In 2024, the once promising start-up Bjyu’s, owned by Think and Learn Private Limited and valued at $22 billion, entered into a phase of insolvency after a default of Rupees 159 crores owed to the Board of Control for Cricket in India (“BCCI”). The admission of the insolvency proceedings before the National Company Law Tribunal (“NCLT”) threw into the limelight a pertinent problem: what happens to a foreign creditor in such cases? GLAS Trust Company, a US-based collateral agent, was a creditor of $1.2 billion. GLAS Trust pursued enforcement both in Delaware and India on the assets of the company. However, the Supreme Court of India was confronted with a particular reality: that, in the absence of a comprehensive cross-border insolvency framework, Indian courts were under no obligation to recognise or stay proceedings on account of a foreign moratorium order. This case dragged into the light a major legislative vacuum – there was no provision for recognition of foreign insolvency proceedings and no safeguards for foreign creditors. Several years later, the Insolvency and Bankruptcy Code (Amendment) Act, 2026, attempted to address this conundrum.
Section 234 and the Persisting Gap
The Insolvency and Bankruptcy Code, 2016 (“IBC”) envisaged cross-border proceedings in light of Sections 234 and 235 of the Code. Section 234 empowered the Central Government to enter into bilateral agreements with countries outside India for enforcing the provisions of the Code and directing their applications to any assets situated outside India. This hinged on the creation of reciprocal arrangements with countries for enforcement and, therefore, could only be done on a case-by-case basis. However, as of 2026, no such bilateral agreements have been entered into by the Indian Government. Section 235 of the Code further empowers the Adjudicating Authority, in this case, NCLT, to send letters of request to foreign courts for enforcement regarding any foreign-based assets. This legislative lacuna was highlighted by the 2018 Insolvency Law Committee Report, which stated that the current framework was inadequate and required a comprehensive framework in line with the UNCITRAL Model Law on Cross-Border Insolvency.
Left with a statutory vacuum, tribunals attempted their own interpretations. The National Company Law Appellate Tribunal (“NCLAT”) in the Jet Airways insolvency case, allowed a Dutch bankruptcy administrator to participate in the Indian proceedings on an ad hoc basis. The tribunal, however, took this step built on mere judicial goodwill rather than settled law. This was not a consistent position. In some cases, the tribunals partially recognised foreign proceedings or, in others, outright refused to entertain the same. Foreign orders, hence, kept hitting a wall while trying to enter the Indian legal force.
The 2026 Amendment and A Sole Provision
The Amendment Act, notified on 26th May 2026, presented the most sweeping revision of the Code since its inception in 2016. The Amendment revised admission timelines, withdrawal rules, avoidance transactions, liquidation and a new creditor-initiated resolution pathway. Among these amendments stood a new provision that had been in contemplation since 2018 – Section 240C.
Section 240C empowers the Central Government to frame rules governing cross-border insolvency proceedings, which would include the process of recognition of proceedings, reliefs, judicial cooperation, assistance and coordination for countries notified by the Central Government. The Statement of Objects and Reasons of the Bill sought the introduction of the cross-border insolvency framework as a move to protect stakeholder interests in both domestic and foreign proceedings and promote investor confidence by aligning the domestic practices with international best practices. The Bill contemplated that this would also lead to improved recognition of Indian insolvency proceedings in foreign jurisdictions.
Section 204(C)(2) further stipulated that the rules made under this Section may apply to any provisions of the Code or the Companies Act 2013 with any exceptions, modifications or adaptations as required to administer the provisions. Read along with Section 240B, which authorises an electronic portal for insolvency processes, and Chapter VA on “group insolvency” which allows the set up of common NCLT benches and coordinated creditor committees, the amendment endeavours to harmonise multi-fold insolvency proceedings. Though not explicitly stated, the amendment is designed on the UNCITRAL Model Law on Cross-Border Insolvency, which anchors a “main” insolvency proceeding that would be recognised by other countries and treats other proceedings as secondary or “non-main”. However, the discretion to recognise a foreign proceeding is retained with the NCLT.
Unenforced and Empty – No Provision Yet
When the Ministry of Corporate Affairs notified the Amendment, a bulk of provisions found place, barring Section 240C. The cross-border insolvency framework, therefore, lives in a flux. While the intention of the legislature is apparent that a cross-border insolvency framework is necessary, it does not appear emergent. The rules, to be framed by the Central Government, an act of delegated legislation, can only be formulated subject to the Parliamentary notification of Section 240C. Therefore, at the moment, no actual machinery for recognition or relief in cross-insolvency proceedings exists. The operative rules are yet to be drafted. This leaves open several questions – will the new Section 240C and the rules framed therein would only recognise proceedings from countries with reciprocal arrangements, as recommended by the 2018 Insolvency Law Committee Report, or will they adopt a broader framework which would follow the UNCITRAL Model Law? It is important to note that the Parliament has nowhere explicitly mentioned the adoption of UNCITRAL, either in the Bill or the Amendment Act.
The Practical Reality and Systemic Lack
With the uncertainty of the notification and the framing of rules, foreign creditors of Indian debtors remain subject to judicial discretion. Even assuming the notification of Section 240C in the near future, several systemic inadequacies need to be dealt with for effective cross-border insolvency. The recognition of foreign orders would require careful examination of foreign judicial orders, questions of jurisdiction, coordination with foreign courts and the address of urgent reliefs. With the current systemic inadequacy and tribunals bogged down with inordinate delays and judicial backlogs, there is an emergent need to enforce judicial timelines, fill tribunal vacancies and ensure training of judges in cross-border insolvency and judicial interpretation to realise the legislative intent for a comprehensive framework. Section 240C may be the beginning of a globalised insolvency process, but its effective implementation rests on the formulation of effective rules and administrative efficiency in dispensing the same.
