When an insolvent Indian company holds aircraft leased through Dublin, receivables booked in Singapore and a bank account in Amsterdam, the resolution professional confronts a problem the domestic machinery of the Insolvency and Bankruptcy Code, 2016 cannot solve alone: the moratorium under Section 14 binds courts in India, not a Dutch trustee or an Irish lessor. Chapter VII of Part III — Sections 234 and 235 — was the drafters' answer to this gap. It is, candidly, a thin answer. Two terse provisions empower the Central Government to sign reciprocal agreements with foreign states and permit an adjudicating authority to issue a ‘letter of request’ to a foreign court. No such agreement has ever been concluded, no letter of request has ever issued, and the real cross-border work — as the Jet Airways saga showed — has been done through ad hoc protocols improvised by the NCLAT. This article unpacks the bare text, the legislative history, the UNCITRAL Model Law that India has repeatedly promised to adopt, and the case law that has filled the vacuum.
Why Cross-Border Insolvency Matters
Insolvency law is territorial by instinct. A liquidation order, a moratorium, an avoidance action — each is an exercise of sovereign judicial power that, absent some bridging mechanism, stops at the national frontier. Yet corporate failure is increasingly transnational. The modern corporate debtor leases assets through offshore special-purpose vehicles, raises external commercial borrowings governed by English or New York law, and parks cash in foreign banks. When such a debtor enters the corporate insolvency resolution process (CIRP), the resolution professional appointed under the Code must somehow reach assets, creditors and proceedings located outside India.
Two recurring problems arise. The first is asset recovery: foreign-situated property of the corporate debtor does not automatically fall within the moratorium under Section 14, and a foreign court owes no duty to recognise an Indian CIRP. The second is concurrent proceedings: foreign creditors may commence parallel insolvency proceedings abroad, producing the spectre of competing liquidators dismembering one estate in two jurisdictions. The objects of the Code — maximisation of value of assets and balancing the interests of all stakeholders, repeatedly emphasised by the Supreme Court in Swiss Ribbons (P) Ltd. v. Union of India (2019) 4 SCC 17 — are defeated if value leaks across the border. Cross-border insolvency law exists to plug that leak. Understanding it presupposes familiarity with the object and scheme of the IBC and the statutory definitions on which the entire process turns.
Legislative History of Sections 234 and 235
The Bankruptcy Law Reforms Committee (BLRC), whose 2015 report is the intellectual foundation of the Code, was acutely conscious of the cross-border dimension. The BLRC recommended that India adopt the UNCITRAL Model Law on Cross-Border Insolvency, 1997 — the gold-standard template that, by 2016, had been enacted by over forty jurisdictions including the United States (as Chapter 15 of the Bankruptcy Code), the United Kingdom and Singapore. The draft Bill annexed to the BLRC report, however, did not carry a full Model Law chapter.
When the Bill went to the Joint Committee of Parliament, the Committee inserted two enabling provisions — what became Sections 234 and 235 — as a placeholder mechanism pending a more comprehensive framework. These sections were deliberately modest: a treaty-based, reciprocity-dependent skeleton rather than the unilateral recognition architecture of the Model Law. The Code received Presidential assent on 28 May 2016, and the two provisions form part of Chapter VII of Part III. Crucially, although on the statute book, the Central Government has never issued the notification or concluded the agreements that would breathe life into them. The provisions are, in the language of practitioners, ‘dormant’ — enacted but un-operationalised.
Section 234: Agreements with Foreign Countries
Section 234 is the gateway. Sub-section (1) provides: ‘The Central Government may enter into an agreement with the Government of any country outside India for enforcing the provisions of this Code.’ Sub-section (2) provides that the Central Government may, by notification in the Official Gazette, direct that the application of the Code's provisions in relation to assets or property of a corporate debtor or debtor — including a personal guarantor of a corporate debtor — situated in a country outside India with which reciprocal arrangements have been made shall be subject to such conditions as may be specified.
