{"id":143856,"date":"2026-07-08T11:19:09","date_gmt":"2026-07-08T11:19:09","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=143856"},"modified":"2026-07-10T08:07:35","modified_gmt":"2026-07-10T08:07:35","slug":"india-restructuring-insolvency","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/india-restructuring-insolvency\/","title":{"rendered":"India: Restructuring &amp; Insolvency"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-143856","comparative_guide","type-comparative_guide","status-publish","hentry","guides-restructuring-insolvency","jurisdictions-india"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Dua Associates<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2019\/01\/Dua-Associates.jpg\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Dua Associates<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2019\/01\/Dua-Associates.jpg\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Restructuring &amp; Insolvency laws and regulations applicable in India<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What forms of security can be granted over immovable and movable property? What formalities are required and what is the impact if such formalities are not complied with?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><strong>Security over Immovable property<\/strong><\/p>\n<p>Under Section 3(26) of the General Clauses Act, 1897, \u2018immovable property\u2019 includes land, benefits to arise out of land, and things attached to the earth or permanently fastened to anything attached to the earth (such as buildings and other structures).<\/p>\n<p>The security which may be created over immovable property is a mortgage under Section 58 of the Transfer of Property Act, 1882 (the \u2018TOPA\u2019). The TOPA recognises six forms of mortgages over immovable property:<\/p>\n<ul>\n<li>Simple mortgage &#8211; entitles the mortgagee to have the property sold on inter alia payment defaults by the mortgagor;<\/li>\n<li>Mortgage by conditional sale &#8211; refers to a transaction wherein the mortgaged property is sold to the mortgagee, and such sale would become absolute on inter alia payment defaults by the mortgagor;<\/li>\n<li>Usufructuary mortgage &#8211; permits the mortgagee to retain possession and appropriate rents and profits in lieu of repayments;<\/li>\n<li>English mortgage &#8211; involves an absolute transfer with a provision for re-transfer upon repayment by the mortgagor;<\/li>\n<li>Equitable mortgage &#8211; created by deposit of title deeds by the mortgagor with the mortgagee;<\/li>\n<li>Anomalous mortgage &#8211; is any combination of two or more kinds of mortgages.<\/li>\n<\/ul>\n<p>Except for an equitable mortgage, every mortgage must be created through a registered instrument signed by the mortgagor (Section 59, TOPA, read with Section 17 of the Registration Act, 1908), and stamped under the Indian Stamp Act, 1899 read with the applicable state stamp legislation.<\/p>\n<p><strong>Security over Movable property<\/strong><\/p>\n<p>Under Section 3(36) of the General Clauses Act, 1897, \u2018movable property\u2019 means property of every description except immovable property. It includes both tangible movables (such as plant, machinery, stock-in-trade and vehicles) and intangible movables (such as receivables, book debts, shares and other securities, and intellectual property).<\/p>\n<p>Recognised forms of security over movables are: (a) pledge of ordinary movables, where possession is delivered to the pledgee (Sections 172\u2013176, Indian Contract Act, 1872); (b) pledge of dematerialised securities by depository entry under the Depositories Act, 1996 and allied regulations; and (c) hypothecation, where possession remains with the borrower (Section 2(1)(n), SARFAESI Act, 2002).<br \/>\nSpecific compliances under the Companies Act, 2013 and the SARFAESI Act<br \/>\nEvery charge created by a company over immovable property must be registered with the Registrar of Companies (the \u2018RoC\u2019) under Section 77 of the Companies Act, 2013, within 30 days of creation, which may be extended by the RoC as per Section 77. Security interests created in favour of \u2018secured creditors\u2019 (as defined under the SARFAESI Act) over both movable and immovable property of the borrower must also be registered with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (\u2018CERSAI\u2019) under Sections 26B\u201326C, SARFAESI Act, 2002. Registration is effected by filing the prescribed particulars of the charge with the RoC in Form CHG-1 (or Form CHG-9 in the case of debentures), together with the instrument creating the charge.<\/p>\n<p>Under Section 77(3) of the Companies Act, 2013, an unregistered charge may not be \u2018taken into account by the liquidator &#8230; or any creditor\u2019 unless it is duly registered under Section 77(1) of the Companies Act, 2013, although the underlying debt remains recoverable from the company (Section 77(4)). Non-registration with CERSAI prohibits enforcement under the SARFAESI Act (Section 26D) and forfeits the statutory priority normally afforded to secured creditors under Section 26E.<\/p>\n<p><strong>Specific compliances under the Registration Act and Stamp Act<\/strong><\/p>\n<p>Section 49 of the Registration Act, 1908 provides that a document which is required to be registered, but has not been registered, cannot affect the immovable property comprised therein or be received in evidence of any transaction affecting such property. However, the proviso to Section 49 permits such an unregistered document to be received in evidence as proof of a contract in a suit for specific performance or as evidence of a collateral transaction not required to be effected by a registered instrument.<\/p>\n<p>An instrument that is not duly stamped is inadmissible in evidence under Section 35 of the Indian Stamp Act, 1899. Under Section 33(1) of the said statute, every person having by law or consent of parties authority to receive evidence, and every person in charge of a public office (other than a police officer), is required to impound an instrument chargeable with stamp duty if it appears to such person that the instrument is not duly stamped.<\/p>\n<p>Under the proviso to Section 35, the defect may be cured by payment of the deficient stamp duty together with the prescribed penalty, following which the instrument may be admitted in evidence. The penalty payable is Rs. 5, or, where ten times the amount of the proper duty or deficient portion thereof exceeds Rs. 5, an amount equal to ten times such duty or deficient portion. Alternatively, where the impounded instrument is forwarded to the Collector, the Collector may, under Section 40(1)(b), require payment of the deficient duty together with a penalty of up to ten times the deficient duty.<\/p>\n<p>Non-payment of stamp duty does not invalidate the underlying transaction; however, it renders the instrument inadmissible in evidence and incapable of being acted upon until the deficiency is cured. This position has been affirmed by the Supreme Court in Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899 (7 judge bench, SC, 13 December 2023).<\/p>\n<p>In the context of security enforcement, a secured creditor holding an insufficiently stamped mortgage deed, hypothecation deed, or other security document may be unable to rely on such instrument for enforcement purposes until the requisite stamp duty and penalty have been paid, potentially resulting in delays in recovery proceedings<\/p>\n<p>A document requiring registration must be presented to the registering officer within four months of its execution under Section 23 of the Registration Act, 1908 (with a further four-month window, on payment of a fine of up to ten times the proper fee, under Section 25 of the Registration Act).<\/p>\n<p>An instrument, which requires stamping and executed in India must be stamped before or at the time of execution under Section 17 of the Indian Stamp Act, 1899, while an instrument executed outside India, not being a bill of exchange or promissory note, may be stamped within three months of its first receipt in India under Section 18 of the Stamp Act.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What practical issues do secured creditors face in enforcing their security package (e.g. timing issues, requirement for court involvement) in out-of-court and\/or insolvency proceedings?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><strong>Out-of-court enforcement<\/strong><\/p>\n<p>Prior to the enactment of the SARFAESI Act, 2002, secured creditors in India generally had to resort to civil proceedings to enforce security interests, save for the limited circumstances in which out-of-court remedies were available under the Transfer of Property Act, 1882 (\u2018TOPA\u2019). The SARFAESI Act was enacted to enable banks and certain financial institutions to enforce security interests without prior court intervention, thereby facilitating recovery of non-performing assets.<\/p>\n<p>Banks, notified financial institutions, asset reconstruction companies and debenture trustees (in respect of listed debentures secured in their favour) may enforce security under the SARFAESI Act by issuing a demand notice under Section 13(2), granting the borrower a 60-day period to discharge the outstanding debt. Upon failure to do so, the secured creditor may take possession of the secured asset under Section 13(4) and proceed with enforcement.<\/p>\n<p>However, possession under Section 13(4) of the SARFAESI Act is symbolic possession. Where the borrower or any other occupant does not voluntarily surrender possession, the secured creditor must approach the District Magistrate or Chief Metropolitan Magistrate under Section 14 of the SARFAESI Act for assistance in obtaining physical possession. Following possession and compliance with the applicable sale procedures, including valuation and issuance of statutory sale notices, the secured asset may be sold by public auction. The borrower retains a statutory right of redemption under Section 13(8) until the sale is completed and title passes to the purchaser.<\/p>\n<p><strong>Practical issues in out-of-court enforcement<\/strong><\/p>\n<p>In our experience, enforcement of security interests out-of-court may be delayed due to several factors, including:<\/p>\n<ul>\n<li>frivolous challenges mounted by borrowers before the Debts Recovery Tribunal (\u2018DRT\u2019), the Debts Recovery Appellate Tribunal (\u2018DRAT\u2019) or constitutional courts, often accompanied by applications for interim or injunctive relief;<\/li>\n<li>difficulties in obtaining physical possession of secured assets, which often requires recourse to the District Magistrate for grant of police assistance or appointment of \u2018local commissioners\u2019 for assistance in taking physical possession under Section 14 of the SARFAESI Act;<\/li>\n<li>the procedural requirements associated with valuation, service of statutory notices, reserve-price determination and auction processes, each of which may extend enforcement timelines;<\/li>\n<li>disputes relating to stamping, registration or enforceability of security documents, which may need to be resolved before enforcement can proceed;<\/li>\n<li>physical resistance by borrowers, occupants or other third parties in possession of secured assets, particularly where secured creditors seek to exercise remedies under the SARFAESI Act or Section 69 of the TOPA<\/li>\n<li>deficiencies in land, title and revenue records, resulting in ownership, boundary or encumbrance-related disputes;<\/li>\n<li>limited bidder participation in auctions of distressed assets, particularly in the real-estate sector, often necessitating repeated auctions and reductions in reserve price.