Varsha Aithala

Report of the Cross-Border Insolvency Committee, June 2020: A Primer

Cross-border insolvency covers circumstances where an insolvent individual or company, i.e. debtor, has assets and/or creditors in more than one country. Such disputes are triggered when an Indian company has foreign assets, liabilities or operations, and when a foreign company has Indian assets, liabilities or operations. Readers may recall the long-drawn-out insolvency proceedings involving Jet Airways, which threw up several challenges for the Indian and Dutch authorities. While the airlines operated out of India, some of its assets located in the Netherlands were seized during the foreign insolvency proceedings. The process impacted the livelihoods of thousands of Jet Airways’ Indian employees, besides its creditors and other stakeholders.

Cross-border insolvency cases involve parallel proceedings across multiple jurisdictions. They require a high degree of co-ordination, co-operation and communication between countries. Cases like those of Jet Airways and Videocon have shown that India’s existing legal framework is not equipped to comprehensively deal with cross-border insolvency.

Towards this end, the Ministry of Corporate Affairs (MCA), Government of India, established the Insolvency Law Committee (ILC) to review the implementation of India’s existing insolvency law. In October 2018, the ILC submitted its report, comprising broad ‘principle-level’ recommendations. ‘Draft Part Z’ of the report recommends a comprehensive framework to tackle cross-border insolvency. It addresses foreign requests for access to domestic courts, recognition of foreign insolvency proceedings in India, co-operation between Indian and foreign courts and insolvency professionals, and co-ordination between concurrent insolvency proceedings in different countries. In January 2020, the MCA constituted the Cross-Border Insolvency Rules and Regulations Committee (CBIRC) to frame the rules and regulations to implement Part Z.

This article explains why India needs a separate law to deal with cross-border insolvency, outlines the steps taken in this direction, and culminates in the key contributions of the CBIRC report.

The need for a law

The Insolvency and Bankruptcy Code, 2016 (IBC) inter alia consolidates laws relating to insolvent corporate entities, individuals and partnership firms. Its objective is to maximise the value of assets in a time-bound manner, promote availability of credit, and balance interests of all stakeholders. While sections 234 and 235 of the IBC tackle cross-border insolvency, the resolution mechanism for each case depends on India’s bilateral agreements with other countries. There are no clear rules guiding the treatment of overseas assets, operations and liabilities of corporate entities. Given the increasing number of such cases, and the need for a decisive and comprehensive mechanism, the proposed law on cross-border insolvency is an urgent policy priority.

Towards reform

The reforms proposed by the ILC aim to make India’s insolvency regime internationally competitive, reduce the time and costs involved for all stakeholders, and improve the country’s image as a strong jurisdiction of choice for insolvency proceedings. They are based on the UNCITRAL Model Law on Cross Border Insolvency (‘Model Law’), a widely accepted legal framework for cross-border insolvency cases adopted by several countries. The ILC adapted the Model Law to suit Indian requirements. This meant defining the types of entities covered, designating specific benches of the adjudicating authority for cross-border insolvency cases, determining forms of access and recognition for foreign representatives, and specifying types of reliefs provided, among others.

The committee and its process

The CBIRC comprised subject matter experts including senior bureaucrats, financial advisors, lawyers and banking professionals. It was assisted by a research team that included sector specialists and independent researchers, including this author. The committee followed a rigorous method of consultations with Indian and foreign practitioners and experts. Regular internal meetings were supplemented by engagement sessions with stakeholders including academics, foreign judges and insolvency and financial sector professionals. Meanwhile, the research team undertook an extensive review of past reports, literature, case law and best practices followed in multiple jurisdictions, to better understand the existing and potential challenges in cross-border insolvency situations.

The CBIRC report, submitted to the MCA in June 2020, was made available for public comments in November 2021 to assess the potential impact of the proposed law on people’s rights. Feedback and comments received from stakeholders, including members of the public, until 15 December 2021, will be considered while finalising draft Part Z into law.

