How Section 28A Brings a Guarantor's Assets Into the CIRP

Section 28A of the Insolvency and Bankruptcy Code, 2016, inserted by the Insolvency and Bankruptcy Code (Amendment) Act, 2026 and in force since 26 May 2026, allows a guarantor's asset to be transferred into the corporate debtor's corporate insolvency resolution process where a creditor already holds a security interest over that asset and has taken lawful possession of it. Approval is required from the corporate debtor's committee of creditors and, where the guarantor is itself insolvent, from its own creditors at a specified threshold. This post sets out the four conditions for a transfer, where the sale proceeds go, and what lenders and resolution applicants should change in practice.

The Four Gates a Guarantor's Asset Must Pass Before It Enters the CIRP

Section 28A confers no roving power on a resolution professional to sweep in whatever a promoter happens to own. It bites only where a particular creditor already holds, and has already enforced, a security interest over a particular asset belonging to a guarantor. Four requirements must be satisfied, and each is capable of being contested.

The first concerns the security itself. The creditor must hold a security interest over the guarantor's asset. Read with the explanation inserted into section 3(31) by the same amendment, that interest has to arise from an agreement or arrangement between two or more parties. A charge existing only because a statute says so falls outside the definition, so a revenue authority asserting first charge under a state enactment cannot reach for section 28A.

Second comes possession. The creditor must have taken possession of the asset in accordance with law on enforcement of its security interest, which in practice means enforcement under section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI). Whether symbolic possession suffices, or whether physical possession is required, is unsettled. Where the asset matters to the resolution, the safer course is physical possession, or possession obtained with the assistance of the District Magistrate under section 14 of SARFAESI.

Third is prior approval of the corporate debtor's committee of creditors (the CoC). Regulation 28A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, notified to operationalise the section, tells the resolution professional what to place before the committee: a description of the asset, its estimated realisable value, and the consents section 28A requires. Regulation 28B governs the mechanics of the transfer and the treatment of what comes in.

The fourth requirement applies only where the guarantor is itself already inside an insolvency process, and it is here that the two special thresholds operate.

Why Do the Sixty-Six Per Cent and Three-Fourths Thresholds Differ Under Section 28A?

Where the guarantor is a corporate guarantor itself undergoing a CIRP or liquidation, the transfer additionally needs approval of not less than sixty-six per cent of the voting share of that corporate guarantor's own CoC. The reason is structural. A corporate guarantor in process has a constituted committee with measurable voting shares, and the asset being removed is one its own creditors were counting on.

Where the guarantor is an individual undergoing insolvency or bankruptcy under Part III of the Code, and the creditor has forfeited or surrendered its rights in relation to the asset, approval must come from creditors holding more than three-fourths in value. A personal guarantor's creditors are not organised into a committee in the same way, so the Code falls back on a value test. Anyone constructing that denominator should expect argument about which claims count and at what figure.

In both situations the amounts received on the transfer form part of the guarantor's insolvency or bankruptcy estate. They are applied against the guarantor's liability after costs, charges and expenses, with any surplus returning to the guarantor. What they do not do is fall into the section 53 waterfall of the corporate debtor.

Position of the guarantor	Approval required before transfer	Where the money goes
Guarantor not in any insolvency process	Prior approval of the corporate debtor's CoC	Applied against the guarantor's liability after costs; surplus returns to the guarantor
Corporate guarantor itself in CIRP or liquidation	Corporate debtor's CoC, plus not less than 66 per cent of the voting share of the corporate guarantor's own CoC	Forms part of the corporate guarantor's insolvency estate
Personal guarantor in insolvency or bankruptcy, creditor having forfeited or surrendered rights in the asset	Corporate debtor's CoC, plus creditors holding more than three-fourths in value	Forms part of the personal guarantor's insolvency or bankruptcy estate
Creditor has not taken lawful possession on enforcement	No transfer is available under section 28A, whatever the CoC decides	Not applicable

Price Discovery When the Factory and the Land Sit in Different Names

The commercial case is easiest to see in a fact pattern that recurs across Indian manufacturing. A textile unit operates from a site where the plant, machinery and shed belong to the corporate debtor, while the land underneath is held personally by the promoter and mortgaged to the same lender. Break the two apart and neither realises much: whoever buys the plant has no right to remain where it stands, and whoever buys the land inherits a structure it cannot easily remove. Put them together and the parcel becomes a functioning industrial site with a market.

Real estate throws up the same problem in a different shape. Development projects are frequently structured so that the entity which borrows and builds is not the entity which owns the land, and when the developer enters a CIRP the meaningful recovery sits with the landowner. That scenario was expressly in view when the corresponding regulations were framed.

Before 26 May 2026 a lender in either position had two options, neither attractive. It could persuade the guarantor to contribute the asset voluntarily, which promoters facing personal exposure rarely agree to do. Or it could enforce under SARFAESI and sell into a thin market of buyers willing to acquire a fragment. Section 28A supplies a third route, and the price is now set by an applicant bidding for a whole rather than by a distress auction of a part.

