Published On: July 16, 2026
Authored By: Jasaswini Tripathy
SOA National Institute of Law
Abstract
The Insolvency and Bankruptcy Code (Amendment) Act, 2026 represents a key moment in India’s efforts to reform insolvency law. A significant change is the insertion of Section 240C, which empowers the Central Government to frame rules for cross-border insolvency — India’s most serious legislative effort yet to address the failure of multinational corporations. For years, Indian courts had to improvise without a proper legal framework, relying on ad hoc measures when dealing with assets and creditors spread across jurisdictions. This article traces the legislative history of cross-border insolvency reform in India, clarifies the functions of Section 240C, situates it within the framework of the UNCITRAL Model Law on Cross-Border Insolvency, and evaluates the benefits and challenges that will determine whether this reform is effectively implemented. It concludes with recommendations on what the subordinate rules should cover to make the framework workable in practice.
Keywords
Cross-Border Insolvency, IBC Amendment Act 2026, Section 240C, UNCITRAL Model Law, Centre of Main Interests, Jet Airways, Judicial Cooperation, NCLT, Recognition of Foreign Proceedings
I. Introduction
When a company goes under, the law intervenes. But what happens when that company has assets in three countries, creditors in five, and operations in two others? This is the problem of cross-border insolvency, and for much of its history, Indian insolvency law lacked a workable answer to it.
The Insolvency and Bankruptcy Code, 2016 (IBC) was a significant reform when it was introduced. It unified scattered insolvency laws, established specialised tribunals, and implemented time-bound resolution — a major shift from the slow, creditor-unfriendly system that preceded it. However, it was designed primarily for domestic corporate failures. For companies with global operations, the IBC offered little more than two dormant provisions and an expectation that courts would find a way through.
Introduced as Bill No. 107 of 2025, the Insolvency and Bankruptcy Code (Amendment) Act, 2026 (Act No. 6 of 2026) was passed by both Houses of Parliament and received Presidential assent on 6 April 2026.[1] Among its twelve key amendments is Section 240C, a provision that, for the first time, gives the Central Government clear legal authority to build a cross-border insolvency framework for India. It is not the framework itself — it is the groundwork for one to be built. The question this article explores is whether India will make effective use of that groundwork.
II. What Is Cross-Border Insolvency and Why Does It Matter?
Before turning to the law, it helps to understand the problem.
When a business operates internationally, its insolvency does too. An India-based holding company might have subsidiaries in Singapore, loans from banks in Germany, factories in Vietnam, and aircraft leased from Irish companies. If that company fails, stakeholders across these jurisdictions will have competing legal claims, each governed by different rules on asset recovery, creditor priority, and judicial oversight.
Without a cross-border insolvency framework, this produces disorder: creditors race to file in jurisdictions that favour them, courts issue conflicting orders, and assets may be sold off in one country while restructuring continues in another. The result is a loss of value for creditors, employees, suppliers, and the wider economy.
A well-functioning cross-border insolvency framework prevents this by setting rules on which proceeding takes precedence, how foreign creditors can participate, how courts cooperate with one another, and what relief is available to support foreign proceedings. In essence, it creates legal order out of the collapse of a globally integrated business.
III. Gaps in the Original Statute
The original IBC did not entirely ignore cross-border insolvency. Sections 234 and 235 empowered the Central Government to enter into bilateral agreements with other countries and allowed the NCLT to seek assistance from foreign courts where such agreements existed.[2]
On paper, these provisions appeared to create a framework. In practice, they remained largely dormant, because their operation depended on bilateral arrangements that were never systematically concluded. As a result, India lacked a structured mechanism for recognising foreign proceedings, facilitating court-to-court cooperation, or enabling foreign representatives to participate in domestic insolvency proceedings.
In plain terms: the framework existed on paper, but India never signed the bilateral agreements that would have activated it. Sections 234 and 235 sat unused while real cases kept arriving.
IV. The Jet Airways Case
The insolvency of Jet Airways illustrates the practical impact of this legislative gap.
