Cross-Border Insolvency Regime Under IBC Amendments

Cross-Border Insolvency under the IBC Amendment Bill, 2025: Legislative Framework, Section 240C and Institutional Realities

The globalisation of commerce has made cross-border insolvency an inevitable legal challenge. Indian companies operate internationally, hold overseas assets, and raise foreign capital. Conversely, foreign entities maintain assets and creditor relationships within India. In this context, a modern insolvency regime must provide a predictable mechanism for handling multi-jurisdictional insolvency scenarios.

While the Insolvency and Bankruptcy Code, 2016 (IBC) created a consolidated domestic insolvency framework, its cross-border architecture remained limited. The IBC Amendment Bill, 2025 seeks to address this structural gap, principally through the introduction of an enabling cross-border insolvency framework.

It is important to note at the outset that the Amendment Bill is presently at the legislative stage and is yet to be accorded assent by both Houses of Parliament. Consequently, the provisions discussed below remain prospective and subject to parliamentary approval and possible modification.

The Existing Cross-Border Framework: Sections 234 and 235

From the inception of the Code, cross-border insolvency found limited mention in Sections 234 and 235.

• Section 234 empowers the Central Government to enter into bilateral agreements with foreign countries for enforcing the provisions of the Code.
• Section 235 authorises the Adjudicating Authority — the National Company Law Tribunal (NCLT) — to issue letters of request to foreign courts in relation to assets situated outside India.

However, these provisions have remained largely dormant. Their operation depends on reciprocal bilateral arrangements, which have not been systematically concluded. As a result, there has been no structured statutory framework governing recognition of foreign proceedings, cooperation between courts, or participation of foreign representatives in Indian proceedings.

For foreign creditors and multinational debtors, this created uncertainty and limited statutory support for coordinated cross-border insolvency resolution.

Judicial Innovation: The Jet Airways Precedent

Despite the absence of a detailed statutory framework, Indian tribunals have, in certain instances, attempted to facilitate cross-border cooperation.

In the insolvency proceedings of Jet Airways, parallel proceedings were initiated in India and the Netherlands. The matter reached the National Company Law Appellate Tribunal (NCLAT), which played a pivotal role in facilitating cooperation between the Indian resolution professional and the Dutch administrator.

The NCLAT approved a cross-border cooperation protocol to coordinate the proceedings and protect stakeholder interests. This was a significant development in Indian insolvency jurisprudence, reflecting a pragmatic and commercially sensible approach to international insolvency coordination.

However, it is crucial to note that such cooperation was largely achieved through judicial innovation and tribunal-led intervention rather than through the structured exercise of statutory provisions under Sections 234 or 235. The absence of a codified recognition mechanism meant that cooperation depended heavily on judicial discretion and case-specific arrangements.

While the Jet Airways case demonstrated the willingness of Indian tribunals to adopt a cooperative approach, it also underscored the need for a formal legislative framework.

Section 240C: The Enabling Provision

The Amendment Bill introduces Section 240C, which constitutes the core legislative pivot for cross-border insolvency reform.

Nature of Section 240C

Section 240C is enabling in character. It empowers the Central Government to:

• Frame rules for the administration and conduct of cross-border insolvency proceedings;
• Specify the manner in which such proceedings may be recognised and coordinated;
• Prescribe conditions, procedures, and safeguards applicable to such cases;
• Apply the framework to specified classes of debtors.

Importantly, Section 240C does not itself codify the substantive mechanics of cross-border insolvency within the primary statute. Instead, it delegates rule-making authority to operationalise the framework.

Thus, unlike jurisdictions where cross-border insolvency provisions are directly embedded within the principal legislation, India’s approach under the Amendment Bill places significant reliance on subordinate legislation.

What Section 240C Does Not Do

For technical precision, it is important to note what Section 240C does not presently contain:

• It does not define “centre of main interests” (COMI);
• It does not explicitly categorise foreign proceedings as main or non-main;
• It does not expressly grant a statutory right of direct access to foreign representatives within the Code itself;
• It does not automatically provide for recognition or relief mechanisms in the text of the primary statute.

These elements, if adopted, would likely emerge through rules framed under Section 240C.

Anticipated Alignment with International Standards

Policy discussions surrounding the reform suggest that the framework may draw from the UNCITRAL Model Law on Cross-Border Insolvency, formulated by the United Nations Commission on International Trade Law.

The Model Law rests on four pillars:

1. Access to domestic courts by foreign representatives;

2. Recognition of foreign proceedings;

3. Relief upon recognition;

4. Cooperation and coordination between courts.

However, it must be emphasised that the Amendment Bill does not textually incorporate the Model Law. Any substantive adoption of its principles will depend on the content of rules notified under Section 240C.

Thus, references to COMI or structured recognition mechanisms in academic or policy discourse are anticipatory, not currently codified within the IBC.

Institutional Challenges: Implementation and Capacity

Even assuming comprehensive rules are notified under Section 240C, implementation presents significant institutional challenges.

The NCLT system is already burdened by:

• A substantial backlog of insolvency and company law matters;
• Delays in admission and completion of corporate insolvency resolution processes;
• Infrastructure limitations;
• Administrative bottlenecks;
• Vacancies in judicial and technical member positions, with appointments sometimes pending for extended periods.

Cross-border insolvency cases are inherently more complex. They may require:

• Examination of foreign judicial orders;
• Interpretation of foreign law;
• Jurisdictional analysis;
• Coordinated hearings with foreign courts;
• Urgent interim relief to preserve value.

Without structural strengthening, the introduction of cross-border provisions may strain the existing adjudicatory framework.

The Need for Systemic Revamp

For Section 240C to achieve its intended objectives, legislative reform must be accompanied by institutional reform. This may require:

• Timely filing of NCLT vacancies;
• Specialised training in cross-border insolvency jurisprudence;
• Clear procedural rules for recognition and cooperation;
• Enhanced digital infrastructure for international coordination;
• Capacity building for insolvency professionals and registry staff.

The IBC’s success has been grounded in time-bound resolution and value maximisation. Cross-border insolvency will demand even greater procedural efficiency.

Conclusion

Sections 234 and 235 of the IBC represented a limited and treaty-dependent cross-border mechanism that remained largely unutilised. The insertion of Section 240C under the IBC Amendment Bill, 2025 marks a significant legislative shift — moving from bilateral cooperation to a rule-based statutory foundation for cross-border insolvency.

However, Section 240C is enabling rather than self-executing. The substantive contours of India’s cross-border insolvency regime will depend on the rules notified under it. The effectiveness of this reform will ultimately turn not only on statutory drafting but also on institutional readiness.

In a globalised economy, cross-border insolvency reform is indispensable. Section 240C lays the groundwork — but its success will depend on the precision of subordinate legislation and the capacity of the adjudicatory system to administer it efficiently.