Cross-Border Insolvency
Domain overview
Cross-Border Insolvency tests the UNCITRAL Model Law, recognition of foreign proceedings, centre of main interests, and India's incomplete statutory framework. The key is to distinguish the Model Law from India's current position.
Core rules
- The UNCITRAL Model Law on Cross-Border Insolvency, 1997 provides for recognition of foreign main and non-main proceedings, relief, cooperation, and a public policy exception.
- A foreign main proceeding is based on the debtor's centre of main interests (COMI); a foreign non-main proceeding is based on an establishment.
- India has not operationalised cross-border insolvency. Section 234 of the Companies Act, 2013 is an enabling provision, but the rules have not been notified.
- The IBC contains no cross-border recognition mechanism. Foreign creditors may file claims in Indian CIRP, but foreign representatives cannot seek recognition as of right.
- Draft rules have been proposed, but until notification, courts rely on comity and general law, which is uncertain.
Worked example
A foreign liquidator appointed in Country X seeks recognition in India to stay asset transfers. Without notified section 234 rules, NCLT has no clear jurisdiction to recognise the foreign proceeding. The liquidator may instead participate in an Indian CIRP as a creditor or pursue remedies under general law. The reasoning: recognition is a statutory gateway, not a matter of comity alone.
Traps
Assuming India has adopted the Model Law; confusing COMI with the registered office; treating section 234 as operative; ignoring the public policy exception; assuming foreign creditors cannot participate in IBC proceedings.