<\/li>\n<\/ul>\n<p><strong>Insolvency proceedings<\/strong><\/p>\n<p>The Insolvency and Bankruptcy Code, 2016 (the \u2018IBC\u2019) is not a debt-recovery or security-enforcement mechanism. However, in practice, IBC proceedings are frequently deployed as a negotiating tool, with creditors relying on the drastic consequences of the Corporate Insolvency Resolution Process (\u2018CIRP\u2019), which commences upon the admission of an insolvency petition under the IBC. These consequences include the replacement of the debtor entity\u2019s erstwhile management by an insolvency professional.<\/p>\n<p>Once CIRP commences, the position changes materially for secured creditors. Section 14 of the IBC imposes a moratorium prohibiting, inter alia, the enforcement of security interests, including proceedings under the SARFAESI Act. Secured creditors are thereafter required to participate in the insolvency process and realise value through the resolution plan or, if the corporate debtor enters liquidation, through the mechanisms prescribed under Sections 52 and 53 of the IBC.<\/p>\n<p>Where a resolution plan is approved, the treatment of security interests is governed by the terms of the plan. The successful resolution applicant ordinarily acquires the corporate debtor on a \u201cclean slate\u201d basis, and security interests may be modified, released or otherwise dealt with pursuant to the approved plan.<\/p>\n<p>The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (\u20182026 Amendment Act\u2019) has clarified that a secured creditor who disagrees and votes against a resolution plan must receive not less than the lower of its liquidation entitlement or the amount payable under the order of priority prescribed under the IBC. The 2026 Amendment Act resolves a long-standing controversy pertaining to the minimum payout towards a dissenting secured creditor, arising out conflicting judicial decisions of the Supreme Court.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What restructuring and rescue procedures are available in the jurisdiction, what are the entry requirements and how is a restructuring plan approved and implemented? Does management continue to operate the business and \/ or is the debtor subject to supervision? What roles do the court and other stakeholders play?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><strong>Statutory restructuring and rescue procedures<\/strong><\/p>\n<p>In India, the IBC prescribes distinct mechanisms and procedures for the resolution and liquidation of distressed entities, depending on the category of debtor involved.<\/p>\n<p>In the case of a corporate entity, insolvency resolution is undertaken through the Corporate Insolvency Resolution Process (\u2018CIRP\u2019). CIRP may be initiated by a financial creditor under Section 7 of the IBC, an operational creditor under Section 9 (following the issuance of a demand notice under Section 8), or the corporate debtor itself under Section 10. Pursuant to Section 4 of the IBC, the minimum threshold for initiation of CIRP is a default of INR 1,00,00,000 (Indian Rupees One Crore).<\/p>\n<p>In the case of individuals, insolvency resolution is governed by a separate framework under the IBC, namely the Personal Insolvency Resolution Process (\u2018PIRP\u2019), which may be initiated under Sections 94 and 95 of the IBC.<\/p>\n<p>In addition to the above, there also exists the mechanism of Pre-Packaged Insolvency Resolution Process (\u2018PPIRP\u2019) under Chapter III-A (Sections 54A\u201354P), available only to MSMEs on a minimum default of INR 10 lakhs (MCA Notification S.O. 1543(E) dated 9 April 2021). PPIRP requires approval of unrelated financial creditors holding at least 66% of financial debt, and submission of a base resolution plan.<\/p>\n<p><strong>CIRP \u2013 Commencement and completion<\/strong><\/p>\n<p>CIRP commences once the National Company Law Tribunal (the \u2018NCLT\u2019) admits an application under Section 7 or 9 of the IBC. In admitting such applications, the NCLT is required to render a finding that there is a debt in existence, and a default has occurred. Under Section 12 of the IBC, CIRP must be completed within 180 days, extendable by 90 days, with a 330-day outer limit.<\/p>\n<p><strong>Roles of various stakeholders in CIRP:<\/strong><\/p>\n<p><strong>\u2022 Resolution Professional<\/strong><\/p>\n<p>On admission of an entity into insolvency, the powers of the board of directors of the corporate debtor are suspended and vest in the Interim Resolution Professional (the \u2018IRP\u2019), and thereafter the Resolution Professional (the \u2018RP\u2019) (Sections 17 and 23). The IRP\/RP manages the affairs of the corporate debtor and operates it as a going concern (Section 25), under the supervision of the Committee of Creditors (the \u2018CoC\u2019).<\/p>\n<p><strong>\u2022 Management<\/strong><\/p>\n<p>The existing management is ousted \/ suspended from the debtor entity and does not continue to run the business. However, the personnel of the corporate debtor, including its promoters and management, are required to extend all assistance and cooperation to the IRP\/RP in accordance with Section 19 of the IBC.<\/p>\n<p><strong>\u2022 CoC<\/strong><\/p>\n<p>The CoC is responsible for taking key commercial decisions during the CIRP, including approving or rejecting resolution plans submitted for the revival of the corporate debtor and ratifying certain actions of the Resolution Professional (\u2018RP\u2019). The RP is also required to obtain the approval of the CoC for specified matters under Section 28 of the IBC. Where resolution of the corporate debtor is not feasible, the CoC may resolve to place the corporate debtor into liquidation. The commercial wisdom of the CoC is paramount and generally not subject to judicial review.<\/p>\n<p><strong>\u2022 Successful Resolution Applicant<\/strong><\/p>\n<p>The successful resolution applicant is the entity whose resolution plan is approved by the CoC and thereafter sanctioned by the NCLT under Section 31 of the IBC. Upon such approval, the SRA assumes control of the corporate debtor and implements the resolution plan in accordance with its terms.<\/p>\n<p><strong>\u2022 Adjudicating Authority \/ NCLT<\/strong><\/p>\n<p>The NCLT, as the Adjudicating Authority, supervises the process, decides applications and approves or rejects the resolution plan, while the CoC takes the key commercial decisions.<\/p>\n<p><strong>Approval of a Resolution Plan under the IBC<\/strong><\/p>\n<p>Upon commencement of CIRP, the NCLT, under Section 13 of the IBC, declares a moratorium under Section 14, directs a public announcement of the CIRP and appoints an IRP. The powers of the board of directors stand suspended and vest in the IRP. The IRP collates and verifies claims, constitutes the CoC, and may thereafter be confirmed or replaced as the Resolution Professional \/ RP.<\/p>\n<p>The RP invites resolution plans from eligible resolution applicants by issuing an invitation for Expressions of Interest, followed by a request for submission of resolution plans. The plans received are evaluated and placed before the CoC for consideration. A resolution plan approved by not less than 66% of the voting share of the CoC is submitted by the RP to the National Company Law Tribunal (\u2018NCLT\u2019) for approval under Section 31 of the IBC. Upon approval by the NCLT, the resolution plan becomes binding on the corporate debtor, its creditors, employees, members, guarantors, governmental authorities and other stakeholders, and is implemented in accordance with its terms.<\/p>\n<p>While there is no statutory requirement for a monitoring committee, approved resolution plans frequently provide for a monitoring mechanism, often comprising the RP, representatives of the CoC and the successful resolution applicant; to oversee implementation of the resolution plan pending its full consummation. The successful resolution applicant may also approach the NCLT for directions in relation to implementation issues.<\/p>\n<p>By contrast, under the Pre-Packaged Insolvency Resolution Process (\u2018PPIRP\u2019) framework, management ordinarily remains with the existing management of the corporate debtor (a debtor-in-possession model), subject to the oversight of the RP and the CoC. However, the CoC may, in specified circumstances and with NCLT approval, resolve to vest management of the corporate debtor in the RP.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can a debtor in restructuring proceedings obtain new financing and are any special priorities afforded to such financing (if available)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under Sections 20 and 23 of the IBC, the IRP and the RP are required to make every endeavour to preserve and protect the value of the assets of the corporate debtor and to manage its operations as a going concern. To facilitate this objective, the IBC permits the raising of fresh financing during the CIRP in the form of \u2018interim finance\u2019. The RP may raise interim finance, subject to the approval of the CoC where required under Section 28 of the IBC.<\/p>\n<p><strong>Interim finance<\/strong><\/p>\n<p>Interim finance is defined under Section 5(15) of the IBC as inter alia financial debt raised by the RP during the CIRP. The RP may raise interim finance, subject to the approval of the CoC by a 66% voting share under Sections 28(1)(a) and 28(3) of the IBC, for the purpose of maintaining the corporate debtor as a going concern.<\/p>\n<p><strong>Payment in priority<\/strong><\/p>\n<p>Interim finance, together with the costs of raising such finance, forms part of the insolvency resolution process costs under Section 5(13)(a) of the IBC and is accorded the highest priority in repayment. Section 30(2)(a) requires insolvency resolution process costs to be paid in priority under any resolution plan. Further, in the event of liquidation, such costs rank first in the waterfall mechanism under Section 53 of the IBC, ahead of all other creditors, including secured creditors, and are to be paid in full. Further, in liquidation, interim finance together with interest for up to 12 months (or until repayment, whichever is earlier) forms part of CIRP costs in terms of Regulation 2(1)(ea) read with Regulation 39B of the CIRP Regulations.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can a restructuring proceeding release claims against non-debtor parties (e.g. guarantees granted by parent entities, claims against directors of the debtor), and, if so, in what circumstances?