Insolvency and Bankruptcy Code, 2016

Section 67 of the IBC: Proceedings under Section 66

Section 67 of the Insolvency and Bankruptcy Code, 2016 (IBC) empowers the Adjudicating Authority to implement orders made under Section 66 for fraudulent or wrongful trading. It provides mechanisms for securing contributions to the corporate debtor and adjusting the priority of debts owed to a creditor held liable under Section 66.

Key point: Section 66 establishes the relevant contribution liability; Section 67 supplies further enforcement and priority-related powers after an order under Section 66(1) or 66(2).

Section 67 - Statutory provisions

67. Proceedings under section 66.

(1) Where the Adjudicating Authority has passed an order under sub-section (1) or sub-section (2) of section 66, as the case may be, it may give such further directions as it may deem appropriate for giving effect to the order, and in particular, the Adjudicating Authority may—

(a) provide for the liability of any person under the order to be a charge on any debt or obligation due from the corporate debtor to him, or on any mortgage or charge or any interest in a mortgage or charge on assets of the corporate debtor held by or vested in him, or any person on his behalf, or any person claiming as assignee from or through the person liable or any person acting on his behalf; and

(b) from time to time, make such further directions as may be necessary for enforcing any charge imposed under this section.

Explanation.—For the purposes of this section, "assignee" includes a person to whom or in whose favour, by the directions of the person held liable under clause (a) the debt, obligation, mortgage or charge was created, issued or transferred or the interest created, but does not include an assignee for valuable consideration given in good faith and without notice of any of the grounds on which the directions have been made.

(2) Where the Adjudicating Authority has passed an order under sub-section (1) or sub-section (2) of section 66, as the case may be, in relation to a person who is a creditor of the corporate debtor, it may, by an order, direct that the whole or any part of any debt owed by the corporate debtor to that person and any interest thereon shall rank in the order of priority of payment under section 53 after all other debts owed by the corporate debtor.

Meaning and scope of Section 67

The provision is consequential to a finding and order under Section 66. It does not independently determine that a person engaged in fraudulent or wrongful trading. Rather, it allows the National Company Law Tribunal (NCLT), acting as Adjudicating Authority for corporate persons, to make its Section 66 order effective.

Section 67(1)(a): Creating a charge

The tribunal may secure the liability by imposing a charge on a debt or obligation owed by the corporate debtor to the liable person, or on relevant mortgages, charges and interests connected with the corporate debtor's assets. The provision also extends to specified persons holding those interests on the liable person's behalf or through an assignment.

Section 67(1)(b): Further enforcement directions

The tribunal may issue additional directions from time to time to enforce a charge imposed under Section 67. This is a continuing enforcement power, exercised according to the circumstances and the order made.

Explanation: Meaning of assignee

An assignee includes a person who receives or benefits from a debt, obligation, mortgage, charge or interest created or transferred at the direction of the person held liable. The statutory exclusion protects an assignee who gives valuable consideration in good faith and without notice of the grounds for the directions.

Section 67(2): Subordination of a creditor's debt

If the person held liable under Section 66 is also a creditor of the corporate debtor, the tribunal may direct that all or part of the debt owed to that creditor, including interest, ranks after all other debts in the priority of payment under Section 53. This consequence requires an order; it is not automatic in every Section 66 proceeding.

Section 66: addresses contributions arising from fraudulent trading or wrongful trading, subject to its statutory conditions and exceptions.
Section 53: sets out the statutory order of priority for distribution of proceeds in liquidation.
Adjudicating Authority: for corporate persons, generally the NCLT under Section 60 of the IBC.
Corporate debtor: a corporate person that owes a debt to any person, as defined in Section 3(8).
Charge: for this provision, a security interest imposed on specified debts, obligations or interests to secure the liability under the tribunal's order.

Illustrative example

Suppose the NCLT orders a former director who is also a creditor to contribute funds to a corporate debtor under Section 66. Under Section 67, the tribunal may secure the contribution against an eligible debt owed to that director and, where appropriate, direct that the director's creditor claim ranks after other debts under Section 53. The precise directions depend on the tribunal's order and the facts.

Official legislation and further reading

Legal information updated: 21 October 2026. Refer to the official consolidated Act, applicable commencement notifications and judicial decisions when applying these provisions to a specific case.