Three features deserve emphasis. First, the provision is permissive (‘may’), not mandatory — it creates no obligation on the executive to act, and no court can compel the conclusion of a treaty. Second, it is bilateral and reciprocity-based: each foreign state must be dealt with through a separate agreement, an inherently slow, country-by-country process. Third, the 2018 amendment widening the language to expressly cover ‘a personal guarantor of a corporate debtor’ aligned Section 234 with the personal-guarantor provisions brought into force from 1 December 2019, but added no operative treaty. The architecture borrows from older statutes such as Section 44A of the Code of Civil Procedure, 1908 (reciprocating territories for foreign decrees), and it inherits the same Achilles' heel: it works only where a treaty in fact exists.
Section 235: Letter of Request to a Foreign Country
Section 235 supplies the procedural arm. Under sub-section (1) — which opens with a non-obstante clause, ‘Notwithstanding anything contained in this Code or any law for the time being in force’ — where, in the course of a resolution process, liquidation or bankruptcy proceeding under the Code, the resolution professional, liquidator or bankruptcy trustee is of opinion that assets of the corporate debtor or debtor (including a personal guarantor) are situated in a country outside India with which reciprocal arrangements have been made under Section 234, he may apply to the Adjudicating Authority that evidence or action relating to such assets is required.
Sub-section (2) provides that the Adjudicating Authority — the National Company Law Tribunal for corporate debtors — on being satisfied that such evidence or action is required, may issue a letter of request to a court or authority of that country competent to deal with the request. The mechanism is the insolvency analogue of letters rogatory in civil and criminal procedure. But note the fatal precondition embedded in sub-section (1): the foreign country must be one ‘with which reciprocal arrangements have been made under Section 234’. Because no Section 234 agreement exists, the trigger for Section 235 has never been satisfied. The letter-of-request power is, in practice, a key without a lock.
The Structural Limitations of the 234-235 Framework
The Insolvency Law Committee (ILC), in its Report of February 2018, catalogued the deficiencies of this two-section regime with unusual frankness. Four limitations stand out. First, reciprocity dependence: the entire scheme is contingent on bilateral treaties that the executive has shown no urgency in negotiating, and a treaty network sufficient to cover the jurisdictions where Indian corporate assets actually sit would take decades to build. Second, no recognition of foreign proceedings: unlike the Model Law, Sections 234-235 contain no machinery for an Indian court to recognise a foreign main or non-main proceeding, to grant a stay in aid of a foreign representative, or to entrust Indian assets to a foreign administrator.
Third, one-directional bias: the sections are drafted from the perspective of an Indian process reaching out to foreign assets; they say nothing about how India should respond when a foreign insolvency reaches in. Fourth, no concept of the ‘centre of main interests’ (COMI), the organising principle of modern cross-border law used to identify which jurisdiction hosts the primary proceeding. The ILC concluded that these provisions ‘do not provide a comprehensive framework’ and recommended a dedicated chapter modelled on UNCITRAL. The contrast with the carefully calibrated domestic triggers — the insolvency triggering events that activate a CIRP within India — is stark: domestically the Code is precise and self-executing; across the border it is aspirational.
The UNCITRAL Model Law on Cross-Border Insolvency, 1997
The road not yet taken is the UNCITRAL Model Law on Cross-Border Insolvency, adopted by the United Nations Commission on International Trade Law in 1997 and recommended by the United Nations General Assembly. Rather than depending on treaties, the Model Law operates unilaterally: a country enacting it commits to recognising qualifying foreign proceedings and cooperating with foreign courts and representatives, whether or not the foreign state reciprocates (though states may add a reciprocity reservation).
