The Hunt For Hidden Value: Asset Tracing And Recovery In Indian Insolvency

Introduction: Why Every Rupee Counts

The Insolvency and Bankruptcy Code, 2016 (“Code”) was enacted with the maximisation of the value of assets of the corporate debtor (“CD”) as one of its primary objectives. To achieve this objective, identification and recovery of all assets that belong to the CD are paramount. Yet, the assets disclosed in the financial statements rarely reflect the true asset position of the CD at the commencement of insolvency proceedings. Assets may have been moved offshore, transferred through group entities, held through intermediaries, or converted into digital or other non-traditional forms. In an era where value can cross borders with the touch of a key and vanish into layered corporate structures overnight, asset tracing and recovery (“ATR”) has become not merely a supporting tool but the very backbone of effective insolvency administration in India.

ATR in insolvency proceedings is the process of locating, identifying, and recovering assets that should be available for distribution to creditors during the corporate insolvency resolution process (“CIRP”), liquidation, or insolvency proceedings against a personal guarantor (“PG”). It involves tracking down assets held through complex arrangements, tracing cross-border assets, and securing the value of assets for all stakeholders under the Code. As the scale of corporate distress grows and becomes more sophisticated, the old adage holds truer than ever: you cannot recover what you cannot find.

ATR and Avoidance Transactions: Following the Money

Within the broad framework of the Code, ATR plays a particularly significant role in the context of avoidance transactions. Sections 43 to 51 and 66 of the Code empower the resolution professional (“RP”) or liquidator to challenge preferential, undervalued, extortionate and fraudulent transactions (“Avoidance Transactions”), and to seek relief before the National Company Law Tribunal (“NCLT”). ATR provides the evidentiary foundation needed to pursue these actions: it identifies when and how value was transferred without any genuine commercial basis, and traces assets moved through intermediaries or related parties to conceal them.

The sheer scale of asset diversion before insolvency commencement is staggering. As of 30 September 2025, RPs and liquidators had filed 1,570 avoidance applications involving approximately INR 3.97 lakh crore in value. Combination transactions accounted for the highest value at INR 2.36 lakh crore across 774 cases, followed by fraudulent transactions worth INR 1.28 lakh crore across 493 cases. As of June 2025, the top 10 companies alone, led by Dewan Housing Finance Corporation Limited, accounted for a significant portion of total reported avoidance transaction value. Yet, of the applications filed, only 338 had been settled by the tribunals as of September 2024, ordering clawback of approximately INR 7,516 crore only. The gap between the value of identified avoidance transactions and actual recoveries reveals both the promise and the challenge of ATR: finding the money is one thing; getting it back is another.

Growing International and Domestic Significance: A Global Awakening

ATR has gained significant international attention in recent times. In July 2025, the United Nations Commission on International Trade Law (“UNCITRAL”) adopted its Toolkit and Background Notes on Asset Tracing and Recovery in Insolvency Proceedings (“UNCITRAL Toolkit”). The Toolkit is a landmark publication: it is designed to facilitate effective court-to-court communication and cooperation, and to expedite ATR across borders, in both physical and digital environments. Significantly, the UNCITRAL Toolkit is non-prescriptive, surveying ATR measures used across jurisdictions and identifying commonalities to help policymakers, legislators, courts, and insolvency practitioners better understand the tools available in different states. This enhanced understanding can equip domestic frameworks with new tools and facilitate more expeditious cross-border ATR. 

At the same time, INSOL International published its Asset Tracing and Recovery Handbook: Jurisdictional Perspectives in September 2025, covering five key jurisdictions - the Cayman Islands, Singapore, the Netherlands, the United Kingdom, and the United States, with plans to expand to further jurisdictions over time. The handbook sets out the range of options available to insolvency practitioners in seeking to identify, value, trace and recover a company's assets, acknowledging that asset structures are growing in sophistication, including through the rise of crypto and other digital assets. 

Domestically, the importance of ATR in the IBC process is further heightened by the Insolvency and Bankruptcy Code (Amendment) Act, 2026 (“2026 Amendment Act”), which received Presidential assent and has been published in the Official Gazette on 6 April 2026. The 2026 Amendment Act represents the most comprehensive overhaul of the Code since its enactment in 2016. It gives the Central Government the authority to create a cross-border insolvency framework, and makes targeted changes to the avoidance transaction provisions. In light of these converging developments, ATR has evolved from a back-office exercise to a front-line mechanism, marking the difference between a successful recovery and an irretrievable loss of value.

