Need for a new legal framework


Status as on- 29/01/2023

Unprecedented growth in international trade is changing the commercial environment. The firms are a component of a global economic system and are active in many countries worldwide. Cross-border insolvency comes from a bankruptcy filing by one of these businesses. The Insolvency and Bankruptcy Code, 2016 (often known as the “IBC”) aims to create a comprehensive method for people and businesses looking for a time-limited court remedy. However, when it comes to cross-border insolvency, relying solely on one jurisdiction’s laws may be ineffective and result in disputes.

When dealing with cross-border insolvency and attempting to implement the rules governing insolvency in many nations worldwide, many problems arise. One of the rules that have complicated cross-border insolvency proceedings uniformity is the Gibbs Rule, which is under discussion. In the case of Antony Gibbs and Sons, the defendant and plaintiff entered into a contract for the purchase of copper. The defendants were businesses that fell under French law’s purview and were declared bankrupt by a French court. The plaintiff appeared before the English court and claimed that they were not subject to French law because the contract was in English. Because the agreement was made in England and intended to be carried out there, the court upheld the claim by declaring that it was an English agreement. The ruling established a precedent that stated that English law-governed debt could not be discharged through a foreign bankruptcy action.

India had its first cross-border insolvency in the P. MacFadyen & Co., in re case in 1908, which featured the liquidation of an Anglo-Indian firm after one of the partners passed away. As a result, the London and Madras Trustees came to an agreement where the excess money was committed to being paid back into the other proceeding for global distribution, which later got judicial approval. The English court declared that the agreement was “obviously a sensible and legitimate business arrangement” and that it was “manifestly for the benefit of all parties interested” when the validity of the aforementioned agreement was questioned.

In its ruling in the case of Jet Airways (India) Limited, the National Company Law Appellate Tribunal (“NCLAT”) established a precedent for future insolvency proceedings in India by ordering the execution of a “Joint Corporate Insolvency Resolution Process” in accordance with the 2016 Insolvency and Bankruptcy Code. The company was obliged to stop conducting flights on April 17th, 2019, as a result of a cash crunch and other financial difficulties. The National Company Law Tribunal (also known as NCLT Mumbai)’s bench received an insolvency case, and as a result, the NCLT started the insolvency resolution procedure.

In order to maximize the value of the insolvent company by guaranteeing coordination and cooperation while the processes run concurrently, the NCLAT sought to establish an agreement between the Dutch trustee and the Indian resolution expert. A cross-border insolvency protocol based on the Model Law was ultimately agreed upon, with India serving as the Center of Main Interest. This protocol was authorized by the NCLAT in a decision dated September 26, 2019.


It is more crucial than ever to have an IBC-based legal framework to handle cross-border conflicts as the globalization of business and trade reaches new heights. The courts’ observations have formed a favorable judicial trend in India’s attempt to develop a business-friendly strategy. However, it should be a wake-up call to include measures for cross-border insolvency.

Disclaimer: The above article is based on the personal interpretation of the related orders and laws. The readers are expected to take expert opinions before relying upon the article. For more information, please contact us at


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