Jet Airways was once India’s second-largest airline before it collapsed in April 2019, grounding its fleet and leaving many employees unpaid. It operated out of India and maintained a major hub in Amsterdam. When it went bankrupt, insolvency proceedings began both in India, before the Adjudicating Authority in Mumbai, and in the Netherlands, before a Dutch court. The Dutch administrator sought recognition from the Indian Adjudicating Authority, but this was refused because the IBC contained no mechanism for recognising foreign insolvency proceedings.
The NCLT’s refusal was legally sound — there was simply no statutory provision for such recognition. But it produced a jurisdictional standoff between two national courts, with Jet Airways’ creditors caught in the middle.
On appeal, the NCLAT took a different approach.[3] Rather than asserting a power of recognition it did not have, it directed the Indian Resolution Professional and the Dutch administrator to work out a cross-border insolvency protocol. That protocol recognised India as the Centre of Main Interests (“COMI”) for Jet Airways — since the airline was incorporated and primarily operated in India — treating the Indian process as the main proceeding and the Dutch process as secondary, or non-main.
This was an inventive solution, and a sensible one given the circumstances. The Appellate Tribunal applied the principle of lex loci incorporationis — the law of the place of incorporation — to identify COMI, a concept that is central to cross-border insolvency law because it determines which jurisdiction leads the resolution process.
But improvisation has its limits. An agreement between two insolvency professionals, approved by a tribunal with no explicit statutory authority to do so, is not the same as a legal framework. It offers no predictability for future cases, no guidance for creditors assessing risk, and no assurance to foreign courts that Indian processes meet any recognised standard. The Insolvency Law Committee had already presented its Report on Cross-Border Insolvency in October 2018, recommending adoption of the UNCITRAL Model Law on Cross-Border Insolvency, 1997 through a proposed “Part Z” of the Code.[4] The Ministry of Corporate Affairs subsequently formed the Cross-Border Insolvency Rules/Regulations Committee, which submitted its first report in November 2021.[5] Despite nearly eight years of preparatory work, legislative progress remained out of reach — until 2026.
V. The UNCITRAL Model Law: The International Perspective
To understand what Section 240C is aiming for, it helps to look at the global standard it is designed to align with.
The international benchmark for cross-border insolvency is the UNCITRAL Model Law on Cross-Border Insolvency, established in 1997 and adopted by more than sixty countries, including the United States, the United Kingdom, Singapore, Japan, South Korea, and Australia.[6]
The Model Law rests on four main principles: recognising foreign insolvency proceedings, giving foreign representatives access to domestic courts, providing relief upon recognition (such as a stay on enforcement actions), and promoting cooperation between courts and insolvency professionals across jurisdictions. A key feature is the distinction between a “main” proceeding, based at the debtor’s Centre of Main Interests (COMI), and a “non-main” proceeding, where the debtor merely has a physical presence.
Its principal advantage is that it does not require countries to harmonise their substantive insolvency laws; instead, it encourages procedural cooperation. Domestic insolvency rules remain unchanged, while courts gain a clear structure for working with their foreign counterparts.
VI. What Section 240C Does, and Doesn’t Do
Section 240C, inserted by the IBC Amendment Act, 2026, empowers the Central Government to frame rules for cross-border insolvency cases.[7] This includes recognition of foreign proceedings, the grant of relief, and provision for judicial cooperation and coordination. It applies to specified classes of debtors and corporate debtors from notified foreign jurisdictions, and allows corresponding adjustments to the IBC and the Companies Act, 2013 where necessary. All rules made under this section must be laid before Parliament.
Three points about Section 240C stand out. First, it addresses the core elements of modern cross-border insolvency law — recognition, relief, cooperation, and coordination — which mirror the UNCITRAL Model Law. Second, it gives the Central Government considerable discretion to define which debtors are covered, notify which jurisdictions are included, designate adjudicating bodies, and modify how existing laws apply. That flexibility is useful in a complex legal area, but it raises real questions about the quality and timeliness of the subordinate legislation still to come.
Most importantly, Section 240C has not yet been brought into force. The rules and regulatory framework it authorises are still being developed. As of June 2026, India has legally enabled a cross-border insolvency system, but it is not yet operational.
