Insolvency and Bankruptcy Code, 2016 | Offences and penalties
Section 76 IBC: Punishment for Non-Disclosure of Dispute or Payment of Debt by Operational Creditor
Section 76 addresses knowing or wilful concealment by an operational creditor of a notified dispute or full and final payment when applying to initiate corporate insolvency resolution under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC).
Who may be liable: The operational creditor, or a person who knowingly and wilfully authorised or permitted the concealment.
Penalty: Imprisonment for one to five years, or a fine from Rs. 1 lakh to Rs. 1 crore, or both.
What Section 76 provides
Under Section 76 of the IBC (official IBBI consolidated text), the following conduct attracts the stated punishment:
- Section 76(a): An operational creditor wilfully or knowingly conceals in a Section 9 application that the corporate debtor notified the creditor of a dispute concerning the unpaid operational debt, or that the operational debt was fully and finally paid.
- Section 76(b): Any person knowingly and wilfully authorises or permits the concealment described in clause (a).
The statute allows imprisonment, a fine, or both. The word payment replaced repayment in Section 76 through the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, effective 6 June 2018. The original page's older terminology has therefore been updated.
Important legal definitions
Operational creditor - Section 5(20)
An operational creditor is a person to whom an operational debt is owed, including a person to whom that debt has been legally assigned or transferred.
Operational debt - Section 5(21)
Operational debt includes a claim in respect of provision of goods or services, including employment, and specified dues payable under law to the Central Government, a State Government or a local authority.
Dispute - Section 5(6)
A dispute includes a suit or arbitration proceeding relating to the existence of the amount of debt, the quality of goods or services, or breach of a representation or warranty. Whether a genuine pre-existing dispute prevents admission is considered under Sections 8 and 9 and applicable case law.
Default - Section 3(12)
Default means non-payment of a debt when the whole or any part or instalment has become due and payable and is not paid by the debtor or corporate debtor, as applicable.
How Sections 8 and 9 relate to Section 76
Section 8 requires an operational creditor, on occurrence of default, to deliver a demand notice or invoice demanding payment. Under Section 8(2), the corporate debtor may bring to the creditor's notice the existence of a dispute or record of a pending suit or arbitration proceeding, or payment of the unpaid operational debt, within the prescribed ten-day period.
Section 9 permits an operational creditor to apply to the National Company Law Tribunal (NCLT) after expiry of the statutory period, subject to the Code's requirements. Section 9(3) specifies accompanying documents and information, and Section 9(5) governs admission or rejection, including relevant dispute and payment considerations.
Section 76 is distinct from rejection of an insolvency application: it imposes potential criminal punishment where the specified concealment is knowing or wilful. Mere rejection of a Section 9 application does not automatically establish a Section 76 offence.
Punishment under Section 76
| Consequence | Statutory range |
|---|---|
| Imprisonment | Not less than 1 year and up to 5 years |
| Fine | Not less than Rs. 1 lakh and up to Rs. 1 crore |
| Combined punishment | Both imprisonment and fine may be imposed |
Practical illustration
Suppose a supplier receives a written notice from a corporate customer raising a genuine dispute about the quality of delivered goods. The supplier later files a Section 9 application and knowingly conceals that notice. The conduct may attract Section 76(a), subject to proof of the statutory elements. A person who knowingly and wilfully approved the concealment may also fall within Section 76(b).
Similarly, concealment of full and final payment of the claimed operational debt can trigger Section 76. The facts, documents, knowledge and conduct of the parties matter.
Related provisions and legal safeguards
Section 65: Penalises fraudulent or malicious initiation of insolvency proceedings for purposes other than resolution or liquidation. It addresses a different statutory wrong and should not be treated as interchangeable with Section 76.
Section 75: Provides a fine for knowingly furnishing materially false information or knowingly omitting a material fact in a Section 7 application.
Section 77: Concerns false information in a corporate debtor's application under Section 10 and includes an explanation relevant to Sections 75 and 76 concerning material particulars.
Section 236: Provides for trial of offences under the IBC by designated Special Courts and governs cognizance of such offences, subject to the applicable statutory text.
Frequently asked questions
What is Section 76 of the IBC?
Section 76 penalises an operational creditor who knowingly or wilfully conceals a notified dispute or full and final payment in an application under Section 9. It also covers a person who knowingly and wilfully authorises or permits that concealment.
What is the punishment under Section 76?
Imprisonment of one to five years, or a fine of Rs. 1 lakh to Rs. 1 crore, or both.
Does every disputed invoice attract Section 76?
No. Section 76 concerns knowing or wilful concealment of the specified facts in a Section 9 application; the existence of a dispute alone does not establish the offence.
What changed in the wording of Section 76 in 2018?
The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 substituted the word payment for repayment with effect from 6 June 2018.
Official legal sources
For the statutory wording and subsequent amendments, consult the IBBI consolidated IBC text, the India Code entry for the Insolvency and Bankruptcy Code, 2016 and the IBBI legal framework. Check the latest notifications and amendments for the date relevant to a particular case.
Read more: The Insolvency and Bankruptcy Code, 2016
This article provides general legal information, not advice on any particular proceeding. Statutory interpretation and prosecution depend on the facts and applicable law.