Section 119: Discharge Order

Section 119 of the Insolvency and Bankruptcy Code, 2016 provides for a discharge order in relation to debts covered by a repayment plan. It permits the repayment plan to provide for early discharge or discharge after complete implementation of the plan and clarifies that the debtor's discharge does not release another person from that person's liability for the debt.

Meaning of discharge order under the IBC

Section 79(13) defines a discharge order as an order passed by the Adjudicating Authority discharging the debtor under Sections 92, 119 or 138, as the case may be. Section 119 specifically concerns discharge connected with a repayment plan in the insolvency resolution process.

A repayment plan is defined in Section 79(20) as 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 the debtor's debts or affairs. A resolution professional, under Section 79(21), is an insolvency professional appointed under Part III to conduct the fresh start process or insolvency resolution process.

Text of Section 119

Application for discharge by the resolution professional

Under Section 119(1), the resolution professional applies to the Adjudicating Authority for the discharge order on the basis of the repayment plan. The discharge concerns the debts mentioned in that plan. The Adjudicating Authority may then pass the discharge order in accordance with the statutory process and the terms of the repayment plan.

Early discharge and discharge after complete implementation

Section 119(2) recognises two possible points at which the repayment plan may provide for discharge:

• Early discharge: the plan may itself provide for discharge before complete implementation, subject to its approved terms and the Code.
• Discharge on complete implementation: the plan may provide for discharge after the repayment plan has been completely implemented.

The discharge mechanism should therefore be read together with Section 114 concerning the order on the repayment plan, Section 115 concerning the effect of that order, and Section 117 concerning completion of the repayment plan.

Forwarding the discharge order to the Board

Section 119(3) requires the discharge order to be forwarded to the Insolvency and Bankruptcy Board of India for recording entries in the register referred to in Section 196. The Board is the statutory regulator established under the Code and exercises the powers and performs the functions assigned to it by the IBC.

Effect on liability of other persons

Section 119(4) expressly limits the effect of the discharge order. A discharge of the debtor under Section 119 does not discharge another person from liability in respect of that person's debt. Accordingly, the statutory discharge is not, merely by reason of Section 119, a release of every other person who may have a separate liability connected with the debt.

Relationship with completion or premature end of the repayment plan

Section 117 deals with completion of the repayment plan and the resolution professional's notice and report following completion. By contrast, Section 118 applies when the repayment plan has not been fully implemented in respect of all persons bound by it within the period specified in the plan. Section 119 addresses the discharge order contemplated by the repayment plan.

This article is intended as a statutory reference. For proceedings under Part III, verify the current text of the Code, applicable commencement notification, rules, IBBI regulations and relevant judicial orders.