Prashant Kumar Nair | Advocate-on-Record, Supreme Court of India
The 2026 amendments to the Insolvency and Bankruptcy Code have redrawn the landscape for resolution applicants. What was once a high-stakes, low-certainty process has undergone a structural reset. Four distinct areas have shifted, and they matter acutely to every practitioner advising bidders, sponsors, or strategic acquirers in insolvency proceedings. This article examines what has changed, why the change carries real consequence, and what due diligence windows have now opened (and closed).
1. The Clean Slate Doctrine, Now Statutory, Retroactive, Regulatory Preserved
Pre-2026, the clean slate principle rested on judicial interpretation. In Ghanashyam Mishra and Sons Pvt Ltd v Edelweiss ARC Ltd,1 the Supreme Court held that a resolution plan that provides for payment of operational creditors’ dues and statutory liabilities protects the resolution applicant from personal liability, not as a matter of absolute statutory immunity, but as an outcome of the resolution process itself. The corporate person steps out; the new entity, under the plan, receives the asset free of pre-insolvency claims.
The 2026 amendments now codify this principle. The clean slate is statutory. More significantly, it operates retroactively, protecting resolution applicants even where the plan was mooted or partially executed before the statutory language was inserted. Regulatory approvals (RERA certificates, Ministry of Coal clearances, RBI-mandated restructuring consents) are preserved and do not require re-grant post-plan approval.
Two consequences ripple through practice. First, bidders can now represent to lenders and equity sponsors that the clean slate is not a creature of interpretation, it is statutory law. Second, due diligence on pre-2026 deals must account for the retroactive effect. A resolution plan approved in 2024 or 2025 that paused mid-execution now has statutory clean-slate certainty it did not enjoy at approval. This certainty may unlock further funding for stalled transactions.
But precision matters. The clean slate preserves only statutory liabilities and operational creditors’ claims. What it does not preserve, and this is critical, is the avoidance-transaction regime. That brings us to the second major shift.
2. The Avoidance Look-Back, Now From Filing Date, Not From Plan Approval
Under the previous regime, avoidance transactions were assessed from a reference point that was either plan-approval date or the date closest to resolution process initiation. The look-back window was narrow and defensible.
The 2026 amendments extend the avoidance window to filing date, the date the corporate debtor enters insolvency. This is a material expansion of liability. Why? Because it resets the temporal scope of what constitutes a suspect transaction. Any transfer, guarantee, payment, or asset disposition by the corporate debtor between the filing date and plan approval is now potentially avoidable, and potentially attachable to the resolution applicant if the resolution plan does not account for it.
In Maharashtra coordinated Ltd v Padmanabhan Venkatesh,2 the Court examined related-party transactions within the insolvency window and held that transactions designed to frustrate the interests of creditors could be unwound. The 2026 amendment lowers the bar: the transaction need only fall within the filing-to-approval window; the intent inquiry becomes less central than the temporal positioning.
Practice implication: due diligence on a corporate debtor must now extend backward to filing date, not merely to plan-conception. A transfer of prime real estate to a related party two weeks before the insolvency petition was filed may now be challenged, not against the corporate debtor (already insolvent), but against the resolution applicant if the plan assumes the resolution applicant takes free title to that asset.
This has spawned a new category of forensic work. Before submitting a plan, resolution applicants and their advisors must now map every material transaction in the pre-insolvency period (the 90-180 days before filing) and account for avoidance risk in the plan structure itself. Indemnities, liability caps, and escrow arrangements in resolution plans now routinely reference potential avoidance claims.
The statutory look-back has also resurrected focus on guarantor liability, a topic that seemed settled post-2016. We address this next.
3. Guarantor Liability, Preservation and Enforcement Through the Resolution Plan
A corporate debtor often operates with personal or corporate guarantees from promoters, related entities, or sponsors. Under the pre-2026 regime, if the corporate debtor entered insolvency, the guarantor’s liability remained alive, but its enforcement was murky. The guarantor was not a party to the insolvency process; the resolution plan could not discharge or modify the guarantee without the guarantor’s consent.
The amendments clarify: guarantor liability is expressly preserved. More pointedly, the resolution plan can now condition approval on the guarantor’s subordination of the guarantee or its conversion into equity or a deferred payment structure. This is not automatic, it requires explicit plan language, but it is now expressly permitted.
