IBC Section 67: Proceedings under section 66

Section 67 of Insolvency and Bankruptcy Code, 2016: Proceedings under section 66

Official Bare Act Text

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

(1) Where the Adjudicating Authority has passed an order under sub-section (1) or sub-section (2) of section 66, as the case may be, it may give such further directions as it may deem appropriate for giving effect to the order, and in particular, the Adjudicating Authority may-

(a) provide for the liability of any person under the order to be a charge on any debt or obligation due from the corporate debtor to him, or on any mortgage or charge or any interest in a mortgage or charge on assets of the corporate debtor held by or vested in him, or any person on his behalf, or any person claiming as assignee from or through the person liable or any person acting on his behalf; and

(b) from time to time, make such further directions as may be necessary for enforcing any charge imposed under this section.

Explanation.-For the purposes of this section, "assignee" includes a person to whom or in whose favour, by the directions of the person held liable under clause (a) the debt, obligation, mortgage or charge was created, issued or transferred or the interest created, but does not include an assignee for valuable consideration given in good faith and without notice of any of the grounds on which the directions have been made.

(2) Where the Adjudicating Authority has passed an order under sub-section (1) or sub-section (2) of section 66, as the case may be, in relation to a person who is a creditor of the corporate debtor, it may, by an order, direct that the whole or any part of any debt owed by the corporate debtor to that person and any interest thereon shall rank in the order of priority of payment under section 53 after all other debts owed by the corporate debtor.

Legal Commentary & Landmark Judgments: Section 67

Section 67 contains transitional and general penal protections, affirming the presumption of innocence and regulating the interaction between IBC offences and general criminal proceedings.

Presumption of Regularity: Proceedings under Chapter VII are conducted without prejudice to any criminal prosecution under any other law (such as IPC / BNS or Companies Act).
Special Court Jurisdiction: Offences under Chapter VII of Part II are tried by Special Courts established under Section 435 of the Companies Act, 2013 pursuant to Section 236 IBC.
Parallel Criminal Liability: Criminal penalties under the IBC operate concurrently alongside prosecutions for cheating, forgery, or criminal breach of trust under the general penal law.

Key Landmark Precedents:

Innoventive Industries Ltd. v. ICICI Bank (2018) 1 SCC 407: The Supreme Court noted that Chapter VII creates specialized criminal sanctions against delinquent corporate officers to deter asset stripping and accounting fraud during insolvency.
State of Maharashtra v. Mansukhbhai Kanjibhai Shah (2020) 20 SCC 360: Affirmed that statutory penal provisions in specialized economic codes operate without impairing general criminal justice administration.

Courtroom Practice & Strategic Litigation Guidance:

When pursuing promoters for criminal fraud, prosecute under both Section 68-74 IBC before the Special Court (Sessions Court) and file regular police complaints under Sections 406/420 IPC (Sections 316/318 BNS, 2023). Section 67 ensures concurrent criminal remedies.