Section 86 of the Insolvency and Bankruptcy Code, 2016: Creditor Objections and Their Examination
Section 86 provides a limited procedure for a creditor to challenge the inclusion or particulars of a qualifying debt in an admitted fresh start application. It also sets out how the resolution professional must examine the objection and update the list of qualifying debts.
What is Section 86?
Under the Insolvency and Bankruptcy Code, 2016, a qualifying debt is a debt meeting the requirements in Section 79(19), read with the eligibility conditions in Section 80. The resolution professional is the insolvency professional appointed for the fresh start process under Section 82. The Adjudicating Authority is the forum designated by the Code to decide the relevant application.
Section 84 concerns admission or rejection of the fresh start application. Section 86 deals with specified creditor objections after the order under Section 84 is received; it does not establish a general right to reopen every aspect of the application.
Section 86 explained: all seven subsections
Section 86(1): Who may object and on what grounds?
A creditor named in the Adjudicating Authority's order under Section 84, to whom a qualifying debt is owed, may object within 10 days of receiving that order. Only two grounds are specified:
- the inclusion of a debt as a qualifying debt; or
- incorrect details of the qualifying debt in the Section 84 order.
For example, an objection may concern whether a listed debt meets the qualifying-debt definition or whether its recorded amount or particulars are inaccurate.
Section 86(2): Where to submit the objection
The creditor makes an application to the resolution professional, rather than filing the initial objection directly before the Adjudicating Authority.
Section 86(3): Supporting evidence
The objection application must be accompanied by the information and documents prescribed under applicable rules. Relevant material may include account statements, agreements, payment records and documents identifying the debt, depending on the prescribed requirements.
Section 86(4): Duty to consider objections
The resolution professional is required to consider every objection made under Section 86.
Section 86(5): Decision within 10 days
The resolution professional must examine the objection and accept or reject it within 10 days from the date of the objection application.
Section 86(6): Examination of related matters
The resolution professional may examine other matters considered relevant to preparing the final list of qualifying debts for the purposes of the discharge order under Section 92.
Section 86(7): Steps following examination
Following the examination under subsection (5) or (6), the resolution professional must take the appropriate statutory step:
- prepare an amended list of qualifying debts for the discharge order;
- apply to the Adjudicating Authority for directions under Section 90; or
- take other steps considered necessary in relation to the debtor.
These alternatives depend on the circumstances of the examination; the provision does not require all three in every case.
Key deadlines under Sections 86 and 87
| Action | Statutory period | Legal basis |
|---|---|---|
| Creditor objects after receiving Section 84 order | Within 10 days of receipt | Section 86(1) |
| Resolution professional accepts or rejects objection | Within 10 days of objection application | Section 86(5) |
| Aggrieved debtor or creditor challenges the professional's action | Within 10 days of the decision | Section 87(1) |
| Adjudicating Authority decides Section 87 application | Within 14 days of the application | Section 87(2) |
What if the creditor or debtor disagrees?
Section 87 provides a specific challenge mechanism. An aggrieved creditor or debtor may apply to the Adjudicating Authority within 10 days of the resolution professional's decision if the professional failed to provide an opportunity to make representations, colluded with another party, or failed to comply with Section 86. The Adjudicating Authority is to decide that application within 14 days. If the challenge succeeds, its order is forwarded to IBBI, which may take action as permitted under the Code.
This statutory challenge is distinct from the initial objection under Section 86.
Related provisions and official references
- Section 79: definitions applicable to the fresh start process, including qualifying debt.
- Section 80: eligibility to apply for a fresh start order.
- Section 81: fresh start application and interim moratorium.
- Section 84: admission or rejection of the application.
- Section 85: effect of admission and moratorium.
- Section 87: challenge to the resolution professional's action.
- Section 90: directions concerning compliance with restrictions.
- Section 92: discharge order.
Read the official text of the Insolvency and Bankruptcy Code, 2016 (India Code PDF) and consult the IBBI legal framework and notifications for amendments, commencement status and rules.
Explore the Insolvency and Bankruptcy Code, 2016 - section-wise guide.