Section 36 - Liquidation Estate: Included and Excluded Assets
Section 36 of the Insolvency and Bankruptcy Code, 2016 explains how the liquidator forms and holds the liquidation estate, what property belongs to it and which assets must be excluded.
Meaning of liquidation estate under Section 36
Under Section 36(1), the liquidator forms a pool of eligible assets for the liquidation of the corporate debtor. Under Section 36(2), the liquidator holds that estate in a fiduciary capacity for the creditors. The estate is governed by the inclusions in Section 36(3), subject to the exclusions in Section 36(4).
Assets included in the liquidation estate - Section 36(3)
The statutory categories cover assets owned by the corporate debtor, whether or not physically held by it; encumbered property; movable and immovable assets; intellectual property and contractual rights; disputed ownership interests; recoveries from avoidance proceedings; security interests relinquished by secured creditors; other property vested in the corporate debtor at insolvency commencement; and realised liquidation proceeds.
Importantly, shares owned by the corporate debtor in a subsidiary may form part of its estate, but the subsidiary's own assets are generally excluded by Section 36(4)(d).
Assets excluded from the liquidation estate - Section 36(4)
Assets belonging to third parties are excluded even when in the corporate debtor's possession. Examples include trust property, assets held under bailment, and assets used under contracts without transfer of ownership. The provision also excludes qualifying provident fund, pension fund and gratuity fund dues, specified financial market collateral, personal assets of shareholders or partners (subject to avoidance-related exceptions), and assets of Indian or foreign subsidiaries. Other exclusions may be specified under applicable law and regulations.
Section 36 - statutory provision and clause-wise text
The following reproduces the clauses from the original webpage for reference. For amendments and authoritative interpretation, consult the official Code and current IBBI materials linked below.
36.
(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 for avoidance of transactions in accordance with this Chapter;
(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 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.
Related provisions and definitions
Section 35 - Powers and duties of the liquidator
Section 35 addresses custody, protection, verification, valuation and realisation of assets and other responsibilities of the liquidator.
Section 52 - Secured creditors in liquidation
Section 52 governs a secured creditor's choices concerning relinquishment of security to the liquidation estate or realisation of security, subject to the Code.
Section 53 - Distribution waterfall
Section 53 sets out the statutory priority for distributing liquidation proceeds, subject to the applicable provisions of the Code.
Avoidance transactions
Transactions subject to avoidance provisions, including preferential and undervalued transactions, may result in recovery of property or value for the estate following the applicable legal process.
Official legal sources and updates
Consult the Insolvency and Bankruptcy Board of India, its updated Liquidation Process Regulations and legal framework publications. The IBBI lists Liquidation Process Regulations updated through 2 June 2026; check later notifications and commencement provisions before relying on any specific requirement.
Explore the Insolvency and Bankruptcy Code, 2016 for related sections.
This article provides general legal information and is not a substitute for professional advice on a particular liquidation.