IBC Section 79: Definitions

Section 79 of Insolvency and Bankruptcy Code, 2016: Definitions

Official Bare Act Text

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

In this Part, unless the context otherwise requires,—

(1) "Adjudicating Authority" means the Debt Recovery Tribunal constituted under sub-section (1) of section 3 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993;

(2) "associate" of the debtor means- a person who belongs to the immediate family of the debtor; a person who is a relative of the debtor or a relative of the spouse of the debtor; a person who is in partnership with the debtor; a person who is a spouse or a relative of any person with whom the debtor is in partnership; a person who is employer of the debtor or employee of the debtor; a person who is a trustee of a trust in which the beneficiaries of the trust include a debtor, or the terms of the trust confer a power on the trustee which may be exercised for the benefit of the debtor; and a company, where the debtor or the debtor along with his associates, own more than fifty per cent. of the share capital of the company or control the appointment of the board of directors of the company. Explanation. - For the purposes of this sub-section, "relative",with reference to any person, means anyone who is related to another, if- they are members of a Hindu Undivided Family; one person is related to the other in such manner as may be prescribed;

(3) "bankrupt" means- a debtor who has been adjudged as bankrupt by a bankruptcy order under section 126; each of the partners of a firm, where a bankruptcy order under section 126 has been made against a firm; or any person adjudged as an undischarged insolvent;

(4) "bankruptcy" means the state of being bankrupt;

(5) "bankruptcy debt", in relation to a bankrupt, means- any debt owed by him as on the bankruptcy commencement date; any debt for which he may become liable after bankruptcy commencement date but before his discharge by reason of any transaction entered into before the bankruptcy commencement date; and any interest which is a part of the debt under section 171;

(6) "bankruptcy commencement date" means the date on which a bankruptcy order is passed by the Adjudicating Authority under section 126;

(7) "bankruptcy order" means an order passed by an Adjudicating Authority under section 126;

(8) "bankruptcy process" means a process against a debtor under Chapters IV and V of this Part;

(9) "bankruptcy trustee" means the insolvency professional appointed as a trustee for the estate of the bankrupt under section 125;

(10) "Chapter" means a chapter under this Part;

(11) "committee of creditors" means a committee constituted under section 134;

(12) "debtor" includes a judgement-debtor;

(13) "discharge order" means an order passed by the Adjudicating Authority discharging the debtor under sections 92, 119 and section 138, as the case may be;

(14) "excluded assets" for the purposes of this part includes- unencumbered tools, books, vehicles and other equipment as are necessary to the debtor or bankrupt for his personal use or for the purpose of his employment, business or vocation, unencumbered furniture, household equipment and provisions as are necessary for satisfying the basic domestic needs of the bankrupt and his immediate family; any unencumbered personal ornaments of such value, as may be prescribed, of the debtor or his immediate family which cannot be parted with, in accordance with religious usage; any unencumbered life insurance policy or pension plan taken in the name of debtor or his immediate family; and an unencumbered single dwelling unit owned by the debtor of such value as may be prescribed;

(15) "excluded debt" means- liability to pay fine imposed by a court or tribunal; liability to pay damages for negligence, nuisance or breach of a statutory, contractual or other legal obligation; liability to pay maintenance to any person under any law for the time being in force; liability in relation to a student loan; and any other debt as may be prescribed;

(16) "firm" means a body of individuals carrying on business in partnership whether or not registered under section 59 of the Indian Partnership Act, 1932;

(17) "immediate family" of the debtor means his spouse, dependent children and dependent parents;

(18) "partnership debt" means a debt for which all the partners in a firm are jointly liable;

(19) "qualifying debt" means amount due, which includes interest or any other sum due in respect of the amounts owed under any contract, by the debtor for a liquidated sum either immediately or at certain future time and does not include- an excluded debt; a debt to the extent it is secured; and any debt which has been incurred three months prior to the date of the application for fresh start process;

(20) "repayment plan" means a plan prepared by the debtor in consultation with the resolution professional under section 105 containing a proposal to the committee of creditors for restructuring of his debts or affairs;

(21) "resolution professional" means an insolvency professional appointed under this part as a resolution professional for conducting the fresh start process or insolvency resolution process;

(22) "undischarged bankrupt" means a bankrupt who has not received a discharge order under section 138. Chapter II Fresh Start Process

Legal Commentary & Landmark Judgments: Section 79

Section 79 provides foundational statutory definitions for Part III, defining 'bankruptcy debt', 'excluded assets', 'excluded debts', 'fresh start process', and 'qualifying debt' to structure individual insolvency.

Excluded Assets (Section 79(14)): Protects unencumbered basic household furniture, personal clothing, tools of trade, and a residential dwelling unit within prescribed value limits from seizure.
Excluded Debts (Section 79(15)): Debts that cannot be discharged or compromised: court fines, damages for negligence/breach of trust, maintenance liabilities, and student loans.
Qualifying Debt Defined: An unsecured debt owed by an individual that is due and liquidated, qualifying for discharge under the Fresh Start Process.
Bankruptcy Debt Defined: Encompasses any debt or liability to which the bankrupt is subject at the bankruptcy commencement date.

Key Landmark Precedents:

Dilip B. Jiwrajka v. Union of India (2024) 5 SCC 436: The Supreme Court analyzed the definition of excluded assets and excluded debts under Section 79, affirming that essential livelihood tools and family maintenance are constitutionally protected from insolvency attachment.
Lalit Kumar Jain v. Union of India (2021) 9 SCC 321: Affirmed that personal guarantee liabilities constitute valid debts under Section 79, subject to restructuring and bankruptcy adjudication.

Courtroom Practice & Strategic Litigation Guidance:

When preparing individual statement of affairs, carefully segregate 'excluded assets' (family clothing, cooking utensils, tools of trade) under Section 79(14) from the attachable estate. Excluded debts (maintenance/fines) cannot be discharged under Section 92 or 138.