IBC Section 87: Application against decision of resolution professional

Section 87 of Insolvency and Bankruptcy Code, 2016: Application against decision of resolution professional

Official Bare Act Text

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

(1) The debtor or the creditor who is aggrieved by the action taken by the resolution professional under section 86 may, within ten days of such decision, make an application to the Adjudicating Authority challenging such action on any of the following grounds, namely:-

(a) that the resolution professional has not given an opportunity to the debtor or the creditor to make a representation; or

(b) that the resolution professional colluded with the other party in arriving at the decision; or

(c) that the resolution professional has not complied with the requirements of section 86.

(2) The Adjudicating Authority shall decide the application referred to in sub-section (1) within fourteen days of such application, and make an order as it deems fit.

(3) Where the application under sub-section (1) has been allowed by the Adjudicating Authority, it shall forward its order to the Board and the Board may take such action as may be required under Chapter VI of Part IV against the resolution professional.

Legal Commentary & Landmark Judgments: Section 87

Section 87 regulates the statutory effect of an admission order passed under Section 86, declaring a full moratorium of one hundred and eighty days on all qualifying debts.

180-Day Moratorium: On the date of admission under Section 86, a moratorium shall commence for a period of one hundred and eighty days.
Bar on Legal Actions for Qualifying Debts: Any pending legal proceeding in respect of any qualifying debt shall be deemed to be stayed, and creditors shall not initiate any legal proceedings.
Debtor Restrictions (Section 87(3)): The debtor shall not act as a director of any company, dispose of any assets, or travel abroad without the permission of the Adjudicating Authority.

Key Landmark Precedents:

Dilip B. Jiwrajka v. Union of India (2024) 5 SCC 436: The Supreme Court held that the moratorium under Section 87 operates as a statutory freeze to enable the completion of the fresh start process without creditor interference.
State Bank of India v. V. Ramakrishnan (2018) 17 SCC 394: Affirmed that Section 87 creates an absolute statutory bar against coercive debt enforcement during the 180-day window.

Courtroom Practice & Strategic Litigation Guidance:

The debtor must strictly comply with Section 87(3) restrictions during the 180-day moratorium: do not take fresh loans, do not accept directorships, and seek prior court permission before any foreign travel to avoid revocation under Section 91.