Cross Border Insolvency

Actions to Avoid Acts Detrimental to Creditors (Article 23 of UNCITRAL Model Law on Cross-Border Insolvency)

Under many national laws both individual creditors and insolvency administrators have a right to bring action to avoid or otherwise render ineffective acts detrimental to creditors.

Such a right, in so far as it pertains to individual creditors, is often not governed by insolvency law but by general provisions of law (such as the civil code); the right is not necessarily tied to the existence of an insolvency proceeding against the debtor to that the action may be instituted prior to the commencement of such a proceeding the person having such a right is typically only an affected creditor and not another person such as the insolvency administrator. Furthermore, the conditions for these individual-creditor actions are different from the conditions applicable to similar actions that might be initiated by an insolvency administrator.

The procedural standing conferred by Article 23 extends only to actions that are available to the local insolvency administrator in the context of an insolvency proceeding, and the article does not equate the foreign representative with individual creditors who may have similar rights under different set of conditions. Such actions of individual creditors fall outside the scope of Article 23.

The Model law expressly provides that a foreign representative has “Standing” to initiate actions to avoid or otherwise render ineffective legal acts detrimental to creditors. The provision is drafted narrowly in that it does not create any substantive right regarding such actions and also does not provide any solution involving conflict of laws. The effect of the provision is that a foreign representative is not prevented from initiating such actions by sole fact that the foreign representative is not the insolvency administrator appointed in the enacting State.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 3(f) (Syllabus 2022).

UN Commission on International Trade Law (UNCITRAL) Model Law on cross-border insolvency was adopted in 1997. The Model Law is designed to provide a harmonized approach to the treatment of cross-border insolvency proceedings, facilitate cooperation between the courts and office holders involved in the insolvency in different jurisdictions, and provide for the mutual recognition of judgements and direct access of foreign representatives to the courts of the enacting state. India has not adopted the model law.

In its current form, the Insolvency & Bankruptcy Code contains only two provisions under section 234 and 235 that may possibly enable and assist the liquidator with respect to a company having assets in a foreign jurisdiction.

Agreement with Foreign countries - Section 234

(1)This section provides that the Central Government may enter into an agreement with the Government of any country outside India for enforcing the provisions of this Code.

(2)The Central Government may, by notification in the Official Gazette, direct that the application of provisions of this Code in relation to assets or property of corporate debtor or debtor, including a personal guarantor of a corporate debtor, as the case may be, situated at any place in a country outside India with which reciprocal arrangements have been made, shall be subject to such conditions as may be specified.

Letter of request to a country outside India in certain cases - Section 235

(1)Notwithstanding anything contained in this Code or any law for the time being in force if, in the course of insolvency resolution process, or liquidation or bankruptcy proceedings, as the case may be, under this Code, the resolution professional, liquidator or bankruptcy trustee, as the case may be, is of the opinion that assets of the corporate debtor or debtor, including a personal guarantor of a corporate debtor, are situated in a country outside India with which reciprocal arrangements have been made under section 234, he may make an application to the Adjudicating Authority that evidence or action relating to such assets is required in connection with such process or proceeding.

(2)The Adjudicating Authority on receipt of an application under sub-section (1)

and, on being satisfied that evidence or action relating to assets under sub section (1) is required in connection with insolvency resolution process or liquidation or bankruptcy proceeding, may issue a letter of request to a court or an authority of such country competent to deal with such request.

The current cross border insolvency framework in India is dependent on India entering bilateral agreements with other countries. Finalisation of bilateral agreements is a long drawn process as it involves long term negotiations and thus takes a lot of time. Moreover, every trade is distinct and thus it would be difficult for the adjudicating authorities to enforce the agreements/treaties entered into with other countries.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2022, Q. 6(b) (Syllabus 2017).

Sections 234 and 235 of the Insolvency and Bankruptcy Code, 2016 make provisions to deal with cases involving cross border insolvency.

