India: Cross Border Insolvency: Indian Law Vis A Vis International Law: UNCITRAL Model

The rapid growth of global economy has led to widespread international trade and this expansion in international trade has brought with it increasing possibilities of cross border insolvency proceedings. In its simplest form, Cross Border Insolvency may involve insolvency proceedings in one country with its creditors located in another country/countries on the other hand in the most complex of cases it may involve subsidiaries, assets, operations and creditors in dozens of nations.

One of the most noteworthy features of international insolvency law is the lack of legal structures either formal or informal to deal with insolvency that transgresses the national borders. Expansion and growth of international trade has made aspects such as choice of law and the conflicts that may arise in circumstances of adverse municipal laws, an important consideration in the context of global economy. Companies may be connected to more than one jurisdiction either by foreign creditors that may press claims or by having assets or branches in more than one country which in turn would result in decrees that may be passed in different legal jurisdictions resulting in further complexities in enforcement and recognition.

In the above pretext, the issue of Cross Border Insolvency poses a serious challenge to India. There are inadequate provisions in the Indian common law regime to enable the Indian courts to recognize and enforce the rights and claims of the foreign creditors and the judgment passed by the courts in foreign jurisdiction. Above all there are no provisions in the existing insolvency legislation or in any enactments in India to deal with Cross Border Insolvency cases. In the light of the above said circumstances it has been strongly suggested that India should adopt the United Nations Commission on Trade Law (UNCITRAL) Model Law on Cross Border Insolvency which would be an ideal solution in the present circumstances.


According to UNCITRAL, a legal body within the United Nation system in the field of International Trade, national insolvency laws were either ill equipped or lagging behind to deal with the cases of Cross Border Insolvency. The problem has always been that each country has its own way of dealing with the issues of Cross Border Insolvency and various national insolvency laws and practice are simply too diverse. Some countries have signed treaties with each other but there has never been a uniform approach to resolve Cross Border Insolvency issues.

Recognizing the need for certainty and clarity on these issues, UNCITRAL adopted the text of Model Law on Cross Border Insolvency issues on 30 May 1997. This Model Law was approved by resolution of United Nations (UN) General Assembly on 15 December 1997.


The Model Law focuses on four components identified as key elements for the conduct of Cross Border Insolvency cases: Access, Recognition, Relief (Assistance) and Cooperation

(a) Access

This provision gives the representative of foreign insolvency proceedings and the creditors a right of access to the courts of an enacting state to seek assistance to appoint and authorize a representative of the local proceedings, being conducted in an enacting state, to seek assistance elsewhere.

(b) Recognition

One of the key objectives of Model Law is to establish simplified procedures for recognition of qualifying foreign proceedings in order to avoid time consuming legislation and to provide certainty with respect to decision to recognize. These core provisions accord recognition to orders issued by foreign courts commencing qualifying proceedings and appointing the foreign representatives of those proceedings provided it satisfies specified requirements. Qualifying foreign proceedings should be recognized as either a main proceeding, taking place where the debtor had its centre of main interests at the date of commencement of the foreign proceedings or non main proceedings taking place where the debtor has an establishment. Recognition of foreign proceedings under Model Law has several effects, principal amongst them is the relief accorded to assist the foreign proceeding.

(c) Relief

The basic principle of model law is that the relief considered necessary for the orderly and fair conduct of Cross Border Insolvency should be available to assist the foreign courts. By specifying the relief that is available, the Model Law imports the consequences of foreign law in to the insolvency system of the enacting states. The element of the relief available include interim relief at the discretion of the court between the making of an application for recognition and the decision on that application , an automatic stay upon recognition of the main proceedings and relief at the discretion of the court for both main and non main proceedings following recognition.

(d) Co-operation and Co-ordination

These proceedings address cooperation among the courts of the states where the debtor's asset is located in coordination of concurrent proceedings concerning that debtor. The Model Law expressly empowers courts to cooperate in the areas governed by the Model Law and to communicate directly with foreign counterparts. The Cooperation between the courts and foreign representative and between foreign and local representatives is also authorized. The provisions addressing coordination of concurrent proceedings aim to foster decision that would best achieve the objective of both proceedings, whether local and foreign proceedings or multiple foreign proceedings.


The existing law in India does not provide legal foundation to resolve a matter relating to international insolvency. In India bankruptcy procedures are still governed by an age old statute that has worn out the passage of time. The Provincial Insolvency Act 1920 and the Presidency Town Insolvency Act 1909, both are extremely outdated legislations and seem to be totally incapable to deal with the issues of Cross Border Insolvency, which is a concept that is only about a decade and a half old.

The Law Commission of India2 took up the revision of these insolvency laws on reference made to it by the government. In the year 1964 the commission proposed a comprehensive Insolvency Legislation for India which was not acted upon by the government As far as the Companies Act, 1956 is concerned the foreign companies are dealt as unregistered and covered under the heading of the unregistered companies. It suffers from short comings, due to absence of any provisions dealing with foreign proceedings, foreign representatives and foreign judgment in India.

In the year 1999, the Government of India set up a High Level Committee headed by Justice V.B. Balkrishna Eradi3, retired judge of the Supreme Court of India for remodeling the existing laws relating to insolvency and winding up of companies to bring them in tune with the international practices in this field. One of the main recommendations of the committee was that the part VII of the Companies Act, 1956 should incorporate new substantive provisions to adopt the UNCITRAL Model Law and that the Model Law itself may be incorporated as schedule to the Companies Act, 1956 which will apply to all cases of cross border Insolvency.

Some important recommendations of Eradi Committee, the Companies Act (second Amendment) Act 2002 was passed but unfortunately this amendment has ignored to provide any framework for Cross Border Insolvency with recognition of foreign proceedings. Hence the current position is that if a foreign company is taken in to liquidation outside India, its Indian business will be treated as separate matter and will not be automatically affected unless an application is filed before Insolvency Court for winding up its branches in India. This problem can however be resolved through the machinery of Coordination and Cooperation between foreign courts provided by the UNCTIRAL Model Law.

Thus the adoption of UNCITRAL Model law for Cross Border Insolvency issues will enable India to meet the demands of the globalization of economy and to deal with international insolvency on the world forum. This will radically change the orientation of Indian Law in the present scenario of insolvency cases and make it suitable for dealing with the challenges arising from globalization and increasing integration of Indian economy with the world economy.


The globalization of trade and commerce has produced international pressure on nations to enact laws and provide institution that can deal with variety of Cross Border Insolvency issues. In absence of specific legislation for dealing with cross border Insolvency, courts in India are yet to be prepared to deal with the plethora international Insolvency issues. Such absence can impede India's growth to enhance and enrich its economic status in a drastic manner. Judicial involvement and devotion in regulating economic aspects is nothing but a natural corollary to its economic development. UNCITRAL Model Law on Cross Border Insolvency has the potential to confer an opportunity to India to equip its judiciary to regulate one such economic aspect- Cross Border Insolvency by empowering its courts to extend coordination to foreign courts and accrue benefits out of the reciprocating coordination.


1 Can be seen at

2 26th Report on Insolvency laws which was submitted to law Minister in the year 1964

3 Eradi Committee submitted its report to the Prime Minister on 31st August 2000

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Singh & Associates
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Singh & Associates
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions