Section 233 IBC: Protection of Action Taken in Good Faith - Meaning, Scope and Limits
Section 233 of the Insolvency and Bankruptcy Code, 2016 (IBC) provides statutory protection against suits, prosecutions and other legal proceedings for specified persons in respect of acts done, or intended to be done, in good faith under the Code and its rules or regulations. The protection is conditional, not an unrestricted immunity.
Section 233 - statutory text
233. Protection of action taken in good faith. - No suit, prosecution or other legal proceeding shall lie against the Government or any officer of the Government, or the Chairperson, Member, officer or other employee of the Board or an insolvency professional or liquidator for anything which is done or intended to be done in good faith under this Code or the rules or regulations made thereunder.
The original uploaded page contains a typographical error ("in done"); the wording above corrects it to "done" for readability. Verify the authoritative current statutory text through India Code or the IBBI legal framework.
What does protection for acts done in good faith mean?
Section 233 is a qualified statutory safeguard for persons carrying out specified insolvency-related functions. It is intended to prevent legal proceedings from being maintained against protected persons for acts genuinely undertaken, or proposed to be undertaken, in good faith pursuant to the IBC, its rules or its regulations.
Good faith is a legal standard that must be assessed in context. Section 233 does not itself create an automatic presumption that every decision is lawful or taken in good faith. Whether the protection applies may depend on the person's role, the statutory source of the action, the circumstances and the applicable judicial interpretation.
Who is expressly protected under Section 233?
| Person or body | Nature of protection |
|---|---|
| Government | Actions done or intended in good faith under the IBC framework. |
| Officers of the Government | Acts connected with functions under the Code, rules or regulations. |
| IBBI Chairperson and Members | Good-faith exercise of statutory responsibilities of the Board. |
| IBBI officers and other employees | Good-faith conduct in the performance of Code-related duties. |
| Insolvency professionals | Good-faith actions taken in the capacity of an insolvency professional under the IBC framework. |
| Liquidators | Good-faith actions in carrying out statutory liquidation functions. |
The wording identifies particular protected categories. It should not be read as extending automatically to every person involved in an insolvency matter, including every creditor, corporate debtor, consultant or service provider.
Conditions and limits of the statutory protection
- Protected person: the party invoking Section 233 must fall within a category identified in the provision.
- Connection with the law: the act must be done or intended to be done under the Code or its rules or regulations.
- Good faith: the conduct must satisfy the applicable legal standard of good faith; the section does not expressly shield deliberate wrongdoing or conduct outside the statutory framework.
- Type of proceedings: the provision refers to a "suit, prosecution or other legal proceeding" in relation to the qualifying act.
Practical examples of how Section 233 may operate
Example 1: A bona fide decision by a resolution professional
An insolvency professional makes a procedural decision in carrying out a statutory responsibility, relying on the available records and acting in good faith. If a proceeding is brought solely in respect of that qualifying action, Section 233 may be raised as a statutory protection. The result depends on the facts and governing law.
Example 2: A liquidator acting within statutory authority
A liquidator undertakes a step authorised by the Code and applicable regulations, genuinely and in good faith. Section 233 may be relevant if legal proceedings are brought over that action. The provision does not independently validate a step that the law does not authorise.
Example 3: Conduct alleged to be dishonest or outside the Code
If an action is alleged to have been undertaken for an improper purpose, without good faith or outside statutory powers, protection cannot simply be assumed. The relevant facts, evidence and law must be examined.
Relationship with other IBC provisions
| Provision | Relevance |
|---|---|
| Section 17 | Management of the affairs of a corporate debtor by an interim resolution professional. |
| Section 18 | Duties of the interim resolution professional. |
| Section 25 | Duties of the resolution professional. |
| Section 35 | Powers and duties of a liquidator. |
| Section 196 | Powers and functions of the Insolvency and Bankruptcy Board of India. |
| Section 208 | Functions and obligations of insolvency professionals. |
| Section 232 | Public-servant status of Board members, officers and employees in specified circumstances. |
| Section 233 | Protection of action taken in good faith. |
| Section 236 | Trial of offences by Special Court. |
Section 232 and Section 233 are different. Section 232 addresses the deemed public-servant status of specified IBBI personnel when acting or purporting to act under the Code. Section 233 addresses the protection of specified persons against legal proceedings for qualifying good-faith conduct. Neither section should be treated as a blanket exemption from all applicable law.
Frequently asked questions about Section 233
Does Section 233 give absolute immunity to insolvency professionals?
No. The statutory wording requires an act done or intended to be done in good faith under the Code or its subordinate legislation. Whether the provision applies depends on the circumstances.
Are liquidators covered by Section 233?
Yes. Liquidators are expressly included among the protected persons, subject to the statutory requirements.
Does the provision protect an intended action as well as a completed action?
Yes. Section 233 expressly refers to anything "done or intended to be done" in good faith under the relevant legal framework.
Can the protection be invoked for an act unrelated to the IBC?
The section requires the act to be under the Code or the rules or regulations made under it. It is not a general immunity for unrelated personal or professional conduct.
Does Section 233 automatically prevent complaints or regulatory action?
Not necessarily. The availability and effect of the protection must be assessed against the wording of Section 233, the nature of the proceeding and the applicable regulatory and judicial framework.
Official sources and further reading
- India Code - Central legislation and amendments
- IBBI - Insolvency and Bankruptcy Code, rules and regulations
- IBBI - regulatory circulars
- IBBI - official website
- The Insolvency and Bankruptcy Code, 2016 - section index
Reviewed October 23, 2026. This explanatory article provides general legal information. For a dispute or regulatory proceeding, consult the applicable current law and relevant judicial decisions.