Its architecture rests on four pillars. Access gives foreign representatives direct standing to apply to local courts. Recognition establishes a streamlined procedure under which a court determines whether a foreign proceeding is a ‘foreign main proceeding’ (one taking place where the debtor has its COMI) or a ‘foreign non-main proceeding’ (one based on a mere establishment). Recognition of a foreign main proceeding triggers an automatic stay analogous to a moratorium. Relief empowers courts to grant interim and post-recognition assistance. Cooperation and coordination obliges courts and insolvency professionals to communicate directly and to coordinate concurrent proceedings. The COMI presumption — that, absent contrary proof, the debtor's registered office is its COMI — supplies the predictability that Sections 234-235 lack. India's repeated commitments to adopt this framework have not yet matured into law.
Draft Part Z and the CBIRC Report
The reform effort has produced a draft but not a statute. Acting on the ILC's 2018 recommendation, the Ministry of Corporate Affairs prepared a draft chapter — popularly called ‘Part Z’ — that would graft a modified UNCITRAL Model Law onto the Code. Part Z was released for public comment, and in 2020 the Ministry constituted the Cross-Border Insolvency Rules and Regulations Committee (CBIRC), chaired by Dr K. P. Krishnan, to fine-tune the draft and design the subordinate rules and regulations needed to operationalise it. The CBIRC submitted its first report in June 2020 and a further report on individual insolvency, both of which were placed in the public domain in 2021.
Part Z, as drafted, departs from the pure Model Law in a few deliberate ways: it proposes a reciprocity requirement (so that recognition is offered only to notified countries), it carves out financial service providers, and it preserves a public-policy exception. The Committee's work has been thorough; what is missing is enactment. As of the time of writing, neither Part Z nor any cross-border chapter has been notified into force, and Sections 234 and 235 remain the only cross-border provisions on the statute book. The gap between the sophistication of the reform proposals and the inertia of implementation is the defining feature of this area.
The Jet Airways Saga: A Protocol Without a Statute
The most important Indian cross-border insolvency authority arose precisely because Sections 234-235 were unavailable. In State Bank of India v. Jet Airways (India) Ltd., the grounded airline faced two parallel insolvencies: a CIRP admitted by the NCLT Mumbai on 20 June 2019, and an earlier bankruptcy declared by a court in the Netherlands on the petition of two European creditors, with a Dutch ‘bankruptcy administrator’ appointed. The NCLT initially held that the Dutch proceeding was a nullity in India and that the Dutch administrator had no locus. The administrator appealed.
The NCLAT, by order, declined to treat the foreign proceeding as a nuisance to be ignored. Recognising that Sections 234 and 235 could not be invoked — there being no agreement with the Netherlands — the Appellate Tribunal nonetheless directed the Indian resolution professional and the Dutch administrator to negotiate a cross-border insolvency protocol to coordinate the two proceedings and maximise the value of the estate. The protocol, approved on 26 September 2019, expressly drew on the principles of the UNCITRAL Model Law. It identified India as the centre of main interest — Jet Airways being incorporated in India with its head office and core operations there — and accordingly designated the Indian CIRP as the main proceeding and the Dutch proceeding as a non-main proceeding, with the Dutch administrator permitted to attend (but not vote at) meetings of the committee of creditors.
The significance is twofold. Jet Airways demonstrated that COMI analysis and Model-Law-style cooperation can be improvised by Indian tribunals even without enabling legislation. But it also exposed the fragility of that approach: a protocol depends on the goodwill of the parties and the creativity of the bench, offers no predictability to foreign investors, and is no substitute for a statutory recognition regime.
Centre of Main Interests and the Problem of Recognition
The Jet Airways protocol imported the COMI concept, but Indian law contains no statutory definition of it. Under the Model Law, COMI is the place where the debtor conducts the administration of its interests on a regular basis and which is ascertainable by third parties, rebuttably presumed to be the registered office. Determining COMI matters because it allocates primacy among competing proceedings — the main proceeding governs the global reorganisation while non-main proceedings are confined to local assets.