Agreements with foreign countries : Section 234 of the Code empowers the central government to enter into an agreement with other countries to resolve situations pertaining to cross border insolvency. Section 234 of the Code provides that the Central Government may enter into an agreement with the Government of any country outside India for enforcing the provisions of this Code. [Section 234(1)] The Central Government may, by notification in the Official Gazette, direct that the application of provisions of this Code in relation to assets or property of corporate debtor or debtor, including a personal guarantor of a corporate debtor, as the case may be, situated at any place in a country outside India with which reciprocal arrangements have been made, shall be subject to such conditions as may be specified. [Section 234(2)] Letter of request to a country outside India in certain cases: Section 235 of the Code lays down that notwithstanding anything contained in this Code or any law for the time being in force if, in the course of insolvency resolution process, or liquidation or bankruptcy proceedings, as the case may be, under this Code, the resolution professional, liquidator or bankruptcy trustee, as the case may be, is of the opinion that assets of the corporate debtor or debtor, including a personal guarantor of a corporate debtor, are situated in a country outside India with which reciprocal arrangements have been made under section 234, he may make an application to the Adjudicating Authority that evidence or action relating to such assets is required in connection with such process or proceeding.

[Section 235(1)] The Adjudicating Authority on receipt of an application under sub-section (1) and, on being satisfied that evidence or action relating to assets under sub-section (1) is required in connection with insolvency resolution process or liquidation or bankruptcy proceeding, may issue a letter of request to a court or an authority of such country competent to deal with such request. [Section 235(2)] The current cross border insolvency framework in India is dependent on India entering bilateral agreements with other countries. Finalisation of bilateral agreements is a long drawn process as it involves long term negotiations and thus takes a lot of time. Moreover, every trade is distinct and thus it would be difficult for the adjudicating authorities to enforce the agreements/treaties entered into with other countries.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2019, Q. 4(a) (Syllabus 2017).

Sections 234 and 235 of the Insolvency and Bankruptcy Code, 2016 contains provisions to deal with the cases involving cross border insolvency.

Section 234 empower the Central Government to enter into an agreement with other countries to resolve situations pertaining to cross border insolvency. Section 234 of the Code provides that:

(1)The Central Government may enter into an agreement with the Government of any country outside India for enforcing the provisions of this Code.

(2)The Central Government may, by notification in the Official Gazette, direct that the application of provisions of this Code in relation to assets or property of corporate debtor or debtor, including a personal guarantor of a corporate debtor, as the case may be, situated at any place in a country outside India with which reciprocal arrangements have been made, shall be subject to such conditions as may be specified.

Section 235 of the Code lays down that notwithstanding anything contained in this Code or any law for the time being in force if, in the course of insolvency resolution process, or liquidation or bankruptcy proceedings, as the case may be, under this Code, the resolution professional, liquidator or bankruptcy trustee, as the case may be, is of the opinion that assets of the corporate debtor or debtor, including a personal guarantor of a corporate debtor, are situated in a country outside India with which reciprocal arrangements have been made under section 234, he may make an application to the adjudicating authority that evidence or action relating to such assets is required in connection with such process or proceeding.

Considering the above provisions, the IBC has provisions in relation to cross border insolvency.

The case of Jet Airways (India) Ltd. v. state Bank of India & Anr. Company Appeal (AT) (Insolvency) no.

707 of 2019 is the first case touching the realm of cross border insolvency in India.

In the instant case Jet Airways (India) Limited, ("Company") was subjected to parallel insolvency proceedings in India as well as in the Netherlands. In India, the Company has been admitted into a corporate insolvency resolution process under the insolvency and Bankruptcy Code, 2016 (the "Indian Proceedings"). Pursuant to the order of the National Company Law Tribunal (NCLT) and resolutions duly passed at the meeting of the Committee of Creditors of the Company (" CoC ") dated 16th July, 2019, the Resolution Professional (RP) had been appointed, resulting in the powers of the board of directors of the Company being vested with the RP.