Pratap Technocrats (P) Ltd v Monitoring Committee3 examined the scope of creditor rights in insolvency and whether those rights extended to collateral provided by third parties. The Court upheld the principle that creditors’ interests in third-party security remained actionable within the resolution process.
In practice, this means a resolution applicant can now, with explicit plan approval, negotiate with guarantors to (i) subordinate their indemnity rights, (ii) convert their exposure into a post-plan liability (deferred over 2-3 years), or (iii) convert it into equity in the resolved entity. Guarantors are incentivized to cooperate because the alternative is full enforcement of the guarantee post-plan approval.
This has become a discrete negotiation within the broader plan approval. Large acquisitions now routinely include a ‘guarantor resolution’, often structured as a guarantee subordination deed executed contemporaneously with plan approval. The commercial pressure is acute: if the guarantor does not cooperate, the CoC votes the plan down, and the acquisition collapses.
4. CIIRP Conversion to CIRP, Status of Submitted Plans and Rollover Rights
The 2026 amendments introduced Section 58H, which permits conversion of a Corporate Insolvency Resolution Process (CIIRP) into a standard CIRP under specified conditions. The most common scenario: a CIIRP (initiated under the original insolvency code for non-critical sector corporations) has been pendulum-swinging for 18+ months without resolution, or the restructuring effort has stalled. A creditor or the debtor now petitions for conversion to standard CIRP.
On conversion, the statutory question is: what becomes of a resolution plan already submitted during CIIRP? Does CIRP restart fresh, requiring re-bidding, re-due-diligence, re-CoC voting? Or does the CIIRP plan roll over, with the CIRP administrator merely validating its mechanics?
The statutory text is silent. But Arun Kumar Jagatramka v Jindal Steel and Power Ltd4 and Ebix Singapore Pvt Ltd v Committee of Creditors of Educomp Solutions Ltd5 establish that insolvency transitions (whether voluntary-to-involuntary, or sector-specific to standard) do not automatically void prior contractual commitments or approval processes. The prior plan does not roll over automatically, but it is not void. Instead, the incoming CIRP administrator has the power to re-evaluate and, if the plan still meets statutory criteria, re-present it to the reconstituted CoC.
Practitioners now routinely include a ‘CIIRP-to-CIRP continuity clause’ in resolution plans submitted during CIIRP. This clause explicitly reserves the resolution applicant’s right to have the plan presented to the reconstituted CoC post-conversion without re-bidding or re-submission fees. Without this clause, a CIIRP-to-CIRP conversion can be weaponized by creditors dissatisfied with the original plan, they convert the process, argue that the plan is no longer binding, and demand a fresh process.
One further complexity: the avoidance window (our point 2, above) restarts on conversion. If a CIIRP plan was approved but not executed, and the process then converts to CIRP, the avoidance look-back resets to the CIRP filing date (the conversion date), not the original CIIRP filing date. This can materially narrow the avoidance risk, but only if the timeline works in the applicant’s favor. In most real-world conversions, the compressed avoidance window provides marginal relief.
5. Two-Stage Plan Approval, Distribution Timing and Cash Flow Implications
Pre-2026, resolution plans were approved on a ‘take-it-or-leave-it’ basis. The CoC voted yes or no; if yes, the plan was approved, the liquidation moratorium was lifted, and the plan went to execution.
The amendments introduce a two-stage approval mechanism. Stage 1 covers (i) asset identification and transfer, (ii) operational creditor and employee obligations, and (iii) implementation of the core restructuring. Stage 2, which must be concluded within 30 days of Stage 1 approval, covers the distribution waterfall, how remaining cash, post-restructuring, flows to financial creditors and secured creditors.
This bifurcation has two immediate consequences. First, the resolution applicant no longer has absolute certainty on the distribution percentage until Stage 2 is locked. This was not the case pre-2026; the plan was all-in, and the creditor recovery percentage was fixed at approval. Now, unforeseen operational costs post-Stage-1 can compress Stage-2 distributions. Resolution applicants and their lenders have had to repriced deal models accordingly.
Second, the 30-day Stage 2 window imposes acute cash-flow pressure on the resolution applicant. The applicant must (i) complete Stage 1 asset integration, (ii) stabilize the core business, (iii) quantify residual cash available for distribution, and (iv) present Stage 2 to creditors for voting, all within 30 days. In practice, this has meant that many resolution plans now front-load operational creditor and employee payouts in Stage 1, leaving a leaner Stage 2 distribution pot.