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><strong>Claims against Guarantors<\/strong><\/p>\n<p>Unless otherwise provided under the relevant contract, there is no automatic release of claims against guarantors on resolution of the corporate debtor. The Supreme Court has held that a guarantor\u2019s liability is co-extensive with the principal debtor\u2019s under Section 128 of the Indian Contract Act, 1872, and is unaffected by plan approval save to the extent expressly provided in the plan (Lalit Kumar Jain v Union of India, (2021) 9 SCC 321).<\/p>\n<p><strong>Claims against Directors<\/strong><\/p>\n<p>Under Indian law, a company is a legal entity distinct from its directors and shareholders. Accordingly, the liabilities of the corporate debtor do not automatically extend to its directors or shareholders, and any recourse against them generally requires an independent basis for liability (for example, personal guarantees, statutory liability, fraud, or circumstances warranting the lifting of the corporate veil).<\/p>\n<p>Approval of a resolution plan also does not operate as a general release of the personal or criminal liability of directors and management. Directors may continue to face proceedings arising from pre-CIRP conduct, including prosecutions under the Negotiable Instruments Act, 1881, as recognised by the Supreme Court in P Mohanraj v Shah Bros Ispat (P) Ltd, as well as proceedings under statutes such as the Prevention of Money Laundering Act, 2002, the Foreign Exchange Management Act, 1999, the Income-tax Act, 1961, GST legislation and the SEBI Act, 1992.<\/p>\n<p>While Section 32A of the IBC grants immunity to the corporate debtor from liability for offences committed prior to the approval of a resolution plan, subject to the conditions prescribed therein, such protection does not extend to persons who were in charge of, or responsible for, the conduct of the business of the corporate debtor at the relevant time. Accordingly, claims and proceedings against directors, officers and other responsible persons may continue notwithstanding the successful resolution of the corporate debtor.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How do creditors organize themselves in these proceedings? Are advisory fees covered by the debtor and to what extent?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><strong>Role of the Creditors<\/strong><\/p>\n<p>Under Section 21 of the IBC, following the collation and verification of claims received against the corporate debtor, the IRP constitutes the CoC. The CoC comprises all financial creditors of the corporate debtor, with voting shares being proportionate to the amount of financial debt owed to each creditor. Operational Creditors are not members of the CoC; however, where their aggregate dues exceed 10% of the total debt, they may attend meetings of the CoC without voting rights (Section 24(3)(c)).<\/p>\n<p>The CoC is the principal commercial decision-making body during the CIRP. It is responsible for taking key decisions relating to the conduct of the process, including appointment or replacement of the RP, raising interim finance, extension of the CIRP period, approval of a resolution plan and, where appropriate, liquidation of the corporate debtor. Routine decisions generally require approval by a simple majority of voting share, whereas specified decisions under the IBC require approval by not less than 66% of the voting share of the CoC.<\/p>\n<p>The CIRP itself is administered by the IRP\/RP, who acts under the supervision of the CoC and may engage legal counsel, accountants, registered valuers and other professionals as necessary for the conduct of the process.<\/p>\n<p><strong>Advisory fees<\/strong><\/p>\n<p>In our experience, individual members of the CoC are not entitled to receive any remuneration, advisory fee or similar compensation for performing their functions as creditors participating in the CIRP.<\/p>\n<p>The IRP\/RP, however, is entitled to fees and expenses approved by the CoC, which form part of the insolvency resolution process costs under Sections 5(13)(b) and (c) of the IBC. Similarly, fees payable to professionals engaged by the IRP\/RP, including registered valuers, legal counsel and accountants, form part of the insolvency resolution process costs. In this regard, the IBBI has prescribed minimum monthly fees for IRPs\/RPs based on the quantum of admitted claims, ranging from INR 1 lakh to INR 5 lakhs per month, as well as a framework for performance-linked incentive fees linked to the timeliness of resolution and value maximisation achieved under the approved resolution plan.<\/p>\n<p>These costs are ordinarily met from the funds of the corporate debtor. Where the corporate debtor lacks sufficient funds, the CoC members may contribute or advance the necessary amounts to fund the CIRP, which amounts are reimbursable as insolvency resolution process costs and are accorded priority in payment under the IBC, including under the waterfall mechanism prescribed in Section 53(1)(a) of the IBC.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is the test for insolvency? Is there any obligation on directors or officers of the debtor to open insolvency proceedings upon the debtor becoming distressed or insolvent? Are there any consequences for failure to do so?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><strong>Test for insolvency<\/strong><\/p>\n<p>The statutory trigger for insolvency proceedings under the IBC is the occurrence of a \u2018default\u2019, defined in Section 3(12) of the IBC as the non-payment of debt when it has become due and payable. The IBC permits insolvency proceedings to be initiated in respect of both financial debt, i.e., debt disbursed against the consideration for the time value of money, and operational debt, i.e., claims arising from the provision of goods or services.<\/p>\n<p><strong>A. Financial Debt<\/strong><\/p>\n<p>The 2026 Amendment Act amends Section 7(5) of the IBC and codifies the settled legal position that, in an application filed by a financial creditor, the NCLT is required only to determine whether a financial debt exists and whether a default has occurred.<\/p>\n<p>The scope of judicial scrutiny at the admission stage is therefore limited. The NCLT does not undertake an assessment of the corporate debtor&#8217;s overall financial health, commercial viability or ability to continue as a going concern. Once the existence of a financial debt and the occurrence of a default are established, the application is ordinarily liable to be admitted.<\/p>\n<p><strong>B. Operational Debt<\/strong><\/p>\n<p>For applications filed by operational creditors under Section 9 of the IBC, the standard differs insofar as the corporate debtor is afforded an additional defence.<\/p>\n<p>If the corporate debtor demonstrates the existence of a genuine pre-existing dispute in relation to the underlying operational debt, which is not spurious, hypothetical or illusory, the application is liable to be rejected. This principle was recognised by the Supreme Court in Mobilox Innovations (P) Ltd v Kirusa Software (P) Ltd, (2018) 1 SCC 353. The rationale underlying this distinction is that Section 9 proceedings are not intended to operate as a debt recovery mechanism in cases where the underlying claim is genuinely disputed.<\/p>\n<p><strong>Directors not obligated to file for insolvency<\/strong><\/p>\n<p>Indian law does not impose any obligation on directors to commence insolvency proceedings upon the financial distress of a company. While Section 166 of the Companies Act, 2013 requires directors to act in good faith and in the best interests of the company and its stakeholders, Section 10 of the IBC merely permits a corporate debtor to initiate CIRP and does not mandate the filing of insolvency proceedings.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What insolvency proceedings are available in the jurisdiction? Does management continue to operate the business and \/ or is the debtor subject to supervision? What roles do the court and other stakeholders play? How long does the process usually take to complete?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><strong>Available insolvency proceedings<\/strong><\/p>\n<p>The IBC provides for: (a) CIRP under Sections 7, 9, and 10; (b) PPIRP under Sections 54A\u201354P, which allows MSMEs to continue managing the company while submitting a resolution plan to creditors for approval; and (c) PIRP for individuals under Sections 94 and 95.<\/p>\n<p><strong>Management<\/strong><\/p>\n<p>On the insolvency commencement date, the powers of the board of directors stand suspended (Section 17(1)(b)). The IRP\/RP runs the corporate debtor as a going concern (Section 25(2)(a)), under CoC supervision.<\/p>\n<p>In PPIRP, by contrast, management continues with the existing management of the corporate debtor on a debtor-in-possession basis.<\/p>\n<p>In liquidation, the liquidator (an insolvency professional) assumes control, assisted by a Stakeholders\u2019 Consultation Committee under Regulation 31A of the IBBI (Liquidation Process) Regulations, 2016 (the \u2018Liquidation Regulations\u2019).<\/p>\n<p><strong>Roles of the court and stakeholders<\/strong><\/p>\n<p>The NCLT admits applications, supervises the conduct of CIRP, approves resolution plans, orders liquidation\/dissolution and resolves disputes inter-se stakeholders. The CoC takes commercial decisions, and its \u2018commercial wisdom\u2019 is non-justiciable on merits (Essar Steel India Ltd v Satish Kumar Gupta, (2020) 8 SCC 531), subject to compliance with the IBC. Appeals lie to the National Company Law Appellate Tribunal (the \u2018NCLAT\u2019) under Section 61. The RP must file periodic compliance and status reports with the NCLT under the CIRP Regulations. For a more detailed discussion of the various stakeholders involved in the insolvency process and their respective roles, reference may be made to our response to Query 3.<\/p>\n<p><strong>Timeline<\/strong><\/p>\n<p>Section 12(3) sets a 330-day outer limit for CIRP, including litigation. In Committee of Creditors of Essar Steel India Ltd v Satish Kumar Gupta, (2020) 8 SCC 531, the Supreme Court read down the word \u2018mandatorily\u2019, holding the period to be directory and extendable in exceptional cases where resolution is nearing completion. PPIRP as per the IBC has to conclude within 120 days. Liquidation is intended to be completed within one year (extendable at the NCLT\u2019s discretion). In practice, insolvency proceedings often extend beyond the statutory timelines contemplated under the IBC, a trend reflected in the quarterly reports published by the IBBI. Further, in our experience, the final approval of a resolution plan by the NCLT may, in certain cases, be further delayed due to the substantial pendency of cases before the tribunal.<\/p>\n<p>The 2026 Amendment Act, introduces a \u2018second chance\u2019 mechanism (new Section 33(1A)) permitting a fresh attempt at resolution in certain CIRPs where the first attempt is unsuccessful. This mechanism, now operative, indirectly extends the effective resolution timeline beyond the 330-day outer limit in Section 12(3) of the IBC. Under the new mechanism, the RP, with the concurrence of the CoC, may move an application for a second attempt at resolution. This second attempt must be completed within a further period of up to 120 days.