Section 186: Punishment for False Information, Concealment, etc., by Bankrupt
Section 186 of the Insolvency and Bankruptcy Code, 2016 ("IBC") specifies criminal consequences for certain acts and omissions by a bankrupt during the bankruptcy process. It covers false representations, concealment of material information, interference with records, breach of statutory restrictions, failure to deliver estate property, unexplained loss of property and absconding.
Text and Meaning of Section 186
186. Punishment for false information, concealment, etc., by bankrupt. - If the bankrupt -
(a) knowingly makes a false representation or wilfully omits or conceals any material information while making an application for bankruptcy under section 122 or while providing any information during the bankruptcy process, he shall be punishable with imprisonment which may extend to six months, or with fine which may extend to five lakh rupees, or with both;
Explanation. - For the purposes of clause (a), a false representation or omission includes non-disclosure of the details of disposal of any property, which but for the disposal, would be comprised in the estate of the bankrupt, other than dispositions made in the ordinary course of business carried on by the bankrupt;
(b) fraudulently has failed to provide or deliberately withheld the production of, destroyed, falsified or altered, his books of account, financial information and other records under his custody or control, he shall be punishable with imprisonment which may extend to one year, or with fine which may extend to five lakh rupees, or with both;
(c) has contravened the restrictions under section 140 or the provisions of section 141, he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five lakh rupees, or with both;
(d) has failed to deliver the possession of any property comprised in the estate of the bankrupt under his possession or control, which he is required to deliver under section 156, he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five lakh rupees, or with both;
(e) has failed to account, without any reasonable cause or satisfactory explanation, for any loss incurred of any substantial part of his property comprised in the estate of the bankrupt from the date which is twelve months before the filing of the bankruptcy application, he shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to three times the value of the loss, or with both:
Provided that where such loss is not quantifiable, the total amount of fine imposed shall not exceed five lakh rupees;
(f) has absconded or attempts to abscond after the bankruptcy commencement date, he shall be punishable with imprisonment for a term which may extend to one year, or with fine which may extend to five lakh rupees, or with both;
Explanation. - For the purposes of this clause, a bankrupt shall be deemed to have absconded if he leaves, or attempts to leave the country without delivering the possession of any property which he is required to deliver to the bankruptcy trustee under section 156.
What Section 186 Covers
The provision is directed at misconduct by a person who is a bankrupt. The mental element varies with the particular clause. Clause (a), for example, refers to a person who knowingly makes a false representation or wilfully omits or conceals material information, while clause (b) addresses fraudulent failure and deliberate withholding, destruction, falsification or alteration of records.
Related Sections Explained
Section 122 - Application for Bankruptcy
Section 122 deals with an application for a bankruptcy order by a debtor or creditor in the circumstances specified by the Code. Section 186(a) applies where material information is knowingly misrepresented, wilfully omitted or concealed while making the bankruptcy application or while information is supplied during the bankruptcy process.
Sections 140 and 141 - Restrictions and Disabilities of a Bankrupt
Section 140 imposes statutory restrictions on a bankrupt, while section 141 provides for specified disabilities during the relevant period. Section 186(c) makes contravention of the restrictions under section 140 or the provisions of section 141 punishable in the manner stated in the provision.
Section 156 - Delivery of Property and Records to Bankruptcy Trustee
Section 156 concerns delivery to the bankruptcy trustee of property, books, papers and other records that the bankrupt is required to hand over. Section 186(d) penalises failure to deliver possession of property comprised in the bankrupt's estate, and the explanation to section 186(f) links absconding with leaving or attempting to leave the country without delivering property required under section 156.
Penalty Summary
| Clause | Conduct | Maximum punishment stated in Section 186 |
|---|---|---|
| (a) | False representation or wilful omission or concealment of material information | Imprisonment up to 6 months, or fine up to Rs. 5 lakh, or both |
| (b) | Fraudulent failure concerning records, or deliberate withholding, destruction, falsification or alteration | Imprisonment up to 1 year, or fine up to Rs. 5 lakh, or both |
| (c) | Contravention of section 140 restrictions or section 141 | Imprisonment up to 6 months, or fine up to Rs. 5 lakh, or both |
| (d) | Failure to deliver possession of estate property required under section 156 | Imprisonment up to 6 months, or fine up to Rs. 5 lakh, or both |
| (e) | Failure, without reasonable cause or satisfactory explanation, to account for specified substantial loss | Imprisonment up to 2 years, or fine up to 3 times the value of the loss, or both; where loss is not quantifiable, fine up to Rs. 5 lakh |
| (f) | Absconding or attempting to abscond after the bankruptcy commencement date | Imprisonment up to 1 year, or fine up to Rs. 5 lakh, or both |
Key Points
The explanation to clause (a) expressly treats non-disclosure of certain property disposals as a false representation or omission, except dispositions made in the ordinary course of the bankrupt's business. Clause (e) looks back to the period beginning twelve months before the bankruptcy application for an unexplained loss of a substantial part of property comprised in the bankrupt's estate. Clause (f) also contains a specific deeming rule for absconding where the bankrupt leaves or attempts to leave India without delivering property required to be delivered to the bankruptcy trustee under section 156.
This page is a statutory information resource. For an official and current legal text, consult India Code and the Insolvency and Bankruptcy Board of India legal framework.