The offences and penalties are listed under Chapter VII of the Insolvency and Bankruptcy Code, 2016. The inclusion of offences and penalties in the Code are important for preventing fraud, misconduct, and ensuring that there is strict adherence to the Insolvency and Bankruptcy Code, 2016.
Offences and Penalties under IBC committed by the officer of the corporate debtorÂ
| Section | Title | Offence | Penalty |
| 68 | Punishment for concealment of property. | Where the officer of the corporate debtor has:Wilfully concealment any property or part of of the corporate debtor or debt of Rs 10,000 or more due to or from the corporate debtorFraudulently removed any part of property worth Rs 10,000 of corporate debtor wilfully concealed, destroyed, mutilated or falsified any book or paper affecting or relating to the property of the corporate debtor or its affairswilfully made any false entry in any book or paper affecting or relating to the property of the corporate debtor or its affairsfraudulently parted with, altered or made any omission in any document affecting or relating to the property of the corporate debtor or its affairswilfully created any security interest over, transferred or disposed of any property of the corporate debtor which has been obtained on creditWillfully concealed any information of the offences mentioned above ORAt any time after the insolvency commencement date, taken in pawn pledge , or otherwise received the property knowing it to be secured, transferred or disposed of. | Imprisonment: not less than 3 years, may extend to 5 years, orFine: not less than Rs. 1 lakh, may extend to Rs 1 crore,Both |
| 69 | Punishment for transactions defrauding creditors | Has made any gift/ transfer/ charge, or has connived in the execution of a decree/ order against the property of the corporate debtorHas concealed or removed any part of the debtor’s property within 2 months before the date of such judgement, decree, or order of the payment of money obtained against corporate debtor | Imprisonment:Not less than 1 yearMay extend to 5 yearsFine: not less than Rs. 1 lakh, may extend to Rs 1 crore,Both |
| 70 | Punishment for misconduct in course of corporate insolvency resolution process | On or before the insolvency commencement date:Does not disclose the relevant details of the debtor’s property that the resolution professional (RP) may requireDoes not deliver the debtor’s property or part of in his control or custody that he is required to deliver to the RPDoes not deliver documents of the debtor in his custody to the RP that he is required to deliverFails to inform the RP the information in his knowledge that a debt has been falsely proved by any person during the corporate insolvency resolution process (CIRP)Prevents the production of any book or paper affecting or relating to the property or affairs of the debtorEntering into transactions defrauding creditors or removing any part of the property of the corporate debtor within two months before the date of any unsatisfied judgement, decree or order for payment of money obtained against the corporate debtor | Imprisonment:Not less than 3 yearsMay extend to 5 yearsFine: not less than Rs. 1 lakh, may extend to Rs 1 crore,Both |
| If insolvency professional contravenes the provisions of this Part | Imprisonment:May extend to 6 monthsFine: not less than Rs. 1 lakh, may extend to Rs 5 lakhs,Both | ||
| 71 | Punishment for falsification of books of corporate debtor | On or after insolvency commencement date:destroys, mutilates, alters or falsifies any books, papers or securities, Makes is in the knowledge of making of any false or fraudulent entry in any register, books of account or document belonging to the corporate debtor with intent to defraud or deceive any person | Imprisonment:Not less than 3 yearsMay extend to 5 yearsFine: not less than Rs. 1 lakh, may extend to Rs 1 crore,Both |
| 72 | Punishment for wilful and material omissions from statements relating to affairs of corporate debtor | Makes any wilful and material omissions from statements relating to affairs of corporate debtor | Imprisonment:Not less than 3 yearsMay extend to 5 yearsFine: not less than Rs. 1 lakh, may extend to Rs 1 crore,Both |
