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;
(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;
(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- corporate debtor; or a member or partner of the corporate debtor who is authorised to make an application for the corporate insolvency resolution process [or the pre-packaged insolvency resolution process, as the case may be,] [Inserted by Act No. 26 of 2021.] under the constitutional document of the corporate debtor; or an individual who is in charge of managing the operations and resources of the corporate debtor; or a person who has the control and supervision over the financial affairs of the corporate debtor;
(6) "dispute" includes a suit or arbitration proceedings relating to- the existence of the amount of debt; the quality of goods or service; or 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 alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes- money borrowed against the payment of interest; any amount raised by acceptance under any acceptance credit facility or its de-materialised equivalent; any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; 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; receivables sold or discounted other than any receivables sold on non-recourse basis; any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing; [Explanation. - For the purposes of this sub-clause,- 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 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;] 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; 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; 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 [or pre-packaged insolvency resolution process, as the case may be] [Inserted by Act No. 26 of 2021.] ;
(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; [***] [Omitted 'Proviso' by Act No. 1 of 2020 , dated 13.3.2020.]
(13) "insolvency resolution process costs" means- the amount of any interim finance and the costs incurred in raising such finance; the fees payable to any person acting as a resolution professional; any costs incurred by the resolution professional in running the business of the corporate debtor as a going concern; any costs incurred at the expense of the Government to facilitate the insolvency resolution process; and 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 [or by the corporate debtor during the pre-packaged insolvency resolution process period, as the case may be] [Inserted by Act No. 26 of 2021.] [and such other debt as may be notified] [Inserted by Act No. 1 of 2020 , dated 13.3.2020.] ;
(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 [Chapter VI and] [Inserted by Act No. 26 of 2021.] 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 or a designated partner as defined in clause (j) of section 2 of the Limited Liability Partnership Act, 2008, 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 [payment] [Substituted 'repayment' by Act No. 26 of 2018, dated 17.8.2018.] 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;
(24) "related party", in relation to a corporate debtor, means- a director or partner of the corporate debtor or a relative of a director or partner of the corporate debtor; a key managerial personnel of the corporate debtor or a relative of a key managerial personnel of the corporate debtor; 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; 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; 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; anybody 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; 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; any person on whose advice, directions or instructions, a director, partner or manager of the corporate debtor is accustomed to act; 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; any person who controls more than twenty per cent. of voting rights in the corporate debtor on account of ownership or a voting agreement; any person in whom the corporate debtor controls more than twenty per cent. of voting rights on account of ownership or a voting agreement; any person who can control the composition of the board of directors or corresponding governing body of the corporate debtor; any person who is associated with the corporate debtor on account of- participation in policy making processes of the corporate debtor; or having more than two directors in common between the corporate debtor and such person; or interchange of managerial personnel between the corporate debtor and such person; or provision of essential technical information to, or from, the corporate debtor;
(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 [or pursuant to section 54K, as the case may be] [Substituted by Act No. 8 of 2018, dated 18.1.2018] ];
(26) "resolution plan" means a plan proposed by [resolution applicant] [Substituted 'any person' by Act No. 8 of 2018, dated 18.1.2018] for insolvency resolution of the corporate debtor as a going concern in accordance with Part II; [Explanation. [Inserted by Act No. 26 of 2019, dated 5.8.2019.] - 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;] [Inserted by Act No. 26 of 2018, dated 17.8.2018.]
(27) "resolution professional", for the purposes of this Part, means an insolvency professional appointed to conduct the corporate insolvency resolution process [or the pre-packaged insolvency resolution process, as the case may be,] [Inserted by Act No. 26 of 2021.] 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. Chapter II Corporate Insolvency Resolution Process
Legal Commentary & Landmark Judgments: Section 5
Section 5 establishes the core definitional framework of Part II of the Insolvency and Bankruptcy Code, 2016, setting out the foundational classifications of corporate debtor, financial debt, operational debt, and dispute that govern the threshold admissibility of corporate insolvency.
Furthermore, Section 5(6) defines 'dispute' expansively to include suits or arbitration proceedings relating to the existence of debt, quality of goods/services, or breach of contractual representation.
Section 5 serves as the statutory gatekeeper for all insolvency litigation under Part II. Because financial creditors and operational creditors possess distinct legal standing, voting entitlements, and procedural hurdles, the characterization of a debt under Section 5(8) versus Section 5(21) directly dictates the creditor's substantive rights before the Adjudicating Authority.