In the Netherlands, the Company has been declared bankrupt and the Dutch trustee had been appointed to manage the estate of the Company (the "Dutch Proceedings").

On an application made by the Dutch trustee, appealing the 20th June, 2019 order of the NCLT before the Hon'ble National Company Law Appellate Tribunal, New Delhi ("NCLAT"), the NCLAT, by its orders dated 12th July, 2019 and 21st August, 2019 ("NCLAT Order"), inter alia, directed the RP, in consultation with the CoC, to consider the prospect of cooperating with the Dutch trustee so as to have joint "corporate insolvency resolution process of the Company" and further vide its order dated 4th September, 2019 directed the RP under the Indian proceedings to reach an arrangement/agreement with the Dutch trustee to extend such cooperation to each other, further allowing the CoC to guide the RP to enable him to prepare an agreement in reaching the terms of arrangement of cooperation with the Dutch trustee in the best interest of the Company and all its stakeholders ("Proposed Cooperation").

The NCLAT set aside the order dated 20th June, 2019 passed by the National Company law Tribunal, Mumbai Bench in so far it related to the observations that the 'Dutch Court' has no jurisdiction in the matter of 'corporate insolvency resolution process' of 'Jet Airways (India) Limited, (Offshore Regional Hub) and the consequential directions as given to the 'Resolution Professional' in respect of 'Offshore proceedings'.

However, NCLAT did not interfered with the order of admission of application under Section 7 of the Code filed by the 'State Bank of India' against 'Jet Airways (India) Limited', therefore, joint 'Corporate Insolvency Resolution Process' will continue in accordance with the Code.

The Parties facilitated the Proposed Cooperation with formulation of a 'Cross Border Insolvency Protocol'.

The key agreements under the said Protocol were as follows:

(i)This Protocol represents a statement of intentions and guidelines designed to minimize the costs and maximize value of assets/recoveries for all creditors of the Proceedings, by promoting the sharing of relevant information among the Parties and the international coordination of related activities in the Proceedings, while respecting the separate interests of creditors and other interested parties to the Proceeding, and the independence, sovereignty, and authority of the NCLT/NCLAT and Dutch Bankruptcy Court.

(ii)In recognition of the substantive differences among the Proceedings in both jurisdictions, this Protocol shall not impose on the RP or the Dutch trustee any duties or obligations (i) that may be inconsistent with or that may conflict with the duties or obligations to which the Parties are subject under applicable law, or

(ii)that are not in the interests of the Company's estate represented by the Parties and/or its creditors.

Furthermore, nothing in this Protocol should be interpreted in any way so as to interfere with (i) the proper discharge of any duty, obligation or function of the Parties, or (ii) the exercise of statutory or other powers otherwise available to a Party under applicable law.

(iii)The Parties should coordinate with each other and cooperate in all aspects of the Proceedings in terms of this Protocol. in doing so, the Parties acknowledge and agree that the Parties shall deal in good faith with each other in the interests of maximizing value of assets/recovery for all of the Company's creditors.

The Parties recognised that the Company being an Indian company with its centre of main interest in India, the Indian Proceedings are the main insolvency proceedings and the Dutch Proceedings are the non-main insolvency proceedings to promote international cooperation and the coordination of activities in the Proceedings; and to promote communication among the Parties and the CoC.

(iv)In the spirit of cooperation, the Dutch trustee aims to not take any decision under the Dutch Proceedings that would adversely impact the interests of the Company or the creditors. in the event it becomes necessary for the Dutch trustee in compliance of the Dutch Bankruptcy Court or any other court, or under any applicable law, to take any decision that might adversely impact the interests of the Company or the creditors, the Dutch trustee shall give advance intimation of such decision to the RP.

(v)The Dutch trustee shall seek inputs, notify the RP and consult the RP, and will be mindful of the Indian Proceedings prior to any material decision being taken in the Dutch Proceedings.