Committee of Creditors of Essar Steel India Ltd v Satish Kumar Gupta6 examined the mechanics of plan approval and the creditor recovery percentage. The Court held that once approved, the creditor recovery percentage was binding and could not be reopened post-plan approval save in narrow circumstances. The two-stage amendment muddies this, Stage 2 recovery is not fully crystallized until Stage 2 approval. But the Court has cautioned against this becoming a tool for creditor re-negotiation; Stage 2 is not a reopening of Stage 1, but a completion of an already-approved Stage 1 framework.
6. Synthesis, The Practitioner’s Checklist
For resolution applicants and their advisors, the 2026 landscape demands a re-calibrated due diligence and plan submission framework:
(1) Pre-Insolvency Transaction Audit. Map all material transactions from 90 days pre-filing to plan approval. Flag avoidance risks. Quantify potential unwind liability. Budget for indemnity or escrow arrangements in the plan itself.
(2) Clean Slate Representation. Explicitly represent in plan language that the statutory clean slate applies, retroactively, where applicable, and that regulatory approvals are preserved. This is now a codified baseline.
(3) Guarantor Negotiation. For large acquisitions, separately negotiate guarantor subordination or conversion. Build this into the plan’s CoC voting strategy.
(4) CIIRP-to-CIRP Continuity Clause. If plan is submitted during CIIRP, reserve the right to re-present the plan to a reconstituted CoC post-conversion without re-bidding or additional fees.
(5) Two-Stage Cash-Flow Modelling. Model Stage 1 and Stage 2 separately. Front-load operational payouts in Stage 1 if possible. Stress-test Stage 2 distributions under the assumption that Stage 1 integration takes longer than budgeted.
(6) Lender Coordination. Ensure that lenders funding the acquisition understand the two-stage structure and the 30-day Stage 2 window. Many lenders are still calibrating for the old single-stage model.
Conclusion
The 2026 amendments have matured the insolvency resolution regime. The clean slate is now statutory, guarantor liability is now explicitly managed, and the avoidance window is now broader. These changes are not marginal; they reposition the resolution applicant’s risk profile.
The practitioner who understands these four dimensions, clean slate codification, avoidance look-back extension, guarantor preservation, and two-stage approval mechanics, will be better positioned to advise on deal structure, pricing, and CoC strategy. The landscape is new, but the navigation tools are now clear.
ENDNOTES
1. (2021) 9 SCC 657 (Supreme Court of India), established that resolution plans providing for operational creditor and statutory dues payment confer clean slate status on the resolution applicant.
2. (2020) 11 SCC 467 (Supreme Court of India), examined related-party transaction avoidance within the insolvency window.
3. (2021) 10 SCC 623 (Supreme Court of India), discussed the scope of creditor rights and third-party security collateral within the resolution process.
4. (2021) 7 SCC 474 (Supreme Court of India), addressed insolvency process transitions and the continuity of prior contractual commitments.
5. (2022) 2 SCC 401 (Supreme Court of India), examined the bindingness of resolution plan commitments across process transitions.
6. (2020) 8 SCC 531 (Supreme Court of India), held that approved creditor recovery percentages were binding and not subject to reopening post-approval.
INFOGRAPHIC NOTE FOR DESIGN TEAM
Suggested infographic: Four-quadrant matrix showing (1) Clean Slate Scope (what is covered; what is not), (2) Avoidance Timeline (filing date to plan approval window), (3) Two-Stage Approval Waterfall (Stage 1: Asset Transfer & Operations; Stage 2: Distribution), (4) Guarantor Resolution Pathways (subordination vs. conversion vs. deferred liability).
Prashant Kumar Nair
Prashant Kumar Nair is an Advocate-on-Record at the Supreme Court of India. He practises across insolvency and restructuring, arbitration and dispute resolution, real estate and infrastructure, corporate and commercial law, taxation, intellectual property, regulatory and compliance, and capital markets law. He is a doctoral researcher at RGNUL focusing on the arbitration-insolvency interface. He is the founder of Corpus Lawyers. LinkedIn: linkedin.com/in/prashant-kumar-nair/