Section 5 of the Insolvency and Bankruptcy Code 2016: Definitions for Part II
Section 5 defines expressions specifically used in Part II of the Insolvency and Bankruptcy Code, 2016. It includes core terms governing corporate insolvency resolution, liquidation and pre-packaged insolvency, including financial creditor, financial debt, operational creditor, operational debt, resolution applicant, resolution plan and voting share.
Scope of Section 5
Section 5 begins with the expression "In this Part, unless the context otherwise requires". Its definitions therefore apply specifically to Part II and must be read with the general definitions in Section 3 of the IBC. The monetary gateway for Part II is dealt with in Section 4.
For the current statute, amendments, notifications and regulations, refer to the India Code portal and the IBBI Legal Framework.
Section 5 Definitions Explained
(1) Adjudicating Authority
For Part II, the National Company Law Tribunal constituted under section 408 of the Companies Act, 2013.
(2) auditor
A chartered accountant certified to practise as such by the Institute of Chartered Accountants of India under section 6 of the Chartered Accountants Act, 1949.
(2A) avoidance transaction
A transaction referred to in sections 43, 45, 49 and 50. This definition was inserted by the Insolvency and Bankruptcy Code (Amendment) Act, 2026.
(2B) base resolution plan
A resolution plan provided by the corporate debtor under section 54A(4)(c). The earlier clause (2A) was re-numbered as clause (2B) by the 2026 amendment.
(3) Chapter
A Chapter under Part II.
(4) constitutional document
In relation to a corporate person, includes the articles of association, memorandum of association of a company and incorporation document of a limited liability partnership.
(5) corporate applicant
Includes the corporate debtor; an authorised member or partner; an individual in charge of managing the operations and resources of the corporate debtor; or a person having control and supervision over its financial affairs, subject to the statutory text.
(5A) corporate guarantor
A corporate person who is the surety in a contract of guarantee to a corporate debtor.
(6) dispute
Includes a suit or arbitration proceeding relating to the existence of the amount of debt, the quality of goods or service, or breach of a representation or warranty.
(7) financial creditor
A person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred.
(8) financial debt
A debt along with interest, if any, disbursed against consideration for the time value of money, and includes the financing transactions specified in clauses (a) to (i) of section 5(8). Amounts raised from an allottee under a real estate project are deemed to have the commercial effect of a borrowing under the statutory Explanation.
(9) financial position
In relation to a person, the financial information of that person as on a certain date.
(9A) fraudulent or wrongful trading
Fraudulent or wrongful trading as referred to in section 66. This definition was inserted by the 2026 amendment.
(10) information memorandum
A memorandum prepared by the resolution professional under section 29(1).
(11) initiation date
The date on which the relevant creditor or corporate applicant makes an application to the Adjudicating Authority for initiating CIRP or PPIRP, as applicable. Following the 2026 amendment, where multiple CIRP applications concerning the same corporate debtor are pending on the insolvency commencement date, the initiation date is the date on which the first such application was made.
(12) insolvency commencement date
The date of admission by the Adjudicating Authority of an application for initiating CIRP under section 7, 9 or 10, as applicable.
(13) insolvency resolution process costs
Includes interim finance and its raising costs, resolution professional fees, specified going-concern costs, Government-facilitation costs and other costs specified by the Board.
(14) insolvency resolution process period
The period beginning on the insolvency commencement date and governed by the CIRP timeline provisions of the Code.
(15) interim finance
Financial debt raised by the resolution professional during CIRP or by the corporate debtor during PPIRP, as applicable, together with such other debt as may be notified.
(16) liquidation cost
Costs incurred by the liquidator during liquidation, subject to the regulations specified by the Board.
(17) liquidation commencement date
The date on which liquidation proceedings commence in accordance with section 33 or section 59, as applicable.
(18) liquidator
An insolvency professional appointed as liquidator in accordance with Chapter III or Chapter V of Part II, as applicable.
(19) officer
For the Chapters specified in the current Code, an officer who is in default under the Companies Act, 2013 or a designated partner under the Limited Liability Partnership Act, 2008, as applicable.
