Bridging Borders: India and the UNCITRAL Model Law

Introduction

The rise of globalization has changed the environment in which businesses function. No longer is a business just confined to one country — a conglomerate can be headquartered in one country, have subsidiary companies in other countries, have creditors dispersed throughout the world, and have assets that are located in more than one jurisdiction! This interconnected way of doing business has led to expansion; however, it also creates significant challenges when a business is experiencing financial difficulties.

Example of Cross-Border Insolvency

We should picture a multinational in trouble — for example, a manufacturing company located in India operating a manufacturing facility and a bank account in Singapore with creditors located in the USA and Europe. If it is insolvent, a court in Singapore might start an insolvency process; meanwhile, a court in another country might also initiate a similar insolvency proceeding.

This chaotic situation may be exacerbated by conflicting outcomes:

• Creditors in various countries may start fighting to be paid first.
• Assets in various jurisdictions might be sold quickly, often at prices much lower than fair value.
• Parties may end up litigating in multiparty disputes across several countries.

Recognizing that this was a global problem, the United Nations Commission on International Trade Law (UNCITRAL) responded by providing the world with the Model Law on Cross-Border Insolvency in 1997. Since then, over 50 jurisdictions, including the USA, UK, and Singapore, have enacted legislation based on the Model Law to assist with harmonization of cross-border insolvency processes.

In India, however, a robust yet still evolving domestic insolvency regime exists under the Insolvency and Bankruptcy Code (IBC), enacted in 2016. While this regime provides many newly-created insolvency concepts and processes that facilitate dealing with domestic insolvency, it does not provide for a cross-border insolvency regime. This gap has been felt acutely in high-profile cases like Jet Airways, where courts had to devise ad-hoc solutions to coordinate with foreign proceedings.

The Current Indian Framework

The IBC includes two sections — Sections 234 and 235 — that relate specifically to cross-border insolvency; however, they are virtually unusable:

Issue: This is a slow, uncertain process that is solely contingent upon the foreign court exercising its discretion to assist. In short, India’s current legal framework for cross-border insolvency is not cohesive or practically useful.

Jet Airways Case: A Wake-Up Call

The limitations of the Indian insolvency framework were exemplified in Jet Airways (India) Ltd. v. State Bank of India & Anr. (2019). Jet Airways, at one point India’s largest privately-owned airline, had insolvency proceedings commenced against it in India while at the same time a Dutch court commenced bankruptcy proceedings for its assets in the Netherlands.

The two concurrent court proceedings raised a constitutional dilemma:

• Which court’s order should be relied upon?
• How can two jurisdictions coordinate without a formal legal framework?

The Appellate Tribunal permitted, for the first time, a “cross-border protocol” whereby the Dutch administrator and the resolution professional in India could coordinate recovery efforts. While this was a positive step, it was ad-hoc and case-specific — not a systemic or legislative solution.

This case highlighted the urgent need for a formal, predictable legal framework to handle such cross-border conflicts effectively.

UNCITRAL Model Law: Features and Framework

The UNCITRAL Model Laws on Cross-Border Insolvency (1997) are a set of non-binding norms that offer a model for adoption into various domestic systems. The appeal of the Model Laws lies in their flexibility and global acceptance — nations such as the USA, UK, Singapore, and South Korea have adopted them.

The Model Laws are designed to promote consistency and efficiency through four main pillars:

• Access – Granting Foreign Representatives Access
• Recognition – Identifying Main vs Non-Main Proceedings
• Relief – Protecting Assets and Creditors
• Cooperation and Coordination – Courts Working Together

Access – Granting Foreign Representatives Access

This pillar defines the role of foreign insolvency representatives — such as administrators, liquidators, or resolution professionals appointed in another jurisdiction — and allows them direct access to local courts. Without this access, representatives would have to wait for a government-to-government or bilateral treaty process, delaying recovery and increasing costs.

Example

A company based in Singapore has assets located in India. Under this pillar, the Singaporean liquidator can directly approach the NCLT (National Company Law Tribunal) in India to recover assets, without waiting for a government-level agreement.

Real Case Illustration: Jet Airways (2019)

The Dutch administrator in the Jet Airways case could not directly approach the Indian court and had to rely on informal cooperation instead of formal agreements, delaying the process. This case highlights the value of the Model Law — enabling direct, efficient participation by foreign administrators without waiting for governmental mediation.

Recognition – Identifying Main vs Non-Main Proceedings

Local courts can recognize foreign insolvency proceedings as either:

Example

Suppose a company is based in the UK (COMI) but operates factories in India and Germany:

• UK proceeding → Main Proceeding
• Indian proceeding → Non-Main Proceeding
• German proceeding → Non-Main Proceeding

This classification helps prevent jurisdictional conflicts and clarifies which court has primary control.

Global Example: Lehman Brothers (2008)

When Lehman Brothers collapsed, the US proceeding was recognized as the Main Proceeding. This allowed other countries’ courts to coordinate and avoid conflicting orders, ensuring smoother international resolution.

