Fraudulent or malicious initiation of proceedings
Section 65 of the Insolvency and Bankruptcy Code, 2016 deals with fraudulent or malicious initiation of proceedings. If, any person initiates the insolvency resolution process or liquidation proceedings fraudulently or with malicious intent for any purpose other than for the resolution of insolvency, or liquidation, as the case may be, the Adjudicating Authority may impose upon such person a penalty which shall no The Act was enacted on 28 May 2016.
(1) If, any person initiates the insolvency resolution process or liquidation proceedings fraudulently or with malicious intent for any purpose other than for the resolution of insolvency, or liquidation, as the case may be, the Adjudicating Authority may impose upon such person a penalty which shall not be less than one lakh rupees, but may extend to one crore rupees.
(2) If, any person initiates voluntary liquidation proceedings with the intent to defraud any person, the Adjudicating Authority may impose upon such person a penalty which shall not be less than one lakh rupees but may extend to one crore rupees.
1[(3) If any person initiates the pre-packaged insolvency resolution process--
(a) fraudulently or with malicious intent for any purpose other than for the resolution of insolvency; or
(b) with the intent to defraud any person, the Adjudicating Authority may impose upon such person a penalty which shall not be less than one lakh rupees, but may extend to one crore rupees.]
Section 65, The Insolvency and Bankruptcy Code, 2016 (Act 31 of 2016).
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.
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Landmark Apartments Pvt. LTD vs Union of India
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: Real estate developer can challenge admission contending insolvency process invoked fraudulently, maliciously, or for purpose other than resolution
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Spaze Towers Private Limited vs Union of India
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: Allows real estate developers to challenge applications filed with fraudulent intent or mala fide purpose
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Uppal Chadha Hi Tech Developers Pvt. LTD vs Union of India
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: The Court notes developers can use this section to argue that insolvency has been triggered fraudulently or with malicious intent, providing protection against arbitrary invocation by speculative investors.
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Ramky Infrastructure Ltd. v. Hi-Reach Construction Equipments Pvt. Ltd.
Court's Decision & Legal Precedent
Final Order order-4.pdf 2024-02-12 DATE VERIFIED. CRP 377/2020 Art 227. M.G. Priyadarsini. Isolate: NCLT wrongly closed the s.65 IA as not maintainable; the Adjudicating Authority must enquire into fraudulent or malicious initiation under IBC 65; the s.65 consequence is penalty, not a parallel civil trial of forgery. Cites Embassy Property + Beacon. Do not pad IBC 7/9 (admission vehicle) or 60 (Embassy already fills 60).
On this section: IBC 65: NCLT must enquire into fraudulent or malicious initiation; closing the IA as not maintainable is a failure of jurisdiction; the s.65 consequence is penalty (Ramky, Telangana HC). Do not pad 7/9 or 60 (Embassy already fills 60).
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.
Questions about Section 65
What have the courts held on Section 65 of the Insolvency and Bankruptcy Code?
Landmark Apartments Pvt. LTD vs Union of India (09 Aug 2019) is the leading judgment on this section among those set out below: Real estate developer can challenge admission contending insolvency process invoked fraudulently, maliciously, or for purpose other than resolution. Another 3 judgments on this section are set out below, 3 of them from the Supreme Court. They run from 2019 to 2024.
How do I find court cases under Section 65 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 65, section 65 Insolvency and Bankruptcy Code, section 65 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. 4 reported judgments on this section are set out on this page, beginning with Landmark Apartments Pvt. LTD vs Union of India (09 Aug 2019).
When was Section 65 of the Insolvency and Bankruptcy Code enacted?
Section 65 of the Insolvency and Bankruptcy Code, cited as Insolvency and Bankruptcy Code 65, 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
- 240. Power to make regulations2349 words
- 5. Definitions2326 words
- 3. Definitions1381 words
- 29A. Person not eligible to be resolution applicant1152 words
- 239. Power to make rules963 words
- 196. Powers and functions of Board942 words
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 14 Oct 2026. This page is not a substitute for legal advice.