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Section5
The Insolvency and Bankruptcy Code, 2016

Definitions

In force Act 31 of 2016 As on 15 Oct 2026

Act 31 of 2016 Ministry Corporate Affairs Enacted 28 May 2016 Cited by 18 provisions Instruments 12

Section 5 of the Insolvency and Bankruptcy Code, 2016 deals with definitions. In this Part, unless the context otherwise requires,-- (1) Adjudicating Authority, for the purposes of this Part, means National Company Law Tribunal constituted under section 408 of the Companies Act, 2013 (18 of 2013); The Act was enacted on 28 May 2016.

In this Part, unless the context otherwise requires,--

(1) Adjudicating Authority, for the purposes of this Part, means National Company Law Tribunal constituted under section 408 of the Companies Act, 2013 (18 of 2013);

(2) auditor means a chartered accountant certified to practice as such by the Institute of Chartered Accountants of India under section 6 of the Chartered Accountants Act, 1949 (38 of 1949);

1 [(2A) “base resolution plan” means a resolution plan provided by the corporate debtor under clause (c) of sub-section (4) of section 54A;]

(3) Chapter means a Chapter under this Part;

(4) constitutional document, in relation to a corporate person, includes articles of association, memorandum of association of a company and incorporation document of a Limited Liability Partnership;

(5) corporate applicant means--

(a) corporate debtor; or

(b) a member or partner of the corporate debtor who is authorised to make an application for the corporate insolvency resolution processs 1[or the pre-packaged insolvency resolution process, as the case may be,] under the constitutional document of the corporate debtor; or

(c) an individual who is in charge of managing the operations and resources of the corporate debtor; or

(d) a person who has the control and supervision over the financial affairs of the corporate debtor;

2[(5A) corporate guarantor means a corporate person who is the surety in a contract of guarantee to a corporate debtor;]

(6) dispute includes a suit or arbitration proceedings relating to--

(a) the existence of the amount of debt;

(b) the quality of goods or service; or

(c) the breach of a representation or warranty;

(7) financial creditor means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to;

(8) financial debt means a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes--

(a) money borrowed against the payment of interest;

(b) any amount raised by acceptance under any acceptance credit facility or its de-materialised equivalent;

(c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;

(d) the amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed;

(e) receivables sold or discounted other than any receivables sold on non-recourse basis;

(f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing;

3[Explanation----For the purposes of this sub-clause,--

(i) any amount raised from an allottee under a real estate project shall be deemed to be an amount having the commercial effect of a borrowing; and

(ii) the expressions, allottee and real estate project shall have the meanings respectively assigned to them in clauses (d) and (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016);]

(g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account;

(h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution;

(i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause;

(9) financial position, in relation to any person, means the financial information of a person as on a certain date;

(10) information memorandum means a memorandum prepared by resolution professional under sub-section (1) of section 29;

(11) initiation date means the date on which a financial creditor, corporate applicant or operational creditor, as the case may be, makes an application to the Adjudicating Authority for initiating corporate insolvency resolution process 4 [or pre-packaged insolvency resolution process, as the case may be];

(12) insolvency commencement date means the date of admission of an application for initiating corporate insolvency resolution process by the Adjudicating Authority under sections 7, 9 or section 10, as the case may be;

3* * * * *

(13) insolvency resolution process costs means--

(a) the amount of any interim finance and the costs incurred in raising such finance;

(b) the fees payable to any person acting as a resolution professional;

(c) any costs incurred by the resolution professional in running the business of the corporate debtor as a going concern;

(d) any costs incurred at the expense of the Government to facilitate the insolvency resolution process; and

(e) any other costs as may be specified by the Board;

(14) insolvency resolution process period means the period of one hundred and eighty days beginning from the insolvency commencement date and ending on one hundred and eightieth day;

(15) interim finance means any financial debt raised by the resolution professional during the insolvency resolution process period 5[or by the corporate debtor during the pre-packaged insolvency resolution process period, as the case may be ] 6[and such other debt as may be notified];

(16) liquidation cost means any cost incurred by the liquidator during the period of liquidation subject to such regulations, as may be specified by the Board;

(17) liquidation commencement date means the date on which proceedings for liquidation commence in accordance with section 33 or section 59, as the case may be;

(18) liquidator means an insolvency professional appointed as a liquidator in accordance with the provisions of Chapter III or Chapter V of this Part, as the case may be;

(19) officer for the purposes of 5[Chapter VI and] Chapter VII of this Part, means an officer who is in default, as defined in clause (60) of section 2 of the Companies Act, 2013 (18 of 2013) or a designated partner as defined in clause (j) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009), as the case may be;

