Section 85 of the Insolvency and Bankruptcy Code, 2016: Effect of Admission of Application
Section 85 describes the legal consequences of admitting a debtor's application for a fresh start order. It establishes a moratorium on debt proceedings, restricts creditor action, imposes specific duties on the debtor and sets a maximum statutory moratorium period of 180 days, subject to revocation.
Meaning and scope of Section 85
Section 85 is located in Chapter II (Fresh Start Process) of Part III of the Insolvency and Bankruptcy Code, 2016. A moratorium is a statutory temporary restraint on specified legal proceedings and creditor enforcement. Under this provision, it begins when the application is admitted under Section 84, rather than merely when the application is filed.
Section 85(1): Moratorium begins on admission
On the date the Adjudicating Authority admits the fresh start application, a moratorium commences in respect of all debts. This is different from the interim moratorium contemplated by Section 81, which runs from filing until admission or rejection.
Section 85(2): Effect on legal proceedings and creditors
- Section 85(2)(a): Any pending legal action or legal proceeding concerning a debt is deemed to be stayed during the moratorium.
- Section 85(2)(b): Subject to Section 86, creditors cannot initiate legal action or proceedings concerning a debt during that period.
Section 86 addresses objections by creditors and their examination by the resolution professional. The moratorium should therefore be read alongside the statutory objection procedure rather than as an unrestricted cancellation of debts.
Section 85(3): Restrictions and disclosure duties of the debtor
During the moratorium, the debtor must comply with all six restrictions and duties:
- Company management: The debtor must not act as a company director or directly or indirectly participate in the promotion, formation or management of a company.
- Disposal of assets: The debtor must not dispose of or alienate any assets.
- Business partners: The debtor must inform business partners that a fresh start process is underway.
- Financial or commercial transactions: Before entering into transactions of a value notified by the Central Government, individually or jointly, the debtor must disclose that a fresh start process is underway. The applicable notified threshold must be checked; the Code itself does not specify a fixed amount here.
- Business name: If the debtor transacts under a name different from the name in the application admitted under Section 84, that name must be disclosed.
- Foreign travel: The debtor must not travel outside India without permission from the Adjudicating Authority.
Section 85(4): Duration of the moratorium
The moratorium ceases at the end of 180 days beginning with the date of admission, unless the admission order is revoked under Section 91(2). The 180-day period is a statutory limit for the fresh start moratorium; it is not an automatic discharge of every liability.
| Stage | Relevant provision | Legal effect |
|---|---|---|
| Application filed | Section 81 | Interim moratorium begins, where the provision applies. |
| Application admitted | Sections 84 and 85(1) | Fresh start moratorium commences. |
| During moratorium | Sections 85(2) and 85(3) | Proceedings are stayed and debtor restrictions apply. |
| Creditor objections | Section 86 | Statutory objection and examination process. |
| Revocation | Section 91(2) | Moratorium may end before the 180-day period. |
| Discharge | Section 92 | Discharge is governed by a separate statutory order. |
Related legal provisions
Section 80: Eligibility for a fresh start
Section 80 lays down eligibility conditions for a debtor seeking the fresh start process, including statutory financial thresholds and other conditions. Eligibility does not itself amount to admission.
Sections 81 and 84: Filing and admission
Section 81 deals with the fresh start application and interim moratorium. Section 84 provides for admission or rejection by the Adjudicating Authority on the resolution professional's report.
Sections 86, 91 and 92: Objections, revocation and discharge
Section 86 concerns creditor objections; Section 91 provides for revocation of the admission order; and Section 92 deals with the discharge order and the liabilities eligible for discharge.
Frequently asked questions
Does the moratorium start when the debtor files the application?
No. Section 81 contemplates an interim moratorium on filing. The Section 85 moratorium begins on admission of the application.
Can a creditor start a recovery case during the moratorium?
Section 85(2) restricts initiation of proceedings in respect of debts, subject to Section 86 and the applicability of the statutory process.
Can the debtor sell property or travel abroad?
Section 85(3) restricts disposal or alienation of assets and requires permission from the Adjudicating Authority for travel outside India.
Are debts automatically written off after 180 days?
No. The moratorium and discharge are separate legal concepts. Section 92 governs the discharge order and the relevant liabilities.
Official legal sources
- India Code - Insolvency and Bankruptcy Code, 2016
- IBBI - Consolidated text of the Insolvency and Bankruptcy Code
- IBBI - Legal framework, notifications and amendments
- The Insolvency and Bankruptcy Code, 2016 - Lawdadi guide
Legal information only. Applicability depends on commencement notifications, subsequent amendments and the facts of the case. Last editorial review: 23 October 2026.