(20) operational creditor
A person to whom an operational debt is owed and includes a person to whom such debt has been legally assigned or transferred.
(21) operational debt
A claim in respect of provision of goods or services, including employment, or a debt in respect of payment of dues arising under law and payable to the Central Government, a State Government or a local authority.
(22) personal guarantor
An individual who is the surety in a contract of guarantee to a corporate debtor.
(23) personnel
Includes directors, managers, key managerial personnel, designated partners and employees, if any, of the corporate debtor.
(23A) preliminary information memorandum
A memorandum submitted by the corporate debtor under section 54G(1)(b).
(23B) pre-packaged insolvency commencement date
The date of admission of an application for initiating PPIRP by the Adjudicating Authority under section 54C(4)(a).
(23C) pre-packaged insolvency resolution process costs
Includes interim finance and raising costs, resolution professional fees and expenses, specified going-concern costs, Government-facilitation costs and other costs as may be specified.
(23D) pre-packaged insolvency resolution process period
The period beginning from the pre-packaged insolvency commencement date and ending when the relevant order under Chapter III-A is passed by the Adjudicating Authority.
(24) related party in relation to a corporate debtor
Covers the persons and entities listed in section 5(24), including specified directors, partners, key managerial personnel, relatives, connected partnerships or companies, controlling persons and persons associated through management, policy making or prescribed corporate relationships.
(24A) related party in relation to an individual
Covers the relationships specified in section 5(24A), including specified relatives, partners, trusts, companies, bodies corporate and persons acting on or giving relevant advice, directions or instructions.
(25) resolution applicant
A person who, individually or jointly with another person, submits a resolution plan to the resolution professional pursuant to the applicable invitation under the Code, including the PPIRP route where applicable.
(26) resolution plan
A plan proposed by a resolution applicant for insolvency resolution of the corporate debtor as a going concern in accordance with Part II. After the 2026 amendment, the Explanation expressly contemplates restructuring by merger, amalgamation, demerger and sale of one or more assets of the corporate debtor through one or more plans proposed by one or more resolution applicants, subject to specified conditions.
(27) resolution professional
For Part II, an insolvency professional appointed to conduct CIRP or PPIRP, as applicable, and includes an interim resolution professional.
(28) voting share
The share of voting rights of a single financial creditor in the committee of creditors based on the proportion of financial debt owed to that creditor in relation to the financial debt owed by the corporate debtor to members of the committee of creditors who are eligible to vote. The eligible-to-vote clarification was added by the 2026 amendment.
Financial Debt Under Section 5(8)
Section 5(8) is wider than a conventional loan definition. In addition to money borrowed against interest, it includes specified financing arrangements such as acceptance credit, bonds and similar instruments, finance or capital leases, qualifying receivables transactions, transactions having the commercial effect of borrowing, derivatives, counter-indemnity obligations and liabilities under guarantees or indemnities relating to the listed transactions.
The statutory Explanation to section 5(8)(f) treats an amount raised from an allottee under a real estate project as an amount having the commercial effect of a borrowing. The expressions "allottee" and "real estate project" take their meanings from the Real Estate (Regulation and Development) Act, 2016.
Related Party Definitions
Section 5 contains separate detailed definitions for a related party in relation to a corporate debtor and a related party in relation to an individual. Because these provisions depend on specific relationships, ownership percentages, control, management links and family relationships, the exact statutory clauses should be checked whenever related-party status affects voting, eligibility, avoidance analysis or another right under the Code.
Effect of the 2026 Changes
The 2026 amendments make several concepts express within Section 5. Avoidance transactions are now directly defined by reference to sections 43, 45, 49 and 50, while fraudulent or wrongful trading is directly linked to section 66. The amended initiation-date rule addresses multiple pending CIRP applications. The resolution-plan definition expressly accommodates sale of one or more assets through one or more plans, subject to specified conditions, and voting share is calculated by reference to financial debt owed to committee members who are eligible to vote.