limited scope of foreign insolvency recognition in India.

All of these cases collectively expose the gaps in India’s cross-border insolvency mechanism. In all four matters, courts ruled on discretionary basis because India has neither adopted the UNCITRAL Model Law nor executed any reciprocal agreements under Sections 234–235 of the IBC. All of this also inevitably leads to forum shopping. 

This reliance on ad hoc mechanisms has resulted in uncertainty, conflicting outcomes, and delays. In Jet Airways, partial cooperation was achieved without legal backing. In Videocon, consolidation was approved by borrowing principles from foreign laws. Kingfisher highlighted the inability to recover foreign assets due to lack of treaties, and in Sumikin Bussan, the Bombay High Court denied recognition of a Singapore bankruptcy order to protect local creditor rights. 

Together, these cases show that India lacks a consistent approach, making it hard for foreign creditors and courts to engage in effective insolvency coordination. 

Global Lessons, Local Relevance 

As India is trying to place itself as a global economic hub, its insolvency regime remains unprepared to deal with the failures of cross-border spillovers. To correct its path, India can borrow judiciously from jurisdictions that have already confronted and resolved the legal problems that India is currently facing. The UNCITRAL Model Law on Cross-Border Insolvency, adopted by over 50 countries, offers a tempting template for balancing the legal framework with a global structure. At the heart of the model law lies the Centre of Main Interests doctrine. The doctrine is a presumption-based system that determines the “main” jurisdiction of insolvency, enabling automatic recognition of proceedings from other areas. This structure not only avoids conflicts but also promotes predictability and legal certainty. 

In the United States, the Bankruptcy Code allows for recognition of foreign main and non-main proceedings, even in the absence of reciprocal treaties. Cases like Sungard Availability Services demonstrate how US courts have extended moratoriums, stopped creditor actions and facilitated the repatriation of assets, thereby streamlining transnational resolution. On the other hand, Singapore offers an interesting parallel for India. The nation is a common law jurisdiction with a similar commercial and judicial basis. Singapore enacted the Model Law in 2017. In the Pacific Andes, restructuring, its courts used model law tools to freeze assets and enable creditor coordination across jurisdictions. The proactive role of Singapore’s judiciary and alignment with UNICTRAL principles significantly enhanced the efficiency of the proceedings. The UK, which has previously been guided by the EU's insolvency regulation, has post-Brexit reverted to a model law-centric approval. Its courts have continued to uphold recognition and cooperation standards, emphasizing legal continuity in cross-border cases.

What India can take away is more than just legislation, its institutional design. Global scenario how proper action, such as automatic recognition and relief mechanisms, helps reduce the transaction costs and maximize asset value. While they do offer a valuable insight India must adopt them carefully and not blindly. Instead of a simple copy-paste approach, what is needed is a systematic adoption by taking into consideration our unique legal, economic, and infrastructural realities. 

Barriers to Operationalizing Section 234 or Adopting the Model Law

India has made little progress in operationalizing Section 234, the reasons might be deeply structural than just procedural. 

First, policy inertia plays a crucial role. India has, time and again, exercised extreme care in a treaty-based framework due to concerns over sovereignty and the enforceability of foreign judgments. This caution is increased further in insolvency, where control over domestic assets is seen as a core sovereign function. Second is the institutional capacity. The Insolvency Law Committee Report 2020 (ILC) showed that India's current infrastructure, particularly the NCLT and NCLAT, may not be adequately equipped to handle foreign law interpretations or supervise multi-jurisdictional processes. Moreover, insolvency professionals (IP) and the committee of creditors (CoC) have minimal training in cross-border coordination. 

Third, the diplomatic process under Section 234 is inherently slow. Crafting reciprocal agreements with dozens of nations, especially with differing insolvency philosophies, is a huge task. The 2018 ILC Report explicitly flagged this by stating, “While international best practices are clear, India’s legislative and institutional preparedness is still developing.”

As a result, despite the judicial creativity in cases like Jet Airways, India remains without a codified framework, leaving it vulnerable to inconsistency and delays. 

The Path Forward: Strategic and Phased Cross Borer Insolvency Reform 

India’s cross borer insolvency regime must evolve through a systematic roadmap, one which aligns legal reform with institutional capacity. 

Short term (within 1 year): The first priority should be initiating bilateral negotiations with key jurisdictions such as the Netherlands, UAE, Singapore, the UK, and the US. These are the countries with recurrent insolvency entanglements involving Indian creditors or debtors. At the same time, MCA or IBBI should issue model court-to-court cooperation protocols, drawing from the Striching Insolvency Cooperation protocol and global best practices. 

Medium term (2-3 years): India can initiate partial adoption of the Model law, focusing solely on corporate insolvency and excluding personal insolvency and MSME. Target capacity building programs must be developed for NCLT judges, IPs, and CoC members in order to equip them with tools for cross-jurisdictional coordination. 

Long term (4-5 years): Full incorporation of the model law tailored to India’s needs, which is followed by the establishment of a dedicated Cross Border Insolvency Division within IBBI or MCA. This body can oversee treaty implementation, streamline data sharing, and serve as a modal coordination agency. 

Ultimately, legal reform without institutional readiness is premature. Law must evolve in line with the infrastructure. 

Conclusion

India aspires to be a global investment hub, yet its insolvency regime remains inward-looking. The absence of a coherent framework results in creditor losses, value erosion, and uncertainty. Inaction here is costly. Cases like Videocon show how the absence of formal mechanisms results in value erosion and reduced recoveries. Here, a hybrid, phased strategy beginning with strategic bilateral treaties and maturing into a customized framework is both needed and overdue. 

This is more than just a legal reform but a legislative opportunity to align India’s insolvency law with its economic ambitions. With the right step, India can move from an ad hoc response to strategic readiness in cross-border insolvency.