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What form of stay or moratorium applies in insolvency proceedings against the continuation of legal proceedings or the enforcement of creditors\u2019 claims? Does that stay or moratorium have extraterritorial effect? In what circumstances may creditors benefit from any exceptions to such stay or moratorium?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><strong>Scope of Moratorium<\/strong><\/p>\n<p>Section 14 of the IBC imposes a moratorium from the insolvency commencement date until completion of CIRP. Once moratorium is imposed, the following four categories of action are suspended:<\/p>\n<p>(a) commencement or continuation of legal proceedings against the corporate debtor (including enforcement of any judgment, decree or order);<\/p>\n<p>(b) any transfer, disposal, encumbrance or alienation of corporate debtor assets or beneficial interests therein;<\/p>\n<p>(c) enforcement or realisation of any security interest over the corporate debtor\u2019s property, including action under the SARFAESI Act; and<\/p>\n<p>(d) recovery by any owner or lessor of property that the corporate debtor occupies or controls.<\/p>\n<p><strong>Proceedings initiated by the corporate debtor not impacted<\/strong><\/p>\n<p>The moratorium under Section 14 is directed at proceedings and enforcement actions against the corporate debtor. It does not extend to proceedings initiated by the corporate debtor itself against third parties. Accordingly, actions such as recovery proceedings, suits or arbitrations commenced by the corporate debtor, which may augment the value of its estate, may continue during the CIRP and be pursued by the RP on behalf of the corporate debtor.<\/p>\n<p><strong>Exceptions to the Moratorium<\/strong><\/p>\n<p>The moratorium is subject to certain statutory exceptions. By virtue of Section 14(3) of the IBC, it does not apply, inter alia, to:<\/p>\n<p>(a) such transactions, agreements or arrangements notified by the Central Government in consultation with any financial sector regulators or any other authority;<\/p>\n<p>(b) surety in a contract of guarantee to a corporate debtor.<\/p>\n<p>Thus, as can be seen, the moratorium under Section 14 of the IBC is not absolute. Creditors may continue to pursue remedies against guarantors and other third parties not protected by the moratorium. In addition, by virtue of Section 14(3), certain notified transactions and arrangements fall outside the scope of the moratorium.<\/p>\n<p><strong>Extraterritorial effect<\/strong><\/p>\n<p>At the outset, reference may be made to Section 1 of the IBC, which expressly clarifies that it extends only to the \u201cwhole of India\u201d. Accordingly, in our understanding, the provisions of the IBC do not extend to territories outside India. That said, a corporate debtor undergoing CIRP remains subject to the provisions of the IBC and is required to comply with the restrictions imposed thereunder. Accordingly, while the moratorium may bind the corporate debtor and its stakeholders from the perspective of Indian law, its recognition and enforcement in foreign jurisdictions would depend on the applicable laws of such jurisdictions and principles of comity or cross-border insolvency recognition.<\/p>\n<p>It may be noted that the IBC contemplates a framework for cross-border insolvency cooperation. In particular, Section 234 of the IBC empowers the Central Government to enter into bilateral agreements with foreign countries for enforcing the provisions of the IBC and facilitating the administration of assets situated in such jurisdictions. However, as of the date of this response, no bilateral agreement or arrangement has been notified or brought into effect under Section 234 of the IBC.<\/p>\n<p>Thus, in our understanding, the provisions of the IBC do not extend to territories outside India; consequently, while the moratorium binds the corporate debtor, it cannot directly restrain proceedings or attachments abroad. Indian courts have nonetheless extended limited assistance on a case-by-case basis.<\/p>\n<p><strong>Liquidation<\/strong><\/p>\n<p>A separate moratorium applies in liquidation under Section 33(5), barring suits or other legal proceedings by or against the corporate debtor, save that the liquidator may, with the prior approval of the Adjudicating Authority, institute a suit or other legal proceeding on behalf of the corporate debtor.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How do the creditors, and more generally any affected parties, proceed in such proceedings? What are the requirements and forms governing the adoption of any reorganisation plan (if any)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><strong>Participation of Creditors in CIRP<\/strong><\/p>\n<p>Upon admission of an insolvency application, the NCLT, in terms of Section 13 of the IBC, declares a moratorium under Section 14, causes a public announcement of the initiation of CIRP and appoints an IRP. Pursuant to the public announcement under Section 15 of the IBC, creditors are required to submit their claims to the IRP in the prescribed forms under Regulations 7 to 9A of the CIRP Regulations, typically within 14 days of the public announcement. Broadly, Form B is prescribed for operational creditors (other than workmen and employees); Forms C and CA for financial creditors, including creditors in a class such as homebuyers; Form D for individual workmen or employees; Form E for the authorised representative of workmen or employees and Form F for other creditors.<\/p>\n<p>The IRP thereafter collates and verifies the claims received and determines their admission or rejection. Upon verification of claims, the financial creditors whose claims have been admitted constitute the CoC in accordance with Section 21 of the IBC.<\/p>\n<p><strong>Requirements of a Resolution Plan<\/strong><\/p>\n<p>A resolution plan is the proposal under which the corporate debtor is revived and its debts are restructured. The RP prepares an Information Memorandum under Section 29 and invites eligible applicants to submit plans. Under Section 30(2), a resolution plan must:<\/p>\n<ul>\n<li>provide for payment of the insolvency resolution process costs in priority (Section 30(2)(a));<\/li>\n<li>pay operational creditors not less than the higher of: (i) their liquidation entitlement under Section 53; and (ii) the amount they would receive if the proceeds under the resolution plan were distributed in accordance with the priority prescribed under Section 53(1) (Section 30(2)(b));<\/li>\n<li>pay dissenting financial creditors such amount which shall not be less than the lower of the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under Section 53 of the IBC or that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of Section 53 of IBC. (Section 30(2)(ba));<\/li>\n<li>provide for the management of the corporate debtor and for the implementation and supervision of the plan; and<br \/>\n\u2022 not contravene any provision of the law for the time being in force.<\/li>\n<\/ul>\n<p>Under Regulation 38 of the CIRP Regulations, the plan must also explain how it addresses the interests of all stakeholders and set out the implementation schedule, the management and control structure during implementation, and supervision arrangements.<\/p>\n<p><strong>CoC approval<\/strong><\/p>\n<p>For a resolution plan to be approved, it must receive the approval of the CoC by a vote of not less than 66% of the voting share in accordance with Section 30(4) of the IBC. Further, where the resolution plan contemplates a combination requiring approval of the Competition Commission of India under the Competition Act, 2002, the proviso to Section 31(4) requires such approval to be obtained prior to the submission of the plan to the NCLT.<\/p>\n<p><strong>NCLT sanction<\/strong><\/p>\n<p>Following approval by the CoC, the resolution plan is submitted to the NCLT under Section 31 of the IBC. The NCLT&#8217;s review is limited to examining whether the plan satisfies the requirements prescribed under Section 30(2) of the IBC. It is well settled that the commercial wisdom of the CoC, including with respect to the quantum, distribution and form of consideration under a resolution plan, is not amenable to judicial review on merits (K Sashidhar v Indian Overseas Bank, (2019) 12 SCC 150; Committee of Creditors of Essar Steel India Ltd v Satish Kumar Gupta, (2020) 8 SCC 531; reaffirmed in Torrent Power Ltd v Ashish Arjunkumar Rathi, (2026) 266 Comp Cas 40). On approval, the plan binds the corporate debtor, employees, creditors, guarantors, the Government and statutory authorities, and all claims not provided for in the plan stand extinguished on a \u2018clean slate\u2019 basis (Ghanashyam Mishra &amp; Sons (P) Ltd v Edelweiss ARC Ltd, (2021) 9 SCC 657).<\/p>\n<p><strong>Eligibility of resolution applicants and disqualifications<\/strong><\/p>\n<p>Section 29A disqualifies, among others, undischarged insolvents, wilful defaulters, persons whose accounts have been classified as non-performing assets for over a year, and related parties of the corporate debtor and connected persons. Promoters of MSMEs are exempt from certain Section 29A disqualifications under Section 240A.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How do creditors and other stakeholders rank on an insolvency of a debtor? Do any stakeholders enjoy particular priority (e.g. employees, pension liabilities, DIP financing)? Could the claims of any class of creditor be subordinated (e.g. recognition of subordination agreement)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The ranking of creditors and other stakeholders is determined by the outcome of the proceedings under the IBC. The statutory waterfall under Section 53 of the IBC applies only in cases where the corporate debtor has to undergo liquidation. Where the corporate debtor is successfully resolved, distributions are governed by the terms of the approved resolution plan, subject to the minimum safeguards prescribed under Section 30(2) of the IBC.<\/p>\n<p><strong>Distribution under a resolution plan<\/strong><\/p>\n<p>A resolution plan must comply with Section 30(2) of the IBC, which prescribes certain minimum entitlements. In particular:<\/p>\n<ul>\n<li>provide for payment of the insolvency resolution process costs in priority (Section 30(2)(a));<\/li>\n<li>pay operational creditors not less than the higher of: (i) their liquidation entitlement under Section 53; and (ii) the amount they would receive if the proceeds under the resolution plan were distributed in accordance with the priority prescribed under Section 53(1) (Section 30(2)(b));<\/li>\n<li>pay dissenting financial creditors such amount which shall not be less than the lower of the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under Section 53 of the IBC or that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of Section 53 of IBC. (Section 30(2)(ba));<\/li>\n<li>provide for the management of the corporate debtor and for the implementation and supervision of the plan; and<\/li>\n<li>not contravene any provision of the law for the time being in force.