Section 119: Discharge Order under the Insolvency and Bankruptcy Code, 2016
Section 119 governs the discharge of debts covered by a repayment plan in the insolvency resolution process for individuals and partnership firms. It specifies who applies for a discharge order, when discharge may occur, and whose liability remains unaffected.
Text and meaning of Section 119
Section 119(1): Application for discharge
On the basis of the repayment plan, the resolution professional shall apply to the Adjudicating Authority for a discharge order in relation to the debts mentioned in the repayment plan and the Adjudicating Authority may pass such discharge order.
Section 119(2): Timing of discharge
The repayment plan may provide for:
- early discharge; or
- discharge on complete implementation of the repayment plan.
Section 119(3): Recording of the order
The discharge order shall be forwarded to the Board, for the purpose of recording entries in the register referred to in section 196.
Section 119(4): Liability of other persons
The discharge order under sub-section (3) shall not discharge any other person from any liability in respect of his debt.
How the discharge process works
A repayment plan sets out the proposed treatment of debts. Under Section 114, the Adjudicating Authority approves or rejects the plan. Under Section 115, an approved plan binds the debtor and the creditors mentioned in it. The resolution professional supervises implementation under Section 116.
Section 119 then provides the mechanism for a discharge order in relation to debts included in the repayment plan. A plan may permit discharge at an earlier stage or upon full implementation. The resolution professional makes the application, and the Adjudicating Authority determines whether to issue the order.
Early discharge versus discharge on completion
Early discharge means that the approved repayment plan contemplates discharge before every step of implementation is complete, subject to the terms of the plan and the Adjudicating Authority's order. Discharge on complete implementation ties discharge to performance of the plan in full.
Under Section 117, the resolution professional must, within fourteen days after completion of the repayment plan, send the required notice and receipts-and-payments report to persons bound by the plan and the Adjudicating Authority, subject to a possible extension of up to seven days.
What happens to guarantors and other liable persons?
Section 119(4) protects against treating the debtor's discharge as a blanket release of everyone else. A co-obligor, guarantor or other person does not obtain a discharge merely because the debtor receives one under Section 119. Any independent defence or release must be considered under the applicable law and contractual terms.
Related legal provisions
- Section 105: Preparation of a repayment plan by the debtor in consultation with the resolution professional.
- Section 114: Approval or rejection of the repayment plan by the Adjudicating Authority.
- Section 115: Legal effect of an order approving or rejecting the repayment plan.
- Section 116: Implementation and supervision by the resolution professional.
- Section 117: Notice and report following completion of the repayment plan.
- Section 118: Consequences where the repayment plan ends prematurely.
- Section 120: Standard of conduct applicable to the resolution professional.
- Section 196: Powers and functions of the Insolvency and Bankruptcy Board of India, including statutory record-keeping functions.
Applicability and current legal framework
Section 119 belongs to Part III of the Code. The commencement and application of Part III provisions must be checked for the relevant class of debtor. In particular, the notified framework for personal guarantors to corporate debtors must not be assumed to apply identically to all individuals and partnership firms.
Readers should check the latest statutory amendments, commencement notifications, applicable regulations and judicial decisions before acting on a repayment plan or seeking a discharge order.
Frequently asked questions
Does approval of a repayment plan automatically discharge the debtor?
No. Section 119 requires an application by the resolution professional, and the Adjudicating Authority may pass a discharge order.
Can a discharge occur before all payments are completed?
Yes, if the repayment plan provides for early discharge and the Adjudicating Authority issues the appropriate order.
Are debts outside the repayment plan discharged?
Section 119(1) concerns debts mentioned in the repayment plan. It should not be read as a general release of all other liabilities.
Does the order release a guarantor?
Not merely by operation of Section 119. Sub-section (4) preserves the liability of other persons in respect of their debts.
Official legal sources
For the statutory text and subsequent updates, consult the India Code entry for the Insolvency and Bankruptcy Code, 2016, the official statutory PDF, and the IBBI legal framework and amendment notifications.
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