INTRODUCTION
As a result of the opening of boundaries brought about by globalization, businesses now operate across countries. When these businesses become insolvent, domestic insolvency procedures frequently fail, leading to problems with jurisdictional conflicts, asset tracing, and creditor claims. A foundation for international collaboration and recognition of bankruptcy procedures are provided by the UNCITRAL Model Law on Cross-Border Insolvency (1997). Numerous nations have adopted it with adjustments, including the US, UK, Singapore, and Australia. There is currently no comprehensive cross-border structure in India’s Insolvency and Bankruptcy Code, 2016 (IBC). Sections 234–2351 are restrictive and call for bilateral treaties, which are unfeasible in the modern world. The Model Law is intended to help States give their insolvency laws a contemporary legal framework so that they can more successfully handle cross-border insolvency processes involving debtors who are in serious financial trouble or are insolvent. Instead of trying to unify substantive insolvency law, it focuses on allowing and promoting collaboration and coordination between jurisdictions while acknowledging the distinctions between national procedural legislation. According to the Model Law, a bankruptcy is considered cross-border if the debtor owns assets in many states or if part of the debtor’s creditors is not from the state where the insolvency action is being conducted2.
In 2018, the Law Committee on Insolvency3 under the Chairmanship of Shri Injeti Srinivas recommended for adopting the Model Law with modifications, but till date its implementation is pending. Though in the year 2022 we adopted this model law but still we lack a proper framework in its respect.
THE INDIAN LANDSCAPE
Presently under section 234 & 235 of the Insolvency and Bankruptcy Code 2026 deals with Cross Border Insolvency. It has been a decade from the coming of the IBC Code 2016 and we still lack a comprehensive code on cross border cases. the India’s cross border insolvency is a a historic juncture that is transforming from a fragmented law to a more sophisticated law. The above stated provision does not actually solve the insolvency proceeding that has been scattered across multiple jurisdictions as it required a bilateral treaty between the states where the cross border proceeding is to be carried out but till date there has been no significant treaties between any state on one side and India on the other side states thus making this provision significantly unused forcing the Indian courts to rely upon various judgements to solve cases.
But we can see that the landscape has significantly changed with the coming up of the IBC(Amendment) Bill 2025. With this bill coming into picture, it has paved way for the integration of cross border insolvency in the IBC code 2016.now India is moving toward a ‘Modified Universalism’ that allows for court-to-court cooperation and recognition of foreign proceedings. This reform has been viewed as an economic excellency and it will lead to faster resolution of bankruptcy proceeding and will not hamper economic growth. This reform has been viewed as an economic imperative which would maximise the asserts value of the creditors and will provide an impression that the Indian market is a secure field for investment. Thus, it would ultimately lead to economic growth.
DECODING THE UNCITRAL MODEL LAW: THE FOUR PILLARS
The model law that was adopted in the year 1997 was not a rigid treaty but a flexible one in which the states were free adopt and modify it as per their liking or need .it basically rest upon the four important pillars Access, Recognition, Relief, Cooperation. The model law is not something that would fit all in the same way rather states are free to alter it. For India the main challenge would be is to integrate it in IBC 2016 which means moving away from mere diplomatic letter of request to a more standardised system of functional four pillars.
• Access – Article 9 to 14 of the model law deals with “right of direct access”. Earlier a foreign liquidator needs to navigate a maze of civil procedure just to be heard but under Article 9 of the model law a foreign representative can apply directly to the NCLT. Again Article 10 ensures that by simply making an application, the foreign representative does not subject themselves or the foreign assets to the general jurisdiction of Indian courts for other matters. thus, it is a “limited appearance” designed to encourage cooperation without fear of legal overreach.
• Recognition – Recognition as a pillar is often termed as the heart of the Model Law on cross border insolvency. It basically allows the NCLT to officially acknowledge a foreign legal proceeding as valid in India. The law generally differentiates between a Foreign Main Proceeding (where the debtor’s “Centre of Main Interests” or COMI is located) and a Foreign Non-Main Proceeding (where the debtor merely has an “establishment”). Under the said model Article 16 says that if a foreign court says a proceeding is a “Main”, the Indian court can generally take what they say unless anything contrary is proved. Thus, avoiding re-litigating the same facts in multiple countries.
• Relief – with the recognition of the proceeding the court must act fast in order to prevent “asset stripping” by local the creditors. Even before a final decision on recognition is made, the NCLT has the authority to grant urgent relief to freeze assets if there is a risk that they will disappear. If a proceeding is recognized as “Main,” an automatic stay may be triggered. This will ultimately stop all lawsuits and executions against the debtor’s assets in India that will create a “breathing space” for a global restructuring plan. The court has a broader ambit of powers to assist the foreign representative which includes examination witnesses or turning over assets to the foreign liquidator for its distribution.
• Cooperation – This is perhaps one of the most revolutionary aspects for the Indian judiciary. Earlier, judges would communicate through formal diplomatic channels but with the coming of Article 25 it explicitly empowers the NCLT to talk directly to foreign courts and its representatives. Now the case is not just limited to letters but also it includes joint hearings, the appointment of a single person to coordinate the two cases across two different jurisdictions and also the sharing of real time information. Thus, it transforms the judge’s role from a passive observer into a more active coordinator of a global solution.
