Decoding the 5th CIRP Amendment (2025): Resolution Plans, Avoidance Claims, and Judicial Clarifications

The Corporate Insolvency Resolution Process (CIRP) is governed by the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. These regulations set out how insolvency cases are conducted under the Insolvency and Bankruptcy Code (IBC), 2016. On 4th of July, 2025, the Insolvency and Bankruptcy Board of India notified the Fifth Amendment to the CIRP Regulations, 2025 vide the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Fifth Amendment) Regulations, 2025 (the “5th Amendment”). The 5th Amendment (2025) focuses on how avoidance transactions and fraudulent/wrongful trading are handled during CIRP, especially in relation to the Information Memorandum (IM) and the resolution plan. The 5th Amendment makes changes to Regulation Nos. 36 and 38, under Chapter X, Resolution Plan.

The Regulations with all amendments incorporated till 04.07.2025 is available here.

Key Changes Introduced

Update Requirement for Information Memorandum (Regulation 36)

Amendment: Sub-regulation (1) now includes the phrase “and its subsequent updates thereof”.

Implication: The Information Memorandum (IM), a core document containing all key financial and operational details about the corporate debtor, must now be updated over time as new information arises (not just prepared once after the insolvency commencement date). This includes post-commencement developments, like findings from ongoing forensic audits or interim financials.

Mandatory Disclosure of Avoidance Transactions (Reg. 36(2)(ha))

New clause/ sub-regulation inserted: Information Memorandum (IM) must now include “details of all identified avoidance transactions” under:

• Chapter III (preferential, undervalued, extortionate, or fraudulent transactions),
• Chapter VI (fraudulent or wrongful trading),

along with filings made before the Adjudicating Authority (AA) under Reg. 35A(3A).

Implication: RPs are now mandatorily required to include (1) Identified avoidance transactions, and (2) The fact that they've been filed before the AA, in the IM itself. This formalises and centralises critical avoidance information, making it available to all stakeholders including prospective resolution applicants (RAs).

Restriction on Assigning Undisclosed Avoidance Claims in Resolution Plans (Reg. 38(2A))

New sub-regulation (2A) inserted: A resolution plan cannot provide for assignment (i.e., transfer/sale) of avoidance claims (Chapter III or VI transactions) if:

• The claims were not disclosed in the IM; and
• Were not informed to prospective resolution applicants before the last date for submission of resolution plans (as per Reg. 35A(3A)).

Exception: This does not apply to resolution plans already submitted to the Adjudicating Authority under Section 30(6) before this amendment’s commencement.

Implication:

• RAs cannot bid for or “purchase” rights over avoidance claims that weren’t transparently disclosed before the bid submission date.
• This prevents ambush or unfair windfalls and improves transparency in the treatment of such claims.
• It also protects creditors from undisclosed side-deals in the plan involving potentially recoverable assets.

Context:

What Are Avoidance Transactions?

Avoidance Transactions are pre-insolvency transactions that are considered detrimental to the interests of creditors and are potentially voidable to protect the interests of all stakeholders during insolvency proceedings.

Under the IBC, avoidance transactions include:

• Preferential transactions: Favouring one creditor over another.
• Undervalued transactions: Selling assets cheaply.
• Extortionate credit: Unfair loan terms.
• Fraudulent/wrongful trading: Directors misusing company during distress.

These can be challenged before the Adjudicating Authority by the RP, and if upheld, set aside or reversed, often to bring back value into the debtor’s estate.

Judicial Precedents

Till 2023, the position of law expounded by the Delhi High Court was that the role of the Resolution Professional comes to an end once the resolution plan is approved and the successful resolution applicant takes charge of the corporate debtor. It was further held that the National Company Law Tribunal (NCLT) has no jurisdiction to entertain and decide avoidance applications in respect of a corporate debtor under a new management, unless provision is made in the final Plan. Reference Venus Recruiters Private Limited v. Union of India [Judgment dated 26.11.2020 in W.P.(C) 8705/2019 & CM APPL. 36026/2019].

