The Interest Conundrum: Carry-Forward of Claims Under the Amended Liquidation Process Regulations
Kartika Barsainyan*
INTRODUCTION
The Insolvency and Bankruptcy Board of India (the “IBBI”), vide the IBBI (Liquidation Process) (Fourth Amendment) Regulations, 2026 (the “Amended Regulations”), has introduced significant changes to the IBBI (Liquidation Process) Regulations, 2016 (the “Principal Regulations”). One major change is the amendment to Regulation 16 of the Principal Regulations (the “Amendment”), governing submission of claims during liquidation.
While the IBBI has justified the Amendment on the ground that it would reduce duplication of effort and expedite the liquidation process, it also gives rise to a significant issue. This stems from the shift in the relevant date for consideration of claims (the “Relevant Date”) from the liquidation commencement date to the insolvency commencement date. Such shift in the Relevant Date raises the question of whether the amended framework allows creditors to account for interest accruing during the period of Corporate Insolvency Resolution Process (the “CIRP”) while their claims are considered during liquidation.
This article examines the position prior to the Amendment and the implications arising thereafter, while further attempting to provide a way forward to avoid duplication of efforts while simultaneously ensuring creditors’ interest.
THE AMENDMENT AND ITS OBJECTIVE
Regulation 16 of the Principal Regulations required stakeholders, upon commencement of liquidation, to either submit a fresh claim or update the claim already submitted during the CIRP, including interest, on or before the last date specified in the public announcement. Irrespective of whether a fresh claim was submitted or an existing claim was updated, the claim was required to be proved as on the liquidation commencement date.
The Amended Regulations have altered this framework by introducing a mechanism for carrying forward claims verified during the CIRP into liquidation. Through the Amendment, a public announcement inviting fresh claims upon commencement of liquidation is no longer required. Instead, claims submitted during the CIRP are carried forward to the liquidation process and only those claims which were not submitted during the CIRP are required to be filed within fourteen days of the liquidation commencement date. Such newly submitted claims are required to be proved as on the insolvency commencement date.
The rationale behind this amendment has been clarified by the IBBI in Press Release No. IBBI/PR/2026/11 dated 03 June 2026 (the “Press Release”). Under Regulation 13 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, claims submitted during the CIRP are verified by the interim resolution professional or the resolution professional, following which a consolidated list of creditors is prepared. According to the IBBI, requiring such claims to be verified once again upon commencement of liquidation resulted in duplication of effort and unnecessary delay.
The Press Release explains the objective of the amendment as follows:
“Carry-forward of claims from the CIRP - claims verified during the CIRP are carried forward as on the insolvency commencement date and are not re-verified, and the liquidation public announcement does not call for fresh claims. Fresh claims are invited only from stakeholders who did not file during the CIRP. This avoids duplication of effort and speeds up the process.”
While the rationale behind the Amendment is apparent, the manner in which this objective has been achieved gives rise to a separate issue concerning the treatment of claims and interest accruing during the length of CIRP.
THE INTEREST CONUNDRUM: THE IMPACT OF THE SHIFT IN RELEVANT DATE
The stated objective of carrying forward claims verified during the CIRP is to avoid duplication of effort by eliminating the requirement of re-verification during liquidation. However, the manner in which this objective has been achieved has a significant bearing on the treatment of claims, particularly the interest accruing during the CIRP. By shifting the Relevant Date from the liquidation commencement date to the insolvency commencement date, the Amendment effectively makes the insolvency commencement date the reference point for determination of claims during liquidation.
The principal consequence of this change is that claims carried forward from the CIRP are now considered with reference to the insolvency commencement date, without any provision permitting stakeholders to update such claims upon commencement of liquidation. Further, even claims that are newly submitted, where not filed during the CIRP, are required to be proved as on the insolvency commencement date. Consequently, the Amended Regulations do not account for any increase in the value of claims between the insolvency commencement date and the liquidation commencement date.
The significance of this change is particularly evident in relation to interest accruing during the CIRP. According to Section 12 of the Insolvency and Bankruptcy Code, 2016 (the “IBC”), the CIRP may continue for a period extending up to three hundred and thirty (330) days from the insolvency commencement date. With the omission of the provision permitting updation of claims, the absence of any reference to interest, and the shift of the Relevant Date from liquidation commencement date to insolvency commencement date in the Amended Regulations, creditors may no longer be able to include the interest accruing during the CIRP while their claims are considered during liquidation.
Accordingly, while the Amendment achieves the objective of reducing duplication of effort and expediting the liquidation process, it does so at the cost of creditors being unable to account for interest accruing during the CIRP.
IMPLICATION FOR CREDITORS
The exclusion of interest accruing during the CIRP period may have significant financial implications for creditors, particularly where the CIRP continues for a prolonged duration. Since the CIRP may extend up to three hundred and thirty (330) days from the insolvency commencement date, the period for which creditors may be unable to account for such interest can be substantial.
The impact of such exclusion is particularly significant for creditors having substantial financial exposure to the corporate debtor. Depending upon the duration of the CIRP and the amount of debt involved, interest accruing during such period may constitute a significant portion of the amount ultimately recoverable by creditors. Consequently, the amended framework may reduce the amount ultimately recoverable by creditors.
Further, the impact extends beyond the mere exclusion of interest from the claims admitted during liquidation. Had such amounts been recovered at an earlier stage, creditors could have utilised the same for other commercial purposes or generated returns on such amounts. Consequently, the inability to account for interest accruing during the CIRP may result in a financial loss to creditors, which increases with the duration of the CIRP.
Accordingly, while the Amendment seeks to achieve procedural efficiency by reducing duplication of effort, the same may have a direct bearing on creditor recoveries. The longer the CIRP continues, the greater the potential impact on the value ultimately recoverable by creditors during liquidation.
THE WAY FORWARD
The objective behind the Amendment, namely avoiding duplication of effort in the verification of claims, is a legitimate concern. However, this objective could have been achieved without shifting the Relevant Date from the liquidation commencement date to the insolvency commencement date.
Instead of requiring complete re-verification of claims upon commencement of liquidation, the verification process could be limited to the updated portion of a claim, including any interest accruing during the CIRP. Claims already verified during the CIRP could continue to be carried forward, while only the incremental changes to such claims would be subject to verification by the liquidator.
Such an approach would preserve the efficiency sought to be achieved through the Amendment while ensuring that creditors are able to account for amounts accruing during the CIRP. This would also avoid requiring the liquidator to re-verify claims that have already been examined during the CIRP, while allowing creditors to update their claims to reflect the passage of time.
For claims that were not submitted during the CIRP, the existing mechanism of submitting and verifying such claims upon commencement of liquidation could continue to apply. This would ensure that the interests of creditors who participated in the CIRP and those who submit their claims only during liquidation are adequately balanced.
Accordingly, the objective of expediting the liquidation process could be achieved without altering the Relevant Date for determination of claims. A mechanism that carries forward verified claims while permitting verification only of subsequent changes would reduce duplication of effort without compromising the ability of creditors to account for amounts accruing during the CIRP.
* Kartika Barsainyan is a fourth year student at the National Law Institute University, pursuing B.Sc. LL.B. (Hons.) [Cyber Security].
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