(vi)The 'Committee of Creditors' have no role to play as the agreement reached between the 'Dutch administrator' and the 'Resolution Professional' of India is on the basis of the direction of this appellate tribunal. In spite of the same, unfortunately the 'Committee of Creditors' interfered with the matter and put its view to the 'Resolution Professional' resulting into difference of the suggestions.

(vii)The NCLAT clarified that the 'Dutch Trustee (Administrator) will work in co-operation with the 'Resolution Professional of India' and, if any, suggestion is required to be given, he may give it to the 'Resolution Professional'. The draft of 'Cross Border Insolvency Protocol' clause is made final and should be treated as a direction of this appellate tribunal and it would be mandatory to comply with the order of this appellate tribunal subject to the other procedures which are to be followed in terms of the 'Insolvency and Bankruptcy Code, 2016.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 1(a) (Syllabus 2017).

With the globalization, the business at international level is increasing day by day and also the presence of the companies in different countries which are having different regulations relating the business and insolvency process in respect of Cross Border Insolvency. The law adopted by 44 countries is UNCITRAL Model of Cross Border Insolvency, 1997 and the same has been recommended by the Insolvency Law Committee to be adopted as Model Law in case of Cross Border Insolvency in India.

The statement that Insolvency and Bankruptcy Code, 2016 (the Code) do not deal with the Cross Border Insolvency is incorrect since Section 234 and 235 of the Code deal with Cross Border Insolvency. Section 234 of the Code empowers the Central Government to enter into an agreement with other countries to resolve situations pertaining to cross border insolvency and provides that:

a)The Central Government may enter into an agreement with the Government of any country outside India for enforcing the provisions of this Code. [Section 234(1)]

b)The Central Government may, by notification in the Official Gazette, direct that the application of provisions of this Code in relation to assets or property of corporate debtor or debtor, including a personal guarantor of a corporate debtor, as the case may be, situated at any place in a country outside India with which reciprocal arrangements have been made, shall be subject to such conditions as may be specified. [Section 234(2)].

Section 235 of the Code lays down that

(1)Notwithstanding anything contained in this Code or any law for the time being in force it, in the course of insolvency resolution process, or liquidation or bankruptcy proceedings, as the case may be, under this Code, the resolution professional, liquidator or bankruptcy trustee, as the case may be, is of the opinion that assets of the corporate debtor or debtor, including a personal guarantor of a corporate debtor, are situated in a country outside India with which reciprocal arrangements have been made under section 234, he may make an application to the adjudicating authority that evidence or action relating to such assets is required in connection with such process or proceeding.

(2)The Adjudicating Authority on receipt of an application under sub-section (1)

and, on being satisfied that evidence or action relating to assets under sub-section (1) is required in connection with insolvency resolution process or liquidation or bankruptcy proceeding, may issue a letter of request to a court or an authority of such country competent to deal with such request.

Considering the above, the statement made by the lawyer is not correct.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2022, Q. 3(a) (Syllabus 2017).

The facts are similar to the first cross border insolvency case of Jet Airways (India) Ltd v. State Bank of India and another, the NCLT referred that the section 234 and section 235 of the Insolvency and Bankruptcy Code, 2016 and also mentioned the absence of any sure-shot legal regime on the cross-border insolvency declared in that European country, the Netherland. So, the NCLT declared that Dutch proceeding is null and void.

Aggrieved by that order of NCLT, the Dutch court appointed Trustee filed appeal against that order of NCLT- Mumbai, the NCLAT allowed stating that it is a matter of cross – border insolvency protocol arranged between the 2 officials based on the model law. The Centre of Main Interests (COMI) of the Jet Airways was recognized to be India as the Jet Airways (India) limited was incorporated in India and it’s primary business is operated in India. This is the first cross border insolvency case in India, so the AA was somewhat shaky to arrive at a constructive decision at the same time the IBC being a newer law and is ever-evolving.

The ‘Dutch Trustee (Administrator) will work in cooperation with the ‘Resolution Professional of India’ and, if any, suggestion is required to be given, he may give it to the ‘Resolution Professional’.

