Not Readily Realisable Assets (NRRA) under the Insolvency and Bankruptcy Code, 2016

1. Executive Summary

The concept of Not Readily Realisable Assets (NRRA) is an important mechanism available during liquidation under the Insolvency and Bankruptcy Code, 2016 (IBC/Code) and the IBBI (Liquidation Process) Regulations, 2016 (Liquidation Regulations).

Regulation 37A enables a liquidator to assign or transfer a NRRA through a transparent process, in consultation with the Stakeholders' Consultation Committee (SCC), for consideration, to a person eligible to submit a resolution plan for the corporate debtor.

The mechanism is particularly relevant where an asset forms part of the liquidation estate but cannot be effectively realised through ordinary sale or recovery mechanisms because of litigation, disputes, contingent rights, enforcement difficulties, untraceable respondents, title issues, or other circumstances.

NRRA is not limited to bad debts. It may encompass valuable but difficult-to-realise economic rights, including receivables, actionable claims, decree/order-based recovery rights, pending litigation rights, refund claims, disputed properties and rights arising from avoidance/PUFE proceedings.

2. Statutory Framework

The NRRA mechanism should be read together with Sections 35, 36, 43–51, 53 and 54 of the IBC and Regulations 31A, 32, 33, 35, 37A and 38 of the Liquidation Regulations, along with Schedule I.

Section 35 is relevant because the liquidator takes custody/control of the corporate debtor's assets and actionable claims and has statutory powers concerning their sale and transfer.

Section 36 is fundamental because the liquidation estate includes intangible assets, contractual rights, assets whose ownership is subject to determination by a court or authority, and assets/value recovered through avoidance proceedings.

3. Section 35 – Powers and Duties of the Liquidator

Section 35(1)(b) requires the liquidator to take into custody or control all assets, property, effects and actionable claims of the corporate debtor.

Section 35(1)(f), subject to Section 52, empowers the liquidator to sell movable and immovable property and actionable claims by public auction or private contract, with power to transfer such property to a person or body corporate.

The express reference to actionable claims is important because many NRRAs are intangible rights rather than physical assets.

4. Section 36 – Liquidation Estate

Section 36 creates the liquidation estate. It is deliberately broad and includes intangible assets and assets whose ownership is subject to determination by a court or authority.

Section 36(3)(d) includes intellectual property, securities, financial instruments, insurance policies, contractual rights and other intangible interests.

Section 36(3)(e) includes assets subject to determination of ownership by a court or authority.

Section 36(3)(f) includes assets or their value recovered through avoidance proceedings.

Accordingly, the liquidation estate is not restricted to assets that are physically available and immediately saleable.

5. Meaning of Not Readily Realisable Asset

Regulation 37A is the principal provision dealing with assignment or transfer of NRRAs.

The Explanation to Regulation 37A defines a not readily realisable asset as an asset included in the liquidation estate which could not be sold through available options.

The definition specifically recognises contingent assets, disputed assets and assets underlying proceedings for preferential, undervalued, extortionate credit and fraudulent transactions under the Code.

The regulatory framework also recognises assets underlying Section 66 proceedings as capable of falling within NRRA even before adjudication of the proceedings.

6. Essential Test for NRRA

The central practical test is: Could the asset be sold through the available options?

An asset should not be classified as NRRA merely because it is inconvenient to recover, has low value, or the liquidator wishes to complete liquidation quickly.

There should be a documented factual and commercial basis demonstrating why ordinary realisation is not presently reasonably practicable.

7. Typical Examples of NRRA

Common examples include difficult or disputed receivables; pending litigation; contractual claims; decree/order-based recovery rights; contingent claims; insurance claims; tax/GST refund claims; disputed properties; leasehold rights; rights under recovery certificates; claims requiring specialised enforcement; and avoidance/PUFE-related rights.

8. Regulation 37A – Core Requirements

Regulation 37A permits the liquidator to assign or transfer a NRRA for consideration through a transparent process, in consultation with the SCC, to a person eligible to submit a resolution plan for the corporate debtor.

