Part III - Insolvency Resolution and Bankruptcy for Individuals and Partnership Firms

Chapter I - Preliminary

Section 78 IBC 2016: Application to Individuals and Partnership Firms

Section 78 of the Insolvency and Bankruptcy Code, 2016 sets out the application of Part III to matters relating to fresh start, insolvency and bankruptcy of individuals and partnership firms and prescribes a statutory default threshold of Rs. 1,000, subject to the Central Government's power to notify a higher threshold not exceeding Rs. 1 lakh.

Text of Section 78

78. Application.

This Part shall apply to matters relating to fresh start, insolvency and bankruptcy of individuals and partnership firms where the amount of the default is not less than one thousand rupees:

Provided that the Central Government may, by notification, specify the minimum amount of default of higher value which shall not be more than one lakh rupees.

Meaning of Section 78

Section 78 is the opening application provision of Part III of the Code. It identifies the subject matter covered by Part III and states the minimum amount of default specified in the section. The provision must, however, be read with the commencement notifications issued under the Code because different provisions and different categories of persons have been brought into force at different times.

Default Threshold Under Section 78

The statutory text states that the amount of default must be not less than Rs. 1,000.
The proviso authorises the Central Government to prescribe, by notification, a higher minimum default amount.
Any higher amount notified under the proviso cannot exceed Rs. 1 lakh.

Current Commencement for Personal Guarantors

The Central Government, by notification dated 15 November 2019, brought specified provisions of Part III into force from 1 December 2019 insofar as they relate to personal guarantors to corporate debtors. The provisions brought into force include Section 78, except with regard to the fresh start process, Section 79, Sections 94 to 187 and specified rule-making provisions.

Accordingly, the practical operation of Section 78 must be understood together with the notified commencement of Part III for personal guarantors to corporate debtors. The broader statutory wording of Section 78 continues to refer to fresh start, insolvency and bankruptcy of individuals and partnership firms, but commencement of the relevant provisions is governed by notifications issued under the Code.

Meaning of Default

For the Code generally, default means non-payment of a 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 the corporate debtor, as the case may be. Section 78 uses the amount of default as the threshold for application of Part III.

Adjudicating Authority

For insolvency matters of individuals and firms under Part III, the Code provides for the Debt Recovery Tribunal as the Adjudicating Authority, subject to the provisions governing personal guarantors to corporate debtors and the jurisdictional framework contained in the Code.

Important: Section 78 should not be read in isolation. Before applying Part III to a particular debtor, verify whether the relevant provisions have been brought into force for that category of person and whether any applicable notification, rule or judicial decision affects the proceeding.

Official Legal Resources

For the current Code and commencement framework, refer to the India Code and the Insolvency and Bankruptcy Board of India legal framework. Official rules, regulations, notifications and circulars are available through the IBBI legal framework.

Last reviewed: 30 September 2026.