<\/li>\n<\/ul>\n<p>Subject to these statutory safeguards, the CoC retains broad discretion to determine the distribution of value among creditors in accordance with its commercial wisdom and may take into account the priority framework set out in Section 53 of the IBC.<\/p>\n<p>The treatment of workmen\u2019s dues under a resolution plan is not separately codified. In our experience however, resolution plans generally provide workmen with at least the value they would receive under the Section 53 waterfall, although the CoC may provide for higher recoveries where considered appropriate.<\/p>\n<p><strong>Distribution in liquidation: the Section 53 waterfall<\/strong><\/p>\n<p>Where the corporate debtor proceeds into liquidation, Section 53(1) prescribes the following order of priority:<\/p>\n<p>(a) CIRP costs and liquidation costs, in full;<\/p>\n<p>(b) (i) workmen\u2019s dues for the 24 months preceding the liquidation commencement date and, (ii) debts owed to secured creditors who have relinquished their security under Section 52, shall rank equally;<\/p>\n<p>(c) wages and unpaid dues to employees (other than workmen) for the 12 months preceding liquidation commencement;<\/p>\n<p>(d) financial debts owed to unsecured creditors;<\/p>\n<p>(e) (i) amounts due to the central and state governments (including statutory dues) for the two years preceding liquidation commencement and,<br \/>\n(ii) unpaid amounts due to a secured creditor following enforcement of security under Section 52, shall rank equally;<\/p>\n<p>(f) any remaining debts and dues;<\/p>\n<p>(g) preference shareholders; and<\/p>\n<p>(h) equity shareholders or partners.<\/p>\n<p><strong>Special priorities<\/strong><\/p>\n<p>Interim finance and other CIRP costs rank at the top of the waterfall (Section 53(1)(a)) and are also given priority under Section 30(2)(a) of IBC. In addition, the Supreme Court in Sunil Kumar Jain v Sundaresh Bhatt, (2022) 7 SCC 540, held that wages and salaries of workmen and employees who continue to work during CIRP form part of CIRP costs and therefore rank in first priority under Section 53(1)(a). Pre-CIRP dues of workmen and employees fall within Sections 53(1)(b) and (c). By contrast, pre-CIRP employee and workmen dues rank under Sections 53(1)(b) and (c).<\/p>\n<p>Further, provident fund, gratuity and pension fund dues are excluded from the liquidation estate pursuant to Section 36(4)(a)(iii) and are therefore not available for distribution to creditors.<\/p>\n<p><strong>Subordination<\/strong><\/p>\n<p>In our experience, contractual subordination arrangements between creditors are generally recognised under Indian insolvency law. Section 53(2) of the IBC, read with Illustration II thereto, contemplates the enforcement of inter se arrangements among creditors of the same class, and intra-class subordination is generally respected in accordance with its terms.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can a debtor\u2019s pre-insolvency transactions be challenged? If so, by whom, when and on what grounds? What is the effect of a successful challenge and how are the rights of third parties impacted?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. The IBC permits review and avoidance of certain pre-insolvency transactions entered into by the corporate debtor. During CIRP, such applications may be brought by the RP, and in liquidation by the liquidator, before the NCLT. The principal avoidance provisions are set out below.<\/p>\n<p><strong>Categories of Avoidance Transactions<\/strong><\/p>\n<p>The IBC recognises four categories of avoidance transactions, commonly referred to as PUFE transactions (preferential, undervalued, fraudulent and extortionate):<\/p>\n<p>i. Preferential transactions (Section 43): transactions that place a creditor, surety or guarantor in a more beneficial position than it would have occupied under the distribution waterfall prescribed in Section 53 in respect of an antecedent debt. Pursuant to the 2026 Amendment Act, the relevant look-back period is computed from the initiation date, i.e., the date of filing of the insolvency application, rather than the insolvency commencement date. The look-back period is two years in the case of related parties and one year in the case of non-related parties.<\/p>\n<p>ii. Undervalued transactions (Section 45): transactions involving gifts or transfers of assets for consideration that is significantly less than the value of the consideration provided by the corporate debtor, when such transaction has not taken place in the ordinary course of business of the corporate debtor. The look-back period is two years in the case of related parties and one year in the case of non-related parties.<\/p>\n<p>iii. Extortionate credit transactions under Section 50: credit on exorbitant or unconscionable terms; two-year look-back from the initiation date (as amended by the 2026 Amendment Act); and<\/p>\n<p>iv. Fraudulent trading and wrongful trading (Section 66): where the business of the corporate debtor has been carried on with intent to defraud creditors or for any fraudulent purpose, the NCLT may direct persons who knowingly participated in such conduct to contribute to the assets of the corporate debtor. Section 66 is not subject to any statutory look-back period.<\/p>\n<p><strong>Who May Challenge Such Transactions?<\/strong><\/p>\n<p>The RP during CIRP, or the liquidator during liquidation, may investigate and apply to the NCLT for appropriate relief under Sections 43, 45, 49, 50 and 66. In Anuj Jain (IRP of Jaypee Infratech Ltd) v Axis Bank Ltd, (2020) 8 SCC 401, the Supreme Court laid down the test for preferential transactions and held that transactions in the ordinary course of business, including security created contemporaneously with the disbursement of loans, are not preferential. The courts have also recognised that avoidance applications survive independently of the CIRP and may continue even after approval of a resolution plan (Tata Steel BSL Ltd v Venus Recruiter (P) Ltd, 2023 SCC OnLine Del 155).<\/p>\n<p><strong>Effect of a successful challenge<\/strong><\/p>\n<p>Where an avoidance transaction succeeds, the NCLT may set aside the impugned transaction, direct restoration of property or value, require contributions to the assets of the corporate debtor and grant such consequential relief as may be necessary under Sections 44, 48, 49, 51 and 66 of IBC.<\/p>\n<p>Any recoveries realised through avoidance proceedings accrue to the benefit of the corporate debtor&#8217;s estate and enhance the pool of assets available for distribution to creditors. Where avoidance proceedings continue after approval of a resolution plan, the treatment of any subsequent recoveries, in our experience, is typically governed by the terms of the approved resolution plan or the prescribed monitoring mechanism.<\/p>\n<p><strong>Impact on Third Parties<\/strong><\/p>\n<p>The IBC contains certain protections for bona fide third parties. The proviso to Section 44 of the IBC provides a two-limbed protection: (a) it protects secondary transferees who acquired an interest in property from a person other than the corporate debtor in good faith and for value; and (b) it protects persons who directly received a benefit from the preference in good faith and for value. However, under Explanation I to Section 44, a presumption of bad faith applies if the person had sufficient information of the commencement of the insolvency process or is a related party Similarly, Section 49 protects persons who were genuinely unaware of the fraudulent purpose underlying an undervalued transaction, although such protection is unavailable to parties who knowingly participated in the impugned arrangement. -if they acted in good faith, for value, and without notice of the relevant circumstances.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How are existing contracts treated in restructuring and insolvency processes? Are the parties obliged to continue to perform their obligations? Will termination, retention of title and set-off provisions in these contracts remain enforceable? Is there any ability for either party to disclaim the contract?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><strong>Treatment of Existing Contracts<\/strong><\/p>\n<p>The treatment of existing contracts during the insolvency process would depend on the nature of the contract and the obligations arising thereunder. While the commencement of CIRP does not automatically terminate existing contracts, the exercise of contractual rights and remedies against the corporate debtor may be restricted to the extent they are inconsistent with the moratorium imposed under Section 14 of the IBC. Subject to the moratorium and the objective of preserving the corporate debtor as a going concern, contracts generally continue to operate in accordance with their terms. Further, under Section 25(2)(a) of the IBC, the RP is required to preserve and protect the assets of the corporate debtor and manage its operations as a going concern, which may necessitate the continuation of contracts that are critical to the business.<\/p>\n<p><strong>Ipso Facto and Termination Clauses<\/strong><\/p>\n<p>Termination of contracts by a counterparty solely on account of the commencement of CIRP has, in certain instances, been judicially curtailed where such termination would jeopardise the status of the corporate debtor as a going concern. In Gujarat Urja Vikas Nigam Ltd v Amit Gupta, (2021) 7 SCC 209, the Supreme Court restrained termination of a power purchase agreement triggered solely by the commencement of CIRP, holding that the agreement was central to the success of the resolution process and that its termination would result in the corporate death of the debtor. However, termination on independent contractual grounds unrelated to CIRP remains permissible (Tata Consultancy Services Ltd v Vishal Ghisulal Jain, (2022) 2 SCC 583). Subject to the foregoing, contractual rights, including rights of termination, may generally be exercised by the parties in accordance with the terms of the relevant agreement, provided their exercise is not inconsistent with the moratorium under Section 14 or the objective of preserving the corporate debtor as a going concern.<\/p>\n<p><strong>Government licences and essential and critical supplies<\/strong><\/p>\n<p>Government-issued licences and permits essential for the going concern cannot ordinarily be cancelled solely on account of CIRP. Section 14(2), read with Regulation 32 of the CIRP Regulations, protects essential supplies (electricity, water, telecommunications and information technology services), provided dues during the moratorium are paid. Under Section 14(2A), the RP may designate further supplies as \u2018critical\u2019 to preserve the corporate debtor as a going concern, and those may not be terminated unless moratorium-period dues remain unpaid.