IBC Section 184: Punishment for false information, etc., by creditor in insolvency resolution process

Section 184 of Insolvency and Bankruptcy Code, 2016: Punishment for false information, etc., by creditor in insolvency resolution process

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

(1) If a debtor or creditor provides information which is false in any material particulars to the resolution professional, he shall be punishable with imprisonment for a term which may extend to one year, or with fine which may extend to five lakh rupees, or with both.

(2) If a creditor promises to vote in favour of the repayment plan dishonestly by accepting any money, property or security from the debtor, he shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to three times the amount or its equivalent of such money, property or security accepted by such creditor, as the case may be, or with both:

Provided that where such amount is not quantifiable, the total amount of fine shall not exceed five lakh rupees.

Legal Commentary & Landmark Judgments: Section 184

Section 184 prescribes criminal penal sanctions for creditors who knowingly make false claims or submit false information in individual insolvency resolution or bankruptcy.

Criminal Penal Offence: Applies to any creditor who knowingly makes a false claim, submits misleading representations, or withholds material information.
Penal Consequences: Punishable with imprisonment for a term which may extend to one year, or with a fine which may extend to five lakh rupees, or with both.
Deterrence Against Fabricated Claims: Ensures that the individual insolvency process is not abused by unscrupulously inflating debt figures to capture voting control.

Key Landmark Precedents:

Swiss Ribbons Pvt. Ltd. v. Union of India (2019) 4 SCC 17: The Supreme Court emphasized that penal provisions under the Code operate as strong deterrents against fraudulent manipulation of the insolvency process by any stakeholder.
Phoenix ARC Pvt. Ltd. v. Spade Financial Services Ltd. (2021) 3 SCC 475: Reaffirmed that manufactured or collusive debts submitted to insolvency administrators attract severe legal and penal consequences.

Courtroom Practice & Strategic Litigation Guidance:

Debtors faced with inflated or fictitious creditor claims should place documentary evidence of payment on record and request the Adjudicating Authority to make a formal penal reference under Section 184 to the IBBI or Special Court.