The CBIRC report

The key contribution of the CBIRC report is the creation of typologies of cross-border insolvency cases based on the identities of the parties involved. Different kinds of proceedings are accompanied by applicable scenarios. ‘Foreign assets’ could include, for instance, cash holdings in a foreign bank account or a production facility or office in a foreign country. But they can also take intangible forms, i.e., those not linked with physical presence or human intervention. For example, investments in foreign securities, licenses or supply agreements. Similarly, ‘foreign operations’ may or may not be linked to the physical presence of the debtor company(ies) in a foreign location, and could include customers, or dues to be recovered or paid, in overseas jurisdictions.

The CBIRC report describes specific issues and challenges, and recommended solutions for the sector regulator—i.e., the MCA—in different types of cross-border insolvency proceedings. Each solutions is supported by a detailed rationale to strengthen the current regulatory framework. For instance, at present, each foreign creditor of a corporate debtor needs to be issued a notice of the proceedings individually. This is tedious and costly, since the debtor may have offices in various countries. Moreover, it is difficult to monitor the progress of parallel insolvency proceedings. The draft rules simplify this process by deeming sufficient a notice published on the websites of the corporate debtor and the Insolvency and Bankruptcy Board of India (IBBI). In cases involving Indian corporate debtors, the draft rules suggest that proceedings can be conducted before any bench of the National Company Law Tribunal (NCLT) where the company’s registered office is located. So far, this function has been restricted to the Principal Bench of the NCLT.

These recommendations are accompanied by a guide for the drafting of new rules, regulations and notifications; and for amending the IBC or other applicable laws, such as the Companies Act, 2013 and the Limited Liability Partnerships Act, 2008.

The CBIRC report lays down clear tests to determine a corporate debtor’s Centre of Main Interest (COMI). COMI refers to the jurisdiction with which a company is most closely associated—where the debtor administers its interests on a regular basis as ascertainable by third parties. The report explains the factors and time period to be considered for such determination. Identifying the central administration of a debtor is a critical step in the resolution process, with implications for the reliefs that can be granted.

Under its procedural recommendations, the CBIRC report establishes a minimal framework to enable foreign representatives to access insolvency proceedings conducted in India, and Indian insolvency practitioners to access relevant systems and infrastructures in foreign jurisdictions. It lists reliefs that that adjudicating authorities can grant with respect to recognised foreign insolvency proceedings. In keeping with the cooperative spirit of the Model Law, the CBIRC recommends instituting protocols for co-operation and communication between adjudicating authorities, foreign courts, foreign representatives and insolvency practitioners across jurisdictions.

Importantly, the CBIRC report offers suggestions to build the institutional capacities of NCLT and IBBI to work on cross-border insolvency matters.


In simplifying procedures, clarifying processes and removing the uncertainties associated with multi-jurisdictional insolvency cases, the CBIRC report sends a strong signal to the international business community of India’s preparedness to effectively deal with the complexities of multi-jurisdiction business transactions. Draft Part Z of the IBC, once made effective through the rules, regulations and notifications listed in the CBIRC report, has the potential to improve the value of stressed assets and ease the resolution of cross-border insolvency disputes in India.

The report can be accessed here.

About the Author

Varsha Aithala is a PhD student at NLSIU and also a recipient of the Dr N R Madhava Menon Scholarship for 2020-23. Varsha’s doctoral research examines the scope for private capital in Indian legal system reform. Her research interests span the areas of private law, insolvency, social investment, technology law and legal system reform. She has a Master’s degree in Corporate Law from the University of Cambridge and a Bachelor’s degree in Law from Nalsar University of Law. Previously, she was Research Fellow and faculty at the School of Policy and Governance, Azim Premji University. She also served as an independent researcher to the Cross Border Insolvency Committee constituted by the Ministry of Corporate Affairs. Prior to that, she was a senior associate in Samvād: Partners. She has more than a decade of practice experience in corporate and commercial laws in India and the United Kingdom.