In short: On 9 September 2026 the Insolvency and Bankruptcy Board of India (IBBI) issued Circular IBBI/CIRP/105/2026. It asks insolvency professionals to watch for six indicators that an insolvency process may be serving a purpose other than resolution, and, on reasonable grounds, to apply to the Adjudicating Authority.
Key facts
| Authority | Insolvency and Bankruptcy Board of India (IBBI) |
|---|---|
| Instrument | Circular IBBI/CIRP/105/2026, Due diligence by Insolvency Professionals regarding misuse of IBC framework (section 196 of the Code) |
| Issue date | 9 September 2026 (IBBI circulars page: 09 Sep, 2026) |
| Effective date | 9 September 2026, the date of the circular (our reading) |
| Applies to | All Registered Insolvency Professionals, Insolvency Professional Entities and Insolvency Professional Agencies |
| Status | Current No later IBBI circular on this subject on the circulars page on 15 October 2026 |
| Official source | https://ibbi.gov.in/uploads/legalframwork/832e58d2371048cebf5c2a43a55e7dfc.pdf |
| Last verified | 15 October 2026, against the circular, circulars page, Code, 2026 Amendment Act, commencement notification and Regulations on ibbi.gov.in |
Why did the IBBI issue this circular?
The Board states its reason in para 1: it has received information from law enforcement and regulatory agencies that, in certain cases, the framework under the Insolvency and Bankruptcy Code, 2016 (the Code) is being misused “for purposes other than insolvency resolution or liquidation of the corporate debtor”. Its examples include mitigating tax liabilities, closing or merging companies without regulatory scrutiny, mitigating investigations and prosecution, and monetising and ring-fencing assets.
Para 2 explains the audience: insolvency professionals (IPs) see the corporate debtor’s books and the committee of creditors (CoC) proceedings, so they are “well placed to identify such indicators”. The circular guides how IPs exercise existing duties and is issued under section 196 (para 6).
Which parts of the Code and Regulations sit behind it?
The circular adds no new section; it rests on provisions already in the IBBI’s published texts.
| Provision | What it provides |
|---|---|
| Code, s 196(1)(p) | The Board may “issue necessary guidelines” to IPs; the 2026 Amendment Act (section 59, in force 26 May 2026) now says “service providers”. |
| Code, ss 208(1)(c), 25(1) | IPs act in the corporate insolvency resolution process (CIRP); the resolution professional must “preserve and protect the assets of the corporate debtor”. |
| Code, ss 21(2), 60(1) | The CoC “shall comprise all financial creditors”; the Adjudicating Authority is the National Company Law Tribunal. |
| Code, s 65(1) | Concerns initiating the process “fraudulently or with malicious intent for any purpose other than for the resolution of insolvency, or liquidation”. our reading Paras 4 and 5 use similar words. |
| IP Regulations, reg 7(2)(h), First Schedule | An IP must abide by the Code of Conduct: integrity (para 1) and “reasonable care and diligence” (para 27A). |
| CIRP Regulations, reg 35A | The resolution professional forms an opinion by day 75 on transactions under ss 43, 45, 50 or 66 and applies to the Adjudicating Authority by day 130 after a determination. |
our reading Before the circular, an IP applied these general duties on its own judgement; now the Board has named the situations it wants noticed and the step to take.
What does the circular ask an IP to do?
- NoticeAn indicator or similar circumstance (para 4)
- EnquireOn records available in the ordinary course (para 4)
- AssessHolistic and contextual (para 4)
- Form a viewReasonable grounds that the process may serve a fraudulent or malicious purpose (para 5)
- ApplyTo the Adjudicating Authority (para 5)
| Para | Indicator |
|---|---|
| 2(a) | CIRP started by, or debt assigned shortly before to, a single creditor who then dominates the CoC. Scheduled banks and public financial institutions (s 2(72), Companies Act, 2013) are excluded. |
| 2(b) | Debtors with common promoters, addresses, directors or inter-lending, admitted close together with overlapping CoCs. |
| 2(c) | Minimal competitive participation, or a common resolution applicant recurring across connected debtors. |
| 2(d) | Realisation grossly disproportionate to admitted claims, without a proper valuation. |
| 2(e) | Debtor or group linked to another regulator’s or agency’s order or proceeding on fraud. |
| 2(f) | Large loans, advances or investments with non-operating group entities, written off or shown doubtful or nil without adequate basis. |
What the circular asks
- Stay vigilant to circumstances that may indicate misuse (para 2).
