(1) If during the corporate insolvency resolution process or a liquidation process, it is found that any business of the corporate debtor has been carried on with intent to defraud creditors of the corporate debtor or for any fraudulent purpose, the Adjudicating Authority may on the application of the resolution professional pass an order that any persons who were knowingly parties to the carrying on of the business in such manner shall be liable to make such contributions to the assets of the corporate debtor as it may deem fit.
(2) On an application made by a resolution professional during the corporate insolvency resolution process, the Adjudicating Authority may by an order direct that a director or partner of the corporate debtor, as the case may be, shall be liable to make such contribution to the assets of the corporate debtor as it may deem fit, if-
(a) before the insolvency commencement date, such director or partner knew or ought to have known that the there was no reasonable prospect of avoiding the commencement of a corporate insolvency resolution process in respect of such corporate debtor; and
(b) such director or partner did not exercise due diligence in minimising the potential loss to the creditors of the corporate debtor.
Explanation.-For the purposes of this section a director or partner of the corporate debtor, as the case may be, shall be deemed to have exercised due diligence if such diligence was reasonably expected of a person carrying out the same functions as are carried out by such director or partner, as the case may be, in relation to the corporate debtor.
Insolvency and Bankruptcy Code 2016
Section 61 Appeals and Appellate Authority
Section 62 Appeal to Supreme Court
Section 63 Civil court not to have jurisdiction
Section 64 Expeditious disposal of applications
Section 65 Fraudulent or malicious initiation of proceedings
Section 66 Fraudulent trading or wrongful trading
Section 67 Proceedings under section 66
CHAPTER VII OFFENCES AND PENALTIES
Section 68 Punishment for concealment of property
Section 69 Punishment for transactions defrauding creditors
Section 70 Punishment for misconduct in course of corporate insolvency resolution process