Sections 219 and 220 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.
After an inspection or investigation under section 218, the Board may issue a show cause notice (section 219). A disciplinary committee then considers the investigating authority's report and may impose a penalty, suspend or cancel a registration, and direct disgorgement of unlawful gain (section 220). The Insolvency and Bankruptcy Code (Amendment) Act, 2026 substitutes section 219 entirely and rewrites much of section 220, including a new appeal to the National Company Law Appellate Tribunal. This article explains section 220 as per the IBBI consolidated text of the Code amended up to 12 August 2021, section 219 as substituted, and the changes.
The show cause notice is issued by the Board after an inspection or investigation. In the consolidated text the disciplinary committee consists of whole-time members only and may impose a penalty of three times the loss or three times the unlawful gain, whichever is higher (not more than one crore rupees where the amount cannot be quantified), suspend or cancel registration, and direct disgorgement. The 2026 Act lets the Board constitute one or more committees, requires a hearing, makes the penalty "up to" the same measure, raises the unquantifiable cap to two crore rupees, and adds an appeal within thirty days.
Section 219: the show cause notice
Before (consolidated text): "The Board may, upon completion of an inspection or investigation under section 218, issue a show cause notice to such insolvency professional agency or insolvency professional or information utility, and carry out inspection of such insolvency professional agency or insolvency professional or information utility in such manner, giving such time for giving reply, as may be specified by regulations."
After the 2026 Act (section 65 of the Amendment Act, a substituted section): "Where the Board, upon completion of an inspection or investigation under section 218 or on the basis of material available on record, is of the prima facie opinion that sufficient cause exists to take action under section 220, it may issue a show cause notice to a service provider in such manner, providing such period for giving reply, as may be specified."
| Feature | Before | After the 2026 Act |
|---|---|---|
| Marginal heading | Show cause notice to insolvency professional agency or its member or information utility. | Show cause notice to service provider. |
| Trigger | Completion of inspection or investigation under section 218 | Completion of inspection or investigation under section 218, or "on the basis of material available on record" |
| Threshold | None stated | The Board is "of the prima facie opinion that sufficient cause exists to take action under section 220" |
| Addressee | Agency, professional or utility | "a service provider" (see article 128 for the definition inserted in section 3) |
| Further inspection | Inspection may be carried out | Not mentioned |
| Manner and reply time | "as may be specified by regulations" | "as may be specified" |
Section 70 of the Amendment Act also substitutes clause (zzza) in section 240(2): "the manner and period under section 219". 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 this change has been notified. A person who has received a show cause notice, or who wishes to respond to one, can take legal dispute resolution advice before the reply is sent.
Section 220 as printed in the consolidated text
(1) The committee. "The Board shall constitute a disciplinary committee to consider the reports of the investigating Authority submitted under sub-section (6) of section 218". The proviso: "the members of the disciplinary committee shall consist of whole-time members of the Board only".
(2) Powers on examination. If the committee "is satisfied that sufficient cause exists, it may impose penalty as specified in sub-section (3) or suspend or cancel the registration of the insolvency professional or, suspend or cancel the registration of insolvency professional agency or information utility as the case may be."
(3) Penalty. Where an agency, professional or utility has contravened any provision of the Code or the rules or regulations, the committee may impose a penalty which shall be (i) three times the amount of the loss caused, or likely to have been caused, to persons concerned, or (ii) three times the amount of the unlawful gain made, "whichever is higher". Proviso: where the loss or gain is not quantifiable, the total penalty "shall not exceed more than one crore rupees" (the words are printed that way).
(4) Disgorgement. "Notwithstanding anything contained in sub-section (3), the Board may direct any person who has made unlawful gain or averted loss by indulging in any activity in contravention of this Code, or the rules or regulations made thereunder, to disgorge an amount equivalent to such unlawful gain or aversion of loss."
(5) Restitution. The Board may take action to provide restitution to the person who suffered loss from the amount disgorged, "if the person who suffered such loss is identifiable and the loss so suffered is directly attributable to such person".
(6) Regulations. The Board may make regulations on the procedure, the period and the manner for restitution claims. (Section 240(2)(zzzb) refers to "sub-section (6)" and "sub-section (7)" of section 220 for these matters; section 220 as printed has sub-sections (1) to (6), so the reference is quoted as printed and not corrected.)
