Section 36: Liquidation Estate under the Insolvency and Bankruptcy Code, 2016
Section 36 of the Insolvency and Bankruptcy Code, 2016 (IBC) governs the creation and composition of the liquidation estate of a corporate debtor. The liquidator forms this estate for liquidation and holds it as a fiduciary for the benefit of creditors. The provision identifies both the assets that form part of the estate and assets that must remain outside it.
Meaning and purpose of liquidation estate
A liquidation estate is the pool of assets constituted by the liquidator under Section 36 for the purpose of liquidating the corporate debtor. Section 36(2) requires the liquidator to hold the estate as a fiduciary for all creditors. In practical terms, the estate identifies the property available to be realised in accordance with the Code, subject to exclusions expressly stated in Section 36(4) and other applicable provisions.
Section 36 - Liquidation estate
(1) For the purposes of liquidation, the liquidator shall form an estate of the assets mentioned in sub-section (3), which will be called the liquidation estate in relation to the corporate debtor.
(2) The liquidator shall hold the liquidation estate as a fiduciary for the benefit of all the creditors.
(3) Subject to sub-section (4), the liquidation estate shall comprise all liquidation estate assets which shall include the following:
(a) any assets over which the corporate debtor has ownership rights, including all rights and interests therein as evidenced in the balance sheet of the corporate debtor or an information utility or records in the registry or any depository recording securities of the corporate debtor or by any other means as may be specified by the Board, including shares held in any subsidiary of the corporate debtor;
(b) assets that may or may not be in possession of the corporate debtor including but not limited to encumbered assets;
(c) tangible assets, whether movable or immovable;
(d) intangible assets including but not limited to intellectual property, securities (including shares held in a subsidiary of the corporate debtor) and financial instruments, insurance policies, contractual rights;
(e) assets subject to the determination of ownership by the court or authority;
(f) any assets or their value recovered through proceedings in respect of an avoidance transaction or fraudulent or wrongful trading or under section 47;
(g) any asset of the corporate debtor in respect of which a secured creditor has relinquished security interest;
(h) any other property belonging to or vested in the corporate debtor at the insolvency commencement date; and
(i) all proceeds of liquidation as and when they are realised.
(4) The following shall not be included in the liquidation estate assets and shall not be used for recovery in the liquidation:
(a) assets owned by a third party which are in possession of the corporate debtor, including:
(i) assets held in trust for any third party;
(ii) bailment contracts;
(iii) all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund;
(iv) other contractual arrangements which do not stipulate transfer of title but only use of the assets; and
(v) such other assets as may be notified by the Central Government in consultation with any financial sector regulator;
(b) assets in security collateral held by financial services providers and which are subject to netting and set-off in multi-lateral trading or clearing transactions;
(c) personal assets of any shareholder or partner of a corporate debtor, as the case may be, provided such assets are not held on account of avoidance transactions that may be avoided under this Chapter;
(d) assets of any Indian or foreign subsidiary of the corporate debtor; or
(e) any other assets as may be specified by the Board, including assets which could be subject to set-off on account of mutual dealings between the corporate debtor and any creditor.
Assets included in the liquidation estate
Section 36(3) uses a broad asset-based approach. It covers assets owned by the corporate debtor, whether or not they are physically in its possession, tangible and intangible property, assets whose ownership is awaiting determination, specified recoveries from avoidance and related proceedings, relinquished secured assets, other property belonging to the corporate debtor at the insolvency commencement date, and proceeds realised during liquidation.
Recoveries under Section 36(3)(f)
With effect from 26 May 2026, Section 36(3)(f) expressly includes assets or their value recovered through proceedings in respect of an avoidance transaction, fraudulent or wrongful trading, or proceedings under Section 47. Section 47 concerns an application by a creditor, member or partner in specified circumstances involving an undervalued transaction where the resolution professional or liquidator has not reported it to the Adjudicating Authority.
Relinquished security interest
Under Section 36(3)(g), an asset of the corporate debtor becomes part of the liquidation estate where a secured creditor relinquishes its security interest. This provision should be read with Section 35 and the provisions governing secured creditors and distribution under the Code.
Assets excluded from the liquidation estate
Section 36(4) protects property that does not properly belong to the corporate debtor or that Parliament has specifically excluded. Important exclusions include third-party assets held in trust or bailment, qualifying employee provident fund, pension fund and gratuity fund dues, certain financial-services collateral, personal assets of shareholders or partners, and assets belonging to subsidiaries of the corporate debtor.
Employee provident fund, pension fund and gratuity fund
Section 36(4)(a)(iii) specifically excludes all sums due to any workman or employee from the provident fund, pension fund and gratuity fund from the liquidation estate. Such excluded sums are therefore not liquidation estate assets available for recovery in liquidation under Section 36.
Related liquidation provisions
Section 36 operates within Chapter III of Part II of the IBC. It should be read with Section 33 on initiation of liquidation, Section 34 on the liquidator, Section 35 on powers and duties of the liquidator, and Section 37 on access to information.
Official legal resources
For the operative legislation, amendments, notifications and regulations, readers should verify the latest material published by the Insolvency and Bankruptcy Board of India - Acts and the IBBI Liquidation Process Regulations. The Insolvency and Bankruptcy Code (Amendment) Act, 2026 amended Section 36(3)(f), and the relevant provision was brought into force from 26 May 2026.
This page is an informational presentation of Section 36 and related provisions. Statutory text, commencement notifications, applicable regulations and judicial decisions should be checked for the facts and date relevant to a particular matter.