In a circular dated September 9, 2026, the Insolvency and Bankruptcy Board of India (IBBI) stated it had received information from law enforcement and regulatory agencies regarding instances where the Insolvency and Bankruptcy Code, 2016 (IBC) was allegedly being used for purposes other than insolvency resolution or liquidation.
The circular directs insolvency professionals to conduct due diligence to verify the propriety of proceedings and the identities of the parties involved, in light of reports about potential misuse of the IBC framework.
The regulator did not provide case-specific details in the communication, noting only that the information originated from law enforcement and regulatory agencies.
Why the development matters
The guidance aims to protect the integrity of insolvency proceedings under the IBC. A credible and properly supervised process is essential for creditors seeking recovery, for businesses and investors involved in distressed assets, and for regulators overseeing insolvency practices.
For taxpayers and other stakeholders, the move signalling heightened due diligence by professionals handling insolvency matters may have implications for process timelines, approvals, and the management of assets under resolution or liquidation.