| 73 | Punishment for falsification of books of corporate debtor | on or after the insolvency commencement date: makes a false representation or commits any fraud for the purpose of obtaining the consent of the creditors of the corporate debtor or any of them to an agreement with reference to the affairs of the corporate debtor, during the CIRP or the liquidation process;prior to the insolvency commencement date: has made any false representation, or committed any fraud, for that purpose | Imprisonment:Not less than 3 yearMay extend to 5 yearsFine: not less than Rs. 1 lakh, may extend to Rs 1 crore,Both |
| 75 | Punishment for false information furnished in application | Any person furnishes information in the application made under section 7, which isfalse in material particulars, knowing it to be false or omits any material fact, knowing it to be material | Fine: not less than Rs. 1 lakh, may extend to Rs 1 crore |
| 76 | Punishment for non-disclosure of dispute or payment of debt by operational creditor | An operational creditor has wilfully or knowingly concealed in an application under section 9 the fact that the corporate debtor had notified him of a dispute in respect of the unpaid operational debt or the full and final copayment of the debt; orany person who knowingly and wilfully authorised or permitted such concealment | Imprisonment:Not less than 1 yearMay extend to 5 yearsFine: not less than Rs. 1 lakh, may extend to Rs 1 crore,Both |
| 77 | Punishment for providing false information in application made by corporate debtor | Corporate debtor provides information an application under section 10, which is false in materials, knowing it to be false and omits any material fact, or any person who knowingly and willingly authorised or permitted the furnishing of such information | Imprisonment:Not less than 3 yearsMay extend to 5 yearsFine: not less than Rs. 1 lakh, may extend to Rs 1 crore,Both |
| 77A | Punishment for offences related to pre-packaged insolvency resolution process | Where the corporate debtor:provides false information in material particulars under section 54C knowing it is false or omits it knowing it was materialprovides false information in material particulars in the list of claims/ preliminary information memorandum under section 54C(1) knowing it is false or omits it knowing it was materialany person who knowingly and willingly authorised or permitted | Imprisonment:Not less than 3 yearsMay extend to 5 yearsFine: not less than Rs. 1 lakh, may extend to Rs 1 crore,Both |
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Offences and Penalties under IBC by insolvency professional agency or insolvency professional
| Section | Title | Offence | Penalty |
| 70(2) | Punishment for misconduct in course of corporate insolvency resolution process | If insolvency professional contravenes the provisions of Part II | Imprisonment:May extend to 6 monthsFine: not less than Rs. 1 lakh, may extend to Rs 5 lakhs,Both |
| 185 | Punishment of contravention of provisions | If insolvency professional contravenes the provisions of Part III | Imprisonment:May extend to 6 monthsFine: not less than Rs. 1 lakh, may extend to Rs 5 lakhs,Both |
| 220 (3) | Appointment of Disciplinary Committee | Insolvency Professional Agency, Insolvency Professional, Information Utility contravenes provisions of this IBC, rules, regulations, | Disciplinary Committee imposes penalty:3 times amount of lossOR3 times amount of unlawful gain Whichever is higher |
Offences and Penalties under IBC by any person on whom the resolution plan is binding
| Section | Title | Offence | Penalty |
| 71 | Punishment for falsification of books of corporate debtor | On or after insolvency commencement date:destroys, mutilates, alters or falsifies any books, papers or securities, Makes is in the knowledge of making of any false or fraudulent entry in any register, books of account or document belonging to the corporate debtor with intent to defraud or deceive any person | Imprisonment:Not less than 3 yearsMay extend to 5 yearsFine: not less than Rs. 1 lakh, may extend to Rs 1 crore,Both |
| 74(3) | Punishment for contravention of moratorium or the resolution plan | Corporate debtor or any of its officers violates, or any person on whom resolution plan is binding under section 31 | Imprisonment:Not less than 1 yearMay extend to 5 yearsFine: not less than Rs. 1 lakh, may extend to Rs 1 crore,Both |
