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Informist, Monday, Jul. 7, 2025

 

NEW DELHI – In its fifth amendment to the Insolvency Resolution Process for Corporate Persons Regulations, 2016, the Insolvency and Bankruptcy Board of India has tightened fraudulent transaction norms, mandating stricter disclosure of "avoidance transactions" in resolution plans, the regulatory body said in a gazette notification. It has also barred post-facto inclusion of such wrongful transactions in resolution plans unless previously disclosed, the notification said.

 

As part of the amendment, the Insolvency and Bankruptcy Board also included a clause that mandates "subsequent updates" of such transactions, that will require continuous updates to the information memorandum after the insolvency commencement date. The amendments took effect from Friday.

 

The notification follows Chairman of the Board Ravi Mittal's direction in quarterly report for Oct-Dec, where he said that avoidance transactions carried out by erstwhile promoters and directors are one of the primary causes leading to financial distress and sickness of the corporate debtor, and eventually entering insolvency.

 

"It is necessary to take these transactions seriously," he had said, adding that the Committee of Creditors should review the progress of these avoidance proceedings on a monthly basis and if required, create a mechanism to pursue these transactions before the Adjudicating Authority. "Recovery from avoidance transactions would play a vital role in reducing haircuts to creditors," Mittal said.

 

The Insolvency and Bankruptcy Board of India, in the notification, also said a resolution plan cannot include any such avoidance or fraudulent transactions unless they were disclosed in the information memorandum and communicated to all prospective resolution applicants before the deadline for submitting plans. This specific restriction does not apply to resolution plans already submitted to the Adjudicating Authority on or before the commencement date of these new regulations.  End

 

Reported by Priyasmita Dutta

Edited by Ashish Shirke

 

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