<\/p>\n<p><strong>Set Off and Retention of Title<\/strong><\/p>\n<p>The IBC does not contain a comprehensive framework governing set-off or retention-of-title rights. In Bharti Airtel Ltd v Vijaykumar V. Iyer (CIVIL APPEAL NOS. 3088-3089 OF 2020), the Supreme Court held that the IBC does not recognise statutory or insolvency set-off during CIRP. However, contractual set-off (where the right had crystallised before the insolvency commencement date) and equitable set-off in closely connected transactions may remain available. Retention-of-title clauses are generally governed by the terms of the underlying contract and applicable principles of property and contract law.<\/p>\n<p><strong>Power to Disclaim<\/strong><\/p>\n<p>The IBC does not confer on the RP a general power to disclaim contracts during CIRP. Similarly, the commencement of CIRP does not, in itself, entitle either party to refuse performance or disclaim its contractual obligations merely by reason of the insolvency proceedings. In liquidation, however, the liquidator may continue, assign or terminate contracts as commercially appropriate. Further, the Liquidation Regulations permit the liquidator, with the approval of the NCLT, to disclaim onerous property, including unprofitable contracts and property subject to burdensome obligations.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What conditions apply to the sale of assets \/ the entire business in a restructuring or insolvency process? Does the purchaser acquire the assets \u201cfree and clear\u201d of claims and liabilities? Can security be released without creditor consent? Is credit bidding permitted? Are pre-packaged sales possible?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><strong>Modes of sale<\/strong><\/p>\n<p>In CIRP, a resolution plan may provide for the transfer of assets, the business, equity, or any combination thereof, including by way of a going-concern transfer. Regulation 37 of the CIRP Regulations permits a wide range of restructuring measures aimed at maximising value, including the transfer or sale of all or part of the corporate debtor&#8217;s assets (whether encumbered or unencumbered), sale of specific assets to one or more successful resolution applicants, transfer of the business as a going concern, and other measures for dealing with the remaining assets of the corporate debtor.<\/p>\n<p>In liquidation, Regulation 32 of the Liquidation Regulations permits sale by:<\/p>\n<ul>\n<li>sale of an asset on a standalone basis;<\/li>\n<li>a slump sale;<\/li>\n<li>sale of a set of assets collectively;<\/li>\n<li>sale of assets in parcels;<\/li>\n<li>sale of the corporate debtor as a going concern; or<\/li>\n<li>sale of the business(es) of the corporate debtor as a going concern.<\/li>\n<\/ul>\n<p>The default mode of sale is through an auction, as specified under Schedule I of the Liquidation Regulations.<\/p>\n<p>Before plan approval, the RP may also sell unencumbered assets of the corporate debtor outside the ordinary course of business with CoC approval under Section 28(1)(f) read with Regulation 29 of the CIRP Regulations, subject to specified conditions. The principal sale process, however, ordinarily takes place through the resolution plan once approved by the NCLT.<\/p>\n<p><strong>Free and clear acquisition<\/strong><\/p>\n<p>A successful resolution applicant under an approved resolution plan acquires the corporate debtor or its assets on a \u201cclean slate\u201d basis. Section 31(1) of the IBC binds all stakeholders, including governmental and statutory authorities, to the approved resolution plan, and claims not provided for in the plan stand extinguished. The Supreme Court recognised this principle in Ghanashyam Mishra &amp; Sons (P) Ltd v Edelweiss ARC Ltd, (2021) 9 SCC 657, and reaffirmed it in Vaibhav Goel v Deputy Commissioner of Income Tax, 2025 SCC OnLine SC 592.<\/p>\n<p>Section 32A further grants immunity to the corporate debtor and its property from prosecution, attachment or confiscation in respect of pre-CIRP offences where control passes to a person who is neither a promoter nor a related party. The constitutional validity of Section 32A was upheld in Manish Kumar v Union of India, (2021) 5 SCC 1.<\/p>\n<p><strong>Release of Security<\/strong><\/p>\n<p>Under an approved resolution plan, security interests may be released, modified or restructured without the consent of every affected secured creditor, provided the plan is approved by the requisite majority of the CoC under Section 30(4) of the IBC and subsequently approved by the NCLT. The protection afforded to dissenting secured creditors lies in the minimum-entitlement safeguards prescribed under Section 30(2).<\/p>\n<p>In liquidation, Section 52 requires a secured creditor either to relinquish its security interest and participate in the distribution waterfall under Section 53 of the IBC, or to realise its security interest outside the liquidation process.<\/p>\n<p><strong>Credit bidding<\/strong><\/p>\n<p>Indian insolvency law does not formally recognise credit bidding as understood under US law.<\/p>\n<p><strong>Pre-Packaged Sales<\/strong><\/p>\n<p>Pre-packaged restructuring is statutorily recognised only under the PPIRP framework for MSMEs (Sections 54A\u201354P). The corporate debtor formulates a resolution plan with the support of unrelated financial creditors representing at least 66% in value of the financial debt, following which competing plans may be invited under Sections 54K(4)\u2013(5). There is presently no equivalent statutory pre-pack framework for larger corporates.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What duties and liabilities should directors and officers be mindful of when managing a distressed debtor? What are the consequences of breach of duty? Is there any scope for other parties (e.g. director, partner, shareholder, lender) to incur liability for the debts of an insolvent debtor and if so can they be covered by insurances?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><strong>Duties of Directors when Managing a Distressed Debtor<\/strong><\/p>\n<p>Section 166 of the Companies Act, 2013 codifies directors\u2019 duties, including the duties to act in good faith, exercise due care, skill and diligence, avoid conflicts of interest and act in the best interests of the company, its members, employees and other stakeholders. In the context of financially distressed debtors, directors should exercise caution in relation to asset transfers, related-party transactions, preferential transactions and the incurrence of additional liabilities, as such transactions may subsequently be scrutinised under the avoidance provisions of the IBC.<\/p>\n<p><strong>Obligations During CIRP<\/strong><\/p>\n<p>Upon commencement of CIRP, Section 19 of the IBC requires directors and promoters to cooperate fully with the IRP\/RP, including by providing access to records, books, assets and information. Non-cooperation by the erstwhile management may invite NCLT directions and police assistance to ensure cooperation. Sections 70\u201373 of the IBC create offences (concealment of property, false representations, fraudulent disposition of property, misconduct), punishable with imprisonment of up to five years and\/or fines.<\/p>\n<p><strong>Consequences of Breach<\/strong><\/p>\n<p>Directors and officers may face personal liability in a number of circumstances. In particular, Section 66(1) of the IBC empowers the NCLT to order contributions to the assets of the corporate debtor from persons who knowingly participated in fraudulent trading. Section 66(2) further permits contribution orders against directors or partners who knew, or ought reasonably to have known, that there was no reasonable prospect of avoiding insolvency and failed to exercise due diligence in minimising losses to creditors.<\/p>\n<p><strong>Liability of Other Parties<\/strong><\/p>\n<p>As a general rule, shareholders benefit from limited liability and are not responsible for the debts of the corporate debtor. However, liability may arise in cases involving fraud, sham arrangements or other circumstances justifying the lifting of the corporate veil. Similarly, Section 339 of the Companies Act, 2013 permits the imposition of liability on any person who knowingly participated in the fraudulent conduct of the company\u2019s business during winding up.<\/p>\n<p><strong>Insurance<\/strong><\/p>\n<p>\u2018Directors and officers\u2019 (D&amp;O) liability insurance is standard market practice. As a matter of contract and public policy, such policies generally exclude deliberate dishonesty, fraud and criminal misconduct established against the insured. Section 23 of the Indian Contract Act, 1872 precludes indemnification against intentional unlawful conduct or fraud.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do restructuring or insolvency proceedings have the effect of releasing directors and other stakeholders from liability for previous actions and decisions? In which context could the liability of the directors be sought?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><strong>No General Release of Liability<\/strong><\/p>\n<p>As a general rule, restructuring or insolvency proceedings do not release directors, promoters or other stakeholders from liability arising from their pre-insolvency conduct.<\/p>\n<p>Section 32A grants immunity only to the corporate debtor and its property, and only for offences committed prior to CIRP, and only where control of the corporate debtor passes to a person who is neither a promoter nor a related party (Manish Kumar v Union of India, (2021) 5 SCC 1). The proviso to Section 32A(1) expressly preserves the liability of any director, officer or other person who was in any manner in charge of, or responsible for, the conduct of the business of the corporate debtor at the relevant time, or against whom the investigating authority possesses material showing involvement by way of abetment or conspiracy.<\/p>\n<p>Further, the moratorium under Section 14 operates solely against the corporate debtor as a legal entity. It does not shield individuals such as directors, officers, promoters or guarantors from personal exposure. Accordingly, directors and officers remain amenable to prosecution for criminal acts committed before CIRP commenced, and to civil proceedings, even after the corporate debtor obtains Section 32A immunity on plan approval.<\/p>\n<p><strong>Personal guarantees<\/strong><\/p>\n<p>Personal guarantees furnished by directors and promoters survive plan approval (Lalit Kumar Jain v Union of India, (2021) 9 SCC 321). Such guarantees remain enforceable under Part III of the IBC and under general principles of contract law. The constitutional validity of the personal-guarantor framework under Sections 95\u2013100 has been upheld by the Supreme Court in Dilip B Jiwrajka v Union of India, (2024) 5 SCC 435.<\/p>\n<p><strong>Circumstances in Which Directors May Be Liable<\/strong><\/p>\n<p>Directors and officers may continue to face liability in a variety of contexts, including:<\/p>\n<p>i. avoidance and contribution proceedings under Sections 43, 45, 50 and 66 of the IBC;<\/p>\n<p>ii. prosecutions under regulatory statutes such as the SEBI Act, FEMA, PMLA, GST legislation and the Income-tax Act, where liability is imposed on persons responsible for the conduct of the business;<\/p>\n<p>iii. criminal proceedings, including prosecutions under Sections 138 and 141 of the Negotiable Instruments Act, 1881, which continue against directors and officers notwithstanding insolvency proceedings against the corporate debtor (P Mohanraj v Shah Bros Ispat (P) Ltd, (2021) 6 SCC 258);<\/p>\n<p>iv. disqualification under Section 164(2) of the Companies Act, 2013 for specified defaults.