The use of the word 'may' makes assignment an enabling power. The liquidator must nevertheless exercise the power consistently with the Code, regulations, fiduciary duties, value-maximisation principles and the SCC process.

Transparency is central. A private or opaque arrangement that does not permit credible price discovery creates avoidable challenge risk.

Assignee eligibility is a statutory safeguard and should be evidenced through appropriate declarations and due diligence.

9. NRRA and Ordinary Sale Under Regulation 32

Ordinary liquidation proceeds generally follow the route of valuation and sale by the permitted modes. NRRA operates where the asset could not be sold through available options and therefore requires a different monetisation route.

NRRA should not be used merely as a substitute for an ordinary auction without recording why ordinary sale mechanisms are inadequate.

10. Failed Auctions and NRRA

Repeated failed auctions can provide strong factual evidence that an asset is not readily realisable. However, a single failed auction should not automatically be treated as conclusive.

The liquidator should examine reserve price, valuation, marketability, legal disputes, title, possession, location, bidder universe, expected recovery, time and costs before deciding on NRRA treatment.

11. Recovery Rights as NRRA

Recovery rights are particularly suitable for NRRA consideration where the economic right exists but recovery is difficult.

For example, if a favourable order exists against a respondent but the respondent is untraceable and execution has not produced recovery, the underlying right to recover may have value but may not be readily realisable.

The existence of an enforceable order does not by itself make recovery readily realisable. The separate question is whether the right can actually be monetised within a reasonable period and through available mechanisms.

12. Respondents Who Are Untraceable

Untraceability is a relevant circumstance but should not be treated as an automatic NRRA trigger.

The liquidator should document attempts to locate the respondent, notices and correspondence, returned notices, service attempts, execution proceedings, available public-record searches, known assets, and the expected cost and duration of continued recovery.

The correct reasoning is that recovery efforts have been undertaken, ordinary realisation is presently impracticable or commercially disproportionate, and therefore the recovery right may qualify as NRRA.

13. Assignment of Multiple Recovery Rights / Three IAs

Where the corporate debtor has recovery rights in three separate IAs, each right can potentially be treated as a separate NRRA. Alternatively, the rights may be bundled into a composite portfolio if commercially and legally appropriate.

A robust price-discovery structure can offer individual lots as well as a composite lot, allowing the market to demonstrate whether specialised bidders or portfolio bidders produce better value.

Bundling should not be used to suppress competition or avoid separate price discovery where separate assignment would reasonably maximise value.

14. Assignment of Order/Decree-Based Rights

Where an order has already been obtained, the asset description should identify the order date, forum, case number, parties, amount awarded, interest, costs, present status, execution status and appeal/stay position.

The assignment deed should clearly transfer the economic and enforcement rights arising from the order, subject to applicable law and any permission or substitution required by the concerned forum.

15. Economic Assignment vs Procedural Substitution

Assignment of an economic right and substitution of the assignee as applicant/petitioner in pending litigation are distinct issues.

An assignment deed should address the right to pursue proceedings, appoint counsel, obtain documents, execute orders, seek substitution and recover amounts. Where required, the assignee should approach the relevant court/tribunal for procedural directions.

This distinction is especially important for pending IAs, avoidance proceedings and execution proceedings.

16. Avoidance / PUFE Proceedings

Regulation 37A expressly recognises assets underlying proceedings relating to preferential transactions under Section 43, undervalued transactions under Section 45, extortionate credit transactions under Section 50 and fraudulent transactions under Section 66.

Such rights may be particularly difficult to realise because litigation can be lengthy and outcome-dependent. The regulatory framework therefore accommodates them within NRRA.

17. Crystallised vs Uncrystallised Claims

A crystallised claim has an adjudicated liability or quantified order and is generally easier to value. An uncrystallised claim remains subject to adjudication and carries greater uncertainty.

Both may potentially qualify as NRRA, but the Process Information Memorandum should clearly disclose the difference and reflect the risk in valuation.

