Section 220 IBC: Disciplinary Committee, Penalty, Disgorgement and Appeal
Section 220 of the Insolvency and Bankruptcy Code, 2016 governs the constitution and powers of IBBI disciplinary committees, the consequences of contraventions by service providers, restitution from disgorged amounts, and the statutory appeal to the National Company Law Appellate Tribunal.
Updated as on 30 September 2026, including the Insolvency and Bankruptcy Code (Amendment) Act, 2026 and the IBBI regulatory amendments of June 2026.
What Section 220 provides
Section 220 forms the principal disciplinary provision in Chapter VI of Part IV of the Code. It operates with Section 219, under which IBBI may issue a show cause notice where the statutory prima facie threshold is met. The notice is then referred to a disciplinary committee constituted under Section 220(1).
Section 220(1): Constitution of disciplinary committees
The Board must constitute one or more disciplinary committees consisting of one or more persons chosen from its Chairperson, whole-time members, or officers not below the rank of Executive Director.
The 2026 amendment replaced the earlier structure under which the provision referred to a disciplinary committee whose members were whole-time members of the Board. The revised provision expressly permits multiple disciplinary committees and expands the pool of eligible members.
Section 220(1A): Reference of show cause notice
Sub-section (1A), inserted in 2026, provides that a show cause notice issued under Section 219 is to be referred to a disciplinary committee constituted under Section 220(1).
Section 220(2): Hearing and disciplinary action
The disciplinary committee must give the service provider an opportunity of being heard. If, after the hearing, it is satisfied that sufficient cause exists, it may impose a penalty under sub-section (3), suspend or cancel the registration of the service provider, or direct disgorgement under sub-section (4).
Meaning of "service provider"
The 2026 amendments introduced a common statutory expression, "service provider", for the IBC regulatory framework. The current framework covers insolvency professionals, insolvency professional agencies, information utilities, registered valuers, and other notified categories of persons rendering services in relation to insolvency and bankruptcy processes and registered with IBBI, as applicable under the Code.
Section 220(3): Monetary penalty
Where a service provider contravenes the Code or the rules or regulations made under it, the disciplinary committee may impose a penalty up to the higher of:
- three times the amount of the loss caused, or likely to have been caused, to the persons concerned by the contravention; or
- three times the amount of the unlawful gain made on account of the contravention.
Where the loss or unlawful gain cannot be quantified, the proviso now caps the total penalty at Rs. 2 crore. The earlier page reflected the former Rs. 1 crore ceiling, which was changed by the 2026 amendment.
Section 220(4): Disgorgement of unlawful gain or averted loss
Sub-section (4) is a separate remedial power. Notwithstanding sub-section (3), the disciplinary committee may direct a person who made an unlawful gain or averted a loss through activity contrary to the Code, rules or regulations to disgorge an amount equivalent to that unlawful gain or loss averted.
Section 220(5): Restitution
The disciplinary committee may take action to provide restitution from the amount disgorged to a person who suffered loss because of a contravention, where that person is identifiable and the loss is directly attributable to the contravention.
Section 220(6): Regulations for restitution
The Board may make regulations specifying the procedure for claiming restitution, the period within which a claim may be made, and the manner in which the amount is to be restituted.
Section 220(7) and (8): Appeal to NCLAT
A person aggrieved by an order of the disciplinary committee under sub-sections (2) to (5) may appeal to the National Company Law Appellate Tribunal (NCLAT) within 30 days from receipt of the order. If NCLAT is satisfied that sufficient cause prevented filing within those 30 days, it may permit the appeal to be filed within a further period not exceeding 15 days.
| Provision | Current legal effect |
|---|---|
| Section 220(1) | IBBI constitutes one or more disciplinary committees of eligible Chairperson, whole-time members or officers not below Executive Director rank. |
| Section 220(1A) | Section 219 show cause notice is referred to a disciplinary committee. |
| Section 220(2) | Opportunity of hearing; penalty, suspension or cancellation of registration, or disgorgement may follow where sufficient cause exists. |
| Section 220(3) | Monetary penalty linked to loss or unlawful gain; where unquantifiable, total penalty cannot exceed Rs. 2 crore. |
| Section 220(4) | Disciplinary committee may order disgorgement of unlawful gain or loss averted. |
| Section 220(5)-(6) | Restitution from disgorged amounts and regulation-making power for the restitution procedure. |
| Section 220(7)-(8) | Appeal to NCLAT within 30 days, with a maximum further 15 days on sufficient cause. |
IBBI Inspection and Investigation Regulations
The disciplinary process is supplemented by the IBBI (Inspection and Investigation) Regulations, 2017. IBBI lists the consolidated regulations as amended up to 2 June 2026. The 2026 regulatory amendment aligned the definitions of "Disciplinary Committee" and "service provider" with the amended Code and made consequential changes concerning the disciplinary committee's disgorgement and restitution functions.
Relationship between Sections 218, 219 and 220
Section 218 deals with investigation of service providers. Section 219 authorises a show cause notice where IBBI forms the required prima facie opinion after an inspection or investigation or on the basis of material available on record. Section 220 then provides the disciplinary committee mechanism, hearing, sanctions, remedial orders and appellate route.
Official legal resources
For the latest authoritative material, refer to the Insolvency and Bankruptcy Code, 2016 on India Code and the IBBI Legal Framework. Current IBBI circulars are available through the IBBI Circulars page.