Relief – Protecting Assets and Creditors

Meaning

Once a foreign proceeding is accepted, local courts can grant relief to:

• Impose an automatic stay on creditor actions to prevent a “race to grab assets.”
• Declare a moratorium on lawsuits or enforcement actions.
• Protect assets from being sold below market value.

Without such relief, assets could quickly lose value due to aggressive creditor actions that undermine equitable recovery.

Example

If a company becomes insolvent in Singapore, creditors in India may rush to seize assets there. Under the Model Law, Indian courts can freeze these actions temporarily to ensure orderly resolution.

Real Case Reference: Re HIH Casualty and General Insurance Ltd. (UK, 2008)

In this case, relief orders facilitated cross-border cooperation and equitable value distribution between UK and Australian creditors.

Cooperation and Coordination – Courts Working Together

The Model Law encourages direct communication and cooperation between:

• Courts in different jurisdictions
• Resolution practitioners and insolvency professionals across borders

Cooperation can include sharing information, coordinating timetables, or even establishing joint cross-border protocols. Without this cooperation, courts risk issuing conflicting orders or duplicating efforts, causing confusion and resource wastage.

Example: Jet Airways (India–Netherlands)

The Indian and Dutch courts informally cooperated to manage Jet Airways’ insolvency proceedings. With the Model Law, this cooperation could have been formalized and more predictable, ensuring faster resolution.

Global Example: Nortel Networks (2013)

The Nortel Networks case between the USA and Canada demonstrated international cooperation in insolvency. Courts in both countries held joint hearings via video conference, allowing judges to make real-time coordinated decisions — a model example of this pillar’s success.

Rationale for UNCITRAL Model Law for India

Many practical advantages result from adopting the Model Law:

Increase Investor Confidence

Foreign investors and creditors continue to be hesitant to lend or invest in businesses in India because of uncertainty with cross-border issues in insolvency. A clearer, more predictable, internationally accepted framework will create confidence and make India a competitive market for capital from around the world.

Expedite Asset Recovery

Asset recovery from foreign debtors is currently slow and uncertain. The Model Law will provide greater clarity to Indian insolvency professionals on how to trace and recover out-of-country assets — and the reverse is true as well.

Avoid Parallel Proceedings

Without coordination, two different courts may each issue judgments that are in conflict with one another. For example, one court may order liquidation while another may approve a restructuring arrangement. The Model Law would introduce a recognition mechanism to resolve such outcomes and limit litigation.

Align with Global Standards

As India continues to integrate with global markets, aligning its insolvency regime to international best practices will enhance India’s Ease of Doing Business ranking and reputation.

Challenges in Adoption

Despite the clear benefits, India will have to overcome some challenges for smooth implementation.

Public Policy Issues

There may be times when foreign court orders are recognized, but this could potentially be detrimental to Indian creditors or violate another Indian law. To address this, the Model Law includes a “public policy exception” that allows courts to refuse recognition in extraordinary cases.

For example, Section 48 of the Insolvency and Bankruptcy Code (IBC) states that foreign decrees are enforceable in India unless contrary to public policy — a principle that can be extended to cross-border insolvency.

Sovereignty Issues

Some detractors have noted that giving effect to foreign court orders may infringe upon India’s judicial sovereignty. This concern can be mitigated by allowing Indian courts to retain final discretion to either accept or reject a foreign decision.

Priority Hierarchy Issues

The priority hierarchy of the IBC is unique. For example, the Supreme Court in Swiss Ribbons Pvt. Ltd. v. Union of India (2019) upheld differential treatment of operational creditors, which may conflict with foreign regimes prioritizing secured creditors. India may need to introduce specific carve-outs to maintain domestic priorities.

Judicial Capacity & Training

Judges of the NCLT and NCLAT have limited experience with complex cross-border matters. Specialized training and institutional strengthening will be necessary for proper implementation procedures.

Comparative Snapshot

India remains one of the few major economies yet to adopt this framework, putting it at a disadvantage in global insolvency coordination.

Way Forward

A controlled, measured approach will provide India a step-by-step transition:

• Hybrid Adoption: Enact the Model Law with Indian-specific protections on creditor priorities and public policy.
• Gradual Implementation: Initially recognize the proceedings of reputable jurisdictions, starting with Singapore and the UK, then gradually expand globally.
• Capacity Building: Provide training for judges, insolvency practitioners, and regulators.
• Legislative Action: The Insolvency Law Committee (2018) has recommended enactment, and it is now up to Parliament to prioritize the cross-border insolvency chapter of the IBC.

Conclusion

India’s insolvency framework has advanced dramatically within a short time frame, successfully resolving complex cases and restoring creditor confidence. However, as seen in the Jet Airways case, ad-hoc responses are not equivalent to a robust legal framework. The UNCITRAL Model Law offers a tested and internationally recognized foundation. If India adopts it with appropriate safeguards, it can strengthen its insolvency regime, attract foreign investment, and ensure fair and efficient cross-border dispute resolution.

In today’s global economy, insolvencies transcend national boundaries. It is time India acknowledges this reality and advances toward becoming a trusted, world-class insolvency jurisdiction.