Section 224: Insolvency and Bankruptcy Fund - Meaning, Contributions and Withdrawals
Section 224 of the Insolvency and Bankruptcy Code, 2016 (IBC) provides for a dedicated Insolvency and Bankruptcy Fund. It identifies the sources of money credited to the Fund, specifies circumstances in which a contributor may seek withdrawal, and provides for its administration.
Text of Section 224 - Insolvency and Bankruptcy Fund
224. (1) There shall be formed a Fund to be called the Insolvency and Bankruptcy Fund (hereafter in this section referred to as the "Fund") for the purposes of insolvency resolution, liquidation and bankruptcy of persons under the Code.
(2) There shall be credited to the Fund the following amounts, namely-
- the grants made by the Central Government for the purposes of the Fund;
- the amount deposited by persons as contribution to the Fund;
- the amount received in the Fund from any other source; and
- the interest or other income received out of the investment made from the Fund.
(3) A person who has contributed any amount to the Fund may, in the event of proceedings initiated in respect of such person under this Code before an Adjudicating Authority, make an application to such Adjudicating Authority for withdrawal of funds not exceeding the amount contributed by it, for making payments to workmen, protecting the assets of such persons, meeting the incidental costs during the proceedings or such other purposes as may be prescribed.
(4) The Central Government shall, by notification, appoint an administrator to administer the fund in such manner as may be prescribed.
What is the Insolvency and Bankruptcy Fund?
Section 224(1) establishes a fund for purposes connected with insolvency resolution, liquidation and bankruptcy under the IBC. The provision concerns a specific statutory fund rather than the routine operating expenses of the Insolvency and Bankruptcy Board of India (IBBI).
Insolvency resolution generally refers to a statutory process for addressing a debtor's insolvency and considering resolution arrangements. Liquidation involves realisation and distribution of assets according to the applicable legal framework. Bankruptcy refers to the statutory process applicable to individuals and partnership firms in relevant cases under the Code.
Section 224(2): Sources of money credited to the Fund
| Provision | Source | Explanation |
|---|---|---|
| 224(2)(a) | Central Government grants | Grants made specifically for the purposes of the Fund. |
| 224(2)(b) | Contributions from persons | Amounts deposited by contributors into the Fund. |
| 224(2)(c) | Other receipts | Amounts lawfully received from other sources. |
| 224(2)(d) | Investment income | Interest and other income earned from investments made from the Fund. |
Section 224(3): Who can apply for withdrawal?
A person who has contributed to the Fund may apply to the relevant Adjudicating Authority when proceedings under the IBC have been initiated in respect of that person. The maximum withdrawal described in the provision is the amount that person contributed, not an unrestricted claim against the entire Fund.
Permitted purposes identified in the section
- Making payments to workmen.
- Protecting the assets of the person undergoing proceedings.
- Meeting incidental costs during the proceedings.
- Any additional purposes validly prescribed under the Code.
For corporate insolvency and liquidation matters, the Adjudicating Authority is generally the National Company Law Tribunal (NCLT), under Section 60. For individuals and partnership firms, jurisdiction is governed by the relevant provisions including Section 179, subject to the special rule in Section 60(2) and other applicable provisions.
Practical example
If a person has contributed Rs. 5 lakh to the Fund and insolvency proceedings are initiated in respect of that person, Section 224(3) permits an application for withdrawal of an amount not exceeding Rs. 5 lakh for eligible purposes. The provision does not itself guarantee approval or establish that the entire contribution must be paid out.
Section 224(4): Administration of the Fund
The Central Government is required to appoint an administrator by notification. The manner of administration is governed by the applicable prescribed framework. The statutory requirement should not be read as identifying a particular administrator without checking the relevant notification.
Section 224 Fund versus Section 222 Board's Fund
| Section 224 | Section 222 |
|---|---|
| Insolvency and Bankruptcy Fund | Fund of the Insolvency and Bankruptcy Board |
| Established for insolvency resolution, liquidation and bankruptcy purposes. | Finances the Board's statutory operations and authorised expenses. |
| Provides for conditional applications by contributors for specified purposes. | Provides for expenditure on Board personnel, functions and authorised objects. |
Related legal provisions and official resources
Read Section 221 (grants by Central Government), Section 222 (Board's Fund) and Section 223 (accounts and audit) for the separate statutory provisions governing IBBI finances.
For the operative Act, rules, regulations and notifications, consult the India Code portal, the IBBI legal framework and the IBBI official website. Verify the latest notifications and prescribed procedures before relying on a withdrawal or administration process.
Frequently asked questions
Is the Section 224 Fund the same as the IBBI Board's Fund?
No. Section 224 establishes the Insolvency and Bankruptcy Fund; Section 222 separately governs the Fund of the Insolvency and Bankruptcy Board.
Can anyone withdraw money from the Fund?
Section 224(3) concerns a person who has contributed to the Fund and in respect of whom proceedings have been initiated under the Code before an Adjudicating Authority. An application must meet the statutory conditions.
Is the withdrawal limit three times the contribution?
No. Section 224(3) states that the amount sought must not exceed the applicant's contribution to the Fund.
Who appoints the Fund administrator?
The Central Government, by notification, under Section 224(4).
This article explains the statutory provision for general legal information. Specific applications depend on applicable rules, notifications, facts and orders of the competent authority.