Offences and Penalties under IBC after the 2026 Amendment

The Code originally relied heavily on criminal law: violating a moratorium, breaching a resolution plan or hiding a dispute could lead to prosecution and imprisonment. In practice, prosecutions were rare and slow. The 2026 Amendment moved several of these wrongs into a regime of civil penalties imposed by the Adjudicating Authority, while keeping criminal liability for fraud and concealment by officers. This note maps what changed, what remained, and how penalties are now imposed.

1. The Shift to Civil Penalties

Figure 1: How the 2026 Amendment recast key provisions

• Section 74 omitted. It had made knowing or wilful violation of the moratorium by the corporate debtor, its officers or creditors, and contravention of an approved resolution plan, offences punishable with imprisonment and fine.
• Section 76 omitted. It had punished an operational creditor who wilfully concealed a notice of dispute or full payment in a section 9 application.
• Rationale. Monetary penalties imposed by the Adjudicating Authority that already handles the case are quicker and more certain than prosecutions in a Special Court, and are better suited to economic contraventions.
• Savings. Explanation II to section 235A preserves prosecutions under sections 74 and 76 pending on the date of commencement, and punishments already imposed.

2. The New Penalty Provisions

• Section 67B(1) and (2). Where the corporate debtor, its officer or a creditor contravenes the moratorium under section 14, the officer or person who committed, authorised or permitted it is liable to a penalty of not less than one lakh rupees, which may extend to two crore rupees.
• Section 67B(3). Where the corporate debtor, its officer, a creditor or any person bound by an approved plan contravenes the plan or abets its contravention, the penalty is at least one lakh rupees and may extend to one crore rupees or 20 per cent of the amount to be distributed under the plan, whichever is higher.
• Section 67C. An operational creditor who conceals in a section 9 application a notice of dispute or full and final payment, and any person who authorised, permitted or acted on such concealment, is liable to a penalty of one lakh to two crore rupees.
• Sections 64A and 183A. A person who initiates frivolous or vexatious proceedings before the Adjudicating Authority under Part II or Part III is liable to a penalty of one lakh to two crore rupees.
• Section 235A. For any contravention of the Code, rules or regulations, the penalty is at least one lakh rupees for each day the contravention continues, up to three times the loss caused or likely to be caused or the unlawful gain, whichever is higher, or five crore rupees where these cannot be quantified; a lower amount may be imposed for sufficient cause recorded in writing.

3. How Penalties Are Imposed

Figure 2: Procedure for civil penalties

Penalties under sections 67B, 67C and 235A are imposed by the Adjudicating Authority, that is the NCLT under section 60 or the DRT under section 179, on an application by the IBBI, the Central Government or a person authorised by it. The authority hears the person concerned and fixes the penalty within the statutory range. Its order is appealable in the ordinary way to the NCLAT or the DRAT. Penalties on insolvency professionals and other service providers are imposed separately by the IBBI's disciplinary committees under section 220 (Topic 74).

4. What Remains Criminal

Figure 3: Criminal offences and civil penalties after 2026

• Officers of the corporate debtor. Concealment of property and falsification of records before the CIRP (section 68), transactions defrauding creditors (section 69), misconduct during the CIRP (section 70), falsification of books (section 71), wilful omissions from statements (section 72) and false representations to creditors (section 73) remain offences, generally punishable with imprisonment of three to five years or fine of one lakh to one crore rupees, or both (Topic 52)
• Fraudulent management. Section 67A punishes fraudulent or malicious management of the corporate debtor during the pre-pack process, and since 2026 the creditor-initiated process.
• False applications. Section 75 (false information by a financial creditor in a section 7 application) and section 77 (false information by a corporate debtor in a section 10 application) remain.
• Part III. Offences by debtors, creditors, professionals, bankrupts and trustees under sections 184 to 187 remain (Topic 71)
• Prosecution. Offences are tried by the Special Court, and no court may take cognizance except on a complaint by the IBBI, the Central Government or a person authorised by it (section 236)

5. Frequently Asked Questions

Is it still a crime for a creditor to enforce its security during the moratorium?

Not since 2026. Section 74 was omitted; the person who authorised or permitted the contravention is now liable to a penalty of one lakh to two crore rupees under section 67B, imposed by the Adjudicating Authority.

What is the maximum penalty for a successful resolution applicant that breaches an approved plan?

One crore rupees or 20 per cent of the amount to be distributed under the plan, whichever is higher, under section 67B(3), apart from liquidation under section 33(3) and forfeiture of performance security.

Does the 2026 Amendment end prosecutions already filed under section 74?

No. Explanation II to section 235A provides that pending prosecutions under sections 74 and 76 continue as if the Amendment had not been made.

Can a creditor be penalised for filing a frivolous insolvency application?

Yes. Section 64A allows the NCLT to impose a penalty of one lakh to two crore rupees for frivolous or vexatious proceedings under Part II, apart from section 65 (Topic 17).

6. Related Topics

• Topic 17: Section 65. Fraudulent or malicious initiation.
• Topic 45: Implementation and Failure of Plans. Consequences of breach.
• Topic 52: Personal Liability of Directors and Promoters. Officers' offences.