[Varsha S. Banta is an India-qualified lawyer, and Senior Resident Fellow (Corporate Law & Financial Regulation) at the Vidhi Centre for Legal Policy, New Delhi]
On August 12, 2025, close to a decade after the enactment of the Indian Insolvency and Bankruptcy Code, 2016 (IBC), the Government of India (GoI) introduced the largest set of amendments through the Insolvency and Bankruptcy Code (Amendment) Bill, 2025 (Bill) to the IBC, till date. Aimed at improving the overall efficiency of the IBC, the Bill includes enabling provisions for cross-border insolvency, aimed at protecting stakeholder interests in domestic and foreign proceedings, promoting investor confidence and aligning domestic practices with international best practices (Proposed Cross Border Insolvency Framework). The rules made under the Proposed Cross Border Insolvency Framework will apply to specific classes of debtors and corporate debtors (CDs) as may be notified by the Central Government. The Bill has currently been referred to a select committee of the Indian Parliament for further deliberations.
At present, the IBC supports enforcement of its provisions through bilateral agreements between the GoI and foreign countries, and applications for letters of requests made by resolution professionals/bankruptcy trustees to the National Company Law Tribunal (NCLT) where they believe that debtor assets are situated in a country which enjoys reciprocal arrangements with India. However, no such bilateral agreements have been entered into by the GoI and foreign countries.
The question that then arises in the interim is this – what is the extent of applicability of the IBC to lending arrangements resting entirely on contracts, particularly those with clauses electing foreign governing law and conferring exclusive jurisdiction on foreign courts?
Statutory Contours and Judicial Guidance on Corporate Insolvency and Resolution with a Foreign Element under the IBC
At the outset, the IBC applies to among others, an Indian company incorporated under the Companies Act, 2013, or any other previous company law. Beyond applicability, the trigger of insolvency proceedings for corporate persons presupposes the existence of the following twin conditions: debt and default. In the event that a CD defaults on debt obligations, the initiation of a corporate insolvency resolution process (CIRP) may be made by a financial creditor (FC), operational creditor (OC), or a CD under Part II of the IBC. Definitionally, FCs, and OCs are defined broadly to encompass any person (including, corporate persons) and are jurisdiction agnostic. Under the IBC, CDs are Indian companies or corporate persons (excluding, financial service providers) who owe debts to any person.
Arguably, therefore, the IBC does not, in statutory language, differentiate between foreign and domestic creditors. Upholding this parity, Indian courts have recognized the non-discriminatory treatment of foreign and domestic creditors in Indian insolvency proceedings. In Macquarie Bank Limited v. Shilpi Cable Technologies Limited, the Supreme Court of India (SC) held that the IBC cannot be construed in a discriminatory fashion so as to include only those OCs who are residents outside India and who happen to bank with Indian financial institutions.
In another case, Stanbic Bank Ghana Ltd. v. Rajkumar Impex Private Limited, the National Company Law Appellate Tribunal in Chennai (NCLAT) did not enforce, but took cognizance of a foreign decree issued by English courts. The NCLAT admitted an insolvency application filed by an FC. The decree, which stemmed from a loan agreement with an exclusive jurisdiction clause for English courts, directed the guarantor to pay over $12 million in principal and interest sums. The NCLAT’s decision was based on the finding that a prima facie case of unpaid debt existed, as evidenced by the foreign decree.
Understanding the NCLT’s Jurisdiction
The NCLT is conferred territorial jurisdiction under section 60 of the IBC in relation to insolvency resolution and liquidation for corporate persons (including, CDs and personal guarantors), in regard to the place of business registration of the corporate person. It also enjoys residuary jurisdiction to decide on any applications, proceedings, claims, or other questions of law, facts or priorities arising out of a CIRP.
Alternatively, some commentators have argued that the IBC should account for exclusive jurisdiction clauses, through broad interpretation, unless the mutual intent of the parties is clear, through either express language or by necessary implication. Specifically, English courts have taken the view that insolvency proceedings are “free standing” proceedings, and therefore one may argue that these may not fall squarely under specialised tribunal jurisdiction.
Indian courts have, nonetheless, provided guidance on the extent and limitations on the exercise of such residuary jurisdiction. In Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta, the SC cautioned that while the NCLT’s jurisdiction is limited to disputes directly related to a company’s insolvency, it must avoid taking over cases that are not strictly linked to the insolvency process, respecting the authority of other courts and tribunals. Arguably, this includes the jurisdiction of foreign courts.
