Jet Airways insolvency
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This article has been written by Yash Mittal, pursuing B.A.LL.B. (Hons) from Institute of Law, Nirma University.


Globalization of markets has increased the rate of commercial transactions between countries, which necessitated the need of unification of legal principles governing commercial transactions globally. In a modern society, substantial business transactions take place between entities which have a global presence or are situated in multiple jurisdictions. In the event of insolvency, businesses coordinate with the proceedings ongoing in different countries through a cross-border insolvency law, which have been developed by many sophisticated economies to deter economic loss to the creditors. But in Indian context the present legislation i.e., Insolvency and Bankruptcy Code, 2016 which governs the law relating to insolvency and bankruptcy in the country has no provision to deal with cross-border insolvency. However, two provisions i.e., Section 234 and Section 235 of the IBC deals with the collaboration and cooperation with any foreign country by way of agreements and issuing letter to the court of such country with which bilateral agreement has been signed respectively, but more is required to be done in order to strengthen the cross-border insolvency laws in the IBC. 

The purpose of this article is to discuss, firstly, the need of cross-border insolvency law in India, secondly, global practice in the event of cross-border insolvency, and thirdly, the cross-border insolvency of Jet Airways by NCLT which opens a gate for cross-border insolvency in India. 

What is cross-border insolvency?

Cross-border insolvency refers to the situation when a multinational companies, enterprise or corporate house possess the assets in different countries and in the event of insolvency there encompasses coordination and cooperation among statutory authorities of different jurisdictions in respect of the insolvency proceedings of any corporate debtor. Maxwell Communication Corp, Societe Generale is a watermark case regarding cross border insolvency proceedings. A media company had its headquarters in England with corporate assets in the UK, US and Canada. The case illustrates the cooperation between foreign courts on cross border insolvency.

Possible scenarios in Cross-border insolvency

The cross border insolvency matters could be triggered by a number of circumstances such as:

  1. Where creditors of an Indian debtors wish to enforce their rights over the assets of an Indian debtor, which are located overseas;
  2. Where the creditors of a foreign debtor wish to enforce their rights over the assets of that foreign debtor in India;
  3. Where Indian creditors to a foreign debtor, wish to enforce their rights over the assets of that foreign debtor in a foreign jurisdiction.

The issues arising out of these scenarios are complex and it inevitably throws up a panic amongst creditors across jurisdictions over how their individual claims may be ascertained by the initiation of insolvency against the debtor in its Centre of Main Interest or COMI (it is the seat of a corporate entity’s major stakes or the location of its assets and its significant operations.)

Different theories governing cross-border insolvency

Cross-border insolvency imposes three important questions such as: which law should be applied? which country has the jurisdiction to administer insolvency process? and how would the judgments asserting control over assets enforced?

The theoretical basis for the cross-border insolvency revolves around three theories namely Universalism, Territorialism and Hybrid. Firstly, the universalism approach stresses upon applying a single global regime over assets across borders with a single administrator. Secondly, the territorialism sets out that each jurisdiction would apply its own laws over the assets located in that jurisdiction, and thirdly the hybrid approach works out on the most relevant center for conducting the proceedings, with the cooperation from other jurisdictions where the assets are being located.
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Understanding the Uncitral Model law on cross-border insolvency

The United Nation Commission on International Trade Law or Model law is an international law governing cross-border insolvency and it attempts to deal with the complexities as mentioned above by rationalizing the process of cross-border insolvency among different jurisdictions in following ways:

  1. It allows when the foreign insolvency proceedings should get recognition.
  2. It allows a person initiating an insolvency proceedings with access to the courts of the enacting country. 
  3. It allows the courts in enacting the country to determine what kind of coordination need to be established in order to dispose of insolvency.
  4. It allows the courts in the enacting country to take advice and cooperation from its foreign counterpart.

The model law works upon four principles namely:

  1. Access: The model law enables foreign representatives to appear in local courts.
  2. Recognition: It provides for simplified procedures for recognition of foreign proceedings and appointment of foreign representatives.
  3. Relief: Generally it is upon the discretion of the court to provide relief, but once the proceedings are recognized there would be an automatic stay.
  4. Cooperation and Coordination: The model law empowers the cooperation among the courts of states where the debtor’s assets are situated and coordination of concurrent proceedings relating to the debtor.

Significance of Foreign Main-proceedings and foreign non-main proceedings in cross-border Insolvency

The model law provides a principle which recognizes the most suitable place to initiate insolvency. It ensures that the resolution professionals appointed for the insolvency proceedings must have the access to the courts of the origin country where the debtors Centre of main interests or COMI lies i.e., foreign main proceeding, it also enables the RP to get recognition from other jurisdictions where the debtor possesses assets i.e., foreign non-main proceedings.

In Indian context, when the foreign creditor initiates the insolvency proceedings against the debtor whose COMI lies in India, then such proceedings would be termed as foreign main proceedings for the foreign creditor. Once the proceedings get recognition it will automatically result in relief such as stay or moratorium on domestic proceedings in relation debtor, and the Indian insolvency professionals gets the right to be represented as foreign representatives before the jurisdictions which are following the Model law, to commence any proceedings in relation to Indian debtor’s whose assets may be located in that jurisdiction.