The deeper problem is recognition of foreign judgments and proceedings generally. Indian courts approach foreign judgments through Section 13 of the Code of Civil Procedure, 1908, which lists grounds on which a foreign judgment is not conclusive — including want of competent jurisdiction and breach of natural justice. That framework was designed for ordinary civil disputes, not for the collective, in-rem character of insolvency, and it offers no mechanism for a stay in aid of a foreign administrator. The absence of a bespoke insolvency-recognition regime means that, today, a foreign liquidator who wishes to reach Indian assets must either commence a fresh proceeding in India or persuade a tribunal to fashion an ad hoc protocol as in Jet Airways. Neither course offers the certainty that cross-border finance requires.
Foreign Creditors Within the Domestic Process
It is important to separate two distinct questions. Sections 234-235 concern reaching foreign assets and proceedings. They do not govern the very different question of whether a foreign creditor may participate in an Indian CIRP — and on that question the Code is emphatically welcoming. The definitions of ‘financial creditor’ and ‘operational creditor’ in the definitions provisions draw no distinction based on the creditor's nationality or place of incorporation.
The Supreme Court confirmed as much in Macquarie Bank Ltd. v. Shilpi Cable Technologies Ltd. (2018) 2 SCC 674, where a foreign bank, as an operational creditor, was permitted to maintain a Section 9 application; the Court held that the certificate contemplated by Section 9(3)(c) is not a mandatory condition precedent — a reading that, among other things, accommodated foreign operational creditors lacking an Indian ‘financial institution’ account. A foreign financial creditor may equally initiate a CIRP, as explained in initiation of CIRP by a financial creditor, and a foreign operational creditor may invoke the route described in initiation of CIRP by an operational creditor. The point to internalise for examinations is that cross-border access into the Indian process is well settled; what remains absent is cross-border reach out of it.
This asymmetry has a practical consequence for resolution professionals. A foreign creditor who is owed money can stand before the NCLT, file proofs of claim, and have its debt collated and ranked in the waterfall under Section 53 just as an Indian creditor would. But when the boot is on the other foot — when the corporate debtor's estate includes a leased aircraft repossessed by an Irish lessor, or receivables frozen by a foreign bank — the resolution professional has no statutory lever to compel cooperation from the foreign court. The route through initiation of CIRP by the corporate debtor itself, where a financially distressed company files in India, equally cannot project the Indian moratorium onto foreign-situated assets. The Code thus treats inbound and outbound cross-border situations with conspicuously different generosity, and candidates should be ready to articulate exactly where that line falls.
Comparative Perspective: Chapter 15 and Singapore
To appreciate what India lacks, contrast two jurisdictions that adopted the Model Law. In the United States, Chapter 15 of the Bankruptcy Code (enacted 2005) allows a foreign representative to petition a US court for recognition of a foreign proceeding; recognition of a foreign main proceeding produces an automatic stay and entrusts the representative with standing to act in the United States. The seminal recognition jurisprudence — on COMI, on the ‘establishment’ threshold for non-main proceedings, and on the public-policy exception — gives transnational lenders a predictable map.
Singapore went further. By the Companies (Amendment) Act 2017 it enacted the Model Law and positioned itself as a restructuring hub, coupling recognition with an enhanced moratorium and pre-pack-style tools. The result is that a distressed multinational can choose Singapore as a coordination venue with confidence about how its foreign proceedings will be treated. India, by retaining only Sections 234-235, signals the opposite: foreign representatives have no statutory entry point, recognition turns on improvised protocols, and the predictability that capital markets prize is missing. This comparative gap is the standing argument for the prompt enactment of Part Z.
The United Kingdom offers a third instructive model. It gave effect to the Model Law through the Cross-Border Insolvency Regulations 2006, while also retaining the older, discretionary common-law tool of assistance to foreign courts under Section 426 of the Insolvency Act 1986 for designated countries. The coexistence of a statutory recognition regime and a residual common-law power illustrates a point relevant to India: even after Part Z is enacted, judge-made cooperation of the Jet Airways kind will retain value at the margins, for proceedings or jurisdictions that fall outside the notified framework. Reform, in other words, supplements rather than abolishes judicial creativity — but it replaces ad hoc improvisation with a default rulebook that lenders can price in advance.
