Trade Receivables and Inter explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
A receivable is documented, aged in the ledger, and often confirmed in writing by the debtor.
None of that makes it money.
In a distressed company, the gap between the receivables balance and what will actually be collected is usually the largest single unexplained item in the valuation.
Test age, counterparty creditworthiness, legal enforceability and set-off risk — then report a probability-weighted figure with the basis stated. For inter-corporate loans, the value is what the borrower can pay, and circular group balances often cancel economically while sitting gross in the books.
The four tests for a trade receivable
1. Age. Recovery probability falls steeply with age, and the ageing schedule is the first place to look. A ledger dominated by balances over three years old is telling you the collection function stopped working long before the CIRP began.
2. Counterparty creditworthiness. A confirmed receivable from a company itself in distress is worth a fraction of face. In sectors where the debtor's customers share its problems — a supplier to a failing industry — correlation makes this worse than it looks item by item.
3. Legal enforceability. Is the claim within limitation? Is there a live quality or quantity dispute? Were contractual conditions for payment satisfied? A time-barred receivable is an accounting entry, not an asset.
4. Set-off risk. Counterparties who are also creditors of the corporate debtor will attempt to net. Where a customer is also a supplier, the gross receivable overstates what is realisable. Mutual debts and set-off in IBC →
The output should be a probability-weighted realisable figure with the reasoning stated — not the ledger total less a round-number provision carried forward from the last audited accounts.
Inter-corporate loans: value the borrower
In a large proportion of insolvencies, substantial sums have been advanced to subsidiaries and group companies. This is frequently the biggest line in the Securities and Financial Assets class, and the one treated most casually. Securities and financial assets →
A loan to a subsidiary is worth what the subsidiary can pay. So valuing it means valuing the borrower:
- its assets and its own liabilities;
- whether it is itself insolvent or dormant;
- whether the advance is documented well enough to be enforced;
- whether it is secured on anything;
- limitation, where no acknowledgement has been obtained for years.
Two traps specific to group balances
Circularity. Where the subsidiary's principal asset is a receivable from the parent, the two balances cancel in economic substance while both sit gross in the respective books. Valuing the parent's loan at face value and the subsidiary's investment at face value counts the same money twice.
The check is straightforward: map inter-company balances both ways across the group before valuing any of them.
Avoidance overlap. Advances made in the run-up to commencement may be preferential, undervalued or fraudulent transactions. Where that is so, the remedy is recovery under the avoidance provisions rather than collection of a receivable — and the two must not be counted twice in the estate. Avoidance transactions under IBC →
What to present
| Item | What to show |
|---|---|
| Ageing | Bucketed, with recovery assumption per bucket |
| Concentration | Top counterparties by exposure, and their status |
| Disputes | Amounts under dispute, stage and stated view |
| Set-off exposure | Counterparties who are also creditors, with net position |
| Inter-company | Each balance, the borrower's capacity, and circularity mapping |
| Limitation | Balances at or past limitation, flagged separately |
| Basis | The probability assumptions and why |
A CoC that receives this can reason about the estate. One that receives "trade receivables — ₹340 crore" cannot. Assumptions and sensitivity →
Key takeaways
- A confirmed receivable is a claim, not a value.
- Age is the strongest single predictor of non-recovery.
- Counterparty distress correlates with the debtor's own in a failing sector.
- Set-off shrinks the gross figure wherever a customer is also a supplier.
- An inter-corporate loan is worth what the borrower can pay.
- Map group balances both ways before valuing them — circularity double counts.
- Avoidance recovery and receivable collection are not both available on the same money.
Read next
- Securities and Financial Assets Valuation Under IBC
- Infrastructure EPC Receivables Valuation Under IBC
- Avoidance Transactions Under IBC: Section 43-51
- Assumptions and Sensitivity Analysis in a Valuation Report
Disclaimer: Positions stated as on 5 September 2026. General guidance only — recovery assessment is fact-specific.