Section 123: Application by Creditor under the Insolvency and Bankruptcy Code 2016
Section 123 of the Insolvency and Bankruptcy Code, 2016 (IBC) sets out the documents, statements and procedural requirements for a creditor seeking a bankruptcy order under Chapter IV of Part III.
Updated: 30 September 2026
Meaning and scope of Section 123
A creditor who is permitted by the Adjudicating Authority to seek bankruptcy after the insolvency resolution process must comply with Section 123. The provision identifies the records and debt information that accompany the application, contains special requirements for secured creditors, permits proposal of an insolvency professional as bankruptcy trustee, addresses a deceased debtor, and regulates the form, fee and withdrawal of the application.
Section 123 - Application by creditor
(1) The application for bankruptcy by the creditor shall be accompanied by-
(a) the records of insolvency resolution process undertaken under Chapter III;
(b) a copy of the order passed by the Adjudicating Authority under Chapter III permitting the creditor to apply for bankruptcy;
(c) details of the debts owed by the debtor to the creditor as on the date of the application for bankruptcy; and
(d) such other information as may be prescribed.
(2) An application under sub-section (1) made in respect of a debt which is secured, shall be accompanied with-
(a) a statement by the creditor having the right to enforce the security that he shall, in the event of a bankruptcy order being made, give up his security for the benefit of all the creditors of the bankrupt; or
(b) a statement by the creditor stating-
(i) that the application for bankruptcy is only in respect of the unsecured part of the debt; and
(ii) an estimated value of the unsecured part of the debt.
(3) If a secured creditor makes an application for bankruptcy and submits a statement under clause (b) of sub-section (2), the secured and unsecured parts of the debt shall be treated as separate debts.
(4) The creditor may propose an insolvency professional as the bankruptcy trustee in the application for bankruptcy.
(5) An application for bankruptcy under sub-section (1), in case of a deceased debtor, may be filed against his legal representatives.
(6) The application for bankruptcy shall be in such form and manner and accompanied by such fee as may be prescribed.
(7) An application for bankruptcy by the creditor shall not be withdrawn without the permission of the Adjudicating Authority.
Secured creditor under Section 123(2)
A secured creditor must make a choice reflected in the application. The creditor may state that the security will be surrendered for the benefit of all creditors if a bankruptcy order is made, or may confine the bankruptcy application to the unsecured portion of the debt and state its estimated value. Where the second course is adopted, Section 123(3) treats the secured and unsecured portions as separate debts.
Bankruptcy trustee and Adjudicating Authority
Under Section 123(4), the creditor may propose an insolvency professional to act as the bankruptcy trustee. For bankruptcy proceedings concerning personal guarantors to corporate debtors, the statutory framework must be read with the applicable rules and IBBI regulations. Section 123(7) also prevents unilateral withdrawal: permission of the Adjudicating Authority is required.
Application where the debtor has died
Section 123(5) expressly permits an application to be filed against the legal representatives of a deceased debtor. This provision should be read with the other applicable provisions of Part III and the procedural rules governing the relevant bankruptcy process.
Related provisions
Section 123 forms part of Chapter IV of Part III. It follows Section 122 - Application by debtor and is followed by Section 124 - Effect of application. The gateway for a bankruptcy application is contained in Section 121 - Application for bankruptcy.