Section 68: Punishment for Concealment of Property under the IBC
Section 68 addresses specified acts by officers of a corporate debtor involving concealment of assets or liabilities, manipulation of records and improper dealings with corporate property around the commencement of insolvency.
Section 68 at a glance
| Who is covered | Officers of a corporate debtor. |
|---|---|
| Look-back period | Specified conduct within the 12 months immediately before the insolvency commencement date. |
| After commencement | Specified conduct occurring at any time after the insolvency commencement date. |
| Penalty | Imprisonment of 3 to 5 years, or a fine of Rs. 1 lakh to Rs. 1 crore, or both. |
| Defence | The officer may avoid punishment by proving an absence of intent to defraud or conceal the state of affairs. |
Meaning and scope of Section 68
Section 68 forms part of Chapter VII, Offences and Penalties, of the Insolvency and Bankruptcy Code, 2016. It concerns conduct of an officer of the corporate debtor, rather than imposing an automatic criminal penalty merely because the company enters insolvency.
The insolvency commencement date is the date of admission of an application for initiating the corporate insolvency resolution process by the Adjudicating Authority under Section 5(12). A corporate debtor is a corporate person who owes a debt under Section 3(8). The expression officer should be read with the applicable statutory definition and facts of the case.
Acts covered by the provision
Within 12 months before commencement
The provision addresses concealment of property or debts and fraudulent removal of property where the specified value is at least Rs. 10,000. It also covers concealment, destruction, mutilation or falsification of books or papers; false entries; fraudulent alteration or omission in documents; specified improper dealings with property obtained on unpaid credit; and wilful concealment of knowledge of certain acts committed by others.
After insolvency commencement
Specified acts concerning property and records remain covered after commencement. The provision also addresses knowingly receiving property that has been secured, transferred or disposed of in the circumstances described by the section.
Punishment and statutory defence
The prescribed punishment is imprisonment for a term of three to five years, or a fine of Rs. 1 lakh to Rs. 1 crore, or both. The proviso protects a person who proves that there was no intent to defraud or to conceal the corporate debtor's state of affairs. The precise ingredients of each offence must be established on the evidence.
Section 68: Statutory provision
The following reproduces the substantive wording retained from the original page, with formatting adjusted for readability. For authoritative text and amendments, consult the official Code.
68. Where any officer of the corporate debtor has,-
(i) within the twelve months immediately preceding the insolvency commencement date,-
(a) wilfully concealed any property or part of such property of the corporate debtor or concealed any debt due to, or from, the corporate debtor, of the value of ten thousand rupees or more; or
(b) fraudulently removed any part of the property of the corporate debtor of the value of ten thousand rupees or more; or
(c) wilfully concealed, destroyed, mutilated or falsified any book or paper affecting or relating to the property of the corporate debtor or its affairs, or
(d) wilfully made any false entry in any book or paper affecting or relating to the property of the corporate debtor or its affairs; or
(e) fraudulently parted with, altered or made any omission in any document affecting or relating to the property of the corporate debtor or its affairs; or
(f) wilfully created any security interest over, transferred or disposed of any property of the corporate debtor which has been obtained on credit and has not been paid for unless such creation , transfer or disposal was in the ordinary course of the business of the corporate debtor; or
(g) wilfully concealed the knowledge of the doing by others of any of the acts mentioned in clauses (c),
(d) or clause (e); or
(ii) at any time after the insolvency commencement date, committed any of the acts mentioned in sub-clause
(a) to
(f) of clause
(i) or has the knowledge of the doing by others of any of the things mentioned in sub-clauses
(c) to
(e) of clause
(i) ; or
(iii) at any time after the insolvency commencement date, taken in pawn or pledge, or otherwise received the property knowing it to be so secured, transferred or disposed, such officer shall be punishable with imprisonment for a term which shall not be less than three years but which may extend to five years, or with fine, which shall not be less than one lakh rupees, but may extend to one crore rupees, or with both: Provided that nothing in this section shall render a person liable to any punishment under this section if he proves that he had no intent to defraud or to conceal the state of affairs of the corporate debtor.
Related provisions and practical implications
Section 66 deals with fraudulent and wrongful trading and potential contributions to the corporate debtor's assets; it is distinct from the criminal offences under Section 68. Section 69 addresses punishment for transactions defrauding creditors. Section 70 concerns misconduct in the course of the corporate insolvency resolution process. Criminal prosecution and the relevant court's jurisdiction are governed by the Code's applicable procedural provisions, including Sections 236 and 237.
Resolution professionals, directors and officers should preserve accounting records, asset registers, transaction documents and communications relevant to the period before and after insolvency commencement. Allegations of concealment require close attention to the statutory time period, mental element, documentary evidence and available defence.
Official legislation and further reading
Insolvency and Bankruptcy Code, 2016 - official IBBI consolidated text. For subsequent amendments and notifications, consult the IBBI legal framework.
The Insolvency and Bankruptcy Code, 2016 - LawDadi overview
Editorial note: This article provides general legal information. Check the current statutory text, commencement notifications and relevant judicial decisions before relying on it in a particular matter.