(20) operational creditor means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred;

(21) operational debt means a claim in respect of the provision of goods or services including employment or a debt in respect of the 4[payment] of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority;

(22) personal guarantor means an individual who is the surety in a contract of guarantee to a corporate debtor;

(23) personnel includes the directors, managers, key managerial personnel, designated partners and employees, if any, of the corporate debtor;

5](23A) “preliminary information memorandum” means a memorandum submitted by the corporate debtor under clause (b) of sub-section (1) of section 54G;

(23B) “pre-packaged insolvency commencement date” means the date of admission of an application for initiating the pre-packaged insolvency resolution process by the Adjudicating Authority under clause (a) of sub-section (4) of section 54C;

(23C) “pre-packaged insolvency resolution process costs” means—

(a) the amount of any interim finance and the costs incurred in raising such finance;

(b) the fees payable to any person acting as a resolution professional and any expenses incurred by him for conducting the pre-packaged insolvency resolution process during the prepackaged insolvency resolution process period, subject to sub-section (6) of section 54F;

(c) any costs incurred by the resolution professional in running the business of the corporate debtor as a going concern pursuant to an order under sub-section (2) of section 54J;

(d) any costs incurred at the expense of the Government to facilitate the pre-packaged insolvency resolution process; and

(e) any other costs as may be specified;

(23D) “pre-packaged insolvency resolution process period” means the period beginning from the pre-packaged insolvency commencement date and ending on the date on which an order under subsection (1) of section 54L, or sub-section (1) of section 54N, or sub-section (2) of section 54-O, as the case may be, is passed by the Adjudicating Authority;]

(24) related party, in relation to a corporate debtor, means--

(a) a director or partner of the corporate debtor or a relative of a director or partner of the corporate debtor;

(b) a key managerial personnel of the corporate debtor or a relative of a key managerial personnel of the corporate debtor;

(c) a limited liability partnership or a partnership firm in which a director, partner, or manager of the corporate debtor or his relative is a partner;

(d) a private company in which a director, partner or manager of the corporate debtor is a director and holds along with his relatives, more than two per cent. of its share capital;

(e) a public company in which a director, partner or manager of the corporate debtor is a director and holds along with relatives, more than two per cent. of its paid-up share capital;

(f) any body corporate whose board of directors, managing director or manager, in the ordinary course of business, acts on the advice, directions or instructions of a director, partner or manager of the corporate debtor;

(g) any limited liability partnership or a partnership firm whose partners or employees in the ordinary course of business, acts on the advice, directions or instructions of a director, partner or manager of the corporate debtor;

(h) any person on whose advice, directions or instructions, a director, partner or manager of the corporate debtor is accustomed to act;

(i) a body corporate which is a holding, subsidiary or an associate company of the corporate debtor, or a subsidiary of a holding company to which the corporate debtor is a subsidiary;

(j) any person who controls more than twenty per cent. of voting rights in the corporate debtor on account of ownership or a voting agreement;

(k) any person in whom the corporate debtor controls more than twenty per cent. of voting rights on account of ownership or a voting agreement;

(l) any person who can control the composition of the board of directors or corresponding governing body of the corporate debtor;

(m) any person who is associated with the corporate debtor on account of--

(i) participation in policy making processes of the corporate debtor; or

(ii) having more than two directors in common between the corporate debtor and such person; or

(iii) interchange of managerial personnel between the corporate debtor and such person; or

(iv) provision of essential technical information to, or from, the corporate debtor;

8[(24A) related party, in relation to an individual, means--

(a) a person who is a relative of the individual or a relative of the spouse of the individual;

(b) a partner of a limited liability partnership, or a limited liability partnership or a partnership firm, in which the individual is a partner;

(c) a person who is a trustee of a trust in which the beneficiary of the trust includes the individual, or the terms of the trust confers a power on the trustee which may be exercised for the benefit of the individual;

(d) a private company in which the individual is a director and holds along with his relatives, more than two per cent. of its share capital;

(e) a public company in which the individual is a director and holds along with relatives, more than two per cent. of its paid-up share capital;

(f) a body corporate whose board of directors, managing director or manager, in the ordinary course of business, acts on the advice, directions or instructions of the individual;

(g) a limited liability partnership or a partnership firm whose partners or employees in the ordinary course of business, act on the advice, directions or instructions of the individual;

(h) a person on whose advice, directions or instructions, the individual is accustomed to act;

(i) a company, where the individual or the individual along with its related party, own more than fifty per cent. of the share capital of the company or controls the appointment of the board of directors of the company.

