Insolvency and Bankruptcy - Law and Practice · Cross Border Insolvency (Elective 7.5)

Introduction to Cross Border Insolvency: Meaning and Concept

Updated 11 October 2026 · Fact-checked

Cross border insolvency arises when a debtor has assets, creditors or operations in more than one country. Courts of different countries may claim control, so rules are needed on jurisdiction, assets abroad and cooperation. In India, Section 235 IBC lets the professional seek a letter of request for assets in a reciprocal country.

Understand Introduction to Cross Border Insolvency

Cross border insolvency means an insolvency where the debtor has assets, creditors, branches or business in more than one country. Think of an Indian company with a plant in India, a subsidiary abroad, a bank account in Singapore and lenders in three countries. When it fails, more than one legal system is involved.

The core problem is conflicting jurisdictions. Each country has its own insolvency law and its own courts. Two courts may open separate proceedings against the same debtor. They may apply different priority rules to creditors. A creditor may race to grab assets in a country where it has an edge. This harms equal treatment of creditors and reduces value.

The second problem is asset location. An insolvency court's orders normally run only inside its own country. A resolution professional or liquidator in India cannot simply seize or sell an asset sitting abroad. Foreign evidence, bank records and witnesses are also outside reach. Cooperation between courts is needed.

There are two classic approaches. Under the territorial approach, each country deals only with assets located within its borders, and local proceedings are separate. Under the universal approach, one main proceeding, usually in the debtor's home country, governs all assets worldwide, and other countries recognise and assist it. Many modern systems follow a middle path, often called modified universalism: one main proceeding, with local courts cooperating.

For India, this matters because Indian companies increasingly operate across borders. The IBC, 2016 gives only a limited tool in Section 235 (letter of request) built on reciprocal arrangements under Section 234. A fuller framework, based on the UNCITRAL Model Law, is a separate topic you should study alongside this one.

Key rules to remember

Meaning of cross border insolvency: Debtor + assets/creditors/operations in more than one country = cross border insolvency; Use this as your opening line in any answer.
Territorial approach: Each country controls only assets within its borders; separate local proceedings; Risk: multiple proceedings, unequal treatment of creditors, lower recoveries.
Universal approach: One main proceeding governs the debtor's assets worldwide; other countries recognise and assist; Risk: countries may not accept foreign control over local assets and local creditors.
Section 235(1) IBC: RP / liquidator / bankruptcy trustee believes assets of the corporate debtor or debtor (including a personal guarantor of a corporate debtor) are in a country with reciprocal arrangements under Section 234 → applies to Adjudicating Authority that evidence or action relating to such assets is required; The application is made to the Adjudicating Authority, not directly to the foreign court.
Section 235(2) IBC: Adjudicating Authority satisfied that evidence or action is required → may issue a letter of request to a court or authority of that country competent to deal with it; The word is 'may': issue is discretionary, and only after the Authority is satisfied.

How to solve Introduction to Cross Border Insolvency questions

Use this method for any theory or case question on the concept of cross border insolvency.

1Define cross border insolvency in one sentence: debtor with assets, creditors or operations in more than one country.
2Identify the cross border element in the facts: foreign assets, foreign creditors, foreign subsidiaries or parallel proceedings.
3State the problem it creates: conflicting jurisdictions, unequal treatment of creditors, difficulty reaching assets and evidence abroad.
4Name the approach that applies or is being compared: territorial, universal, or the middle path of cooperation.
5Apply the Indian provision if asked: Section 235 IBC, who may apply, to whom, on what condition and what the Authority may do.
6Conclude with a clear answer and, where useful, a practical point such as seeking a letter of request or noting the need for a fuller framework.

Quickest way: Define, problem, approach, provision

When to use it: Short-note questions or when time is tight in a 3-hour written paper.

Write the one-line definition.
List two problems: conflicting jurisdictions and asset location.
Give territorial versus universal in two lines each.
Close with Section 235: RP applies, Adjudicating Authority may issue a letter of request, only for reciprocal countries under Section 234.

