The Insolvency and Bankruptcy Code (Amendment) Act, 2026 introduces a significant reform through the insertion of Section 28A, which enables the integration of guarantor assets (both personal and corporate) into the Corporate Insolvency Resolution Process (CIRP) or liquidation estate of the corporate debtor. This provision seeks to maximise value, streamline recoveries, and avoid fragmented enforcement actions.
“28A. (1) Notwithstanding anything contained in this Code or any other law for the time being in force, where a creditor of the corporate debtor has taken possession of an asset of a personal guarantor or corporate guarantor of the corporate debtor by enforcing its security interest over such asset under any law for the time being in force which empowers the creditor to transfer the asset, the creditor may, during the corporate insolvency resolution process of the corporate debtor, permit the transfer of such an asset as part of its insolvency resolution with prior approval of the committee of creditors in such manner and subject to such conditions as may be specified:
Provided that where the corporate guarantor is undergoing a corporate insolvency resolution process or the liquidation process, transfer of the asset under this sub-section shall take place upon approval of the committee of creditors of the corporate guarantor, by a vote of not less than sixty-six per cent. of the voting share, and the amount received pursuant to the transfer shall form part of the corporate insolvency resolution process or the liquidation estate of the corporate guarantor, as the case may be:
Provided further that during the liquidation process of the corporate guarantor, the approval of the committee of creditors under the first proviso is required only where the creditor has relinquished such asset to the liquidation estate under section 52:
Provided also that where the personal guarantor is undergoing an insolvency resolution process or the bankruptcy process and the creditor has forfeited or surrendered his right in relation to an asset, the transfer of such asset under this sub-section shall take place upon approval by a majority of more than three-fourths in value of the creditors of the personal guarantor, 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.
(2) The transfer of an asset referred to in sub-section (1) under a resolution plan shall vest in the transferee all rights in, or in relation to the asset, as if the transfer had been made by the owner of such asset.
(3) The amount received pursuant to the transfer of the asset shall be adjusted towards the amount of debt owed by the guarantor in accordance with the applicable law, subject to any costs, charges and expenses incurred in respect of the preservation and protection of the asset before its transfer, and where such amount is more than the debt owed, the surplus shall be paid to the guarantor.”.
Key Objective of Section 28A
Historically, creditors enforcing security over guarantor assets were required to initiate separate recovery proceedings under laws such as SARFAESI, leading to parallel actions and value erosion. Section 28A addresses this inefficiency by permitting such assets to be pooled and resolved within the insolvency framework of the corporate debtor.
1. Enabling Consolidation of Assets
- Creditors who have already taken possession of a guarantor’s asset by enforcing their security interest may permit such asset to be transferred as part of the corporate debtor’s CIRP.
- This creates a unified insolvency estate, improving value realisation and reducing litigation.
2. Conditions and Approval Mechanism
The transfer of guarantor assets is subject to the following safeguards:
- Possession Requirement
The creditor must have lawfully taken possession of the guarantor’s asset under applicable law. - Approval of Committee of Creditors (CoC)
Transfer requires prior approval of the CoC of the corporate debtor. - Where Corporate Guarantor is under CIRP/Liquidation
- Approval of the corporate guarantor’s CoC by not less than 66% voting share is required
- Proceeds form part of the CIRP or liquidation estate of the corporate guarantor
- Where Personal Guarantor is under Insolvency/Bankruptcy
- Approval of more than 75% in value of creditors of the personal guarantor is required
- Proceeds form part of the guarantor’s insolvency/bankruptcy estate
- Special Case – Liquidation of Corporate Guarantor
CoC approval is required only where the secured creditor has relinquished the asset to the liquidation estate under Section 52
3. Vesting of Rights in Transferee
- Upon transfer under a resolution plan, the asset vests in the transferee as if transferred by the owner itself, ensuring clear and marketable title.
4. Distribution and Adjustment of Proceeds
To prevent double recovery and ensure equitable treatment:
1. Costs and expenses related to preservation and protection of the asset are first deducted
2. The proceeds are adjusted against the guarantor’s liability
3. Any surplus amount is returned to the guarantor
Impact of the Amendment
- Eliminates parallel enforcement proceedings against guarantors
- Enables value maximisation through asset consolidation
- Strengthens the collective nature of insolvency resolution
- Reduces delays and litigation arising from fragmented recoveries
- Brings greater coordination between debtor and guarantor insolvency processes
Observations of the Select Committee
Addressing Asset Fragmentation
The Select Committee noted that Section 28A seeks to resolve a practical issue of asset fragmentation, where:
- the corporate debtor operates the business, but
- critical assets (such as land or infrastructure) are owned by the guarantor.
By enabling consolidation of such assets, the provision facilitates a holistic and value-maximising resolution.
Stakeholder Concerns
Stakeholders raised certain concerns, including:
- Potential impact on the guarantor’s right of redemption
- Risk of inter-creditor conflicts
- Lack of clarity on valuation and eligibility criteria
There was a need for procedural safeguards and regulatory clarity to ensure fairness and reduce litigation.
Committee’s Response and Endorsement
The Committee observed that these concerns have been adequately addressed:
- The mechanism is voluntary and enabling, not mandatory
- It applies only where the creditor has already taken lawful possession
- Transfer requires approval of the CoC
- The rights of the guarantor are protected, including return of surplus
Further, the Committee noted that the Insolvency and Bankruptcy Board of India (IBBI) will frame detailed regulations covering:
- Conditions for transfer
- Eligibility of purchasers
- Valuation methodology
Accordingly, the Committee endorsed the provision without modification, recognising that it balances value maximisation with protection of stakeholder rights.
Illustration – Practical Impact of Section 28A
Before the Amendment
- ABC Ltd. undergoes CIRP
- Its factory land is owned by its promoter acting as a personal guarantor
- A bank enforces security over the guarantor’s land under SARFAESI and takes possession
Issue:
- CIRP proceeds without the land (core asset)
- Bank separately auctions the land
- Resolution applicant cannot acquire a complete business unit
- Result: lower valuation and fragmented recovery
After the Amendment (Section 28A)
- Same facts: ABC Ltd. in CIRP and guarantor’s land is under possession of the bank
Now:
- Bank, with CoC approval, permits transfer of land as part of CIRP
- Land is included in the resolution plan
Outcome:
- Resolution applicant acquires business + land together
- Higher valuation achieved
- Sale proceeds:
- Adjusted against guarantor’s liability
- Surplus (if any) returned to guarantor
Conclusion: Section 28A represents a transformational shift towards integrated insolvency resolution. By enabling consolidation of guarantor assets within the CIRP framework, the provision eliminates inefficiencies arising from fragmented enforcement while safeguarding stakeholder rights through layered approvals and regulatory oversight. It ultimately strengthens the IBC’s core objective of maximising value through a coordinated and collective resolution mechanism.
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