Explanation.--For the purposes of this clause,--

(a) relative, with reference to any person, means anyone who is related to another, in the following manner, namely:--

(i) members of a Hindu Undivided Family,

(ii) husband,

(iii) wife,

(iv) father,

(v) mother,

(vi) son,

(vii) daughter,

(viii) sons daughter and son,

(ix) daughters daughter and son,

(x) grandsons daughter and son,

(xi) granddaughters daughter and son,

(xii) brother,

(xiii) sister,

(xiv) brothers son and daughter,

(xv) sisters son and daughter,

(xvi) fathers father and mother,

(xvii) mothers father and mother,

(xviii) fathers brother and sister,

(xix) mothers brother and sister, and

(b) wherever the relation is that of a son, daughter, sister or brother, their spouses shall also be included;.

9[(25) resolution applicant means a person, who individually or jointly with any other person, submits a resolution plan to the resolution professional pursuant to the invitation made under clause (h) of sub-section (2) of section 25] 10[or pursuant to section 54K, as the case may be];

(26) resolution plan means a plan proposed by 11[resolution applicant] for insolvency resolution of the corporate debtor as a going concern in accordance with Part II;

12[Explanation.--For the removal of doubts, it is hereby clarified that a resolution plan may include provisions for the restructuring of the corporate debtor, including by way of merger, amalgamation and demerger;]

(27) resolution professional, for the purposes of this Part, means an insolvency professional appointed to conduct the corporate insolvency resolution process 10[or the pre-packaged insolvency resolution process, as the case may be,] and includes an interim resolution professional; and

(28) voting share means the share of the voting rights of a single financial creditor in the committee of creditors which is based on the proportion of the financial debt owed to such financial creditor in relation to the financial debt owed by the corporate debtor.

Section 5, The Insolvency and Bankruptcy Code, 2016 (Act 31 of 2016).

Cross-references

Extracted from the operative text of the enactments themselves. Every destination below exists in our corpus.

This section refers to

  1. Chartered Accountants Act s. 6 Certificate of practice
  2. Companies Act s. 2 Definitions
  3. Companies Act s. 408 Constitution of National Company Law Tribunal
  4. s. 7 Initiation of corporate insolvency resolution process by financial creditor
  5. s. 9 Application for initiation of corporate insolvency resolution process by operational creditor
  6. s. 10 Initiation of corporate insolvency resolution process by corporate applicant
  7. s. 25 Duties of resolution professional
  8. s. 29 Preparation of information memorandum
  9. s. 33 Initiation of liquidation
  10. s. 54 Dissolution of corporate debtor
  11. s. 54A Corporate debtors eligible for pre-packaged insolvency resolution process
  12. s. 54C Application to initiate pre-packaged insolvency resolution process
  13. s. 54F Duties and powers of resolution professional during pre-packaged insolvency resolution process
  14. s. 54G List of claims and preliminary information memorandum
  15. s. 54J Vesting management of corporate debtor with resolution professional
  16. s. 54K Consideration and approval of resolution plan
  17. s. 54L Approval of resolution plan
  18. s. 54N Termination of pre-packaged insolvency resolution process
  19. s. 59 Voluntary liquidation of corporate persons
  20. Limited Liability Partnership Act s. 2 Definitions

Referred to by 18

  1. Finance Act s. 37 Amendment of section 115JB
  2. Finance Act s. 45 Amendment of section 140
  3. Finance Act, 2019 (No. 2) s. 34 Amendment of section 115JB
  4. Finance Act s. 51 Insertion of new section 156A
  5. Finance Act s. 54 Amendment of section 170
  6. Finance Act s. 55 Insertion of new section 170A
  7. Finance Act s. 80 Substitution of new section for section 170A
  8. Income-tax Act s. 115JB Special provision for payment of tax by certain companies
  9. Income-tax Act s. 140 Return by whom to be verified
  10. Income-tax Act s. 156A Modification and revision of notice in certain cases
  11. Income-tax Act s. 170 Succession to business otherwise than on death
  12. Income-tax Act s. 170A Effect of order of tribunal or court in respect of business reorganisation

and 6 more

Related judgements & precedents

These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.

  1. Pioneer Urban Land and Infrastructure Ltd. v. Union of India

    Supreme Court of India 09 Aug 2019 Binding (Supreme Court) Reportable (2019) 8 SCC 416

    Court's Decision & Legal Precedent

    Allottees of real-estate projects are financial creditors under IBC s.5(8)(f) explanation; they may trigger CIRP under s.7. RERA and IBC operate in distinct spheres; RERA does not oust IBC. Not a Companies Act oppression petition.