18. Valuation of NRRA

NRRA valuation is inherently uncertain. A practical methodology can consider expected recovery, probability of success, enforcement cost, time to recovery and legal risk.

Illustratively: potential recovery ₹10 crore × 30% probability of recovery = ₹3 crore expected gross recovery; less estimated enforcement cost of ₹50 lakh = ₹2.5 crore indicative economic value. This is an analytical approach, not a statutory formula.

For significant assets, independent professional input or a documented valuation methodology may materially strengthen the process.

19. Process Information Memorandum

The PIM should disclose the corporate debtor details, liquidation order, nature of the NRRA, legal basis, supporting documents, litigation status, amount claimed/adjudicated, recovery history, respondent details, risks, limitation, appeal/stay position, assignment terms and due-diligence requirements.

Material adverse facts should be expressly disclosed, particularly where respondents are untraceable, proceedings are pending, or recovery is uncertain.

20. Transparent Assignment Process

A defensible process may involve identification, legal due diligence, documentation of recovery efforts, valuation, SCC consultation, preparation of PIM, EOI, eligibility verification, competitive bidding, bid evaluation, SCC recommendation, receipt of consideration, execution of assignment deed, handover and post-assignment compliance.

Possible price-discovery mechanisms include e-auction, EOI followed by bidding, competitive bidding, Swiss Challenge or another transparent mechanism suited to the asset.

21. SCC Role

The SCC should be provided sufficient information to meaningfully deliberate on NRRA classification, valuation, process, reserve/benchmark, eligibility criteria, bidder selection and assignment terms.

Minutes should record the substance of deliberation rather than merely stating that assignment was approved.

22. Assignee Eligibility and Section 29A

Because Regulation 37A requires the assignee to be a person eligible to submit a resolution plan, the process should obtain Section 29A declarations, beneficial ownership information, connected-person disclosures, conflict declarations and other appropriate eligibility documents.

23. Assignment Consideration

The assignment must be for consideration. The commercial structure may be an upfront fixed amount, structured consideration or another properly documented arrangement.

For uncertain claims, the liquidator should carefully consider whether certainty of upfront consideration is preferable to contingent structures, taking into account value maximisation, administrative simplicity and future recovery uncertainty.

24. Assignment Deed – Essential Clauses

The deed should identify assigned rights, excluded rights, consideration, payment terms, representations, risk allocation, litigation rights, execution rights, future recoveries, confidentiality, documents, taxes/stamp duty, conditions precedent, termination/default provisions and applicable approvals.

A typical commercial formulation may state that the asset is transferred on an 'as is where is, as is what is, whatever there is and without recourse' basis, subject to complete and accurate disclosure by the liquidator.

25. Limitation, Appeal and Stay

Before assignment, the liquidator should examine limitation, execution limitation, pending appeals, stays and modifications of the underlying order.

An order under appeal may still constitute an asset, but its risk profile and valuation must reflect the appellate position.

26. Value Maximisation and Bid Finality

Value maximisation is a core liquidation objective, but it must be pursued through a fair and transparent process rather than by repeatedly reopening concluded bidding.

The 2026 NCLAT decision in Sunrise Industries v. Umesh Gupta, Liquidator of Hema Automotive Pvt. Ltd., is relevant for transparency, process discipline, competing bids and finality.

27. NRRA vs Unsold Asset

An unsold asset is not automatically a NRRA. The liquidator should consider whether another auction, revised reserve price, private sale, parcel sale or other ordinary mode remains reasonably viable.

NRRA is more appropriate where the asset is dependent upon litigation, enforcement, adjudication, asset tracing, dispute resolution or other circumstances that prevent straightforward realisation.

28. NRRA vs Bad Debt

Bad debt is primarily an accounting concept; NRRA is a liquidation/regulatory concept. Every bad debt is not necessarily an NRRA, and an NRRA need not be a bad debt.

29. NRRA vs Abandonment

NRRA assignment is not abandonment. The objective is to monetise difficult assets for consideration and transfer the relevant rights, rather than simply discard them.

