Quick answer: Interim finance under IBC is a financial debt that the resolution professional raises during CIRP to keep the debtor running. It needs approval from at least 66% of the committee of creditors. The Code treats it as an insolvency resolution process cost, so lenders recover it ahead of other creditors in a resolution plan or liquidation.
Interim finance under IBC keeps a stressed company alive while creditors look for a buyer. For banks and NBFCs, it creates both a duty and an opportunity. As CoC members, they decide how to fund the process. As lenders, they can earn a priority return.
What Is Interim Finance Under IBC?
Section 5(15) of the Insolvency and Bankruptcy Code, 2016 defines interim finance as financial debt that the resolution professional raises during the insolvency resolution process period. The definition also covers other debt that the Central Government notifies. Section 5(13) then counts interim finance, and the cost of raising it, as part of insolvency resolution process costs (CIRP costs).
In practice, it pays for operating expenses, insurance and professional fees. Edelweiss provided one of the first major deals in the Alok Industries CIRP in 2017.
Who Approves Interim Finance in CIRP?
Before the CoC exists, Section 20(2)(c) lets the interim resolution professional raise interim finance. However, he cannot create a security interest over encumbered property without the secured creditor’s consent. That consent becomes unnecessary only if the property is worth at least twice the secured debt.
Once the CoC meets, control shifts to the lenders. Under Section 28(1)(a), the resolution professional needs prior CoC approval to raise interim finance beyond the limit the CoC sets. This approval requires at least 66% of the voting share. Our guide to the committee of creditors under IBC explains these voting thresholds in detail.
In addition, Regulation 18(5) of the CIRP Regulations, inserted by the IBBI on 26 May 2025, lets the CoC invite prospective interim financiers to its meetings. They attend as observers and cannot vote.
Priority of Interim Finance in a Resolution Plan and Liquidation
Because interim finance forms part of CIRP costs, it enjoys the strongest protection the Code offers. Section 30(2)(a) requires every resolution plan to pay CIRP costs in priority to other debts. Similarly, Section 53(1)(a) places CIRP costs at the top of the liquidation waterfall. Consequently, an interim financier usually recovers principal and interest before secured financial creditors receive anything.
Key Case Law on Interim Finance
- Axis Bank Ltd. v. Morarjee Textiles Ltd. (NCLT Mumbai, 23 September 2025): The RP asked the tribunal to make the CoC contribute ₹15 crore. The tribunal refused. It held that any such “contribution” is interim finance, which needs 66% CoC approval under Section 28. It relied on the NCLAT’s 2025 ruling in ODAT GmbH v. CA Santanu Brahma.
- Gonugunta Murali, RP of Sai Krishna Minerals v. Income Tax Department (NCLT Bengaluru, 15 April 2026): The CoC had voted for external interim finance. The tribunal upheld that commercial choice and declined to force members to pay. Instead, it told the RP to approach banks, financial institutions and operational creditors.
- Conquerent Control Systems v. Ansal Crown Infrabuild (NCLT New Delhi, 17 April 2025): The tribunal treated SWAMIH Fund’s last-mile loan as interim finance, even though the fund lent before CIRP began. It relied on the March 2020 notification under Section 5(15) and ordered priority repayment under the plan.
Checklist for Banks and NBFCs Providing Interim Finance
- Ask the RP for a cash-flow budget for each drawdown.
- Seek observer access to CoC meetings under Regulation 18(5).
- Confirm that the CoC resolution records at least 66% approval and a clear amount cap.
- Check whether the security offered sits on encumbered assets, and obtain prior consents where needed.
- Document interest, tenure and repayment from plan proceeds or liquidation estate.
- Ensure the resolution plan lists the interim finance as a CIRP cost payable first.
Frequently Asked Questions
What is interim finance under IBC?
It is financial debt that the resolution professional raises during CIRP to run the debtor as a going concern. Section 5(15) defines it, and notified debts such as SWAMIH funding also qualify.
What CoC vote does interim finance need?
Interim finance needs approval from at least 66% of the CoC’s voting share under Section 28. The NCLT cannot impose it without that vote.
Does interim finance get priority over secured creditors?
Yes. As a CIRP cost, it ranks first under Section 30(2)(a) in a resolution plan and Section 53(1)(a) in liquidation.
Can the NCLT force CoC members to fund CIRP costs?
Recent NCLT rulings say no. Mumbai and Bengaluru benches refused to compel contributions that the CoC had not approved.
Can a lender take security on mortgaged assets?
Only with the existing secured creditor’s consent. The exception applies where the asset is worth at least twice the secured debt.
Did the IBC Amendment Act, 2026 change interim finance?
The 2026 Amendment, largely in force from 26 May 2026, does not appear to rewrite the interim finance rules.
Lex Pleaders advises banks, NBFCs and businesses on interim finance, CoC decisions and CIRP strategy before the NCLT and NCLAT. You can also read about our IBC lawyers and NCLT practice. Write to us at lexpleadersindia@gmail.com to discuss your matter.
Disclaimer: This article offers general information only and does not constitute legal advice.