    On this section: Explanation to s.5(8)(f): real-estate allottees are financial creditors.

    Read the full order on eCourts India

  2. Landmark Apartments Pvt. LTD vs Union of India

    Supreme Court of India 09 Aug 2019 Binding (SC) Reportable

    Court's Decision & Legal Precedent

    The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, which deems allottees of real estate projects as financial creditors under Section 5(8)(f) and provides for their representation on Committee of Creditors through authorized representatives under Sections 21(6A) and 25A, is constitutionally valid under Articles 14, 19(1)(g), and 300-A of the Constitution of India. The amendment does not violate Article 14 as allottees, who finance their own apartment projects and provide consideration for time value of money through installment-based advance payments, constitute a rationally distinct class of financial creditors similar to debenture holders and fixed deposit holders, with intelligible differentia bearing nexus to the Code's object of maximizing creditor recovery and protecting stakeholders in corporate rehabilitation. The amendment does not infringe Article 19(1)(g) as it is a reasonable restriction in public interest for protecting millions of home buyers with substantial invested amounts. The amendment does not deprive developers of property without constitutional authority as it operates through valid legal process respecting due process and defenses. The explanation to Section 5(8)(f) merely clarifies that allottees already fell within the definition's ambit and is not substantively enlarging the scope. The classification does not offend the UNCITRAL Legislative Guide as allottees are recognized as financial creditors based on genuine financing characteristics. The Code and RERA can harmoniously coexist as parallel remedies serving different purposes, with Code taking primacy due to its later non-obstante clause. Parliament's legislative judgment in treating allottees as financial creditors is entitled to judicial deference as an economic experiment within free play in joints doctrine.

    On this section: Definition of 'financial creditor' as person to whom financial debt is owed; original definition before amendment

    Read the full order on eCourts India

  3. Spaze Towers Private Limited vs Union of India

    Supreme Court of India 09 Aug 2019 Binding - Supreme Court Constitution Bench Judgment Reportable (2019) 9 SCC 698

    Court's Decision & Legal Precedent

    Amendments to the Insolvency and Bankruptcy Code 2016 classifying allottees of real estate projects as financial creditors and allowing them to trigger insolvency proceedings against developers are constitutionally valid. These amendments do not violate Articles 14, 19(1)(g) read with Article 19(6), or 300-A of the Constitution. Allottees constitute a distinct class of financial creditors with intelligible differentia from operational creditors due to their role in financing real estate projects through installment payments, their vital interest in the company's well-being, and their similarity to other individual financial creditors like deposit and debenture holders. The amendments have rational nexus with the Code's objects of maximizing asset value and rehabilitating corporate debtors. Section 5(8)(f) as originally enacted already subsumed allottees within the definition of financial debt as a residuary provision covering transactions having the commercial effect of borrowing. The explanation added by the Amendment Act is merely clarificatory. The Code and RERA provide concurrent remedies and must be read harmoniously with the Code prevailing in case of conflict. Representation of allottees through authorized representatives under Section 21(6A) and 25A is constitutionally valid. The legislature has free play in the joints when enacting economic legislation and courts must accord deference to such experimentation.

    On this section: Person to whom financial debt is owed, establishing financial creditor status of allottees

    Read the full order on eCourts India

  4. Uppal Chadha Hi Tech Developers Pvt. LTD vs Union of India

    Supreme Court of India 09 Aug 2019 Binding (Supreme Court) - Landmark precedent Reportable

    Court's Decision & Legal Precedent

    Real estate allottees are 'financial creditors' within the meaning of Section 5(8) of the Insolvency and Bankruptcy Code, 2016, as they advance money against consideration for the time value of money to finance real estate construction projects. The Explanation to Section 5(8)(f) inserted by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, is constitutionally valid as it is clarificatory of the original provision's language and does not infringe Articles 14, 19(1)(g), or 300-A of the Constitution. Allottees are entitled to trigger insolvency proceedings under Section 7 of the Code against real estate developers, and their inclusion as financial creditors does not violate principles of reasonable classification or legislative objects. The Code and RERA operate harmoniously in different spheres providing concurrent remedies to home buyers.

    On this section: Financial creditor means a person to whom a financial debt is owed. This definition is central to the case as it depends on Section 5(8) to define 'financial debt'.

