CHAPTER VII - OFFENCES AND PENALTIES
Section 68: Punishment for Concealment of Property under the Insolvency and Bankruptcy Code 2016
Section 68 of the Insolvency and Bankruptcy Code, 2016 creates criminal liability for specified acts by an officer of a corporate debtor involving concealment or fraudulent removal of property, falsification or concealment of records and certain dealings with corporate property before or after the insolvency commencement date.
Section 68 - Punishment for concealment of property
Where any officer of the corporate debtor has:
(i) within the twelve months immediately preceding the insolvency commencement date:
(a) wilfully concealed any property or part of such property of the corporate debtor or concealed any debt due to, or from, the corporate debtor, of the value of ten thousand rupees or more; or
(b) fraudulently removed any part of the property of the corporate debtor of the value of ten thousand rupees or more; or
(c) wilfully concealed, destroyed, mutilated or falsified any book or paper affecting or relating to the property of the corporate debtor or its affairs; or
(d) wilfully made any false entry in any book or paper affecting or relating to the property of the corporate debtor or its affairs; or
(e) fraudulently parted with, altered or made any omission in any document affecting or relating to the property of the corporate debtor or its affairs; or
(f) wilfully created any security interest over, transferred or disposed of any property of the corporate debtor which has been obtained on credit and has not been paid for unless such creation, transfer or disposal was in the ordinary course of the business of the corporate debtor; or
(g) wilfully concealed the knowledge of the doing by others of any of the acts mentioned in clauses (c), (d) or clause (e); or
(ii) at any time after the insolvency commencement date, committed any of the acts mentioned in sub-clauses (a) to (f) of clause (i) or has the knowledge of the doing by others of any of the things mentioned in sub-clauses (c) to (e) of clause (i); or
(iii) at any time after the insolvency commencement date, taken in pawn or pledge, or otherwise received the property knowing it to be so secured, transferred or disposed,
such officer shall be punishable with imprisonment for a term which shall not be less than three years but which may extend to five years, or with fine which shall not be less than one lakh rupees but may extend to one crore rupees, or with both.
Proviso: Nothing in this section shall render a person liable to punishment if he proves that he had no intent to defraud or to conceal the state of affairs of the corporate debtor.
Who can be liable under Section 68?
The provision applies to an "officer" of the corporate debtor. The expression "officer" is defined for the Code through Section 5(20), which adopts the meaning assigned to that expression in Section 2(59) of the Companies Act, 2013.
Acts committed before insolvency commencement
Clause (i) covers specified conduct occurring within the twelve months immediately preceding the insolvency commencement date. The provision includes concealment of property or debt of the prescribed value, fraudulent removal of property, falsification or concealment of books and papers, false entries, fraudulent alteration of documents, specified dealings with property obtained on credit, and concealment of knowledge of certain acts by others.
Acts committed after insolvency commencement
Clause (ii) extends the provision to specified acts committed after the insolvency commencement date. Clause (iii) separately covers taking property in pawn or pledge, or otherwise receiving it, with the knowledge specified in the section.
Punishment under Section 68
The statutory punishment is imprisonment for not less than three years and up to five years, or a fine of not less than Rs. 1 lakh and up to Rs. 1 crore, or both.
Defence under the proviso
The proviso expressly protects a person from punishment where that person proves that there was no intent to defraud or to conceal the state of affairs of the corporate debtor. The availability of the proviso depends on the evidence and circumstances of the particular case.
Related provisions
See also Section 66 - Fraudulent trading or wrongful trading, Section 67 - Proceedings under Section 66, Section 69 - Punishment for transactions defrauding creditors and Section 70 - Punishment for misconduct in the corporate insolvency resolution process.