Section 28A of the Insolvency and Bankruptcy Code, 2016 (“IBC”): A new tool for value maximisation in corporate insolvency

The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (“Amendment Act”) has introduced several important reforms aimed at strengthening India's insolvency framework. Among these, the insertion of Section 28A of the Amendment Act represents a significant change in the manner in which certain secured assets of personal or corporate guarantors may be dealt with during the corporate insolvency resolution process ("CIRP"). While the amendment may appear procedural at first glance, its commercial implications for banks, financial institutions and NBFCs are substantial, particularly in transactions supported by personal or corporate guarantees.

Section 28A introduces a statutory mechanism under which, where a creditor has taken possession of an asset of a personal or corporate guarantor by enforcing its security interest under a law which empowers the creditor to transfer such asset, the creditor may permit the transfer of such asset as part of the corporate debtor's insolvency resolution, subject to prior approval of the committee of creditors and the conditions prescribed under the applicable regulations. Provided that where the corporate guarantor is itself undergoing CIRP, the transfer requires approval of the committee of creditors of the corporate guarantor by a vote of not less than 66% of the voting share. During liquidation of the corporate guarantor, such approval is required only where the creditor has relinquished the asset to the liquidation estate under Section 52 of the IBC. The amount received pursuant to the transfer forms part of the CIRP or liquidation estate of the corporate guarantor, as applicable. It is clarified that in cases where the personal guarantor is undergoing an insolvency resolution process or the bankruptcy process and the creditor has forfeited or surrendered its right in relation to an asset, the transfer of such asset shall take place upon approval by creditors of more than three fourths in value, and the amount received pursuant to the transfer shall form part of the insolvency resolution process or the bankruptcy process of the personal guarantor, as the case may be.

The regulations prescribe a specific process for such transfers. Regulation 28A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2026 requires the resolution professional to place the proposal before the committee of creditors, together with a detailed description of the asset, its estimated realisable value as determined by registered valuer transferring the asset or, where applicable, as relevant insolvency, liquidation or bankruptcy process and the consent determined during the of the transferring creditor or, where applicable, evidence of approval from the creditors or committee of creditors of the guarantor.Once the committee approves the proposed transfer, the resolution professional is required to disclose the proposed transfer in the information memorandum and specify its particulars in the request for resolution plans. The resolution plan must also provide for treatment of the transfer proceeds in accordance with Section 28A(3). Where the corporate guarantor is itself undergoing CIRP, regulation 28B of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2026 introduces an additional coordination mechanism between the resolution professionals of the corporate guarantor and the corporate debtor.

The legislative intent behind Section 28A of the Amendment Act is clearly reflected in the Report of the Select Committee on the Insolvency and Bankruptcy Code (Amendment) Bill, 2025. The Committee identified asset fragmentation as a practical challenge where assets connected with the business of the corporate debtor are held by different legal entities, including guarantors. In practice, secured creditors may also enforce security over assets of personal or corporate guarantors under applicable laws while the corporate debtor is undergoing CIRP. While such enforcement may be legally permissible under applicable laws, the absence of coordination could result in fragmented asset realisations and reduced overall value. Assets that could have formed part of a comprehensive restructuring often remained outside the resolution process, limiting the effectiveness of the resolution process.

The Select Committee accepted the Ministry's view that permitting guarantor assets, which had already come into the possession of secured creditors, to be transferred through the corporate debtor's resolution plan could facilitate holistic restructuring and improve value maximisation. Importantly, however, the Committee clarified that Section 28A of the Amendment Act is intended to operate as an enabling procedural mechanism rather than a provision creating new substantive rights. Section 28A of the Amendment Act does not create an unrestricted right to sell guarantor assets or otherwise alter the substantive rights of the parties under applicable law. Instead, it provides an additional statutory route through which assets already in possession of secured creditors may be utilised within the CIRP where doing so produces superior commercial outcomes.

This distinction is significant. The amendment is not intended to strengthen creditor enforcement rights in the traditional sense, rather, it seeks to strengthen the resolution process itself. By enabling certain guarantor assets already in the possession of creditors to be considered as part of the corporate debtor's resolution process, the legislature seeks to preserve enterprise value and improve the prospects of successful restructuring. In doing so, Section 28A of the Amendment Act reinforces one of the foundational objectives of the IBC, maximisation of value for all stakeholders through a coordinated insolvency process rather than piecemeal recovery actions.

For banks, financial institutions and non-banking financial companies (NBFCs), the amendment has the potential to materially influence recovery strategies. Under the earlier framework, lenders could face a strategic choice between pursuing independent enforcement against guarantor assets and supporting the corporate insolvency process. Separate enforcement proceedings could result in fragmented recoveries and diminish the attractiveness of the corporate debtor as a going concern. Resolution applicants may previously have been unable to structure their bids around guarantor owned assets that were outside the corporate debtor's resolution estate..

Section 28A of the Amendment Act seeks to address this inefficiency. By permitting qualifying guarantor assets already in the possession of creditors to be transferred as part of the corporate debtor's resolution process, the amendment creates a mechanism for addressing assets that might otherwise remain outside the corporate debtor's resolution. This may enable resolution applicants to submit more competitive bids based on a more comprehensive asset base, thereby increasing enterprise value and improving recoveries for financial creditors. The mechanism could be particularly relevant in asset intensive businesses, including infrastructure, renewable energy and manufacturing, where land or other critical secured assets may be held by a guarantor while the operating business is held by the corporate debtor.

The amendment may also reduce the practical tension that has historically existed between individual enforcement actions and collective insolvency resolution. One of the central principles of the IBC is that collective resolution should ordinarily generate greater value than fragmented enforcement. Section 28A of the Amendment Act reflects this philosophy by providing lenders with a mechanism to facilitate the transfer of qualifying assets already in their possession as part of a coordinated resolution process where doing so is commercially advantageous.

Section 28A of the Amendment Act is therefore more than a technical procedural amendment, it provides creditors with an additional strategic mechanism for integrating qualifying guarantor assets into the corporate debtor's resolution process and potentially improving value realisation.