Cross-border insolvency proceedings pose a challenge to domestic regulatory recovery mechanisms. Discuss with examples.

Cross-border insolvency arises when an insolvent debtor's assets, creditors or proceedings straddle multiple jurisdictions. When a foreign court's insolvency process captures assets that Indian regulators are trying to recover, enforcement orders passed in India risk becoming paper decrees.

How foreign insolvency blunts domestic recovery

• Asset capture: a foreign moratorium or liquidation freezes and distributes assets, while Indian orders are unenforceable abroad absent a reciprocal arrangement [1].
• Ranking of claims: regulatory dues — disgorgement, penalties, restitution under the SEBI (PFUTP) Regulations, 2003 — compete with, and often rank below, secured creditors in the foreign estate [4].
• Territorial mismatch: regulators can assert jurisdiction over trades executed in India, yet the profits rest in offshore vehicles domiciled in low-tax hubs such as Mauritius [4].
• Timing: quasi-judicial proceedings run for years, during which a parallel liquidation may dissipate the corpus.

India's statutory vacuum

• Sections 234 and 235, IBC allow bilateral agreements and letters of request, but remain largely inoperative for want of notified reciprocal arrangements [1].
• India has not adopted the UNCITRAL Model Law (1997), forgoing its centre-of-main-interest test, automatic recognition and interim relief [2].
• The Insolvency Law Committee (2018) proposed Draft Part Z; the Cross Border Insolvency Rules/Regulations Committee (2021) framed enabling rules — enactment is still awaited [1][3].

Illustrative cases

• Jet Airways: the NCLT first denied the Dutch administrator standing; the NCLAT invoked inherent powers to approve a cross-border insolvency protocol, letting Netherlands sale proceeds flow to the Indian estate — relief improvised, not statutory [3].
• Adani–Hindenburg matter: SEBI's proceedings against offshore entities alleged to have traded ahead of the January 2023 short-seller report show a regulator pursuing recovery from a foreign-domiciled fund facing insolvency abroad [5].

Cross-border insolvency thus exposes the limits of purely territorial regulation. Enacting Draft Part Z, notifying reciprocity under Section 234, and deepening regulator-to-regulator cooperation would convert improvised protocols into predictable rights — securing both investor confidence and India's credibility as a rule-based market.