But what if Indian debtor COMI lies in foreign jurisdiction? then the foreign main proceedings will be initiated in that jurisdiction and the IBC ceases to operate, as it doesn’t enforce extra-territorial operations. Now the Indian creditor will get relief only when the foreign law is consistent with the IBC and it depends upon the discretion of the foreign court to allow insolvency proceedings against the Indian debtor under IBC.

Existing framework on cross-border insolvency in India

The existing law i.e., IBC, 2016 doesn’t provide a complete chapter on cross-border insolvency as of now, but the committee established by the Corporate Affairs Ministry under the Chairmanship of Mr. Injeti Srinivas, has suggested in its report to implement the UNCITRAL model law on cross-border insolvency in India. The committee found it appropriate as it recognizes the foreign proceedings and give access to the representatives of the jurisdictions where corporate debtors default to the Indian courts and vice versa. 

Although, IBC comprises two sections i.e., 234 and 235 which deals with the cross-border insolvency in a cursory manner. Section 234 empowers the Indian court to enter into an agreement with the court of foreign jurisdiction, whereas Section 235 deals with the issuance of letter of request to the court of foreign jurisdiction by the Indian court to cooperate and collaborate to deal with the insolvency proceedings in a specified manner. 

The Uncitral model law in India, and the case of Jet Airways cross-border insolvency

It was widely expected that the law relating to the cross-border insolvency will found its space in the IBC, 2016, as non-inclusion of cross-border insolvency provisions will make the code an incomplete when it is viewed from the lens of corporate entities owing to the large amount of international corporate and business transactions.

It is significant to note that many large corporate giants of the country like Amtek Auto, Videocon Industries, Essar Steel, Jet Airways and others are undergoing insolvencies and are confronted with cross-border insolvency issues. Absence of prudent law to govern the cross-border insolvency has led these companies to face financial troubles resulting into significant economic losses.

Most interestingly, last year in the month of May, the Dutch court passed an order of insolvency of Jet Airways on the petition of creditors based in Netherlands, furthermore the resolution professional of one of the creditor seized the Aircraft of the airline parked in the Schiphol Airport near Amsterdam. The insolvency proceedings of the Jet Airways in the Netherlands provides a eloquent example of the cross-border insolvency, where the letter received by the Dutch trustee by the Dutch government to the Ministry of Corporate Affairs of India and other secured creditors of the grounded airline seeking their approval and cooperation to access the assets of the debtor. 

Another issue appeared in the matter is whether foreign creditors stand on equal footing with that of its Indian counterpart when it comes to the asking of claims from the corporate debtor. In jet airways case when the consortium of banks led by SBI filed insolvency proceedings under section 7 of the code before the NCLT (Mumbai Bench), the Adjudicating Authority informed the applicants that the insolvency proceedings have already been initiated through the order of the Dutch Court to administer bankruptcy process on such order. But the Adjudicating Authority held the foreign proceedings against the debtor as nullity ab-initio and held that the certain provisions of Code of Civil Procedure, 1908 such Sections 13, 14 and 44A doesn’t provide recognition and enforcement of foreign judgments in India. 

Now, the Indian creditors can claim their amount by initiating Corporate Insolvency Resolution Process (CIRP) against the debtor Jet Airways but that is not the case with foreign creditor situated in Netherland as India doesn’t ratify UNCITRAL model law on cross-border insolvency and the absence of provisions on cross-border insolvency in the code makes it harder for the court to accept foreign insolvency proceedings. According to this scenario, the foreign creditor is at a disadvantaged position with respect to Indian creditor as it would cause hardship to the foreign creditor to receive its claims. 

Meanwhile, when the economy of India is staggering to achieve its desired targets of GDP growth it is important to provide desirable and business friendly atmosphere to the foreign investors, therefore, the Supreme Court in Macquarie Bank v. Shilpi Cable Technologies, has held that the foreign creditor must be kept on equal footing to that of Indian debtor as equal treatment of creditors will increase faith among foreign creditors regarding investment in the businesses in India. Therefore, in lieu of that recently the National Company Law Appellate Tribunal (NCLAT) has provided access to the Dutch trustees (equivalent to insolvency professional in India) to attend the meetings of the Committee of Creditors of Jet Airways and hence become the first instance where the cross-border insolvency proceedings has been accepted by the Indian court of any Indian entity. 


The basic objective of the Insolvency & Bankruptcy Code, 2016 is to facilitate the corporate entity in order to overcome from the distressed financial position by preparing a resolution plan that could help in the revival of the entity. Due to the obscure position of the cross-border insolvency law in India, it becomes difficult for the foreign creditor to proceed against its Indian debtor, and hence it may have detrimental effect on the ease of doing business index, as if foreign creditors were kept in loom that would certainly impact the foreign investments in India which is not the good sign. Hence, it is the need of the time to adopt cross-border insolvency law in India.

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