The Insolvency and Bankruptcy Board of India (IBBI) on September 09, 2026, issued a circular regarding Due diligence by Insolvency Professionals regarding misuse of the IBC framework.
The following has been stated: -
•IBBI has directed Insolvency Professionals (IPs) to remain vigilant against misuse of the IBC for purposes other than insolvency resolution or liquidation.
•IPs must examine indicators such as related-party transactions, connected corporate debtors, lack of competitive resolution applicants, disproportionate recoveries, and links to fraud investigations.
•These indicators are illustrative and should be assessed holistically, as they may also occur in genuine insolvency cases.
•Where reasonable grounds indicate a fraudulent or malicious purpose, the IP must undertake further enquiry and approach the Adjudicating Authority with relevant facts, evidence and reasons.
[Circular No.: IBBI/CIRP/105/2026]