NCLAT set asides part of the impugned order dated 20th June, 2019 passed by the NCLT, Mumbai Bench in so far it relates to the observations that the ‘Dutch Court’ has no jurisdiction in the matter of ‘corporate insolvency resolution process’ of ‘Jet Airways (India) Limited, (Offshore Regional Hub)

and the consequential directions as given to the ‘Resolution Professional’ in respect of ‘Offshore proceedings. However, it is was made clear that NCLAT have not interfered with the order of admission of application under Section 7 of the I&B Code filed by the ‘State Bank of India’ against ‘Jet Airways (India) Limited’, therefore, joint ‘Corporate Insolvency Resolution Process’ will continue in accordance with ‘Insolvency and Bankruptcy Code, 2016.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 2(b) (Syllabus 2022).

Sections 234 and 235 of the Insolvency and Bankruptcy Code, 2016 make provisions to deal with cases involving cross border insolvency.

Agreements with foreign countries : Section 234 empowers the central government to enter into an agreement with other countries to resolve situations pertaining to cross border insolvency. Section 234 of the Code provides that: The Central Government may enter into an agreement with the Government of any country outside India for enforcing the provisions of this Code. [(Section 234(1)].

The Central Government may, by notification in the Official Gazette, direct that the application of provisions of this Code in relation to assets or property of corporate debtor or debtor, including a personal guarantor of a corporate debtor, as the case may be, situated at any place in a country outside India with which reciprocal arrangements have been made, shall be subject to such conditions as may be specified. [Section 234(2)].

Letter of request to a country outside India in certain cases : Section 235 of the Insolvency and Bankruptcy Code, 2016 lays down that notwithstanding anything contained in this Code or any law for the time being in force if, in the course of insolvency resolution process, or liquidation or bankruptcy proceedings, as the case may be, under this Code, the resolution professional, liquidator or bankruptcy trustee, as the case may be, is of the opinion that assets of the corporate debtor or debtor, including a personal guarantor of a corporate debtor, are situated in a country outside India with which reciprocal arrangements have been made under section 234, he may make an application to the Adjudicating Authority that evidence or action relating to such assets is required in connection with such process or proceeding. [(Section 235(1)] The Adjudicating Authority on receipt of an application under sub-section (1) and, on being satisfied that evidence or action relating to assets under sub-section (1) is required in connection with insolvency resolution process or liquidation or bankruptcy proceeding, may issue a letter of request to a court or an authority of such country competent to deal with, such request. [Section 235(2)] The current cross border insolvency framework in India is dependent on India entering bilateral agreements with other countries. Finalisation of bilateral agreements is a long drawn process as it involves long term negotiations and thus takes a lot of time. Moreover, every trade is distinct and thus it would be difficult for the adjudicating authorities to enforce the agreements/treaties entered into with other countries.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 2(a) (Syllabus 2017).

The movement of cash and other assets by companies through multiple layered structures to different jurisdictions often creates regulatory hurdles. This complex web of corporate and financial arrangements can pose significant challenges for regulators and lawmakers, especially when dealing with insolvency and restructuring across borders. The explanation of model law conflicts, interpretation, and the definition and types of foreign proceedings in this context are as follows:

Model Law Conflicts:

Principle of supremacy of international obligations (Article 3) provides that to the extent the Model Law conflicts with an obligation of the state enacting the Model law arising out of any treaty or other form of agreement to which it is a party with one or more other states, the requirements of the treaty or agreement prevail.

Interpretation of Model Law:

In the interpretation of Model law, regard is to be had to its international origin and to the need to promote uniformity in its application and the observance of good faith. [Article 8] Meaning of “Foreign Proceeding”:

“Foreign Proceeding” means a collective judicial or administrative proceeding in a foreign State, including an interim proceeding, pursuant to a law relating to insolvency in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganization or liquidation.