What Does the Section 28A(2) Deeming Provision Actually Vest in the Transferee?

Section 28A(2) provides that a transfer under a resolution plan vests in the transferee all rights in, or in relation to, the asset as if the transfer had been made by its owner. That is a powerful fiction, because the creditor in possession is not the owner. A mortgagee's rights under the Transfer of Property Act, 1882 stop at possession and enforcement, and the mortgagor's right of redemption under section 60 survives until a sale is completed. Section 13(8) of SARFAESI likewise preserves a right to redeem until the auction notice period has run.

The Parliamentary Select Committee that examined the Bill in December 2025 accepted the ministry's position that section 28A is facilitative and displaces no substantive right under any other statute. That sits uneasily with the vesting language. A guarantor stripped of an asset without a redemption window has an obvious argument under Article 300A of the Constitution, since the section requires neither consent nor any right of first refusal. Until the point is tested, applicants should price the risk rather than assume it away.

Is a Guarantor Released Once Their Asset Enters the CIRP Under Section 28A?

A guarantor whose land is absorbed into someone else's CIRP is not thereby released. In Lalit Kumar Jain v. Union of India [(2021) 9 SCC 321] the Supreme Court, while upholding the notification that brought the Code into force for personal guarantors to corporate debtors, held that approval of a resolution plan for the corporate debtor does not ipso facto discharge the personal guarantor. Liability under the contract of guarantee survives, subject to the terms of that contract and of the approved plan. The credit a guarantor receives is measured by the value realised, not by the value of what was taken.

Subrogation is the harder question. Under section 140 of the Indian Contract Act, 1872 a surety who discharges the guaranteed debt is invested with the rights the creditor held against the principal debtor, and section 141 gives the surety the benefit of the creditor's securities. Section 28A says nothing about preserving those rights over the asset it moves. Where the corporate debtor emerges under an approved plan, the new section 31(6) extinguishes claims not dealt with in the plan, so there may be no residual claim left to be subrogated to. The amendment does not address the mismatch.

Ranking is a related irritant. Because the proceeds enter the guarantor's estate rather than the corporate debtor's, the guarantor's own unsecured creditors acquire a financial interest in the price at which an asset is sold inside a process where they have no vote.

Where Dilip B. Jiwrajka Fits Into the Approval Arithmetic

In Dilip B. Jiwrajka v. Union of India [(2024) 5 SCC 435] the Supreme Court upheld sections 95 to 100 of the Code and held that the appointment of a resolution professional and the report under section 99 carry no adjudicatory character, meaningful scrutiny beginning only when the adjudicating authority considers admission under section 100. Applied here, a personal guarantor's process may have been triggered without anyone yet having examined the claims of the very creditors whose three-fourths approval the section demands. Lenders should record the basis of the value calculation contemporaneously.

Drafting the Security Package So a Section 28A Transfer Is Actually Available

For a lender, the practical consequence is that a bare personal guarantee is now worth materially less than a guarantee supported by a described, registered security over an identified asset. Section 28A is asset-specific and possession-specific; a guarantee unaccompanied by a mortgage or charge engages none of it.

At the security creation stage the asset should be described with the specificity a conveyance would require, the mortgage registered, and the security interest recorded with the Central Registry so the possession step cannot be attacked on a technicality years later. The guarantee and the mortgage deed should carry express covenants under which the guarantor consents to enforcement, consents to disposal of the asset alongside the borrower's assets, and undertakes not to obstruct possession. None of this displaces the statutory conditions, but it removes the easy defences.

Sequencing deserves more attention than most lenders currently give it. Possession has to precede the CoC proposal, so the recovery function and the insolvency function inside a bank can no longer run on separate calendars. The lender that enforces may also not command the votes. Where a consortium is involved, the inter-creditor agreement should state in advance how members will vote on a section 28A proposal and how the resulting credit is allocated.

Diligence Points for a Resolution Applicant Bidding on a Bundled Package

An applicant offered a package that includes a guarantor's asset is buying a different risk from one acquiring only the corporate debtor's estate. The chain of possession is the first item to verify: the demand notice under section 13(2), the possession notice, the date and mode of possession, and whether that possession was symbolic or physical. Any securitisation application under section 17 of SARFAESI, or a suit brought by the guarantor, should be treated as live until disposed of.

Confirm next that the disclosures required by Regulation 28A were in fact made and that the resolution records the approval in the terms the section requires, because a defective approval is the cleanest ground on which a transfer can later be unwound. Consideration should be structured so the amount attributable to the guarantor's asset is separately identifiable, since it must be routed into the guarantor's estate. Constitutional risk belongs in the price, not in an indemnity from a promoter with nothing left to give.

Frequently Asked Questions

Can a resolution professional bring in a promoter's house simply because he signed a personal guarantee?

No. Section 28A applies only where a creditor holds a security interest over that specific asset and has taken possession of it by enforcing that security. An unsecured personal guarantee, however large the exposure, does not bring any particular asset within the provision.

