Section 74 IBC: Punishment for Contravention of Moratorium or Resolution Plan

Section 74 of the Insolvency and Bankruptcy Code, 2016 (IBC) prescribes criminal penalties for specified knowing or wilful breaches of the corporate insolvency moratorium under Section 14 and the terms of a binding, approved resolution plan under Section 31.

Meaning of key legal provisions

Section 14: Moratorium

Under Section 14 of the IBC, the adjudicating authority declares a moratorium on commencement of the corporate insolvency resolution process. Subject to statutory exceptions, this restricts proceedings against the corporate debtor, transfer or disposal of its assets, enforcement of security interests, and recovery of property occupied by or in the possession of the corporate debtor by an owner or lessor. The provision also addresses essential and critical supplies, specified exclusions and the duration of the moratorium.

Section 31: Approved resolution plan

Under Section 31, a resolution plan approved by the adjudicating authority becomes binding on the corporate debtor and the persons specified by that provision, including employees, members, creditors, guarantors and other stakeholders covered by the statutory text. Section 74(3) concerns knowing and wilful contravention of that binding plan, or abetment of such contravention.

Corporate debtor, creditor and officer

The IBC defines a corporate debtor in Section 3(8) as a corporate person who owes a debt to any person. A creditor under Section 3(10) is a person to whom a debt is owed and includes financial, operational, secured and unsecured creditors and decree-holders. Section 74 refers to an officer of the corporate debtor; the identity and responsibility of the officer must be assessed in light of the applicable law and facts.

Section 74 explained, subsection by subsection

Section 74(1): Breach of moratorium by corporate debtor or its officer

Where the corporate debtor or any of its officers violates Section 14, an officer who knowingly or wilfully committed, authorised or permitted the contravention is exposed to the punishment set out in Section 74(1). The provision targets the responsible officer and does not mean that every officer is automatically criminally liable merely because a violation occurred.

Section 74(2): Breach of moratorium by a creditor

Where a creditor violates Section 14, a person who knowingly and wilfully authorised or permitted that contravention may be punished under Section 74(2). This subsection addresses intentional authorisation or permission of a creditor's breach.

Section 74(3): Breach of an approved resolution plan

Where the corporate debtor, an officer, a creditor, or another person bound by an approved resolution plan under Section 31 knowingly and wilfully contravenes a term of the plan, or abets its contravention, Section 74(3) provides criminal penalties. A dispute about performance is not by itself proof of the mental elements required by the subsection.

Punishment and fines under Section 74

Each subsection provides for imprisonment or fine or both. The ranges above describe the statutory alternatives; they are not automatic sentences for every allegation.

Practical examples

• Corporate debtor: An officer knowingly authorises disposal of assets in a manner prohibited by a subsisting Section 14 moratorium.
• Creditor: A person knowingly and wilfully permits prohibited enforcement against the corporate debtor during the moratorium.
• Resolution plan: A person bound by an approved plan knowingly and wilfully disregards a binding obligation under its terms.

These examples are illustrative. Actual liability depends on the applicable prohibition, statutory exceptions, evidence, required state of mind and the facts of the case.

Enforcement and legal procedure

Section 74 is located in Chapter VII of Part II of the IBC, which deals with offences and penalties. Section 236 addresses trial of offences by Special Courts, while Section 236(2) governs cognizance upon a complaint made by the IBBI, the Central Government or a person authorised by the Central Government in this behalf. The procedural route for criminal prosecution is distinct from applications seeking insolvency-related directions or enforcement of a resolution plan before the adjudicating authority.

Frequently asked questions

Does every breach of the moratorium result in imprisonment?

No. Section 74 specifies the conduct and mental elements relevant to each offence and permits imprisonment, a fine or both upon conviction.

Can creditors be liable under Section 74?

Yes. Section 74(2) concerns persons who knowingly and wilfully authorise or permit a creditor's breach of Section 14. Section 74(3) may also apply to a creditor who knowingly and wilfully breaches a binding approved resolution plan.

Does Section 74 apply to a resolution plan before its approval?

Section 74(3) refers to an approved resolution plan binding under Section 31. Its wording should not be equated with non-compliance with an unapproved proposal.

What is the maximum fine under Section 74?

Section 74(1) specifies a maximum fine of Rs. 3 lakh. Sections 74(2) and 74(3) each specify a maximum fine of Rs. 1 crore.

Official statutory references

• India Code: Insolvency and Bankruptcy Code, 2016 (official Act PDF)
• Ministry of Corporate Affairs: IBC statutory text
• Insolvency and Bankruptcy Board of India: Legal Framework and updates
• Read the Insolvency and Bankruptcy Code, 2016 on LawDadi

Editorial note: This explanatory article reflects the statutory provisions reviewed on 23 October 2026. Consult the latest official consolidated law, notifications and applicable judicial decisions before relying on a provision in a particular matter. This article provides general legal information, not individual legal advice.