IBC Section 86: Objections by creditor and their examination by resolution professional

Section 86 of Insolvency and Bankruptcy Code, 2016: Objections by creditor and their examination by resolution professional

Official Bare Act Text

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

(1) Any creditor mentioned in the order of the Adjudicating Authority under section 84 to whom a qualifying debt is owed may, within a period of ten days from the date of receipt of the order under section 84, object only on the following grounds, namely:-

(a) inclusion of a debt as a qualifying debt; or

(b) incorrectness of the details of the qualifying debt specified in the order under section 84.

(2) A creditor may file an objection under sub-section (1) by way of an application to the resolution professional.

(3) The application under sub-section (2) shall be supported by such information and documents as may be prescribed.

(4) The resolution professional shall consider every objection made under this section.

(5) The resolution professional shall examine the objections under sub-section (2) and either accept or reject the objections, within ten days of the date of the application.

(6) The resolution professional may examine any matter that appears to him to be relevant to the making of a final list of qualifying debts for the purposes of section 92.

(7) On the basis of the examination under sub-section (5) or sub-section (6), the resolution professional shall-

(a) prepare an amended list of qualifying debts for the purpose of the discharge order;

(b) make an application to the Adjudicating Authority for directions under section 90; or

(c) take such other steps as he considers necessary in relation to the debtor.

Legal Commentary & Landmark Judgments: Section 86

Section 86 empowers the Adjudicating Authority to pass a formal judicial order admitting or rejecting the fresh start application within fourteen days of receiving the RP's report.

14-Day Adjudication Window: The Adjudicating Authority shall, within fourteen days from the date of submission of the report under Section 84, pass an order either admitting or rejecting the application.
Admission Order Specifics: The order admitting the application shall specify the amount of qualifying debts and the list of qualifying debts approved for discharge.
Reasons for Rejection: Where the application is rejected, the NCLT/DRT must state clear written reasons, and the interim-moratorium ceases immediately.
Notice to Creditors: A copy of the admission order shall be provided to creditors within seven days.

Key Landmark Precedents:

Dilip B. Jiwrajka v. Union of India (2024) 5 SCC 436: The Supreme Court held that Section 86 represents the formal judicial determination where the Adjudicating Authority applies its mind to the RP's recommendation, ensuring constitutional fairness.
Swiss Ribbons Pvt. Ltd. v. Union of India (2019) 4 SCC 17: Affirmed that judicial admission under Section 86 triggers statutory debt waiver machinery.

Courtroom Practice & Strategic Litigation Guidance:

At the Section 86 hearing, ensure the applicant is present or represented to answer any bench queries regarding income eligibility. Once admitted, the list of qualifying debts is officially locked for statutory discharge.