MCA To Examine Litigation Funding For PUFE Claims Under Insolvency Regime

The Ministry of Corporate Affairs (MCA) will examine third-party litigation funding for preferential, undervalued, fraudulent and extortionate (PUFE) transactions under the insolvency framework, with the aim of improving recoveries.

The ministry told a parliamentary standing committee that the framework would be studied in line with global practices and through consultations with stakeholders. It also noted that litigation funding remains at an early stage in India. According to Insolvency and Bankruptcy Board of India data, more than Rs 4.38 lakh crore across 1,878 avoidance applications remained pending as of March 31, 2026. By June 2025, 379 cases involving Rs 66,919 crore had been disposed of, with Rs 7,931 crore ordered to be recovered.

Under third-party litigation funding, an external investor pays legal and related costs in return for a share of the recovery if the case succeeds.

The parliamentary panel recommended safeguards including disclosure of funding arrangements, restrictions on funder control and oversight by the IBBI.