Section 3 of the Insolvency and Bankruptcy Code 2016: Definitions
Section 3 contains general definitions used throughout the Insolvency and Bankruptcy Code, 2016. These definitions provide the statutory meaning of foundational terms such as claim, corporate person, corporate debtor, creditor, debt, default, financial institution, property, secured creditor and security interest.
Meaning and Scope of Section 3
Section 3 begins with the words "In this Code, unless the context otherwise requires". The definitions therefore operate across the Code, subject to context and to any more specific definition applicable to a particular Part or Chapter. For corporate insolvency matters, Section 3 should commonly be read with the additional definitions in Section 5 of the IBC.
The current statutory framework and amendment material can be verified through the IBBI Legal Framework and the India Code portal.
Section 3 Definitions
(1) Board
means the Insolvency and Bankruptcy Board of India established under sub-section (1) of section 188.
(2) bench
means a bench of the Adjudicating Authority.
(3) bye-laws
mean the bye-laws made by the insolvency professional agency under section 205.
(4) charge
means an interest or lien created on the property or assets of any person or any of its undertakings or both, as the case may be, as security and includes a mortgage.
(5) Chairperson
means the Chairperson of the Board.
(6) claim
means: (a) a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured; and (b) a right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured.
(7) corporate person
means a company as defined in clause (20) of section 2 of the Companies Act, 2013, a limited liability partnership as defined in clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008, or any other person incorporated with limited liability under any law for the time being in force, but does not include any financial service provider.
(8) corporate debtor
means a corporate person who owes a debt to any person.
(9) core services
means services rendered by an information utility for: (a) accepting electronic submission of financial information in the specified form and manner; (b) safe and accurate recording of financial information; (c) authenticating and verifying financial information submitted by a person; and (d) providing access to information stored with the information utility to persons as may be specified.
(10) creditor
means any person to whom a debt is owed and includes a financial creditor, operational creditor, secured creditor, unsecured creditor and decree-holder.
(11) debt
means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt.
(12) default
means non-payment of debt when the whole or any part or instalment of the amount of debt has become due and payable and is not paid by the debtor or corporate debtor, as the case may be.
(13) financial information
in relation to a person, includes records of debt; liabilities when solvent; assets over which security interest has been created; instances of default; balance sheet and cash-flow statements; and such other information as may be specified.
(14) financial institution
means: (a) a scheduled bank; (b) a financial institution as defined in section 45-I of the Reserve Bank of India Act, 1934; (c) a public financial institution as defined in clause (72) of section 2 of the Companies Act, 2013; and (d) such other institution as the Central Government may specify by notification.
(15) financial product
means securities, contracts of insurance, deposits, credit arrangements including loans and advances by banks and financial institutions, retirement benefit plans, small savings instruments, specified foreign currency contracts, or any other instrument as may be prescribed.
(16) financial service
includes accepting deposits; safeguarding and administering financial products belonging to another; effecting insurance contracts; offering or managing assets consisting of financial products; specified advisory or solicitation services; establishing or operating an investment scheme; maintaining or transferring ownership records of a financial product; underwriting; and selling, providing or issuing stored value or payment instruments or providing payment services.
(17) financial service provider
means a person engaged in the business of providing financial services in terms of an authorisation issued or registration granted by a financial sector regulator.
(18) financial sector regulator
means an authority or body constituted under law to regulate financial-sector services or transactions and includes the Reserve Bank of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority of India, Pension Fund Regulatory and Development Authority and such other regulatory authorities as may be notified by the Central Government.
(19) insolvency professional
means a person enrolled under section 206 with an insolvency professional agency as its member and registered with the Board as an insolvency professional under section 207.
(20) insolvency professional agency
means any person registered with the Board under section 201 as an insolvency professional agency.
(21) information utility
means a person registered with the Board as an information utility under section 210.
(22) notification
means a notification published in the Official Gazette; "notified" and "notify" are construed accordingly.
(23) person
includes an individual, Hindu Undivided Family, company, trust, partnership, limited liability partnership, any other entity established under a statute, and includes a person resident outside India.
(24) person resident in India
has the meaning assigned to that term in clause (v) of section 2 of the Foreign Exchange Management Act, 1999.
(25) person resident outside India
means a person other than a person resident in India.
(26) prescribed
means prescribed by rules made by the Central Government.
(27) property
includes money, goods, actionable claims, land and every description of property situated in India or outside India, and every description of interest including present or future or vested or contingent interest arising out of, or incidental to, property.
(27A) registered valuer
has the same meaning as assigned to it under Chapter XVII of the Companies Act, 2013.
(28) regulations
means the regulations made by the Board under this Code.
(29) Schedule
means the Schedule annexed to this Code.
(30) secured creditor
means a creditor in favour of whom security interest is created.
(31) security interest
means a right, title or interest or a claim to property, created in favour of or provided for a secured creditor by a transaction which secures payment or performance of an obligation, and includes mortgage, charge, hypothecation, assignment, encumbrance or any other agreement or arrangement securing payment or performance of an obligation of any person. A performance guarantee is excluded. The 2026 Explanation clarifies that a security interest exists only where the right, title, interest or claim to property arises pursuant to an agreement or arrangement by the act of two or more parties, and does not include a security interest created merely by operation of law.
(31A) service provider
means an insolvency professional, insolvency professional agency, information utility, registered valuer and any person falling within a category notified by the Central Government for rendering services in relation to insolvency and bankruptcy processes under the Code and registered with the Board.
(32) specified
means specified by regulations made by the Board under this Code; "specify" is construed accordingly.
(33) transaction
includes an agreement or arrangement in writing for the transfer of assets, funds, goods or services from or to the corporate debtor.
(34) transfer
includes sale, purchase, exchange, mortgage, pledge, gift, loan or any other form of transfer of right, title, possession or lien.
(35) transfer of property
means transfer of any property and includes transfer of any interest in the property and creation of any charge upon such property.
(36) workman
has the meaning assigned to it by the applicable statutory cross-reference in the Code.
(37) words and expressions used but not defined
provides that words and expressions used but not defined in the Code, but defined in the statutes specified in clause (37), have the meanings respectively assigned to them in those enactments. The current consolidated statutory text should be consulted for the operative cross-references.
Important 2026 Changes to Section 3
Registered valuer - Section 3(27A): The 2026 amendment expressly places the term in the Code and links its meaning to Chapter XVII of the Companies Act, 2013.
Security interest - Section 3(31): The inserted Explanation clarifies that a security interest must arise pursuant to an agreement or arrangement by the act of two or more parties. A security interest created merely by operation of law is excluded by the Explanation.
Service provider - Section 3(31A): The new definition brings insolvency professionals, insolvency professional agencies, information utilities, registered valuers and qualifying notified persons registered with the Board within a common defined expression.