<\/p>\n<p>Accordingly, while a successful resolution may result in the corporate debtor obtaining the benefit of Section 32A of the IBC, directors, promoters and other responsible individuals generally remain exposed to personal civil, regulatory and criminal liability arising from their pre-insolvency conduct.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Will a local court recognise foreign restructuring or insolvency proceedings over a local debtor? What is the process and test for achieving such recognition? Does recognition depend on the COMI of the debtor and\/or the governing law of the debt to be compromised? Has the UNCITRAL Model Law on Cross Border Insolvency or the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments been adopted or is it under consideration in your country?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><strong>Statutory position<\/strong><\/p>\n<p>India does not presently have a comprehensive statutory framework for the recognition of foreign insolvency or restructuring proceedings.<\/p>\n<p>India has adopted neither the UNCITRAL Model Law on Cross-Border Insolvency, 1997, nor the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments, 2018.<\/p>\n<p>The IBC contains limited cross-border provisions. Section 234 of the IBC empowers the Central Government to enter into bilateral agreements with foreign countries for insolvency cooperation. However, no bilateral agreement has been concluded under the said provision. The 2026 Amendment Act inserts an enabling provision for cross-border insolvency rule-making (new Section 240C); however, Section 240C is among the provisions not yet brought into force by the said notification and accordingly remains inoperative pending a further commencement notification.<\/p>\n<p><strong>No COMI framework<\/strong><\/p>\n<p>In the absence of statutory adoption of the Model Law, Indian law does not explicitly recognise centre of main interests (\u2018COMI\u2019) or distinguish between foreign main and non-main proceedings. Recognition of foreign judgments, in our experience, is governed by general principles of private international law under Sections 13 and 44A of the CPC. Section 44A permits direct enforcement of decrees of superior courts of countries notified as \u2018reciprocating territories\u2019 (currently 13, including the United Kingdom, Singapore, the UAE and Hong Kong). Judgments from non-reciprocating territories may be enforced only by a fresh civil suit on the judgment under Section 13, subject to the usual exceptions (want of jurisdiction, fraud, breach of natural justice, breach of Indian law or public policy).<\/p>\n<p><strong>Ad hoc cooperation<\/strong><\/p>\n<p>In State Bank of India v Jet Airways (India) Ltd, Company Appeal (AT) (Insolvency) No 707 of 2019 (NCLAT, 26 September 2019), the NCLAT approved a cross-border insolvency protocol between the Indian RP and the Dutch trustee, recognising India as the COMI. In Usha Holdings LLC v Francorp Advisors (P) Ltd, 2018 SCC OnLine NCLAT 397, the NCLAT held that the NCLT cannot determine the legality and consequent enforceability, in India, of a foreign judgment.<\/p>\n<p><strong>Reform<\/strong><\/p>\n<p>The Insolvency Law Committee Reports (2018 and 2020) and the Cross-Border Insolvency Rules\/Regulations Committee Report (2020) recommended adoption of a modified Model Law framework through a proposed \u2018Part Z\u2019 to the IBC, and the Ministry of Corporate Affairs has issued consultation papers in 2021 and 2022. As of May 2026, however, no Model Law-based regime has been enacted or notified.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">For EU countries only: Have there been any challenges to the recognition of English proceedings in your jurisdiction following the Brexit implementation date? If yes, please provide details.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Not applicable. India is not an EU jurisdiction.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can debtors incorporated elsewhere enter into restructuring or insolvency proceedings in the jurisdiction? What are the eligibility requirements? Are there any restrictions? Which country does your jurisdiction have the most cross-border problems with?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><strong>Eligibility of Foreign-Incorporated Debtors<\/strong><\/p>\n<p>The IBC defines a \u2018corporate person\u2019 under Section 3(7) as a company, limited liability partnership or other person incorporated with limited liability under any law in force in India, excluding financial service providers. Accordingly, foreign-incorporated entities ordinarily cannot be subjected to CIRP under Sections 7\u201310 of the IBC.<\/p>\n<p>Indian subsidiaries, Indian-incorporated special purpose vehicles and other entities incorporated in India, however, remain fully subject to the IBC.<\/p>\n<p><strong>Foreign creditors<\/strong><\/p>\n<p>Foreign creditors are treated on substantially the same footing as domestic creditors. The definitions of \u2018financial creditor\u2019 and \u2018operational creditor\u2019 under Sections 5(7) and 5(20) of the IBC are jurisdiction-neutral, and foreign creditors may file claims, participate and vote in the CoC and submit resolution plans, subject to Section 29A, India\u2019s FDI policy, exchange-control regulations and sector-specific restrictions.<\/p>\n<p><strong>Common cross-border issues<\/strong><\/p>\n<p>The most significant cross-border insolvency disputes have arisen in:<\/p>\n<ul>\n<li>the aviation sector, particularly leased aircraft owned by foreign lessors \u2013 leading to the Section 14(3)(a) carve-out introduced by MCA Notification S.O. 4321(E) dated 3 October 2023, following the Go Airlines and Jet Airways insolvencies;<\/li>\n<li>multinational holding structures incorporated in Mauritius, Singapore, the UAE and the Netherlands, common in private-equity and venture-capital investments; and<\/li>\n<li>overseas asset-tracing and recognition issues.<\/li>\n<\/ul>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How are groups of companies treated on the restructuring or insolvency of one or more members of that group? Is there scope for cooperation between office holders? For EU countries only: Have there been any changes in the consideration granted to groups of companies following the transposition of Directive 2019\/1023?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><strong>Current framework<\/strong><\/p>\n<p>The IBC, in its current form, subjects each corporate debtor to a separate insolvency process, with its own CIRP, insolvency professional and CoC. At present, the IBC does not contain a comprehensive statutory framework for group insolvencies or the consolidation of insolvency proceedings involving related entities.<\/p>\n<p><strong>Proposed Group Insolvency Framework<\/strong><\/p>\n<p>The 2026 Amendment Act introduces enabling provisions for a dedicated group insolvency regime through the insertion of a new Chapter VA. However, these provisions have not yet been brought into force.<\/p>\n<p>Once operationalised, Section 59A will empower the Central Government to prescribe rules governing insolvency proceedings involving two or more members of a corporate group. The proposed framework contemplates, among other things, the assignment of proceedings to a common NCLT Bench, transfer of pending proceedings, coordination between CoCs and insolvency professionals, appointment of a common insolvency professional, constitution of combined committees and the adoption of coordination agreements. A &#8220;group&#8221; is proposed to include entities connected through control or significant ownership, with &#8220;significant ownership&#8221; defined as the ability to exercise 26% or more voting rights.<\/p>\n<p><strong>Judicial accommodation<\/strong><\/p>\n<p>Notwithstanding the absence of an express statutory framework, Indian tribunals have recognised the practical need for coordination in appropriate cases. Courts have permitted procedural coordination and in narrowly defined circumstances, substantive consolidation where there is commonality of management, inter-company financial entanglement and operational interdependence.<\/p>\n<p>In State Bank of India v Videocon Industries Ltd, MA 1306\/2018 in CP 02\/2018 (NCLT Mumbai, order dated 8 August 2019), the NCLT permitted procedural consolidation of the CIRPs of 13 Videocon group companies through a common RP, coordinated CoC meetings and a joint resolution process. Similar approaches have followed in Educomp, Era Infra Engineering and insolvencies of certain real-estate groups.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is your country considering adoption of the UNCITRAL Model Law on Enterprise Group Insolvency?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>As of the date of this response, India has not adopted the UNCITRAL Model Law on Enterprise Group Insolvency. Its principles remain under active consideration, with the Working Group on Group Insolvency (2019) and subsequent IBBI-led consultations examining elements of the framework. India does not yet have a statutory regime for enterprise group insolvency, substantive consolidation or coordinated group restructuring.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any proposed or upcoming changes to the restructuring \/ insolvency regime in your country?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Several significant reforms have recently been introduced through the Insolvency and Bankruptcy Code (Amendment) Act, 2026, a substantial portion of which came into force on May 26, 2026 (MCA Notification S.O. 2625(E) dated May 22, 2026). Certain provisions, however, remain pending notification.<\/p>\n<p><strong>Reforms introduced by the 2026 Amendment Act<\/strong><\/p>\n<p>The 2026 Amendment Act introduces a number of measures intended to streamline and strengthen the insolvency framework, including:<\/p>\n<ul>\n<li>a revised framework for withdrawal of CIRP applications under the substituted Section 12A, restricting withdrawal of a CIRP application to the defined window under the substituted Section 12A i.e. after CoC constitution and before the first invitation for resolution plans;<\/li>\n<li>a \u201csecond chance\u201d mechanism (new Section 33(1A)) permitting a further attempt at resolution where an earlier resolution process has failed;<\/li>\n<li>stricter adherence to statutory timelines; and<\/li>\n<li>statutory recognition that, in applications based on financial debt, the NCLT\u2019s inquiry at the admission stage is confined to determining the existence of a financial debt and a default. Further, a record of default in respect of such financial debt registered with an Information Utility is deemed sufficient evidence for establishing the existence of default.