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Informist, Thursday, Sept. 10, 2026

 

NEW DELHI – The Insolvency and Bankruptcy Board of India has asked insolvency professionals serving as resolution professionals and liquidators of debt-ridden companies to remain vigilant for circumstances that may indicate misuse of the insolvency process for purposes such as tax avoidance or the closure or merger of companies without regulatory scrutiny. Given their access to the corporate debtor's books and records and the proceedings of the committee of creditors, insolvency professionals are well placed to identify such circumstances in the ordinary course of the insolvency process, the bankruptcy board said.

 

The board said it has received information from law enforcement and regulatory agencies that, in certain cases, the framework under the Insolvency and Bankruptcy Code, 2016 is being misused for purposes other than insolvency resolution or liquidation of the corporate debtor. Such instances include mitigating tax liabilities, closing or merging companies without regulatory scrutiny, avoiding investigations, prosecution and penalties under various statutes, and monetising and ring-fencing assets, it said. 

 

The board asked the insolvency professionals to be particularly alert to indicators such as an insolvency process initiated by a single creditor, other than a scheduled bank or a public financial institution, or debt assigned to such a creditor shortly before initiation of the process, with the creditor then dominating the committee of creditors. Insolvency professionals should look after cases where a cluster of corporate debtors with common promoters, addresses, directors, or inter-lending arrangements are taken into the insolvency process within a proximate timeframe and have overlapping committee of creditors compositions, it said. Insolvency professionals should enquire into cases with minimal competitive participation in the resolution process, or where a common resolution applicant recurs across connected corporate debtors, it said.

 

Further, insolvency professionals should probe cases where the realisation to creditors is grossly disproportionate to admitted claims and unsupported by a proper valuation exercise, the board said. Insolvency professionals should scrutinise cases where the corporate debtor or its group is linked to an order or ongoing proceeding by another regulator, enforcement agency, or investigating agency concerning fraud, the regulator said. In addition, cases where substantial loans, advances or investments to or from related group entities, despite absence of operations, are written off or shown as doubtful should also be probed, the board said.

 

The Insolvency and Bankruptcy Board is under scrutiny after huge haircuts to lenders in approved resolution plans and company liquidations. Till June 2026, the creditors have realised INR 4.35 trillion under the approved resolution plans, according to the bankruptcy board data. The haircut for creditors relative to their admitted claims is around 69%. Of the 203 companies rescued under the insolvency process with admitted claims of more than INR 10 billion, lenders have realised 31.35% of their claims. Further, 186 corporate debtors were closed by sale as a going concern under the liquidation process. These corporate debtors had claims amounting to INR 2.21 trillion. However, the liquidator realised just INR 73.37 billion in these cases. Recently, a tie-breaker judge of the tribunal had approved the INR-65-million repayment plan of Subhash Chandra, chairman emeritus of Zee Entertainment Enterprises Ltd., for admitted claims of INR 220.07 billion. However, a five-member bench of the tribunal stayed the order and listed the case for fresh hearing.   

 

If the insolvency professional forms a view on reasonable grounds that the insolvency process may be serving a fraudulent or malicious purpose other than insolvency resolution or liquidation of the corporate debtor, the insolvency professional should make an application before the National Company Law Tribunal, setting out the relevant facts and materials, the board said. End

 

Reported by Surya Tripathi

Edited by Saji George Titus

 

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