Govt likely to opt for global model over bilateral agreements for cross-border insolvency

The model law would make it easier to coordinate with foreign courts and give insolvency professionals a more predictable process for handling cases involving overseas assets and creditors.

Officials said that adopting a global model would help the government avoid the time and complexity involved in negotiating separate insolvency treaties with every country where domestic companies are present. “This approach could enable the government roll out the long-awaited cross-border insolvency faster without having to wait for separate reciprocal agreements with individual countries,” the official said.

The Insolvency and Bankruptcy Code (Amendment) Act, 2026 was partially brought into force in May, but the cross-border insolvency provisions are yet to take effect. That’s because the relevant rules and foreign jurisdictions to which the new regime will apply are yet to be notified.

The move towards adopting MLCBI has been enabled by the newly-inserted Section 240C into the IBC through the 2026 amendments. This section gives central government the power to lay down rules for recognising foreign insolvency proceedings and coordinating with courts in notified countries.

Opting for a global model law would also mark a shift from the route envisaged under Sections 234 and 235 of the IBC. These provisions, operationalised in 2017, allow for reciprocal arrangements with foreign countries. However, no bilateral agreement under Section 234 has been signed so far.

According to an official, the absence of specific rules governing cross-border insolvency can lead to value erosion and competing claims by creditors.

“The UNCITRAL model needs to be tailored to meet the domestic legal and financial requirements. The government recognises that delays in recognising insolvency proceedings or securing assets across jurisdictions can adversely affect creditors that have extended loans to companies with a global presence,” the official said.

Experts said that the UNCITRAL model law provides a tested architecture for recognition, relief and judicial cooperation without requiring countries to completely harmonise their substantive insolvency laws. “A global template could provide greater predictability while allowing India to tailor implementation to domestic requirements,” said Srinivasa Rao, partner and leader (risk advisory services) at Nangia Global.

Currently, the UNCITRAL model law has been used by 62 states across 65 jurisdictions to strengthen their cross-border insolvency laws.

Devendra Mehta, fellow at INSOL said the insertion of Section 240C was a positive development given the growing cross-border exposure of Indian corporates. However, he cautioned that spelling out the provisions in the law itself could have provided greater certainty than leaving them to legislation.

“The enabling provision is welcome because Indian companies increasingly have overseas vendors, customers and other stakeholders whose interests can directly affect insolvency proceedings. At the same time, putting the substantive framework into the statute itself would have offered greater certainty than relying primarily on rules,” Mehta said.

Even though Section 234 allows bilateral pacts which gives India the option of pursuing reciprocal ties with specific countries where necessary, no such insolvency provisions have been included into the recent trade agreements. For example, the latest India-UK Comprehensive Economic and Trade Agreement (CETA) does not include provisions for insolvency recognition.

Meanwhile, a parliamentary panel on Wednesday asked the ministry of corporate affairs (MCA) to consider “selective adoption” of the UNCITRAL model with some modifications.

“With cross-border trade ties deepening, there’s a need to define clear rules and notified jurisdictions so that insolvency proceedings involving overseas assets and creditors can be recognised and dealt with predictably,” said Rao.