Exam Pointers and Common Traps
For judiciary and CLAT-PG candidates, a few crisp points repay memorisation. (1) Sections 234 and 235 fall in Chapter VII of Part III of the Code and are the only cross-border provisions presently on the statute book. (2) Section 234 is permissive and treaty-based; Section 235 supplies the letter-of-request procedure but is expressly conditional on a Section 234 reciprocal arrangement — the standard trap is to assume a letter of request can issue to any country, when in fact it can issue only to a reciprocating one. (3) No agreement under Section 234 has ever been concluded, so both sections are dormant.
(4) The reform pathway runs ILC Report (2018) → Draft Part Z → CBIRC Report (2020), all modelled on the UNCITRAL Model Law, 1997, none yet enacted. (5) The leading practical authority is the Jet Airways cross-border protocol (NCLAT, 2019), which applied COMI reasoning and Model-Law principles without statutory backing and identified India as the COMI. (6) Distinguish access (foreign creditors may freely participate in an Indian CIRP, per Macquarie Bank) from reach (Indian processes cannot effectively bind foreign assets). Anchoring all of this is the broader scheme of the Code and its value-maximisation objective. A balanced answer notes both the existence of the provisions and the candid reality of their non-operation.
Frequently asked questions
Are Sections 234 and 235 of the IBC currently in force?
They are part of the Code as enacted and appear in Chapter VII of Part III, but they are dormant. Section 235 can be triggered only where a reciprocal arrangement exists under Section 234, and the Central Government has never concluded any such agreement with a foreign state. No letter of request has therefore ever issued, and the sections remain un-operationalised in practice.
What is the difference between Section 234 and Section 235?
Section 234 is the enabling power: it lets the Central Government enter into reciprocal agreements with foreign governments to enforce the Code. Section 235 is the procedural mechanism: it lets an adjudicating authority, on the application of a resolution professional, liquidator or bankruptcy trustee, issue a letter of request to a foreign court — but only in respect of a country with which a Section 234 arrangement already exists.
What is the UNCITRAL Model Law and why does India want to adopt it?
The UNCITRAL Model Law on Cross-Border Insolvency, 1997 is a template enacted by over forty countries. Unlike the treaty-dependent Sections 234-235, it operates unilaterally on four pillars — access, recognition, relief and cooperation — and uses the centre-of-main-interests concept to coordinate concurrent proceedings. India's Insolvency Law Committee recommended its adoption through the draft ‘Part Z’ chapter, which has not yet been enacted.
What did the Jet Airways case decide about cross-border insolvency?
In State Bank of India v. Jet Airways (India) Ltd., parallel insolvencies ran in India and the Netherlands. The NCLAT, unable to invoke Sections 234-235 for want of a treaty, directed the Indian resolution professional and the Dutch administrator to adopt a cross-border insolvency protocol based on UNCITRAL principles. The protocol, approved in September 2019, identified India as the centre of main interest and treated the Indian CIRP as the main proceeding.
Can a foreign creditor initiate insolvency proceedings against an Indian company?
Yes. The Code's definitions of financial and operational creditor do not turn on nationality. In Macquarie Bank Ltd. v. Shilpi Cable Technologies Ltd. (2018) 2 SCC 674 the Supreme Court allowed a foreign bank to maintain a Section 9 operational-creditor application, holding that the Section 9(3)(c) certificate is not a mandatory precondition. Cross-border access into the Indian process is therefore well settled, even though Indian processes cannot reach foreign assets.
What is 'centre of main interests' (COMI) and is it defined in Indian law?
COMI is the place where a debtor regularly administers its interests, ascertainable by third parties and rebuttably presumed to be the registered office; under the Model Law it identifies which jurisdiction hosts the main insolvency proceeding. Indian statute does not define COMI. It entered Indian practice only through the Jet Airways protocol, which located Jet's COMI in India on the basis of its place of incorporation and core operations.