30. Recommended Procedure for Three IAs With Favourable Orders

1. Obtain certified copies of all three orders.
2. Determine the principal, interest and costs recoverable under each order.
3. Verify appeal/stay status and limitation.
4. Document execution and recovery efforts.
5. Document attempts to locate the respondents and identify attachable assets.
6. Prepare an asset-wise legal and commercial note.
7. Obtain valuation/indicative recovery assessment.
8. Place separate and composite NRRA options before the SCC.
9. Obtain SCC consultation and record the reasons.
10. Consider NCLT directions where substitution/prosecution or jurisdictional issues require clarity.
11. Issue a detailed PIM/EOI.
12. Conduct eligibility verification and transparent price discovery.
13. Select the successful bidder based on the declared process.
14. Receive consideration before completion of assignment as required by the process terms.
15. Execute a detailed assignment deed.
16. Handover litigation and recovery records.
17. Seek substitution/directions before the relevant forum where necessary.
18. Account for the consideration in the liquidation estate and proceed in accordance with the Code.

31. Suggested SCC Resolution

RESOLVED THAT the Stakeholders' Consultation Committee hereby takes note of the recovery rights/claims arising from IA Nos. ___, ___ and ___ and, considering the present status of the proceedings, non-traceability of the respondents, difficulties and uncertainty associated with enforcement and realisation, and the absence of immediate realisation through the available liquidation mechanisms, approves/recommends exploration of assignment/transfer of the said rights as Not Readily Realisable Assets under Regulation 37A of the IBBI (Liquidation Process) Regulations, 2016, subject to a transparent process, eligibility requirements and applicable law.

32. Documentation Checklist

Asset identification note; legal due-diligence note; recovery-efforts record; valuation note; SCC agenda and minutes; public notice/EOI; PIM; bidder eligibility declarations; bid comparison; SCC recommendation; assignment deed; proof of consideration; handover documents; court/tribunal directions where required; updated liquidation accounts; progress/final report.

33. Key Legal Principles

1. NRRA is an asset-based concept: the question is whether the asset is readily realisable.
2. Difficulty of recovery can support NRRA classification.
3. NRRA is not abandonment.
4. Transparency is mandatory.
5. SCC consultation is essential.
6. Assignee eligibility matters.
7. Economic assignment and procedural substitution are distinct.
8. Value maximisation remains central.
9. Defined timelines and process finality matter.
10. Complete disclosure of material risks is essential.

34. Conclusion

Regulation 37A is a significant tool for dealing with assets that are legally valuable but commercially difficult to realise. This includes recovery rights, decree/order-based claims, pending litigation, receivables, PUFE/avoidance rights, refund claims and disputed property rights.

For three IAs where favourable orders have been obtained but respondents are untraceable, NRRA assignment can be a strong option if the liquidator documents recovery efforts and demonstrates that ordinary realisation is not reasonably practicable.

A particularly defensible structure is to place the three recovery rights before the SCC as separate proposed NRRAs while also considering a composite portfolio lot, allowing transparent market-based price discovery.

The overarching principle is: Identify → substantiate NRRA status → value → consult SCC → conduct transparent process → verify eligibility → obtain consideration → execute assignment → address procedural rights before the competent forum → account for proceeds → proceed towards completion of liquidation.

Principal Authorities / References

• Insolvency and Bankruptcy Code, 2016 – Sections 35, 36, 43–51, 53 and 54.
• IBBI (Liquidation Process) Regulations, 2016 – Regulations 31A, 32, 33, 35, 37A and 38 and Schedule I.
• IBBI legal framework and liquidation auction notices.
• Sunrise Industries v. Umesh Gupta, Liquidator of Hema Automotive Pvt. Ltd., Company Appeal (AT) (Ins.) No. 2269 of 2024, NCLAT, decided 19 March 2026.
• Relevant NCLT orders concerning assignment of NRRA and pending avoidance proceedings.