- Make further enquiry as warranted (para 4).
- Apply, naming the indicators, material relied on and reasons (para 5).
What it cautions
- The list is illustrative, not exhaustive (para 3).
- Some indicators arise in genuine distress (para 3).
- No indicator, by itself, is conclusive of misuse (para 3).
Who is affected, and from when?
The circular is addressed to IPs, IP entities and IP agencies. Applicants, CoC creditors and resolution applicants are not addressees, yet the indicators describe their dealings, so they may meet the IP’s enquiries. our reading Banks appear as CoC members and as assignors of debt, where indicator 2(a) looks at assignment shortly before initiation.
- Code, s 196Board may issue guidelines (in force)
- Circular, 9 September 2026Indicators and the application step; the circular carries its date of issue, and our reading is that it applies from then, including to running processes.
- Still to comeNew s 196(1)(sa) lets the Board specify standards of conduct for the CoC; none has been issued on the IBBI site yet.
What could IPs and banks do now?
These are our suggestions, not requirements of the circular.
- IPs: note the reasoning as you go.Para 5 wants indicators, material and reasons in the application, so file notes made during the para 4 enquiry help.
- Banks on a CoC: know the 2(a) boundary.Check for a recent assignment to a creditor outside that carve-out.
- Banks assigning debt: date the paperwork.Keep assignment dates and counterparties retrievable, as para 2(a) looks at assignment shortly before initiation.
What to watch for
Terms such as “shortly before” and “grossly disproportionate” are for the IP’s judgement; practice and any further IBBI guidance will show how they are applied. Watch also for CoC conduct standards under s 196(1)(sa).
Frequently asked questions
Who must follow IBBI Circular IBBI/CIRP/105/2026?
All Registered Insolvency Professionals, Insolvency Professional Entities and Insolvency Professional Agencies. Creditors are not addressees, though they may meet these questions on a committee of creditors.
What exactly triggers an application to the Adjudicating Authority?
Para 5: where, after review, the IP forms a view on reasonable grounds that the process may be serving a fraudulent or malicious purpose, the IP shall apply. No indicator alone is conclusive (para 3).
Is the list of six indicators complete?
No. Para 3 calls them illustrative and not exhaustive, and para 4 extends to “other circumstances of a similar nature”.
When does the circular apply?
It is dated 9 September 2026. In our reading it applies from that date, including to running processes, as the circular sets out no separate start date or transition.
Sources (official, verified 15 October 2026)
- IBBI Circular No. IBBI/CIRP/105/2026, 9 September 2026, “Due diligence by Insolvency Professionals regarding misuse of IBC framework” https://ibbi.gov.in/uploads/legalframwork/832e58d2371048cebf5c2a43a55e7dfc.pdf
- IBBI circulars page (listing, dated 09 Sep, 2026) https://ibbi.gov.in/legal-framework/circulars
- The Insolvency and Bankruptcy Code, 2016 (IBBI consolidated text, up to 12.08.2021) https://ibbi.gov.in/uploads/legalframwork/2022-04-28-181717-r28jw-af0143991dbbd963f47def187e86517f.pdf
- The Insolvency and Bankruptcy Code (Amendment) Act, 2026, 6 April 2026 https://ibbi.gov.in/uploads/legalframwork/2026-04-07-115842-i5nsk-7ed69ef2a4d23a8b0d472cc0fcd55e79.pdf
- Ministry of Corporate Affairs notification S.O. 2625(E), 22 May 2026 (commencement from 26 May 2026) https://ibbi.gov.in/uploads/legalframwork/d31669ba7f826ee9ebefe58e85d652ec.pdf
- IBBI (Insolvency Professionals) Regulations, 2016 (amended up to 20-11-2025) https://ibbi.gov.in/uploads/legalframwork/e0fb3ed8b7ca2f3af06098ab579655de.pdf
- IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (amended up to 09-06-2026) https://ibbi.gov.in/uploads/legalframwork/2026-08-21-143609-9lrjk-3c823e0e70ca54d08d26fde4f04545e7.pdf
- IBBI
- Insolvency and Bankruptcy Code
- IBC misuse
- Insolvency professionals
- CIRP
- Committee of creditors
- India
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