| 75 | Punishment for false information furnished in application | Any person furnishes information in the application made under section 7, which isfalse in material particulars, knowing it to be false or omits any material fact, knowing it to be material | Fine: not less than Rs. 1 lakh, may extend to Rs 1 crore |
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Offences and penalties by creditors or operational creditor
| Section | Title | Offence | Penalty |
| 74(1) | Punishment for contravention of moratorium or the resolution plan | Corporate debtor or any of its officers violates of section 14, knowingly or willingly committed, authorised, permitted | Imprisonment:Not less than 3 yearsMay extend to 5 yearsFine: not less than Rs. 1 lakh, may extend to Rs 1 crore,Both |
| 74(1) | Punishment for contravention of moratorium or the resolution plan | Creditor violates section 14, knowingly or willingly committed, authorised, permitted | Imprisonment:Not less than 1 yearMay extend to 5 yearsFine: not less than Rs. 1 lakh, may extend to Rs 1 crore,Both |
| 76 | Punishment for non-disclosure of dispute or payment of debt by operational creditor | An operational creditor has wilfully or knowingly concealed in an application under section 9 the fact that the corporate debtor had notified him of a dispute in respect of the unpaid operational debt or the full and final copayment of the debt; orany person who knowingly and wilfully authorised or permitted such concealment | Imprisonment:Not less than 1 yearMay extend to 5 yearsFine: not less than Rs. 1 lakh, may extend to Rs 1 crore,Both |
Offences and penalties by Bankrupt
| Section | Sub-section | Title | Offence | Penalty |
| 186 | (a) | Punishment for false information, concealment, etc, by bankrupt | Imprisonment:May extend to 6 monthsFine:Not less than Rs 5 lakhsBoth | |
| (b) | Imprisonment:May extend to 1 yearFine:Not less than Rs 5 lakhsBoth | |||
| (c) | Imprisonment:May extend to 6 monthsFine:Not less than Rs 5 lakhsBoth | |||
| (d) | Imprisonment:May extend to 6 monthsFine:Not less than Rs 5 lakhsBoth | |||
| (e) | Imprisonment:May extend to 2 yearsFine:Not less than 3 times | |||
| (f) | Imprisonment:May extend to 1 yearFine:Not less than Rs 5 lakhsBoth | |||
| 187 | (a) | Punishment for certain actions | fraudulently misapplied, retained or accounted for any money or propertycomprised in the estate of the bankrupt | Imprisonment:May extend to 3 yearsFine:Less than 3 times the amount of loss caused, or likely to have been caused.Both |
| (b) | Punishment for certain actions | wilfully acted in a manner that the estate of the bankrupt has suffered any loss in consequence of breach of any duty of the bankruptcy trustee in carrying out his functions under section 149 | Imprisonment:May extend to 3 yearsFine:Less than 3 times the amount of loss caused, or likely to have been caused.Both | |
| If such loss/ unlawful gain is not quantifiable | Total amount of fine should not exceed Rs. 5 lakhs |
Amendments under IBC in 2018 Related to Offences and Penalties
The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 was enacted on 17th August, 2018. As per this Amendment, sections 69 officers of the corporate debtor for defrauding creditors and section 76 on the punishment for non-disclosure of dispute or payment of debt by operational creditor:
| Section | Title | Prior to Amendment, 2018 | After Amendment, 2018 |
| 69 | Punishment for transactions defrauding creditors | “On or after the insolvency commencement date, if” | The word “if” substituted |
| 76 | Punishment for non-disclosure of dispute or payment of debt by operational creditor | “Repayment” in the marginal title | “payment” |
| 76(a) | Punishment for non-disclosure of dispute or payment of debt by operational creditor | “repayment” | “payment” |
Conclusion
The Insolvency and Bankruptcy Code, 2016 ensures that any malpractices, fraud, and misconduct of corporate debtors, creditors, and other stakeholders, including insolvency professionals are liable for their actions. These provisions are important for so that the integrity of the insolvency and bankruptcy processes and ensuring that there is no contravention to the resolution plan or the Insolvency and Bankruptcy Code, 2016, rules, or regulations.