Civil Penalty Regime explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The 2026 Amendment substitutes Sections 74 and 76 and abolishes their criminal prosecution frameworks. In their place, new Sections 67B and 67C impose civil penalties of up to three times the loss caused or unlawful gain, subject to a five crore rupee cap where the amount is unquantifiable.
Section 67B — contravention of moratorium or resolution plan
Section 74 is substituted. The criminal prosecution framework — imprisonment plus fine — for contravention of the moratorium under Section 14 and of a resolution plan under Section 31 is abolished. In its place, a civil penalty regime under new Section 67B applies:
| Offence | New penalty (Section 67B) |
|---|---|
| Contravention of moratorium — by the corporate debtor, its officers or creditors | Civil penalty up to 3x loss caused or unlawful gain, or Rs. 5 crore cap where unquantifiable |
| Contravention of an approved resolution plan — by the CD, officers, creditors or bound persons | Same as above |
Section 67B is described as specifically addressing a gap where creditors could violate these provisions without criminal exposure.
Under the substituted regime the penalty reaches the corporate debtor, its officers and creditors for moratorium contravention, and bound persons as well for plan contravention. A creditor who enforces security in breach of the moratorium is now directly exposed — which was the practical enforcement gap.
Section 67C — non-disclosure by an operational creditor
Section 76 is substituted. The criminal prosecution framework for an operational creditor's concealment of a dispute or of full payment in a Section 9 application is abolished, and a civil penalty under new Section 67C applies:
- Offence: an operational creditor knowingly concealing a dispute or full payment in a Section 9 application.
- Penalty: mandated at up to 3x loss or unlawful gain, or a Rs. 5 crore cap where unquantifiable.
Section 64A — frivolous or vexatious proceedings
New Section 64A empowers the Adjudicating Authority to impose a civil penalty of up to Rs. 2 crores on any person who initiates or continues frivolous or vexatious proceedings under Part II.
It is a deterrent against abuse of the insolvency process for purposes of debt recovery, harassment or unjustified delay, and the penalty is in addition to any costs that may be awarded.
Why the shift from criminal to civil
- Speed. A civil penalty is imposed by the Adjudicating Authority within the insolvency proceeding; a prosecution runs on its own timetable, long outliving the process it was meant to protect.
- Proportionality to harm. A penalty measured at up to three times loss or unlawful gain scales with the contravention; a fixed fine range does not.
- Reach. Civil penalties attach to creditors and bound persons, who were not realistically exposed under a criminal framework aimed at officers.
- Deterrence where it operates. Moratorium and plan contraventions are commercial decisions taken by institutions, and a monetary consequence proportionate to gain addresses the incentive directly.
The measure of the penalty
Both Sections 67B and 67C use the same formula: up to three times the loss caused or the unlawful gain, with a five crore rupee cap where the amount is unquantifiable. Two consequences follow:
- Quantification matters to the respondent. Where loss or gain is quantifiable and small, the multiple is small; the five crore cap applies only where the amount cannot be quantified.
- There is no floor. The provision sets a ceiling, leaving the Adjudicating Authority to fit the penalty to the contravention.
What survives as criminal
The substitution is targeted. The offences under Sections 68 to 73 — concealment of property, transactions defrauding creditors, misconduct during the CIRP, falsification of books, wilful omissions and false representations — remain criminal, as does Section 77 for false information in a Section 10 application. Section 65 continues to penalise fraudulent or malicious initiation with a fine of one lakh to one crore rupees.
Compliance checklist
- Advise creditors that moratorium contravention now carries direct civil exposure.
- Assess penalty exposure as a multiple of loss or gain, not a fixed fine.
- Check whether the amount is quantifiable before assuming the five crore cap.
- Ensure Section 9 applications disclose any dispute or payment received.
- Evaluate Section 64A risk before continuing a contested application.
- Remember Sections 68 to 73 remain criminal.
Common mistakes
- Advising that moratorium contravention is now merely regulatory.
- Assuming the penalty is capped at five crore in every case.
- Treating the substitution of Sections 74 and 76 as decriminalising the Code generally.
- Filing a Section 9 application without disclosing a part payment.