<\/li>\n<\/ul>\n<p>The 2026 Amendment Act also contains enabling provisions relating to inter alia cross-border insolvency and group insolvency; however, these provisions have not yet been brought into force.<\/p>\n<p><strong>Cross-border insolvency framework.<\/strong><\/p>\n<p>India is considering adoption of a formal cross-border insolvency regime broadly inspired by the UNCITRAL Model Law on Cross-Border Insolvency to the IBC. The earlier CBIRC and Insolvency Law Committee proposals continue to inform the process. Reference may be made to our answer to Questions 9 and 17.<\/p>\n<p><strong>Group insolvency framework.<\/strong><\/p>\n<p>The Government is considering a dedicated group insolvency regime that would facilitate procedural coordination among group entities, coordinated resolution processes, communication and information-sharing protocols, and, in appropriate cases, substantive consolidation. The 2026 Amendment Act, contains enabling provisions for group insolvency rule-making (new Chapter VA); these provisions are, however, yet to be operationalised.<\/p>\n<p><strong>Creditor-led and consensual restructuring frameworks.<\/strong><\/p>\n<p>Policymakers are considering expansion of out-of-court and creditor-led restructuring tools, including mediation-based mechanisms and restructuring frameworks analogous to schemes of arrangement. The IBBI Expert Committee on the Framework for Use of Mediation under the Insolvency and Bankruptcy Code, 2016 submitted its report on 31 January 2024. Subsequently, the IBBI issued a Discussion Paper on Mediation by Operational Creditors before approaching the Adjudicating Authority for filing Section 9 applications dated 4 November 2024, proposing insertion of draft Regulation 2BA into the IBBI (CIRP) Regulations, 2016. As of May 2026, however, no standalone Mediation Regulations have been formally notified under the IBC.<\/p>\n<p><strong>Other reforms.<\/strong><\/p>\n<p>Other reforms that continue to be discussed include:<\/p>\n<ul>\n<li>strengthening NCLT and NCLAT capacity to reduce delays and admission-stage pendency;<\/li>\n<li>tightening the regulation, accountability and performance standards for insolvency professionals;<\/li>\n<li>continued refinement of e-auction and liquidation-sale processes under the Liquidation Regulations;<\/li>\n<li>phased operationalisation of individual insolvency provisions under Part III beyond personal guarantors;<\/li>\n<li>calibrated reconsideration of the Section 29A disqualifications; and<\/li>\n<li>clarification of the treatment and distribution of recoveries arising from avoidance applications pursued after approval of a resolution plan.<\/li>\n<\/ul>\n<p>Overall, the direction of reform remains focused on achieving resolutions, improving timelines, increasing recovery values, and addressing areas of the insolvency framework that have generated significant litigation or practical challenges since the enactment of the IBC.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is your jurisdiction debtor or creditor friendly and was it always the case?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>India\u2019s insolvency regime is best described as resolution-oriented\u2013 with a strong creditor-in-control framework. The objective of the IBC is not to protect either debtors or creditors as a class, but to maximise value through the rescue of viable businesses and the timely resolution of financial distress.<\/p>\n<p>Prior to the enactment of the IBC in 2016, the insolvency and debt recovery framework was widely regarded as debtor-friendly. Proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985, the Companies Act winding-up regime and various recovery statutes often resulted in prolonged delays, low recoveries and significant erosion of asset value, while existing management frequently remained in control for extended periods. The IBC, enacted following the recommendations of the Bankruptcy Law Reforms Committee, deliberately shifted to a creditor-in-control model.<\/p>\n<p>Creditor-centric features<br \/>\nUpon commencement of CIRP, the powers of the board of directors stand suspended and vest in the IRP\/RP under Section 17. The CoC, comprised primarily of financial creditors, exercises the key commercial decision-making powers during the process, and its commercial wisdom is generally not subject to judicial review on merits (K Sashidhar v Indian Overseas Bank, (2019) 12 SCC 150; Committee of Creditors of Essar Steel India Ltd v Satish Kumar Gupta, (2020) 8 SCC 531). Operational and unsecured creditors have comparatively limited influence over the conduct of the CIRP. Further, Section 29A restricts defaulting promoters and connected persons from regaining control of the corporate debtor through the resolution process<\/p>\n<p>Evolution of the Framework<br \/>\nOver time, the framework has been refined to accommodate broader restructuring objectives. For example, the PPIRP regime introduced a debtor-in-possession model for MSMEs. Further, homebuyers have been recognised as financial creditors, and the minimum default threshold for initiating CIRP has been increased to INR 1 crore. In addition, Section 240A exempts MSMEs from certain disqualifications under Section 29A, recognising that existing promoters may in some cases be best placed to revive the business.<\/p>\n<p>Accordingly, while the IBC is more accurately described as a resolution-oriented regime. The emphasis throughout the process is on preserving enterprise value and facilitating the rescue of viable businesses.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do sociopolitical factors give additional influence to certain stakeholders in restructurings or insolvencies in the jurisdiction (e.g. pressure around employees or pensions)? What role does the State play in relation to a distressed business (e.g. availability of state support)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>While the IBC is designed as a creditor-driven regime, certain stakeholder groups, particularly employees, workmen and homebuyers; have attracted legislative and judicial protection owing to broader social and economic considerations.<\/p>\n<p><strong>Employees and workmen<\/strong><\/p>\n<p>Section 53(1)(b)(i) of the IBC accords pari passu status to workmen\u2019s dues for the 24 months preceding liquidation commencement, alongside secured creditors who relinquish security under Section 52. Section 53(1)(c) provides for wages and unpaid dues to employees (other than workmen) for the 12 months preceding liquidation commencement. In addition, provident fund, gratuity and pension fund dues are excluded from the liquidation estate under Section 36(4)(a)(iii) and are therefore unavailable for distribution to other creditors.<\/p>\n<p><strong>Homebuyers<\/strong><\/p>\n<p>Following the 2018 amendment to the IBC and the decision in Pioneer Urban Land &amp; Infrastructure Ltd v Union of India, (2019) 8 SCC 416, homebuyers are recognised as financial creditors under Section 5(8)(f) of IBC. Given the large number of affected individuals in major real-estate insolvencies, courts and tribunals have often adopted innovative solutions, including project-wise resolution and reverse CIRP models, in an effort to protect homebuyers&#8217; interests.<\/p>\n<p><strong>Role of the Government<\/strong><\/p>\n<p>The Central Government plays a significant, though largely indirect, role in the insolvency ecosystem. Public-sector banks frequently constitute a substantial portion of the CoC in large insolvencies and are subject to policy oversight by the Reserve Bank of India and the Ministry of Finance.<\/p>\n<p>The Government has also undertaken targeted interventions: (a) temporary suspension of Sections 7, 9 and 10 filings under Section 10A for defaults during the COVID-19 pandemic (defaults occurring between 25 March 2020 and 24 March 2021); and (b) the increase of the default threshold from INR 1 lakh to INR 1 crore in March 2020 to protect MSMEs.<\/p>\n<p>Strategic or politically sensitive sectors (telecom, aviation, infrastructure, banking and financial services) attract closer stakeholder-engagement informally, but in our experience, direct financial support from the State for distressed private businesses is rare.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the greatest barriers to efficient and effective restructurings and insolvencies in the jurisdiction? Are there any proposals for reform to counter any such barriers?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><strong>Principal barriers<\/strong><\/p>\n<p>The most significant barriers to efficient restructurings and insolvencies in India are institutional and implementation related. Infrastructural issues, leading to pendency at the NCLT and NCLAT continue to impede the IBC\u2019s time-bound design. Although Section 12 of the IBC sets a 330-day outer limit, the Economic Survey 2025\u201326 records that average CIRP duration has stretched to an average of around 713 days overall (853 days for cases closed in FY25), describing the delay as a \u2018binding institutional constraint\u2019. Even admission of Section 7 applications routinely exceeds the statutory 14-day timeline.<\/p>\n<p>Litigation-led delays remain common, with repeated appellate challenges and writ proceedings before constitutional courts often prolonging the resolution process.<\/p>\n<p><strong>Reform Measures Under Consideration<\/strong><\/p>\n<p>The Indian insolvency framework continues to evolve through legislative and regulatory reforms aimed at improving the efficiency and effectiveness of the resolution process. Since its enactment in 2016, the IBC has undergone several amendments intended to address practical challenges encountered during implementation, reduce delays, maximise value for stakeholders and strengthen the overall insolvency ecosystem.<\/p>\n<p>A number of reforms are presently under consideration. These include the expansion of digital infrastructure, strengthening of NCLT and NCLAT capacity; tighter regulation of insolvency professionals; and the possible introduction of creditor-led restructuring mechanisms analogous to schemes of arrangement.<\/p>\n<p>Mediation-based tools are also a potential way forward. The IBBI Expert Committee Report (31 January 2024) and the IBBI Discussion Paper (4 November 2024) on mediation for certain operational creditor disputes, although no standalone mediation framework has been notified as of June 2026.<\/p>\n<p>The 2026 Amendment Act introduces several measures aimed at enhancing the efficiency of the insolvency framework, including stricter timelines for admission of insolvency applications filed by financial creditors, statutory clarification regarding the limited scope of inquiry at the admission stage and the evidentiary value of Information Utility records, as well as enabling provisions for cross-border and group insolvency. However, certain provisions of the 2026 Amendment Act have not yet been brought into force.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">12736<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/143856","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=143856"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}