    Read the full order on eCourts India

  5. Sds Infracon PVT LTD vs Union of India

    Supreme Court of India 09 Aug 2019 Binding - Supreme Court Three Judge Bench Reportable (2019) 9 SCC 1

    Court's Decision & Legal Precedent

    Amendments to the Insolvency and Bankruptcy Code 2016 treating real estate project allottees as financial creditors are constitutionally valid under Articles 14 19 1 g and 300 A of the Constitution. Real estate allottees genuinely finance projects by advancing payments for future delivery of apartments and constitute financial creditors under Section 5 8 f as amounts raised have commercial effect of borrowing considering time value of money. The explanation to Section 5 8 f is clarificatory in nature and allottees would fall within this provision even without it. Allottees have right to trigger insolvency proceedings under Section 7 by filing applications before NCLT. Code and RERA provide concurrent and complementary remedies not conflicting jurisdictions. There is no violation of Article 14 as legitimate intelligible differentia exists between allottees and other operational creditors. There is no violation of Article 19 1 g as restriction on right to business is reasonable being in public interest of protecting allottee investments.

    On this section: Person to whom financial debt is owed can trigger insolvency proceedings

    Read the full order on eCourts India

  6. Moser Baer Karamchari Union Thr. President Mahesh Chand Sharma vs Union of India

    Supreme Court of India 02 May 2023 Binding (Supreme Court) Reportable (2023) 5 SCC 1

    Court's Decision & Legal Precedent

    The Insolvency and Bankruptcy Code 2016 represents an organic evolution of insolvency law through a consultative process involving multiple committees and expert bodies. The waterfall mechanism under Section 53 of IBC, which ranks workmen's dues for 24 months preceding liquidation commencement date pari passu with secured creditors who relinquish security, is a carefully balanced framework that adequately protects workmen's interests while promoting revival of insolvent companies and maximizing asset value for all stakeholders. This framework is not arbitrary or violative of Articles 14 and 21 of the Constitution. The two regimes - liquidation under Companies Act 2013 and liquidation under IBC - deal with different situations and cannot be compared for constitutional purposes. In economic legislation, courts should defer to legislative judgment unless the exercise of legislative judgment appears to be palpably arbitrary. The sacrifices required from workmen under IBC are not manifestly unjust or arbitrary, and the exclusion of Provident Fund, Pension Fund and Gratuity Fund from liquidation estate, combined with the 24-month protection and Regulation 21A safeguards, adequately protect workmen's dues.

    On this section: Definition of liquidation cost including wages and salary of workmen during liquidation process

    Read the full order on eCourts India

  7. Mahendra Kumar Rajpal vs Ministry of Corporate Affairs

    Supreme Court of India 21 May 2021 Binding (Supreme Court) Reportable

    Court's Decision & Legal Precedent

    The Central Government, acting under Section 1(3) of the Insolvency and Bankruptcy Code, 2016, has the power to bring into force different provisions of the Code at different times for different categories of persons. The 2018 Amendment Act, by creating personal guarantors as a distinct category in Section 2(e) and mandating the NCLT as the adjudicating authority in Section 60, provided sufficient legislative guidance for the Central Government to selectively apply the Code to personal guarantors to corporate debtors. The notification dated 15.11.2019 is a valid exercise of conditional legislation, not an instance of excessive delegation or impermissible legislative exercise. Personal guarantors, though individuals, are intrinsically connected to corporate debtors and warrant unified adjudication before the NCLT. The approval of a corporate resolution plan does not discharge the personal guarantor's liability, which remains enforceable as an independent contractual obligation under the Indian Contract Act, 1872.

    On this section: Definition of personal guarantor as individual surety in contract of guarantee to corporate debtor

    Read the full order on eCourts India

  8. Raman Prakash Mangla vs Anuj Jain

    Supreme Court of India 24 Mar 2021 Binding (SC) Reportable

    Court's Decision & Legal Precedent

    The Adjudicating Authority has limited jurisdiction in approving a resolution plan, circumscribed by Sections 30(2) and 31 of the Insolvency and Bankruptcy Code, 2016. The Authority cannot interfere with the commercial aspects of the decision taken by the Committee of Creditors. If the Adjudicating Authority finds shortcomings in the resolution plan vis-à-vis the specified parameters of keeping the corporate debtor as a going concern, maximizing the value of its assets, and taking care of interests of all stakeholders, it must send the plan back to the Committee of Creditors for reconsideration, not modify the plan itself. Payment to dissenting financial creditors must be in monetary terms, not in kind or through transfer of equity or land. Once homebuyers as a class vote in favor of a resolution plan through their authorized representative, individual homebuyers cannot challenge the plan as dissenting creditors or aggrieved persons. The INR 750 crores deposited by the holding company pursuant to Supreme Court orders in Chitra Sharma is the property of the holding company, not the corporate debtor, and cannot be appropriated by the corporate debtor or the resolution applicant.