Common mistakes in Introduction to Cross Border Insolvency

Saying the RP sends the letter of request directly to the foreign court.
Students remember 'letter of request' but skip the procedure.
Fix: Write that the RP, liquidator or bankruptcy trustee applies to the Adjudicating Authority, which may then issue the letter.
Ignoring the reciprocal arrangement condition.
Section 234 is not read together with Section 235.
Fix: Always state that the country must be one with which reciprocal arrangements have been made under Section 234.
Mixing up territorial and universal approaches.
The names sound similar and students memorise without the logic.
Fix: Territorial = each country takes its own local assets. Universal = one main proceeding for worldwide assets.
Saying the Adjudicating Authority must issue the letter.
Overlooking the word 'may' and the need for satisfaction.
Fix: State that it may issue the letter only if satisfied that evidence or action relating to the assets is required for the process.
Limiting Section 235 to corporate debtors only.
Focus on CIRP creates a narrow reading.
Fix: The section covers insolvency resolution, liquidation and bankruptcy proceedings, and the corporate debtor or debtor, including a personal guarantor of a corporate debtor.
Claiming Section 235 gives a full cross border insolvency regime.
Students treat the provision as complete.
Fix: Describe it as a limited enabling tool for evidence or action on foreign assets; the wider framework is a separate topic.

Worked examples

Example 1

Explain what is meant by cross border insolvency and discuss the problems it creates. Contrast the territorial and universal approaches.

Show the solution

Define: cross border insolvency arises where a debtor has assets, creditors or business in more than one country.
Problem 1, conflicting jurisdictions: courts of several countries may open separate proceedings and apply different priority rules.
Problem 2, asset location: an insolvency order of one country does not by itself reach assets or evidence abroad, so cooperation is needed.
Consequence: unequal treatment of creditors, a race to seize assets and lower overall recovery.
Territorial approach: each country deals with assets inside its borders through its own proceedings.
Universal approach: one main proceeding governs worldwide assets and other countries recognise and assist it.
Add that many systems follow a cooperation-based middle path.

Answer: Cross border insolvency is insolvency of a debtor with a foreign element. It creates conflict of jurisdictions and difficulty in reaching foreign assets. The territorial approach is local and fragmented; the universal approach is unified with global reach and depends on foreign recognition.

Example 2

Sundaram Textiles Ltd, an Indian company, is in CIRP. The resolution professional learns that it owns a warehouse in a country with which India has made reciprocal arrangements under Section 234. Advise the RP on what can be done under the IBC.

Show the solution

Provision: Section 235 applies where, in the course of CIRP, liquidation or bankruptcy, the RP, liquidator or trustee thinks assets are in a reciprocal country.
Facts: CIRP is on, the RP has formed the opinion that an asset is abroad, and the country has reciprocal arrangements under Section 234.
Action: the RP may apply to the Adjudicating Authority stating that evidence or action relating to the warehouse is required in connection with the process.
Analysis: the Adjudicating Authority must be satisfied that such evidence or action is required for the process.
If satisfied, it may issue a letter of request to a court or authority of that country competent to deal with the request.
Conclusion: the RP cannot act abroad directly; the route runs through the Adjudicating Authority.

Answer: The RP should apply to the Adjudicating Authority under Section 235(1). If it is satisfied that evidence or action on the warehouse is required, it may issue a letter of request under Section 235(2) to the competent foreign court or authority.

Exam tips

Open with a one-line definition, then the two core problems. Examiners reward structure.
For territorial versus universal, give one line of meaning and one line of drawback for each.
Whenever the facts mention foreign assets, cite Section 235 and Section 234 together and state the reciprocal condition.
Use the exact verbs: the RP 'applies', the Adjudicating Authority 'may issue' a letter of request.
In case-based questions, write provision, facts, analysis and conclusion in that order.

Practice questions from Cross Border Insolvency (Elective 7.5)

Introduction to Cross Border Insolvency in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Introduction to Cross Border Insolvency: frequently asked questions

What is cross border insolvency in simple words?

It is an insolvency where the debtor has assets, creditors or business in more than one country. Because each country has its own courts and laws, the process needs rules on who has control and how courts cooperate.

What is the difference between territorial and universal approach?

Under the territorial approach, each country handles only the assets within its borders. Under the universal approach, a single main proceeding covers the debtor's assets worldwide and other countries recognise and assist it.

Which IBC section deals with assets outside India?

Section 235 deals with letters of request to a country outside India. It works for countries with which reciprocal arrangements have been made under Section 234.

Who can apply under Section 235 IBC?

The resolution professional, liquidator or bankruptcy trustee, as the case may be, applies to the Adjudicating Authority. They must be of the opinion that assets of the corporate debtor or debtor, including a personal guarantor of a corporate debtor, are in such a country.