However, in 2023, the Delhi High Court in Tata Steel BSL Ltd. v. Venus Recruiter Pvt. Ltd. [2023 SCC OnLine Del 155] held that avoidance proceedings can survive beyond the conclusion of Corporate Insolvency Resolution Process (CIRP), setting aside the judgment in Venus Recruiters (above). The High Court relied on the Insolvency Law Committee Report as on June, 2022 to understand the scheme of Insolvency and Bankruptcy Code (IBC), 2016, giving objective interpretation to various provisions of the IBC on the basis of the legislative objectives of the IBC.

Referring to the 2023 judgment of the Delhi High Court, the National Company Law Appellate Tribunal (NCLAT), Delhi, while hearing an appeal from orders of the NCLT, Mumbai Bench permitting the successful resolution applicant to pursue avoidance applications filed by the erstwhile administrator and which were pending before the Adjudicating Authority, also arrived at the same view in its judgment in the case of Kapil Wadhawan vs. Piramal Capital & Housing Finance Ltd. & Ors. [Judgment dated 15.05.2023 in Company Appeal (AT) (Insolvency) Nos. 437, 439, 441, 442, 445, 451, 452 & 512 of 2023].

Also notable is the Supreme Court’s decision in the DHFL Resolution Plan case, Piramal Capital And Housing Finance Limited (Formerly Known As Dewan Housing Finance Corporation Limited) vs. 63 Moons Technologies Limited & Ors. [2025 INSC 421], which deals with the treatment of recoveries under Section 66 of the IBC (fraudulent and wrongful trading). The Supreme Court clarified that unlike other avoidance applications under Chapter III (Sections 43–51), Section 66 proceedings are not "avoidance transactions" in the strict sense and need to be dealt with separately. It upheld the commercial wisdom of the Committee of Creditors (CoC) to ascribe nominal or no value to Section 66 recoveries in the resolution plan and ruled that judicial interference in such business decisions should be limited. The Court rejected the NCLAT’s intervention, reaffirming that where there is no statutory or procedural violation, the CoC's decision (in the case before the SC, allowing Piramal to retain recoveries from Section 66 applications) must stand. Importantly, it also held that the NCLT has limited jurisdiction in matters of fraudulent trading under Section 66 and cannot pass orders setting aside such transactions; it can only act upon specific findings of fraud involving ascertainable parties.

Practical Takeaways

For Resolution Professionals:

• Must update the IM regularly, not just once.
• Must disclose all identified avoidance transactions and confirm filings made before the AA.
• Should track compliance with Reg. 35A(3A) to ensure disclosure to RAs in time.

For Resolution Applicants:

You can only include avoidance claims in your plan if those were:

• Disclosed in the IM, and
• Informed to you before the plan submission deadline.
• Ensures level playing field and no hidden information advantage to any bidder.

For Creditors & CoC:

• Transparency in how avoidance claims are handled.
• Discourages sale or assignment of high-value claims without disclosure.
• Protects estate value by ensuring such rights are considered separately or post-resolution, not quietly “gifted” in a resolution plan.

Conclusion

The July 2025 amendment enhances transparency, procedural fairness, and accountability in handling avoidance transactions during CIRP. The amendment :-

• Reinforces the IM as a living document.
• Prevents undisclosed assignments of potentially high-value claims.
• Aligns with IBBI’s broader push for standardised disclosures and clean bidding processes.

The July 2025 CIRP Amendment harmonises statutory regulations with the evolving judicial consensus around avoidance transactions. It codifies the view taken by the Delhi High Court and NCLAT, i.e. that avoidance proceedings can survive the resolution process, subject to disclosure. At the same time, it aligns with the Supreme Court’s decision in Piramal v. 63 Moons Technologies, by upholding the CoC’s prerogative to assign value (or none) to such claims, so long as procedural transparency is ensured.