    On this section: Definitions of Adjudicating Authority, financial creditor, financial debt, operational creditor, operational debt, resolution applicant, resolution plan, resolution professional, and voting share

    Read the full order on eCourts India

  9. Anuj Jain Interim Resolution Professional for Jaypee Infratech Limited vs Axis Bank Limited

    Supreme Court of India 26 Feb 2020 Binding (Supreme Court) Reportable

    Court's Decision & Legal Precedent

    Mortgage transactions executed by a subsidiary to secure loans of its holding company constitute preferential transactions under Section 43 of the Insolvency and Bankruptcy Code 2016 when: (1) the transactions transfer the subsidiary's property for benefit of the holding company (a related party and creditor of the subsidiary) for antecedent debts owed by the subsidiary to the holding company; (2) the transactions put the holding company in a beneficial position compared to other creditors in liquidation distribution; (3) the transactions fall within the two-year look-back period for related party transactions; and (4) the transactions are not made in the ordinary course of business or financial affairs of the subsidiary, which requires reading the word 'or' in Section 43(3)(a) as 'and' to ensure both the subsidiary's and transferee's ordinary course of business are considered. Furthermore, lenders of a holding company cannot be categorized as financial creditors of a subsidiary merely by holding mortgages on the subsidiary's assets because financial debt requires disbursal against consideration for time value of money to the corporate debtor, and mortgage debt does not satisfy this essential requirement. The distinction between secured creditor and financial creditor must be maintained, with financial creditors being those with direct engagement in the corporate debtor's functioning from inception, involvement in assessing viability, and role in restructuring.

    On this section: Financial creditor means person to whom financial debt is owed; includes person to whom such debt has been legally assigned or transferred

    Read the full order on eCourts India

  10. Sanjay Singal vs Union of India

    Supreme Court of India 21 May 2021 Binding (SC) Reportable

    Court's Decision & Legal Precedent

    The impugned notification dated 15.11.2019 bringing into force provisions of the Insolvency and Bankruptcy Code, 2016 only in so far as they relate to personal guarantors to corporate debtors is a valid exercise of power conferred by Section 1(3) of the Code. The Central Government acted within its constitutional powers in selectively applying Code provisions to personal guarantors as a distinct category of individuals, as this classification was created by Parliament through the 2018 Amendment Act which amended Section 2(e) and Section 60 to provide unified adjudication of corporate debtors and personal guarantors before the NCLT. The notification does not constitute impermissible delegation of legislative power or excessive modification of statutory provisions, but rather operationalizes the Parliamentary intent to treat personal guarantors differently from other individuals due to their intrinsic connection with corporate debtors. Approval of a resolution plan relating to a corporate debtor does not operate to discharge the liabilities of personal guarantors to such corporate debtors, as the guarantor's liability is co-extensive with the principal debtor and continues notwithstanding involuntary discharge of the principal debtor by operation of law.

    On this section: Definition of personal guarantor as an individual who is surety in contract of guarantee to corporate debtor, found in Part II provisions

    Read the full order on eCourts India

  11. Lalit Kumar Jain vs Union of India

    Supreme Court of India 21 May 2021 Binding (SC) Reportable

    Court's Decision & Legal Precedent

    The Central Government, in exercise of powers conferred by Section 1(3) of the Insolvency and Bankruptcy Code, 2016, has authority to bring into force different provisions of the Code at different times for different categories of persons, including personal guarantors to corporate debtors. The 2018 Amendment Act, by creating distinct classification of personal guarantors under Section 2(e) and amending Section 60, provided sufficient parliamentary guidance for such selective application. The impugned notification, which brings into force provisions of Part III of the Code only in relation to personal guarantors to corporate debtors, is valid exercise of power conferred by Section 1(3) and does not amount to excessive delegation or modification of Code provisions. Furthermore, approval of a resolution plan for a corporate debtor does not discharge the personal guarantee liabilities of guarantors, as such liabilities arise from independent contracts of guarantee and are not discharged by involuntary discharge of principal debtor by operation of law.