Indian Position on Contractual Bar of Indian Statutes & Foreign Governing Law
As noted above, foreign loan agreements (with a foreign lender) will usually contain a ‘governing law’ and ‘jurisdiction’ clause electing foreign law and foreign courts as applicable frameworks and forums. In such cases, one of two scenarios may arise.
Contractual bar on applicability of IBC
Parties may at times seek to bar the applicability of a statute which may otherwise apply due to its nexus (through jurisdictional reach or otherwise) to a contracting party. Here this would be the nexus of an NCLT with an Indian CD. Ruling on section 23 of the Indian Contract Act, 1872 (ICA), the SC has upheld the impermissibility of contracting against statute.
Ouster of NCLT jurisdiction
The broader contractual construction of ‘foreign governing law’ has been consistently recognised by Indian courts in light of its regard to party autonomy. In one particular case, the SC emphasized the freedom of parties (one of them, an Indian party) to choose the proper law governing the substantive contract/disputes; in this case being the laws of the United Kingdom.
There is also a narrower element in legal proceedings, i.e., the choice (and ouster) of judicial forums for contractual disputes; the treatment of which has been more flexible through the eyes of Indian courts. Exclusive jurisdiction clauses are permissible and are not considered violative of section 28 of the Contract Act, to the extent they do not impose an absolute bar on legal recourse available to parties.
The question that then arises is on the effect of such exclusive jurisdiction clauses. Do the courts selected by the parties alone have jurisdiction to the exclusion of other courts and can the parties definitively exclude, by their agreement, jurisdiction of other courts otherwise granted under the law (here, jurisdiction conferred on the NCLT by section 60 of the IBC)?
The answer is in the negative. While parties can oust a particular forum, they cannot contractually deprive a court of its jurisdiction to enforce rights and grant remedies. This is the differentiating element of the ‘specific choice of jurisdiction’ versus ‘general deprivation of jurisdiction’. In cases such as Stanbic Bank where the contract carried a limiting jurisdiction clause, the jurisdiction of the NCLT would stand open. Drawing back to the Contract Act, the answer is in the negative because any agreement that absolutely restricts a party from enforcing their rights through the “usual legal proceedings in the ordinary tribunals” is void. Jurisdiction is not a private right. The law views the administration of justice as a matter of public policy. If a statute (like the IBC) creates a specialized court to handle a crisis (insolvency), allowing private parties to definitively “opt-out” of that court’s jurisdiction by contract would undermine the state’s ability to regulate that sector. The choices of private parties, therefore, cannot be universalised to override powers conferred by statute.
The infeasibility of contractual exclusion simply reaffirms the residuary jurisdiction granted to the NCLT under the IBC. In any case, the NCLT can bar the operation of exclusionary clauses through the overriding powers granted to it under section 60(5) of the IBC.
The Bill reinforces the principle that contractual clauses cannot definitively bar the NCLT’s inherent jurisdiction. By proposing to change the NCLT’s admission powers from discretionary to mandatory upon proof of default, the Bill effectively prevents parties from using extraneous (i.e., contractual) factors such as foreign jurisdiction clauses as a shield to stall insolvency proceedings. This proposed legislative shift ensures that the “twin test” of debt and default remains the sole gateway for the IBC, rendering private agreements to litigate elsewhere secondary to the State’s mandate to resolve insolvency in a time-bound manner.
With the introduction of section 240C (Power to make rules for cross-border insolvency) under the IBC Bill, the Central Government may make rules for administering and conducting cross-border insolvency proceedings, included in relation to designation of specialised Benches for dealing with proceedings under section 240C. Here, Benches would necessarily mean those of the NCLT. The mechanics of the adoption of the cross-border insolvency framework remain to be seen, given the recent recommendations of the Report of The Select Committee on the IBC Bill, as submitted on December 17, 2025 on the amended clause 67 (section 240C), in terms of specific rules proposed to be made for recognition of proceedings (which would include an examination of foreign jurisdiction).
Therefore, while the rules made pursuant to the IBC Bill may provide much needed clarity to the jurisdiction of the NCLT on matters related to cross-border insolvency (including, for foreign CDs), the NCLT currently enjoys jurisdiction for Indian corporate persons under section 60(1), and for residuary matters such as questions of law, priority, or facts – by reference or otherwise.
Conclusion
Indian courts have recognized the validity of foreign governing law for contracts & generally opted for non-interference. They have also upheld exclusive jurisdiction clauses within such contracts; however, such exclusions are not absolute. The IBC, therefore, may apply to lending arrangements governed entirely by contract if the CD is registered in India, and may be invoked through the design of the NCLT’s jurisdiction.
– Varsha S. Banta
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