Cross-Border Insolvency Framework Under IBC: 2026 Exam Guide

For bankers preparing for the IIBF's IBC paper, the cross-border insolvency framework under IBC is one of the most conceptually tricky — and increasingly tested — topics, because India still does not have a comprehensive statute for handling insolvencies that span more than one country. Instead, practitioners work with two thin provisions, a stack of committee reports, and a long-pending Bill. This guide breaks down what Sections 234 and 235 actually allow, why the UNCITRAL Model Law matters, and how examiners like to frame the gap between where India is and where it is headed.

🌐 Why Cross-Border Insolvency Needed a Rulebook

Indian corporates increasingly hold assets, subsidiaries, and creditors across borders — a defaulting company might have a factory in Gujarat, a bank loan syndicated out of Singapore, and a warehouse in Germany. When such a company enters the Corporate Insolvency Resolution Process, the resolution professional often needs to trace assets sitting outside India, or a foreign court may simultaneously be handling proceedings against the same debtor. Without a coordinated framework, creditors race to grab assets in whichever jurisdiction is fastest, value leaks out of the estate, and resolution outcomes suffer. The IBC 2016, as originally enacted, anticipated this gap only partially, leaving cross-border recognition to be built through bilateral treaties rather than a uniform code.

This is why the topic sits awkwardly between two worlds in the current syllabus: the black-letter law of Sections 234-235, and the reform proposals that have not yet been notified. Candidates should be comfortable explaining both, because exam questions frequently test "what exists today" versus "what has been recommended."

📜 Sections 234 and 235: The Current Mechanism

Section 234 empowers the Central Government to enter into bilateral agreements with other countries for enforcing the IBC's provisions, while Section 235 allows an Indian NCLT-appointed resolution professional or liquidator to request a foreign court, through a "letter of request," to deal with the corporate debtor's assets located abroad. In practice, these sections have almost never been operationalised — India has not signed the reciprocal agreements Section 234 contemplates with any major jurisdiction, which means Section 235's letter-of-request route has little enforceable teeth outside voluntary judicial cooperation.

💡 Exam Tip: Remember the pairing — Section 234 is the "government-to-government treaty" power, and Section 235 is the "professional-to-foreign-court" request mechanism. Examiners frequently swap the section numbers in distractors, so anchor them by function, not just number.

Several deep-dives on the structure of the IBC place these two sections at the tail end of the miscellaneous provisions, which is itself a clue to how peripheral they were to the original 2016 design — cross-border insolvency was treated as an afterthought, not a pillar.

⚖️ The UNCITRAL Model Law and the Proposed Chapter

Recognising the inadequacy of Sections 234-235, the Insolvency Law Committee recommended in 2018 that India adopt a version of the UNCITRAL Model Law on Cross-Border Insolvency (1997) — the internationally accepted template already adapted by the US, UK, Singapore, and Japan, among roughly 50 jurisdictions. The proposed framework, drafted as a new Part Z to the Code, would let Indian courts recognise foreign insolvency proceedings as either "main" (where the debtor's Centre of Main Interest, or COMI, is located) or "non-main," grant automatic relief such as a moratorium on recognition of a main proceeding, and permit direct communication and cooperation between the NCLT and foreign courts and insolvency practitioners — without needing a bilateral treaty first.

⚠️ Common Mistake: Candidates often assume the Model Law has already been enacted in India. As of the current syllabus, it remains a draft/recommended framework — the reciprocity-based Sections 234-235 are still the operative law. Do not mark "UNCITRAL Model Law" as India's current cross-border regime on a factual MCQ.

Comparative material on how other jurisdictions built their own regimes is covered in the bankruptcy laws cross-country experience chapter, which contrasts India's treaty-dependent approach with the Model Law's reciprocity-free recognition standard.

🏛️ COMI, Recognition, and the NCLT's Evolving Role

A central concept borrowed from the Model Law is COMI — the place from which a debtor's affairs are principally administered, which is usually (but not always) its registered office. Under a Model-Law-style regime, the jurisdiction of the COMI hosts the "main proceeding," while insolvency processes elsewhere are "non-main," with a hierarchy of relief attached to each. India's NCLT and NCLAT currently have no statutory COMI-recognition power; their role is confined to domestic CIRP and liquidation matters under the IBC, with any cross-border cooperation happening informally or through the Section 235 letter-of-request route.

📌 Remember: The proposed cross-border chapter would give NCLT the power to recognise foreign proceedings and grant interim relief — a significant expansion of its current jurisdiction, which examiners like to test as a "before vs after" comparison.

For the domestic side of what NCLT already does once a case is admitted, revisit the chapter on the initiation of Corporate Insolvency Resolution Process, and for how a case actually opens once admitted, see commencement of CIRP — both useful for contrasting domestic procedure with the cross-border gap.

📊 Current Regime vs Proposed Model Law Framework

As the IIBF exam curriculum notes, candidates preparing for banking law papers are expected to track legislative direction as well as enacted text; see the official syllabus reference at iibf.org.in for the current exam framework this topic sits within.

🧠 Practice MCQs: Cross-Border Insolvency Framework Under IBC

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Frequently Asked Questions

Understanding the cross-border insolvency framework under IBC is as much about knowing the reform trajectory as memorising two sparse sections — examiners reward candidates who can place Sections 234-235 correctly against the still-pending Model Law chapter. Reinforce this by tracing the credit recovery laws for banks that interact with insolvency proceedings, revisiting how Section 29A eligibility for resolution applicants shapes who can bid domestically, and comparing it with personal guarantor insolvency under IBC and avoidance transactions under IBC for the full recovery-law picture. Browse more exam guides on the iibf.store blog, explore every IBC post via the Insolvency and Bankruptcy Code 2016 tag hub, and when you're ready to test yourself, take a full-length paper on the CAIIB course page or jump straight into chapter-wise mock tests to lock in these distinctions before exam day.