IBBI Mandates Disclosure of Avoidance Transactions in CIRP
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- Last Updated on 8 July, 2025
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Notification F. No. IBBI/2025-26/GN/REG128, Dated: 04.07.2025
The Insolvency and Bankruptcy Board of India (IBBI) has introduced significant amendments to the Insolvency Resolution Process for Corporate Persons Regulations, 2016 (CIRP Regulations), aimed at increasing transparency and accountability during the Corporate Insolvency Resolution Process (CIRP). These changes primarily focus on the treatment and disclosure of avoidance transactions and instances of fraudulent or wrongful trading.
1. Mandatory Disclosure of Avoidance Transactions in the Information Memorandum
Under the amended Regulation 36, the Information Memorandum prepared by the Resolution Professional must compulsorily include details of all identified avoidance transactions or instances of fraudulent or wrongful trading, that have been detected during the CIRP.
This includes:
- Nature and summary of the transaction,
- Parties involved,
- Grounds on which the transaction has been identified as avoidable, and
- Status of any applications or filings made before the Adjudicating Authority (NCLT) in relation to such transactions.
This amendment ensures that all stakeholders, including the Committee of Creditors (CoC) and prospective resolution applicants (PRAs), are fully informed about past misconduct or questionable transactions before submitting or approving a resolution plan.
2. Restriction on Assignment of Avoidance Transactions in Resolution Plans
To further strengthen the integrity of the process, the amended regulations now prohibit resolution plans from assigning avoidance transactions (e.g., transferring rights or proceeds from them to third parties) unless two conditions are fulfilled:
- The transactions were explicitly disclosed in the Information Memorandum, and
- The same was communicated to all prospective resolution applicants (PRAs) prior to the submission deadline for resolution plans.
This move prevents any hidden monetisation or manipulation of such transactions by the resolution applicant and ensures that the resolution plan is formulated based on complete and accurate disclosures.
3. Objective of the Amendment
The key objective of this regulatory update is to:
- Enhance transparency and fairness in the CIRP,
- Ensure equal access to information for all PRAs,
- Safeguard the interests of creditors and stakeholders by addressing questionable transactions upfront, and
- Prevent misuse of resolution plans to acquire rights over undisclosed or litigated assets.
4. Conclusion
By mandating disclosure of avoidance transactions and restricting their inclusion in resolution plans unless pre-disclosed, the IBBI has taken a decisive step towards improving the credibility and robustness of the resolution process under the IBC. These changes are expected to reduce litigation risks, promote ethical conduct, and improve the overall quality of resolution outcomes.
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