    On this section: Definition of personal guarantor as individual who is surety in contract of guarantee to corporate debtor; found in Part II relating to corporate debtors

    Read the full order on eCourts India

  12. Rajesh Gupta vs Nbcc (india) LTD

    Supreme Court of India 24 Mar 2021 Binding (SC) Reportable

    Court's Decision & Legal Precedent

    The Adjudicating Authority's jurisdiction in approving a resolution plan is limited to verifying compliance with the mandatory requirements specified in Section 30(2) of the Insolvency and Bankruptcy Code, 2016. The Authority cannot modify the commercial terms of a resolution plan approved by the Committee of Creditors by the requisite majority (66% or more of voting share). If the Authority finds that the resolution plan does not meet the specified parameters (keeping corporate debtor as going concern, maximizing asset value, protecting stakeholder interests), it must remit the plan back to the Committee of Creditors for reconsideration rather than modifying it itself. The commercial wisdom of the Committee of Creditors is non-justiciable and cannot be interfered with by the Adjudicating Authority or Appellate Authority on equitable or quantitative grounds. Dissenting financial creditors must receive payment in monetary terms (cash) equivalent to their liquidation value, not in kind through equity or land transfers. The INR 750 crores deposited by the holding company JAL pursuant to Supreme Court orders in the Chitra Sharma case remains the property of JAL and cannot be treated as an asset of the corporate debtor JIL for purposes of the resolution plan. Homebuyers as a class are bound by the decision of their authorized representative in the Committee of Creditors under Section 25A(3A), and individual homebuyers cannot maintain separate challenges to the resolution plan. The Insolvency and Bankruptcy Code prevails over the Real Estate (Regulation and Development) Act, 2016 in case of conflict, though both statutes must be interpreted harmoniously. Concession Agreements with statutory authorities are not statutory contracts and their material terms cannot be modified without the consent of the other contracting party. Security interests not avoided under Section 43 of the Code cannot be unilaterally extinguished through a resolution plan.

    On this section: Definitions of Adjudicating Authority, financial creditor, financial debt, operational creditor, operational debt, resolution applicant, resolution plan, resolution professional, and voting share

    Read the full order on eCourts India

  13. Vodafone Idea LTD vs Union of India Department of Telecommunications through Its Secretary

    Supreme Court of India 01 Sep 2020 Binding (Supreme Court) - Landmark Decision with Substantial Judicial Impact Reportable

    Court's Decision & Legal Precedent

    The primary ratio decidendi are: (1) Spectrum constitutes a natural resource held by the government in sovereign trust and cannot be treated as property owned by corporate debtors subject to insolvency proceedings merely due to right to use granted under license; the question requires NCLT examination within two months as it is a substantial jurisdictional issue affecting the validity of insolvency proceedings initiated by telecom companies; (2) In spectrum sharing arrangements, the sharing operator has no liability for the original licensee's predecessor AGR dues as the sharing operator merely obtains right to use additional spectrum alongside its own spectrum - each operator remains liable only for AGR dues arising from spectrum it holds; (3) In spectrum trading arrangements, the buyer's liability for seller's predecessor AGR dues is determined by the Trading Guidelines - if entire spectrum is traded, buyer assumes seller's known past dues; if only partial spectrum is traded, buyer has no predecessor dues liability; any dues discovered after trade date are recoverable from buyer or seller jointly or severally at government discretion; (4) AGR dues determined by the Supreme Court judgment dated October 24, 2019 are final, binding and not subject to reassessment or fresh disputes; telecom operators must pay the determined amount through installment schedule without room for contesting the calculation; (5) The government as licensor retains sovereign privilege over spectrum allocation under Telegraph Act Section 4 and can enforce contractual conditions precedent (particularly payment of dues) before permitting license transfers or spectrum trading, notwithstanding IBC moratorium provisions, as these are conditions precedent to the right itself rather than post-right enforcement.

    On this section: Defines operational creditors; central to dispute about whether government should be treated as operational creditor with priority claims

    Read the full order on eCourts India

  14. Tata Teleservices LTD vs Union of India through Its Secretary

    Supreme Court of India 01 Sep 2020 Binding - Supreme Court Division Bench Judgment on Civil Appeal/Application Reportable