Is symbolic possession under SARFAESI enough?

The section requires possession taken in accordance with law and does not itself distinguish between symbolic and physical possession. The point is untested. If the asset is material, assume a guarantor will challenge a transfer resting on symbolic possession alone.

What approval is needed when the corporate guarantor is itself in liquidation?

The corporate debtor's CoC must approve, and in addition the corporate guarantor's own committee of creditors must approve by not less than sixty-six per cent of voting share. Neither substitutes for the other.

Do the sale proceeds go to the corporate debtor's creditors?

No. Amounts received are applied against the guarantor's liability after costs, charges and expenses, and form part of the guarantor's insolvency or bankruptcy estate. They do not enter the corporate debtor's distribution under section 53.

Does a transfer release the guarantor from the balance of the guaranteed debt?

Only to the extent of the value realised. The guarantee continues to operate on the residue according to its own terms, and the position that approval of a resolution plan does not by itself discharge a personal guarantor is unaffected by section 28A.

Can the guarantor redeem the asset after the committee has approved the transfer?

Section 28A creates no express redemption window, and the vesting language in section 28A(2) is framed to defeat prior claims. Whether the redemption rights under the Transfer of Property Act, 1882 and section 13(8) of SARFAESI survive is genuinely open. A guarantor intending to redeem should move before the transfer is effected.

When did section 28A take effect?

It commenced on 26 May 2026 along with most of the Insolvency and Bankruptcy Code (Amendment) Act, 2026. Regulations 28A and 28B of the CIRP Regulations followed, so the mechanism is fully operative and is not a pending reform.

Does Section 28A apply to guarantees created before the provision came into force?

Section 28A does not distinguish between guarantees created before or after 26 May 2026; what matters is that a qualifying security interest exists and possession has been taken in accordance with law at the time the transfer is proposed, not when the guarantee or the mortgage was originally executed. A guarantee and mortgage package created years earlier can therefore support a transfer under the section provided the other conditions, depending on the guarantor's own insolvency status, are independently satisfied.

Does Section 28A require NCLT approval in addition to the committee of creditors?

The section itself conditions the transfer on approval by the corporate debtor's committee of creditors and, where the guarantor is separately in an insolvency process, the additional thresholds described above. It does not expressly require a further National Company Law Tribunal order sanctioning the specific transfer, though the transfer typically forms part of a resolution plan that the tribunal does approve under Section 31 of the Code. A defective approval process remains open to challenge before the adjudicating authority.

What happens if the guarantor is not undergoing any insolvency process at all?

The two special voting thresholds, sixty-six per cent for a corporate guarantor's committee and three-fourths in value for a personal guarantor's creditors, apply only where the guarantor is itself already inside a CIRP, liquidation, insolvency resolution or bankruptcy process. Where the guarantor faces no such process, the transfer proceeds on the three general conditions: a qualifying security interest, lawful possession, and approval of the corporate debtor's own committee of creditors, without the guarantor-side threshold.

Can a guarantor dispute the valuation placed on the asset before it is transferred?

The regulations require the resolution professional to place the asset's estimated realisable value before the committee of creditors, but they do not give the guarantor a formal right to be heard on that valuation before approval. A guarantor who considers the valuation unfair or the process defective can raise the objection before the adjudicating authority once the transfer or the resolution plan incorporating it comes up for approval, though success will depend on showing the valuation was not conducted in accordance with the applicable regulations.

Do a guarantor's other creditors have any say in a Section 28A transfer?

Where the guarantor is itself undergoing insolvency, its own committee of creditors or the value-based threshold of its other creditors must approve the transfer, giving them a direct vote. Where the guarantor is not in any insolvency process, its other creditors, such as separate unsecured lenders, have no statutory role in the transfer decision under Section 28A itself, though they may have independent contractual or equitable remedies once proceeds enter the guarantor's hands.

Can Section 28A be used to bring in an asset the guarantor has already sold or mortgaged to someone else?

Section 28A operates only in favour of the creditor who holds the security interest and has taken possession; it does not override the rights of a third party who holds an earlier, validly created and perfected security interest or ownership right in the same asset, since Section 28A(2) vests only what the enforcing creditor could transfer. A prior charge holder or a bona fide purchaser with a superior claim would need to be dealt with separately, and disputed priority is likely to be the subject of litigation before any transfer is finalised.

Vikrant D. Shetty | Vikrant D. Shetty leads the Insolvency and Arbitration Practice at the law firm Vikrant D. Shetty & Associates, Advocates & Solicitors which advises financial creditors, operational creditors, corporate debtors and guarantors in proceedings before the National Company Law Tribunal (NCLT), Mumbai Bench, including matters concerning enforcement of security interests, guarantee liability and resolution plan implementation, and represents parties in domestic and international commercial arbitrations seated in India and abroad, including enforcement and challenge proceedings before the Bombay High Court.

Related reading: IBC vs SARFAESI: Which Route Delivers Faster Asset Realisation.

This article is for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please seek direct consultation with an advocate.