Section 123 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.
A creditor who wants a bankruptcy order against an individual or a firm must file an application that carries specific documents and, if the debt is secured, a statement about the security. Section 123 sets all of this out. It also deals with a deceased debtor, with proposing a bankruptcy trustee and with withdrawal. This article reads the section as printed in the IBBI consolidated text of the Code amended up to 12 August 2021. A creditor planning such an application can discuss it with our recovery suit team.
A creditor's application for bankruptcy must be accompanied by the records of the insolvency resolution process, a copy of the order permitting the creditor to apply, details of the debts owed as on the date of the application and other prescribed information. A creditor with a secured debt must also file a statement that he will give up his security for all creditors, or that he applies only for the unsecured part and its estimated value. He may propose a bankruptcy trustee, the application may be filed against the legal representatives of a deceased debtor, and it cannot be withdrawn without permission.
Section 123(1): what the application must carry
"The application for bankruptcy by the creditor shall be accompanied by":
| Clause | Document or information |
|---|---|
| (a) | The records of the insolvency resolution process undertaken under Chapter III |
| (b) | A copy of the order passed by the Adjudicating Authority under Chapter III permitting the creditor to apply for bankruptcy |
| (c) | Details of the debts owed by the debtor to the creditor as on the date of the application for bankruptcy |
| (d) | Such other information as may be prescribed |
Clauses (a) and (b) tie the application to the earlier process. Section 121(1) lists the three orders after which an application may be made; see our article on sections 121 and 122, which also describes the three-month window and the change that the Amendment Act, 2026 makes to the list of orders. Clause (c) fixes the debt as at the date of the application, not as at the date of an earlier claim. Clause (d) leaves further information to be prescribed. Section 123 itself does not mention the statement of affairs that section 122(1)(b) requires from a debtor.
Section 123(2) and (3): secured debts
Sub-section (2): "An application under sub-section (1) made in respect of a debt which is secured, shall be accompanied with":
- (a) "a statement by the creditor having the right to enforce the security that he shall, in the event of a bankruptcy order being made, give up his security for the benefit of all the creditors of the bankrupt"; or
- (b) "a statement by the creditor stating" (i) that the application for bankruptcy is only in respect of the unsecured part of the debt, and (ii) an estimated value of the unsecured part of the debt.
Sub-section (3): "If a secured creditor makes an application for bankruptcy and submits a statement under clause (b) of sub-section (2), the secured and unsecured parts of the debt shall be treated as separate debts."
The choice is therefore between two statements:
| Choice | Statement | Consequence |
|---|---|---|
| Give up the security | The creditor will give up his security for the benefit of all the creditors if a bankruptcy order is made | The security goes into the pool for all creditors |
| Apply for the unsecured part only | The application is only for the unsecured part, with an estimated value | The secured and unsecured parts are treated as separate debts |
The design mirrors what section 110 requires of a secured creditor in the repayment plan stage; see our article on section 110. The consequence of a bankruptcy order for secured creditors who keep their security is in section 128(2), which is "subject to the provisions of section 123"; see our article on sections 127 and 128.
Example. Westgate Credit Limited lent a large sum to Anwar Sheikh, secured on a shop. After the repayment plan is rejected, Westgate applies for bankruptcy. It can file a statement that it will give up the shop for the benefit of all creditors if a bankruptcy order is made. Or it can state that it applies only for the shortfall, the unsecured part, giving an estimate of its value, in which case the secured and unsecured parts are treated as separate debts. It cannot simply file the application and say nothing about the security.
Section 123(4) to (7): trustee, deceased debtor, form and withdrawal
Proposing a trustee (sub-section (4)). "The creditor may propose an insolvency professional as the bankruptcy trustee in the application for bankruptcy." If one is proposed, section 125 requires the Authority to direct the Board to confirm that no disciplinary proceedings are pending; see our article on section 125.
Deceased debtor (sub-section (5)). "An application for bankruptcy under sub-section (1), in case of a deceased debtor, may be filed against his legal representatives." The sub-section extends the application to the legal representatives. It does not describe what a legal representative's liability is, and this article does not add to it. Check the current law for the corresponding provisions on legal representatives.
Form and fee (sub-section (6)). The application "shall be in such form and manner and accompanied by such fee as may be prescribed". The Insolvency and Bankruptcy Board of India (Bankruptcy Process for Personal Guarantors to Corporate Debtors) Regulations, 2019 is the regulation set for bankruptcy of personal guarantors; the copy consulted is amended up to 02-06-2026. No rules or regulations on other individuals or on partnership firms are in the texts consulted, so no form or fee is given here.
Withdrawal (sub-section (7)). "An application for bankruptcy by the creditor shall not be withdrawn without the permission of the Adjudicating Authority." Section 122(4) uses "leave" for the debtor's application; section 123(7) uses "permission" for the creditor's. The text uses different words for the same idea, and this article reads both as requiring the Authority's approval.
Joint creditors
Section 121(1) lets a creditor apply "individually or jointly with other creditors". Section 123 is written in the singular, "the creditor". It does not say how a joint application should present the secured-debt statements or the details of debts. That point is left to the form and manner prescribed, which are not in the texts consulted.
How section 123 fits
After the application is filed, the Adjudicating Authority acts on the bankruptcy trustee (sections 124 and 125) and passes the bankruptcy order (section 126); see our articles on the bankruptcy trustee and the interim moratorium and on the bankruptcy order under section 126. A general overview is in our note on the bankruptcy application under sections 121 to 123.
The Amendment Act, 2026
The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (No. 6 of 2026) does not amend section 123 as printed in the texts consulted. It amends section 121, which governs when this application may be made. The Amendment Act, 2026 comes into force on the date or dates the Central Government notifies; the notification is not in the texts consulted, so check whether that change has been notified.
Amendments and notifications made after 12 August 2021, other than the Amendment Act, 2026, are not in the texts consulted and should be checked.
Need help preparing a creditor's bankruptcy application?
The secured-creditor statement is the part of section 123 that most affects what a lender keeps. Our recovery suit team can review your security documents, your debt statement and the earlier orders before you choose between giving up the security and applying for the unsecured part only.
Key takeaways
- The application must carry the process records, a copy of the order permitting it, debt details as at the application date and any prescribed information.
- A secured creditor must either promise to give up his security or limit the application to the unsecured part, with an estimate.
- In the second case the secured and unsecured parts are separate debts.
- The creditor may propose a bankruptcy trustee.
- The application may be filed against the legal representatives of a deceased debtor.
- Withdrawal needs the Authority's permission.
Read next
- Sections 121 and 122: application for bankruptcy and application by the debtor
- Section 125: appointment of the bankruptcy trustee
- Sections 127 and 128: validity and effect of the bankruptcy order
- Section 110: secured creditors and the repayment plan
Disclaimer: Based on the IBBI consolidated text of the Insolvency and Bankruptcy Code, 2016 amended up to 12 August 2021 and on the Insolvency and Bankruptcy Code (Amendment) Act, 2026 (No. 6 of 2026), which comes into force on the date or dates notified by the Central Government, as consulted on 2 October 2026. It explains the words of the statute only; commencement notifications, other amendments made after 12 August 2021, notified thresholds, the rules and IBBI regulations, and the way tribunals and courts apply these sections should be checked. This article is general information, not legal advice; check the official text before acting.