CRITICAL CHALLENGES IN INDIAN CONTEXT
Adopting a global template like the UNCITRAL Model Law is not an easy task specially with respect to a diverse country like India. The transition from a rigid, territorial system to a comparatively fluid, international one involves a significant friction. The following sections outline the most pressing problem that legislators and the judiciary must navigate a way out in order to completely implement the model law.
• The COIM Conundrum – The entire Model Law revolves around the concept of the Centre of Main Interests (COMI). If a foreign proceeding is to be recognized as a “Main” proceeding4, it will automatically stay the local proceeding that was earlier been carried out. However, the actual problem arises while defining COMI in an era of digital commerce and shell companies is nothing sort of nightmare.it has been seen that many Indian conglomerates use “Special Purpose Vehicle” in the Cayman Island or Mauritius thus they act tax havens.
• The Public Policy Shield – under Article 6 of the Model Law5 a country can refuse cooperation if that would contrary go against their public policy. In the Indian legal context, the term “Public Policy” is famously very broad. There is a fear among the foreign investors that Indian courts might use this as an exception to protect their own local creditors drawing the expense of foreign transparency. If “Public Policy” becomes a frequent excuse tool to block foreign court orders, there is no doubt that the international investors might ultimately lose faith in the working of the IBC. The challenge lies in narrowing this definition so it only applies to core constitutional values, thus faith shall not lose.
• Infrastructure Issue – The National Company Law Tribunal (NCLT) is already in the state of freight of the IBC, that it is struggling with massive backlogs and vacancies of proceeding. Cross-border cases require judges not only to understand domestic laws but also understand foreign laws, coordinate via video link with international liquidators, and to manage the assets in various time zones. Without specialized “International Benches” or a massive tech upgrade, there is a high chance of NCLT becoming a graveyard for complex global insolvencies.
THE REFORM OF 2025
With the coming of the Insolvency and Bankruptcy Code (Amendment) Bill, 20256, it Represents a watershed moment in India’s economic history. The legislature by proposing the inclusion of “Part Z” a new chapter that is dedicated solely to cross-border issues. now it can be said that the legislature has finally provided the statutory “teeth” that were missing for nearly a decade in the Indian legal system. This move toward “Modified Universalism” is legal system will be able to handle such as the complexities of a multi-billion dollar, multi designed in such a way that this will ultimately reassure global capital support that India’s jurisdictional collapse without the chaotic, temporary judicial improvisations of the past. The most significant prospect of the 2025 reforms is that it will boost the Foreign Direct Investment (FDI). Earlier, it was the view of the foreign lenders that India is nothing but a “Black hole” for asset recovery due to the uncertainty that how foreign court orders would be treated. The new framework of 2025 provides a clear, time-bound relief which was not previously present. Once a foreign proceeding is recognized, the automatic moratorium prevents local creditors from grabbing assets, thus securing foreign investors right. This predictability turns India from a risky, territorial market into a sophisticated jurisdiction that equates to global practice sand effectively lowering the risk for businesses operating in the Indian subcontinent.
POLICY RECOMMENDATION
In order to bridge the existing gap between policy legislation and policy proper implementation following recommendation are suggested
• Specialised cross border benches – The Ministry of Corporate Affairs should designate specific NCLT benches starting from metro cities then slowing moving to other cities. These benches should be equipped with such judicial officer who are specially trained in dealing with private international law.
• Narrowing the meaning of public policy as an exception – As discussed above “Public Policy “has become a shield used by local creditors thus creating uncertainty in the mind of foreign investors, thus the IBBI need to issue a clear Guidance Note. This in response shall limit this as an exception only to core Constitutional values, ensuring that “economic inconvenience” to a local creditor is not used as a reason to stop international cooperation.
• Digital cooperation and advancement – as the time is of digitalisation, India’s main object should be establishment of a Digital Insolvency Portal that allows for document sharing and joint video hearings between the NCLT and foreign courts. Thus, there will be cooperation and sense of security.
• Enhancing the role of Insolvency Professional – Insolvency Professional plays a very vital role during insolvency proceedings. thus, in order to achieve the object of effective cross border insolvency, the role of insolvency professional shall be enhanced. There need to be Special certification programs that will train “Foreign Representatives” who can represent India’s interests in foreign courts.
CONCLUSION
The transformation of the Insolvency and Bankruptcy Code (IBC) from a purely territorial law to a multinational framework marks a new legal age for India. For years, the absence of a cross border framework has significantly affected India’s economy. By finally completely adopting the UNCITRAL Model Law via the 2025 Amendment Bill, it shows that India is not merely adopting a foreign templated but also signifying its everlasting commitment to support global trade and commerce. The research has demonstrated that the modified universalism is gold approach in today’s time but its effectiveness in India will depend upon its proper implementation rather than just a piece of legislation.
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Footnotes
1. The Insolvency and Bankruptcy Code, No. 31 of 2016 (India).
2. Ran Chakrabarti, Key Issues in Cross-Border Insolvency, 30 Nat’l L. Sch. India Rev. 108 (2018).
3. Ministry of Corp. Aff., Report of the Insolvency Law Committee (Mar. 2018).
4. A.K. Sikri, Cross Border Insolvency: Court-to-Court Cooperation, 51 J. Indian L. Inst. 467 (2009).
5. UNCITRAL Model Law on Cross-Border Insolvency (1997).
6. The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 (India).