Why ATR Has Become Central to the IBC Framework

During the CIRP, the RP is required to keep the CD operational, manage its affairs, and prepare an information memorandum (“IM”) under Section 29 of the Code that gives a true and fair view of the CD's assets and liabilities. If assets have been moved, concealed, or if records are incomplete, the IM cannot provide a reliable basis for decision-making. Any resolution plan based on such incomplete or inaccurate information is at risk of failure, legal challenge, or undervaluation. Sometimes a CD may appear to have insufficient capital, but related parties may hold substantial value; conversely, a CD that appears financially stable may have lost significant value through asset diversion.

During liquidation, ATR becomes even more consequential. Under Section 36 of the Code, the liquidator is required to form a liquidation estate consisting of all assets of the CD, and under Section 53, to realise and distribute the value derived from the sale of the liquidation estate among creditors. This obligation involves tracking down and retrieving assets wherever they may be, even if they were moved prior to the start of the insolvency. ATR therefore has a significant deterrent effect as well: promoters and management are less likely to transfer value to related parties or third parties when they are aware that assets can be tracked down and recovered. 

In this broader context, specialised asset tracing agencies are becoming increasingly relevant. These organisations assist RPs and creditors by mapping promoter and related-party holdings, conducting digital forensics, obtaining intelligence on hidden or offshore assets, and preparing evidence for avoidance or recovery proceedings. Their techniques include cross-border verification, on-ground investigation, opensource intelligence, and registry searches. Early involvement of these agencies in the CIRP often forms the basis for avoidance applications.

The Global Playbook: Lessons from Mature Jurisdictions

India's insolvency framework does not operate in a vacuum. Comparative practice from more mature jurisdictions offers both cautionary tales and pragmatic blueprints for strengthening ATR.

In England and Wales, the insolvency practitioner's toolkit is backed by robust disclosure mechanisms, including the power to examine directors and officers under Section 236 of the Insolvency Act 1986 and to seek Norwich Pharmacal orders, i.e., orders compelling third parties to disclose information about wrongdoers. The UK's well-developed freezing injunction regime described by courts as a “nuclear weapon” of civil litigation, allows practitioners to restrain asset dissipation on an urgent, ex parte basis. These tools, combined with a judiciary experienced in complex commercial fraud, give English insolvency practitioners a formidable arsenal for ATR.

Singapore has positioned itself as a leading restructuring hub in Asia, having adopted the UNCITRAL Model Law on Cross-Border Insolvency through Schedule 3 to its Insolvency, Restructuring and Distribution Act 2018. Recent jurisprudence has expanded the scope of Singapore's cross-border framework. In the landmark Ascentra Holdings decision (2023), the Singapore Court of Appeal clarified that the Model Law applies to foreign proceedings concerning solvent companies and not just insolvent ones, thereby facilitating foreign office holders in tracing and recovering assets situated in Singapore. 

In the Cayman Islands, insolvency practitioners have access to Norwich Pharmacal and Bankers Trust orders to compel disclosure from third parties, including crypto-exchanges, enabling them to identify wallet owners and trace assets through decentralised structures. The Cayman courts have readily adapted their remedies to blockchain-based assets, including authorising service of proceedings via non-fungible token airdrops into digital wallets. This pragmatic approach to digital asset tracing is particularly instructive for India, where the regulatory treatment of virtual digital assets remains in flux.

The common thread across these jurisdictions is clear: effective ATR requires a combination of strong information-gathering powers, swift interim relief mechanisms (especially freezing orders), sophisticated digital forensics capability, and a judiciary willing to adapt remedies to evolving asset classes. India's framework would benefit enormously from careful importing and adaptation of these tools to its own institutional context.

Interaction with Other Laws: The Tangled Web

ATR under the Code often interacts with parallel statutory regimes. A circular issued by the IBBI on 4 November 2025 illustrates how this interaction now operates in practice: it addresses situations where assets of the CD are attached by the Enforcement Directorate under the Prevention of Money Laundering Act, 2002 (“PMLA”), acknowledging that the release of attached property back into the hands of the CD can significantly enhance value for creditors, and setting out a structured mechanism for doing so.

