Will The Lion Head's Nod Spur India's Cross-Border Insolvency Law?

Introduction

In 2023, a financial creditor of Compuage Infocom Limited (CIL) initiated the Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code (IBC) before the National Company Law Tribunal (NCLT), Mumbai. The CIRP was admitted by the NCLT, and RP was appointed. CIL had assets and monies in Singapore, and consequently, the RP sought the recognition of the CIRP in Singapore to gain control over these assets and be repatriated to India. This was the first time that the Singapore High Court in Re Compuage Infocom Ltd.¹ has given recognition of an Indian CIRP in a foreign court under the UNCITRAL Model Law on Cross-Border Insolvency (Model Law).² It also extended judicial assistance to the Resolution Professional (RP) of Compuage Infocom Limited (Corporate Debtor) appointed in the Indian Proceedings. The judgment deals with several key issues, including whether the NCLT is a 'foreign court', whether RPs are 'foreign representatives', and whether repatriation of assets located in a foreign jurisdiction can be permitted for the benefit of creditors in other jurisdictions. This is a welcome development.

Insolvency is no longer a domestic issue. As business houses expand their operations across countries, creditors and stakeholders face complexities in initiating and managing insolvency proceedings across borders. The last decade has necessitated the development of cross-border insolvency mechanisms in every nation because of these expansions through branches or subsidiaries. Until recently, India's insolvency proceedings had not been recognised in foreign jurisdictions. While the insolvency regime has expanded significantly, India is yet to adopt the Model Law, leaving a critical gap in its insolvency landscape.

This article explores the Singapore High Court's ruling, its significance in the evolution of Indian insolvency law and the need for India to enact its own cross-border insolvency laws to ensure reciprocal recognition of foreign insolvency proceedings.

Key Findings

Whether CIRP is a 'foreign proceedings'?

The High Court relied on Ascentra Holdings, Inc and others v. SPGK Pte Ltd ³ which held that there were five requirements for a proceeding to qualify as a "foreign proceeding" under Article 2(h) of the Model Law, the proceedings must be collective in nature; judicial or administrative proceeding in a Foreign State; must be conducted under a law relating to insolvency or adjustment of debt; the property and affairs of the debtor company must be subject to control or supervision by a foreign court; and it must be for reorganisation or liquidation.

The High Court concluded that the CIRP is a collective proceeding as it considers the rights and obligations of all creditors and not for a single creditor. The High Court also recognised NCLT as a 'foreign court'⁴ as the foreign court can include both judicial and non-judicial authorities, and NCLT was authorised to supervise the foreign proceeding that is CIRP. The High Court states that the most important characteristic of a foreign court is that the body must be adjudicative, and hence, NCLT is a foreign court. All the other requirements are also met, and hence, CIRP is a 'foreign proceeding'.

Whether the RP of the Corporate Debtor is a 'foreign representative' under the foreign proceeding?

The High Court applied the definition of a 'foreign representative' under Article 2(i) of the Model Law and concluded that the RP of the Corporate Debtor was clearly authorised in the CIRP to administer the reorganisation of the Corporate Debtor.

Whether the procedural requirements under Article 15 and Article 17 of the Model Law are satisfied?

The High Court acknowledged that the RP has complied with the procedural requirements under Article 15 of the Model Law. The High Court also observed that CIL is registered in India, making India its presumptive Centre of Main Interests (COMI), and the High Court did not find any proof to rebut this presumption. It is important to note that a court can only grant recognition to a foreign main proceeding when the foreign proceeding takes place in the COMI. This concept of COMI has been a debatable subject since the beginning of the Model Law. According to Article 16(3), the COMI is presumed to be the registered office of the debtor as of the date of the recognition application. The Court suggested that COMI should reflect permanence and actual operations over legal structures and corporate identities. Therefore, India was confirmed as its COMI, leading to the recognition of the CIRP as a foreign main proceeding.

Whether CIL's assets in Singapore could be repatriated to CIL's estate in India?

The High Court declined to permit repatriation of CIL's Singapore assets to India to protect the interests of any Singapore-based creditors. It underscored the need to balance international co-operation with the protection of local creditor interests, inconsistent with the provisions of IRDA, and to ensure that such a class of creditors are treated fairly and given an opportunity to participate in the CIRP. The relief of repatriation highlights the theory of Modified Universalis,m which seeks to balance the interests of foreign stakeholders while safeguarding the rights of local creditors. India does not have a cross-border insolvency law.

This raises a question as to how India will ensure that Singaporean creditors will be treated fairly and given a fair opportunity to participate in the CIRP process?

The Need for Cross-Border Insolvency Law

The recognition of CIRP in Singapore exposes gaps in India's insolvency framework. Although IBC proposed cross-border insolvency provisions based on the UNCITRAL Model Law in 2018, referred to as Draft Part Z, they are yet to be implemented. It is important to have such laws so that Indian courts can reciprocate foreign recognition and ensure rights of foreign stakeholders. At present, cross-border insolvency issues are being addressed by the NCLTs and NCLATs on a case-by-case basis. For instance, NCLAT directed the RP and the Dutch administrator to facilitate the resolution process through a 'Proposed Cooperation' model in Jet Airways (India) Ltd. (Offshore Regional Hub) v. State Bank of India & Anr.⁵ However, an explicit statutory provision is needed to clarify the rights of foreign creditors and establish procedures for processing their claims effectively.

With a rapid rise of startups and Small and Medium Enterprises (SMEs) expanding across borders and holding assets worldwide, corporate insolvency is no longer just a domestic concern. Further delay in implementing a structured legal framework could severely jeopardise the rights of both Indian and foreign creditors.

Conclusion

The Singapore High Court's landmark decision in Re Compuage Infocom Ltd. represents a watershed moment for the recognition of Indian insolvency proceedings by a foreign court. It is significant in advancing cross-border insolvency cooperation under the Model Law framework. Since the Model Law has been adopted in nearly 60 jurisdictions, the judgment will be helpful in getting CIRP proceedings recognised in all such jurisdictions. The Singapore High Court had a proactive and pragmatic approach which stands in stark contrast to India's current regime, where Section 234 and 235 of the IBC have had limited practical utility.

The increasing globalization of businesses necessitates a reciprocal and predictable mechanism for handling cross-border insolvency. The delay in implementing the Draft Part Z of the IBC, which incorporates the Model Law, not only disadvantages Indian creditors and debtors with international footprints but also signals a lag in India's commitment to international best practices. The Compuage ruling serves as a compelling catalyst for Indian policymakers to prioritize legislative reform, fostering a legal environment that promotes seamless cross-border insolvency resolution, protects the interests of all stakeholders, and ultimately strengthens India's position in the global economic landscape.

Footnotes

^{1. [2025] SGHC 49}

^{2. UNCITRAL Model Law on Cross-Border Insolvency, U.N. Doc. A/RES/52/158 (1997), available at}

^{3. [2023] 2 SLR 421}

^{4. Reading Article 2(e) of the UNCITRAL Model Law along with Para 74 of the Guide to Enactment of the UNCITRAL Model Law on Cross-Border Insolvency and Section 252(2)(b) of the IRDA.}

^{5. Company Appeal (AT) (Insolvency) No. 707 of 2019}