    Court's Decision & Legal Precedent

    The core ratio decidendi is: (1) Spectrum is a natural resource held by Government under exclusive privilege per Section 4 of Telegraph Act, granted to licensees subject to contractual conditions including payment of AGR dues. While the question of whether spectrum can be subjected to IBC proceedings involves significant jurisdictional issues to be examined by NCLT, it is clear that AGR dues accumulated over nearly 20 years must be paid in full by all telecom service providers without dispute or reassessment. (2) Payment of these dues aggregating Rs. 1,43,271.74 crores (as calculated by Court) shall be made in 10 equal yearly installments commencing from April 1, 2021 to March 31, 2031, with 10% due by March 31, 2021. This represents modification of Government's proposal for 20-year timeline as inappropriate given the sovereign nature of spectrum rights. (3) For telecom service providers sharing spectrum under 2015 Guidelines, each operator remains liable for AGR dues proportionate to spectrum held; sharing operator bears no liability for past dues of original licensee. (4) For spectrum trading, seller must clear all pre-trading dues; buyer liable for post-trading dues except those discovered later and unknown at trading date, recoverable jointly or severally at Government's discretion. (5) All telecom service providers must pay dues without any reduction, waiver, or relief other than the approved 10-year installment schedule with NPV protection. No dispute, reassessment, or recalculation is permitted. Default in payment results in automatic interest, penalty and interest on penalty, and constitutes contempt of court. (6) The question of whether spectrum can be subjected to insolvency proceedings is a jurisdictional matter for NCLT to decide within two months, examining whether such proceedings constitute bona fide attempts at revival or subterfuge to avoid AGR payment.

    On this section: Defines 'operational creditor' - parties argued Government/DoT qualifies as operational creditor for AGR dues

    Read the full order on eCourts India

The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.

Judgments citing this section

These may be obiter dicta or a precedent, for you to study. These are the judgments where this section is quoted.

  1. Supreme Court of India 25 Apr 2024 SCIN010308932021

    … In Civil Appeal no.1143 of 2022, the issue involved is whether the first respondent is a financial creditor within the meaning of sub-section (7) of Section 5 of the Insolvency and Bankruptcy Code, 2016 (for short, 'the IBC'). The corporate debtor, in this case, is M/s. Mount Shivalik Industries Limited. The impugned judgment and order dated 7th October 2021 holds that the first respondent is a financial creditor. As far as Civil Appeal nos.6991-6994 of 2022 are …

    Read this order on eCourtsIndia

  2. Supreme Court of India 25 Apr 2024 SCIN010072352022

    … In Civil Appeal no.1143 of 2022, the issue involved is whether the first respondent is a financial creditor within the meaning of sub-section (7) of Section 5 of the Insolvency and Bankruptcy Code, 2016 (for short, 'the IBC'). The corporate debtor, in this case, is M/s. Mount Shivalik Industries Limited. The impugned judgment and order dated 7th October 2021 holds that the first respondent is a financial creditor. As far as Civil Appeal nos.6991-6994 of 2022 are …

    Read this order on eCourtsIndia

Made under this section, and citing it

1 instrument states that it was made under this provision — the power to make it comes from here, so a change to any of them changes what this section requires in practice. Newest first.

Another 11 instruments name this provision in its title or its text without being made under it.

All subordinate legislation

Questions about Section 5

What have the courts held on Section 5 of the Insolvency and Bankruptcy Code?

Pioneer Urban Land and Infrastructure Ltd. v. Union of India (09 Aug 2019) is the leading judgment on this section among those set out below: Explanation to s.5(8)(f): real-estate allottees are financial creditors. Another 13 judgments on this section are set out below, all of them from the Supreme Court. They run from 2019 to 2023.

How do I find court cases under Section 5 of the Insolvency and Bankruptcy Code?

In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Insolvency and Bankruptcy Code 5, section 5 Insolvency and Bankruptcy Code, section 5 of the Insolvency and Bankruptcy Code. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 14 reported judgments on this section are set out on this page, beginning with Pioneer Urban Land and Infrastructure Ltd. v. Union of India (09 Aug 2019).

What should I read with Section 5 of the Insolvency and Bankruptcy Code, and has it changed?

Its own text turns on Chartered Accountants Act 6 (Certificate of practice), Companies Act 2 (Definitions), Companies Act 408 (Constitution of National Company Law Tribunal), section 7 (Initiation of corporate insolvency resolution process by financial creditor), and on 16 further provisions, so none of them can safely be read on its own. 18 other provisions in this corpus refer back to it. The rules and notifications made under it are where it actually bites, and there is one: most recently Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2023 (2023).

When was Section 5 of the Insolvency and Bankruptcy Code enacted?

Section 5 of the Insolvency and Bankruptcy Code, cited as Insolvency and Bankruptcy Code 5, was enacted on 28 May 2016 as Act 31 of 2016. It is in force as at the date shown on this page.

Other sections of this Act

Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 15 Oct 2026. This page is not a substitute for legal advice.