Section 121: Application for Bankruptcy under the Insolvency and Bankruptcy Code, 2016
Section 121 explains when a debtor or creditor may seek a bankruptcy order, identifies the prior orders that permit an application and sets out a three-month filing period.
Section 121 - statutory provisions
121. (1) An application for bankruptcy of a debtor may be made, by a creditor individually or jointly with other creditors or by a debtor, to the Adjudicating Authority in the following circumstances, namely:-
(a) where an order has been passed by an Adjudicating Authority under sub-section (4) of section 100; or
(b) where an order has been passed by an Adjudicating Authority under sub-section (2) of section 115; or
(c) where an order has been passed by an Adjudicating Authority under sub-section (3) of section 118.
(2) An application for bankruptcy shall be filed within a period of three months of the date of the order passed by the Adjudicating Authority under the sections referred to in sub-section (1).
(3) Where the debtor is a firm, the application under sub-section (1) may be filed by any of its partners.
Meaning and explanation of Section 121
Who can apply for bankruptcy?
Under Section 121(1), the debtor may apply, or a creditor may apply alone or jointly with other creditors. The application must follow one of the specified orders. Section 121 does not, by itself, permit an unrestricted bankruptcy filing whenever a debt is unpaid.
Three qualifying orders
- Section 100(4): an order rejecting an insolvency resolution application on the ground specified in that subsection, including where the application was made with the intention to defraud creditors or the resolution professional.
- Section 115(2): an order rejecting a repayment plan under Section 114, following which the debtor and creditors may pursue bankruptcy.
- Section 118(3): an order recording that an approved repayment plan has not been completely implemented after its premature end.
What is the filing deadline?
Section 121(2) states that the application shall be filed within three months of the relevant order. Applicants should calculate the deadline from the order date and obtain advice promptly. Judicial decisions have considered the character of this time limit in particular cases; any proposed late filing should be assessed against current binding decisions and procedural rules rather than assumed to be automatically permitted.
Can a partner file on behalf of a firm?
Section 121(3) provides that, where the debtor is a firm, any of its partners may file the application. Whether the statutory bankruptcy process is presently operational for a particular category of firm must be checked separately.
Procedure after Section 121
Section 121 provides the gateway to a bankruptcy application. Section 122 governs an application by a debtor, while Section 123 governs an application by a creditor, including additional requirements concerning secured debts. Section 124 addresses the interim moratorium arising on filing. Sections 125 and 126 address the proposed bankruptcy trustee and the bankruptcy order. Filing an application is not itself the same as obtaining a bankruptcy order.
For personal guarantors to corporate debtors, the applicable procedural rules and IBBI bankruptcy regulations should be consulted for prescribed forms, fees and supporting documents. The identity of the Adjudicating Authority also depends on the relevant jurisdictional provisions, including Section 60 where applicable.
Illustrative example
If the Adjudicating Authority rejects a personal guarantor's repayment plan under Section 114 and passes the relevant order under Section 115(2), a creditor or the debtor may seek bankruptcy under Section 121, subject to the filing period and applicable procedural requirements. The bankruptcy order, if made, follows the separate statutory process.
Frequently asked questions
Does failure to pay a debt automatically permit bankruptcy under Section 121?
No. One of the orders identified in Section 121(1) is required.
Can several creditors submit one application?
Yes. Section 121(1) expressly allows creditors to apply jointly.
Does an application immediately make the debtor bankrupt?
No. The Adjudicating Authority must consider the application under the relevant provisions before making a bankruptcy order.
Official legislation and further reading
- India Code - Insolvency and Bankruptcy Code, 2016
- Official text of the Insolvency and Bankruptcy Code (PDF)
- IBBI - Rules and application requirements
- IBBI - Current legal framework and amended regulations
- The Insolvency and Bankruptcy Code, 2016 - overview
This article provides general legal information. The statutory text, commencement notifications, applicable regulations and relevant judicial decisions govern individual cases.