Insolvency and Bankruptcy Board of India warns against IBC misuse

The Insolvency and Bankruptcy Board of India (IBBI) has issued a warning to insolvency professionals regarding the misuse of the Insolvency and Bankruptcy Code (IBC) framework. The regulator noted that some entities are exploiting the code for purposes other than genuine debt resolution, such as mitigating tax liabilities, evading investigations, or facilitating company mergers without regulatory scrutiny.

To combat this, the IBBI identified several red flags for professionals to monitor, including insolvency processes initiated by single non-institutional creditors who then dominate creditor panels, or clusters of interconnected companies entering insolvency simultaneously. Professionals are urged to use their access to corporate financial records to flag irregularities early.

In a related enforcement action, the IBBI suspended insolvency professional Anurag Jain for two years. The disciplinary committee found that Jain, acting as the resolution professional for Orient Tourism Private Limited, raised 1 crore rupees in interim finance from Resolve Support Services Private Limited—an entity where he served as a director—without obtaining required approval from the Committee of Creditors. The funds were also improperly used to cover his own professional and legal fees.