Chapter II - Corporate Insolvency Resolution Process
Section 26
Section 26: avoidance proceedings do not stop CIRP
Section 26 separates proceedings about suspect transactions or wrongful trading from the main insolvency timeline. A qualifying application does not stop CIRP or liquidation, and completion of either main process does not itself end the application.
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This article is for general information. Refer to the Insolvency and Bankruptcy Code, 2016 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
The filing of an application in respect of an avoidance transaction or fraudulent or wrongful trading or under section 47, shall not affect the proceedings of the corporate insolvency resolution process or the liquidation process, as the case may be.
Explanation.—For the removal of doubts, it is hereby clarified that the completion of the corporate insolvency resolution process or the liquidation process shall not affect the continuation of proceedings in respect of an avoidance transaction or fraudulent or wrongful trading or under section 47, as the case may be.
Introduction
Section 16 of the IBC (Amendment) Act, 2026, substituted this section. It expressly covers liquidation and continuation after the main process is complete, beyond the older wording limited to an avoidance application not affecting CIRP. The provision is about parallel progress; it does not decide whether any transaction is avoidable or what recovery follows.
Key takeaways
Parallel proceedings
Filing a qualifying application does not pause CIRP or liquidation.
Continuation after completion
Finishing CIRP or liquidation does not, by itself, terminate the qualifying application.
Expanded 2026 scope
The substituted text covers avoidance transactions, fraudulent or wrongful trading and Section 47 applications.
Identify the application
Confirm whether the filing concerns an avoidance transaction, fraudulent or wrongful trading, or Section 47. Section 26's procedural rule applies to those categories; the substantive test comes from the relevant provision.
Keep the main process moving
Track CIRP or liquidation milestones separately from the application docket. Filing alone does not freeze the main process.
Preserve post-completion conduct
If CIRP or liquidation completes while an application is pending, keep the pleadings, evidence and responsibility for pursuing it clear. The new Explanation expressly preserves continuation, subject to applicable orders and process rules.
Practical checklist
Do
- Maintain separate calendars for the main insolvency process and the transaction or trading application.
- Identify the exact statutory basis and preserve documents supporting the impugned transaction or conduct.
- Check the resolution plan, liquidation record and tribunal orders for handling pending applications.
Avoid
- Do not describe the pre-2026 Section 26 wording as current.
- Do not assume the mere filing proves a transaction is void or requires the tribunal to stop CIRP.
Glossary
- Avoidance transaction
- A transaction challenged under the Code's avoidance provisions, subject to the particular statutory conditions.
- Wrongful trading
- A statutory claim concerning conduct of the debtor's business under the Code's specific test; it is not established merely by financial failure.
Frequently asked questions
Does an avoidance application stop CIRP?
No. Current Section 26 expressly says that filing a qualifying application shall not affect CIRP or liquidation proceedings.
Can the application continue after CIRP ends?
Yes. The 2026 Explanation clarifies that completion of CIRP or liquidation does not itself affect continuation of the listed proceedings.
Does Section 26 itself determine liability?
No. It deals with the interaction of proceedings; the elements and relief must be examined under the particular avoidance or trading provision.
Need help applying this provision to your situation?
Contact BizeneedLast updated 9 October 2026