This interaction is not limited to PMLA. Secured creditors' rights under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”) are stayed during the CIRP by virtue of Section 14 of the Code. However, as the RP takes control of assets and traces transactions during this period, the information collected often helps clarify the status and location of secured assets, which can support enforcement by secured creditors after the CIRP concludes or in liquidation proceeding. Similarly, where funds have moved offshore or the CD has foreign subsidiaries or accounts, provisions of the Foreign Exchange Management Act, 1999 may become relevant. Listed companies may also fall under the jurisdiction of the Securities and Exchange Board of India Act, 1992 when related-party transactions or undisclosed transfers raise questions under its Listing Obligations and Disclosure Requirements framework. These overlaps present both challenges and opportunities. Stronger cooperation mechanisms would allow the RP to access information more easily, verify asset movements, and undertake more effective avoidance actions.

Challenges: Where the Trail Goes Cold

ATR faces several practical and structural challenges across jurisdictions, many of which are also acknowledged in the UNCITRAL Toolkit. These include delayed investigations, missing or unreliable records, lack of cooperation from key parties, fragmented asset information, cross-border barriers, and the increasing complexity of digital assets.

Delayed investigation by RPs remains a critical issue. ATR depends on understanding how value moved before default, but this becomes far harder if the gap between default and insolvency commencement is large. The UNCITRAL Toolkit stresses that early information-gathering is essential, as delays can cause asset trails to disappear. This was illustrated in Shiv Nandan Sharma v Subhash Chandra (2025), where the NCLT noted that the RP accepted significant changes in the PG's net worth without independent asset tracing or verification, allowing the process to proceed on incomplete information.

Non-cooperation by suspended management and PGs is equally endemic. ATR requires access to books of account, inventories, and supporting documents, but these are often withheld or unavailable. In Anju Agarwal, RP of Shri Akshar Kuchroo (2025), repeated requests for information from the PG produced no results, and creditors had to appoint an external agency for investigation and asset tracing. However, the PG remained untraceable and no unencumbered assets were found, ultimately preventing the insolvency resolution process from proceeding. Similarly, in IndusInd Bank v Pramod Kumar Singh (2023), the liquidator tried to locate books of account, machinery, and other assets, but nothing had been handed over by the suspended management, and the NCLT noted that the liquidator's reasonable efforts were defeated by the absence of a reliable asset trail.

Cross-border elements add layers of complexity. Promoters sometimes hold assets, companies, or accounts abroad, but the existing provisions in the Code offer limited help. The UNCITRAL Toolkit identifies cross-border access to information, recognition of foreign representatives, and differences in legal standards as major challenges. Notably, India has not yet adopted the UNCITRAL Model Law on Cross-Border Insolvency, leaving practitioners reliant on bilateral arrangements under Sections 234 and 235 of the Code, a mechanism widely acknowledged to be inadequate for modern cross-border cases. 

Digital assets present a new frontier of difficulty. Information relevant to ATR may be stored in cloud systems, payment platforms, dematerialised securities, or cryptocurrency accounts. The UNCITRAL Toolkit notes that such assets require early preservation and specialised expertise. Unlike in the Cayman Islands and England, where courts have readily adapted disclosure and freezing mechanisms to cryptoassets, Indian courts are yet to develop the jurisprudence to deal with these novel asset classes. 

Impact of the 2026 Amendment Act: A Step Forward, Not a Destination

The 2026 Amendment Act has introduced targeted amendments to the avoidance transaction framework. It shifts the look-back period for preferential, undervalued, and extortionate transactions from the insolvency commencement date to the initiation date (i.e., the date of filing the application for CIRP), and extends it until the insolvency commencement date. This expansion is critical: under current law, the significant time between filing and admission of an application often allows transactions to fall outside the statutory review window. The amendment closes this gap and allows the RP to examine older patterns of dissipation that were previously out of reach.

The 2026 Amendment Act also introduces Section 28A, which permits the CoC to authorise the use of a PG's assets during CIRP, broadening the asset base available for recovery. Importantly, Section 47 is amended to empower creditors, not just the RP or liquidator, to file avoidance applications where the RP or liquidator has failed to act. This is a welcome check against institutional inertia and ensures that the pursuit of diverted value does not depend solely on the initiative of a single professional.

In cross-border matters, the 2026 Amendment Act introduces Section 240C, empowering the Central Government to frame rules for cross-border insolvency and to designate special benches for such cases. This moves India beyond the current bilateral arrangement system under Sections 234 and 235, and towards the principles of the UNCITRAL Model Law on Cross-Border Insolvency. Notably, reflecting the recommendation of the Select Committee that examined the Bill, the Explanation to Section 240C clarifies that the expression “corporate debtor” shall also include any person incorporated with limited liability outside India, ensuring that the cross-border provisions apply to foreign companies with assets, creditors, or operations connected to India.

