Due diligence in insolvency requires closer inquiry and Adjudicating Authority applications where CIRP or liquidation appears fraudulent or malicious.

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....Insolvency Professionals must conduct further enquiry where indicators suggest that CIRP or liquidation may be used for a fraudulent or malicious purpose unrelated to insolvency resolution or liquidation. Relevant indicators include a dominant recently assigned single creditor, connected corporate debtors entering CIRP with overlapping creditors, limited competitive bidding, unsupported disproportionate recoveries, links to fraud proceedings, and unjustified related-party loans or write-offs. Indicators are illustrative and not conclusive; they require holistic, contextual assessment based on records available in the ordinary course. Where reasonable grounds support suspected misuse, the IP must apply to the Adjudicating Authority, identifying the indicators, supporting material, and reasons for seeking directions.....