VII. What a Functioning Statute Can Unlock
Even though Section 240C is currently dormant, it holds real potential. It lays the groundwork for India’s participation in a cooperative international insolvency system while preserving domestic protections.
For international creditors, a formal recognition system reduces uncertainty and mitigates the risks associated with cross-border lending. Greater assurance that insolvency processes will be recognised across jurisdictions can lower transaction costs and improve access to capital.
For Indian firms, having Indian CIRP processes recognised in countries that have adopted the UNCITRAL Model Law could enable smoother restructurings and prevent simultaneous enforcement actions by creditors in multiple countries. The Compuage Infocom case, in which a Singapore court was asked to recognise an Indian CIRP under Singapore’s own version of the Model Law, is an early example of how this plays out in practice.[8]
More broadly, a reliable cross-border insolvency framework signals institutional maturity. It shows that India offers not just dependable rules for investment and business activity, but also dependable rules for corporate distress and exit.
VIII. Challenges
Three challenges could limit the effectiveness of Section 240C. First, it remains an enabling provision: after years of committee reports and draft proposals, Parliament has again left the details to the executive without a fixed timeline, which risks producing another dormant framework. Second, the framework’s success depends on reciprocity — if Indian proceedings are not meaningfully recognised abroad, its usefulness will be limited. Third, cross-border insolvency demands specialised expertise. Concepts like COMI and the main/non-main distinction require judicial experience that the already overburdened NCLT may not currently possess.
IX. Suggestions
To make Section 240C a working statute rather than a dormant one, the Government should announce the subordinate rules within a fixed timeframe and clarify the scope and application of the regime.
The rules should closely follow the UNCITRAL Model Law, incorporating its core principles of recognition, relief, direct access for foreign representatives, and inter-court cooperation, while adapting them to India’s domestic needs.
India should also pursue reciprocity with major commercial jurisdictions, though this should not become a rigid precondition for recognition. Dedicated NCLT benches should be assigned to handle cross-border matters, and ongoing training should be provided to tribunal members and insolvency professionals. Ultimately, the effectiveness of Section 240C will depend not on its enactment, but on how quickly, clearly, and effectively it is implemented.
X. Conclusion
The IBC Amendment Act, 2026 represents the most significant change to India’s insolvency system since the Code was introduced a decade ago. Among its many updates, Section 240C stands out — not because it has created a cross-border insolvency framework, but because it has cleared the way for one to be built.
India’s judiciary, particularly the NCLAT in the Jet Airways case, has already shown a willingness to cooperate internationally. What was missing was a legal foundation to support that willingness. Section 240C now provides that foundation. How quickly and effectively the Central Government uses it will determine whether this reform is remembered as a turning point or as another missed opportunity.
For nearly thirty years, the UNCITRAL Model Law has served as a ready-made template, adopted by more than sixty countries. India has studied it, endorsed it, and now legally cleared the way toward it. What remains is not a legislative challenge but a matter of political will and administrative speed. For a country that aspires to be a major hub for global investment and trade, a functioning cross-border insolvency system is not optional — it is essential.
References
[1] Insolvency and Bankruptcy Code (Amendment) Act, 2026 (Act No. 6 of 2026), assented to by the President of India on 6 April 2026.
[2] Insolvency and Bankruptcy Code, 2016, ss 234–235.
[3] Jet Airways (India) Ltd v State Bank of India & Anr, Company Appeal (AT) (Insolvency) No. 707 of 2019 (NCLAT, order dated 26 September 2019).
[4] Insolvency Law Committee, Report on the Cross-Border Insolvency Framework for India (Ministry of Corporate Affairs, October 2018).
[5] Cross-Border Insolvency Rules/Regulations Committee, Report (Ministry of Corporate Affairs, November 2021).
[6] UNCITRAL Model Law on Cross-Border Insolvency (1997).
[7] Insolvency and Bankruptcy Code, 2016, s 240C (as inserted by the Insolvency and Bankruptcy Code (Amendment) Act, 2026).
[8] Re Compuage Infocom Ltd and another [2025] SGHC 49.