Pragmatic Solutions: A Blueprint for Better ATR

Drawing on global best practice and the practical challenges outlined above, the following measures would materially strengthen ATR in Indian insolvency:

First, improve the quality of early assessment. The determination of avoidance transactions should be deeper and more rigorous, with RPs deploying specialised agencies and digital repositories at an early stage to lay the proper foundation for ATR. Better coordination mechanisms between RPs and external forensic specialists, focusing on related-party transactions, cash outflows in the look-back period, and asset movements across group entities, would materially improve outcomes. The UNCITRAL Toolkit underscores that early information-gathering is the single most important factor in successful ATR.

Second, build a unified asset information platform. Asset information in India is fragmented across multiple registries such as sub-registrar offices, the Ministry of Corporate Affairs, depositories, the RBI, and various state-level databases. A centralised, searchable platform linking these registries would dramatically reduce the time and cost of tracing assets. This should be integrated with the electronic portal envisaged under Section 240B of the 2026 Amendment Act.

Third, strengthen interim relief mechanisms. Indian courts should develop a more robust framework for urgent freezing and disclosure orders in insolvency proceedings, analogous to the freezing injunction and Norwich Pharmacal regimes in the UK and Cayman Islands. The moratorium under Section 14, whilst important, does not itself address the need to freeze specific assets held by third parties or related parties outside the CD's direct control.

Fourth, invest in digital forensics capability. As digital assets grow in prevalence, RPs and insolvency professionals need access to specialised blockchain analytics and digital forensic tools. The IBBI should consider prescribing minimum standards for digital asset tracing and requiring insolvency professionals to undertake training in this area.

Fifth, operationalise cross-border cooperation. When framing rules under Section 240C, the Central Government should prioritise establishing formal channels for court-to-court communication, mutual recognition of insolvency representatives, and joint protocols for cross-border asset disclosure, drawing on the UNCITRAL Model Law and its Guide to Enactment. 

Sixth, incentivise creditor participation in avoidance proceedings. The amendment empowering creditors to file avoidance applications directly is an important reform. To make it effective, resolution plans should be required to clearly allocate the proceeds of ongoing avoidance proceedings, and creditors should be permitted to assign the right to pursue recovery to specialised agencies or resolution applicants, with appropriate safeguards.

Seventh, establish protocols for coordination between agencies and lenders. Effective ATR requires alignment between resolution professionals, specialised tracing agencies, forensic accountants, and financial creditors. Clear protocols should be developed to: (i) define entitlement to recovered assets as between secured creditors, the insolvency estate, and other stakeholders; (ii) enable lenders to participate in or benefit from realisations arising from ATR efforts, particularly where they have funded or supported tracing activities; and (iii) facilitate information-sharing between agencies such as the SFIO, ED, and IBBI without compromising confidentiality or ongoing investigations. Such coordination would align incentives and encourage more proactive pursuit of diverted value.

Conclusion: The Stakes Have Never Been Higher

ATR has become central to the Indian insolvency regime as value shifts through complex structures and offshore routes, and digital assets become more common. Recent NCLT and NCLAT orders show that missing information, incomplete handovers, and delayed investigation continue to undermine recovery, and that ATR is often the difference between an effective process and one where value is irretrievably lost.

International developments including the UNCITRAL Toolkit and the INSOL International Handbook, together with domestic reforms enacted through the 2026 Amendment Act, point towards a more structured and information-driven approach. Extending the avoidance window, empowering creditors to act independently, and laying the foundation for a cross-border framework are important steps, but they need to be supported by effective implementation. The global experience is unambiguous: jurisdictions with strong ATR regimes recover more value, deter more misconduct, and inspire greater confidence among creditors and investors.

As the volume of avoidance applications and the complexity of financial behaviour continue to grow, ATR will play an even larger role in shaping outcomes under the Code. Strengthening ATR practices through timely investigation, better cooperation with regulators, greater use of specialised agencies, and a workable cross-border framework will help preserve value, deter misconduct, and give creditors greater confidence in the process. Importantly, effective ATR serves objectives beyond insolvency alone: it supports the broader integrity of commercial transactions, discourages fraudulent conduct across the economy, and reinforces confidence in the rule of law. As these practices mature, stakeholders who prioritise early and systematic asset tracing will be better positioned to secure meaningful recoveries.

* The authors acknowledge the assistance of Ms. Arushi Handa, Associate, Shardul Amarchand Mangaldas, in the preparation of this article.

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