Types of “Foreign Proceedings”:

Foreign proceedings can be classified in the following main types:

(a)“Foreign main proceeding” means a foreign proceeding taking place in the State where the debtor has the center of its main interests;

(b)“Foreign non-main proceeding” means foreign proceeding, other than a foreign main proceeding, taking place in a State where the debtor has an establishment within the meaning of subparagraph (f) of this Article; To fall within the scope of the Model law, a foreign insolvency proceeding needs to possess certain attributes. These include the basis in insolvency-related law of the originating State; involvement of creditors collectively; control or supervision of the assets and affairs of the debtor by a court or another official body; and reorganization or liquidation of the debtor as the purpose of the proceeding. Within those parameters, a variety of collective proceedings would be eligible for recognition, be they compulsory or voluntary, corporate or individual, winding up or reorganization.

It also includes those proceedings in which the debtor retains some measure of control over its assets, albeit under court supervision (e.g., suspension of payments, “debtor in possession”). An inclusive approach is also used as regards the possible types of debtors covered by the Model law.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 6(A) (Syllabus 2017).

No, we do not agree with the said statement. In fact the UNCITRAL Model Law on Cross Border Insolvency do harmonize the Insolvency Laws enacted by the individual countries.

Globally, cross-border insolvency laws are based on one country providing assistance to the other in taking control of the assets and eventual disposition of such assets of the debtor company. Such aims are achieved by the mutual recognition of each country's insolvency regime.

Some countries have adopted the UN Commission on International Trade Law (UNCITRAL) Model Law on cross-border insolvency, adopted in 1997. The model law is designed to provide a harmonized approach to the treatment of cross-border insolvency proceedings, facilitate cooperation between the courts and office holders involved in the insolvency in different jurisdictions, and provide for the mutual recognition of judgements and direct access of foreign representatives to the courts of the enacting state.

The Legislative Guide on Insolvency Law is intended to be used as a reference by national authorities and legislative bodies when preparing new laws and regulations or reviewing the adequacy of existing laws and regulations.

The UNCITRAL Model Law on Cross-Border Insolvency, is designed to assist States to equip their insolvency laws with a modern, harmonized and fair framework to address more effectively instances of cross-border insolvency. Those instances include cases where the insolvent debtor has assets in more than one State or where some of the creditors of the debtor are not from the State where the insolvency proceeding is taking place.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 4(a) (Syllabus 2017).

The Preamble to UNCITRAL Model Law on Cross-Border Insolvency provides that:

The purpose of this Law is to provide effective mechanisms for dealing with cases of cross-border insolvency so as to promote the objectives of:

(a)Co-operation between the courts and other competent authorities of this State and Foreign States involved in cases of Cross-border insolvency;

(b)Greater legal certainty for trade and investment;

(c)Fair and efficient administration of Cross-border insolvencies that protects the interests of all creditors and other interested persons, including the debtor;

(d)Protection and maximization of the value of the debtor's assets; and

(e)Facilitation of the rescue of financially troubled business, thereby protecting investment and preserving employment.

UNCITRAL Model Law on Cross-Border Insolvency applies where:

(i)Assistance is sought in this State by a foreign court or a foreign representative in connection with foreign proceeding; or

(ii)Assistance is sought in a foreign State in connection with a proceeding under [identify laws of the enacting State relating to insolvency]; or

(iii)A foreign proceeding and a proceeding under (identify laws of the enacting State relating to insolvency) in respect of the same debtor are taking place concurrently; or

(iv)Creditors or other interested persons in a foreign State have an interest in requesting the commencement of or participating in a proceeding under (identify laws of the enacting State relating to insolvency).

UNCITRAL Model Law on Cross-Border Insolvency does not apply to a proceeding concerning (designate any types of entities, such as Banks or Insurance Companies, that are subject to a special Insolvency regime in this State and that this State wishes to exclude from this Law).

The acceptance of the cross border insolvency norms was observed in the CIRP of Jet Airways Limited where the NCLAT has allowed Dutch Administrator to attend the meeting of the Committee of Creditors, however, with limited or no power to participate directly.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 6(b) (Syllabus 2017).