What are the key exclusions from the liquidation estate under IBC? How do these exclusions balance the interests of different stakeholders in insolvency resolution?

Section 36 of the Insolvency and Bankruptcy Code, 2016 vests the liquidation estate in the liquidator, who holds it in fiduciary capacity for all stakeholders. Section 36(4), however, carves out assets that were never truly the corporate debtor's own — a design that makes the Code a stakeholder-balancing statute, not merely a creditor-recovery one.

Key exclusions under Section 36(4)

• Employee welfare dues — all sums due to any workman or employee from the provident fund, pension fund and gratuity fund; these stand wholly outside the Section 53 waterfall [1].
• Assets held in trust for third parties, and goods held under contracts of bailment.
• Assets of any Indian or foreign subsidiary of the corporate debtor.
• Personal assets of shareholders/partners (except where liability is unlimited), and assets in which a secured creditor has not relinquished its security interest.
• Assets subject to specified regulatory or contractual arrangements, and any asset notified by the Central Government.

How the exclusions balance stakeholder interests

• Workmen and employees: PF/gratuity are deductions from wages held in statutory trust under the EPF Act, 1952 [3]; in Sunil Kumar Jain v. Sundaresh Bhatt (2022) the Supreme Court held the liquidator has no claim over these funds [2]. Workers are thus not reduced to competing claimants.
• Financial creditors: the secured-creditor exclusion preserves the right to stand outside liquidation and enforce security, protecting bank balance sheets and credit discipline.
• Third parties and group entities: trust and bailment carve-outs uphold property rights, while the subsidiary exclusion respects separate corporate personality.
• Systemic: predictable carve-outs let lenders price risk ex ante, aiding credit markets.

The recent Jet Airways liquidation, where the NCLAT directed full payment of PF, pension and gratuity dues outside the estate over lenders' objections, shows the carve-out working in practice [4][5]. Read together, these exclusions convert insolvency from a creditor-versus-worker contest into an equitable process aligned with the constitutional goal of social and economic justice.