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Corporate Laws Central Ministry of Law and Justice Insolvency and Bankruptcy Code, 2016

IBBI issues circular regarding Due diligence by Insolvency Professionals regarding misuse of IBC framework

09-Sep-2026 | IBBI/CIRP/105/2026

IBBI has issued circular regarding Due diligence by Insolvency Professionals regarding misuse of IBC framework Through this circular, IBBI informed to Insolvency Professionals (IPs) that they should remain vigilant for any circumstances indicating misuse of the insolvency process and identify such indicators during the normal course of the proceedings. IPs should particularly be alert to the following indicators: 1. CIRP initiated by, or debt assigned shortly before initiation to, a single creditor 2. minimal competitive participation in the resolution process 3. Realisation to creditors is grossly disproportionate to admitted claims without proper valuation. 4. linkage of the CD or its group to an order or ongoing proceeding of another regulator or enforcement Above indicators are illustrative and not exhaustive. Further, upon identifying such indicators, the IP should conduct further enquiry based on available records and information to assess whether the CIRP or liquidation process is being misused for fraudulent or malicious purposes. For more information, please refer the attached pdf.

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