What the Amendment Act, 2026 changes in section 220
Section 66 of the Amendment Act amends section 220 in these places.
| Provision | As printed in the consolidated text | After the 2026 Act |
|---|---|---|
| (1) | The Board shall constitute a disciplinary committee ...; proviso: whole-time members only | "The Board shall constitute one or more disciplinary committees consisting of one or more persons from amongst its Chairperson, whole-time members or officers not below the rank of the Executive Director for the purposes of this section." (substituted sub-section; the Act prints no proviso to it) |
| (1A) | none | "The show cause notice issued under section 219 shall be referred to a disciplinary committee constituted under sub-section (1)." |
| (2) | Committee satisfied that sufficient cause exists may impose penalty, or suspend or cancel registration | "Where the disciplinary committee, after giving the service provider an opportunity of being heard, is satisfied that sufficient cause exists, it may, impose a penalty as provided in sub-section (3), or suspend or cancel the registration of the service provider, or direct disgorgement under sub-section (4)." |
| (3) opening | "... may impose penalty which shall be" | "Where any service provider has contravened any provisions of this Code or rules or regulations made thereunder, the disciplinary committee may impose penalty which shall be up to—" |
| (3) proviso | "more than one crore rupees" | "two crore rupees" |
| (4) and (5) | "Board" | "disciplinary committee", wherever the word occurs in the two sub-sections |
| (7) | none | Any person aggrieved by an order of the disciplinary committee under sub-sections (2) to (5) may appeal to the National Company Law Appellate Tribunal "within a period of thirty days from the date of receipt of the order" |
| (8) | none | The Appellate Tribunal, if satisfied that sufficient cause prevented the appeal within thirty days, may allow it to be filed "within a further period not exceeding fifteen days" |
Putting the Act's words into the old text gives, for sub-section (3) after the 2026 Act (built from the Act's words): the committee may impose a penalty which shall be up to (i) three times the amount of the loss caused, or likely to have been caused, to persons concerned on account of the contravention, or (ii) three times the amount of the unlawful gain, whichever is higher; where the loss or gain is not quantifiable, the penalty "shall not exceed" two crore rupees.
Three points. First, the Act's clause (e) replaces "Board" with "disciplinary committee" in sub-sections (4) and (5), so disgorgement and restitution become the committee's functions; sub-section (2) also lists disgorgement as one of the committee's orders. Second, the appeal in new sub-section (7) lies against an order "under sub-sections (2) to (5)". Third, the Appellate Tribunal's power in sub-section (8) to allow a late appeal is limited to "a further period not exceeding fifteen days".
Example (invented). The Board's investigating authority reports that Meridian Resolution Services, an agency, earned an unlawful gain of rupees twenty lakh. After the 2026 Act, the Board issues a show cause notice under the new section 219; a disciplinary committee hears the service provider and may impose a penalty up to three times that gain (or the higher of that and three times the loss), or direct disgorgement. The service provider has thirty days from receipt of the order to appeal. The amounts and the number are invented for illustration.
Rules and regulations
The set that implements these sections is the Insolvency and Bankruptcy Board of India (Inspection and Investigation) Regulations, 2017; the copy consulted is amended up to 02-06-2026. The date of that copy does not show that any provision of the Amendment Act, 2026 is in force.
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 with a show cause notice or a disciplinary order?
Replies to a show cause notice and challenges to a disciplinary order turn on dates, reasons and the sections above. We can review the notice and the order with you through legal dispute resolution support and draft the reply plan from the text.
Key takeaways
- Section 219, as substituted, lets the Board issue a show cause notice on completion of an inspection or investigation or on material on record, when it holds a prima facie opinion that sufficient cause exists.
- Section 220 penalty is three times the loss or three times the unlawful gain, whichever is higher; the cap where not quantifiable is one crore rupees (consolidated text) and two crore rupees after the 2026 Act.
- Disgorgement and restitution are in sub-sections (4) and (5).
- The 2026 Act adds an appeal to the National Company Law Appellate Tribunal within thirty days, with up to fifteen days more.
- The Amendment Act, 2026 comes into force by notification; check whether it has been notified.
Read next
- Sections 217 and 218: complaints against and investigation of service providers
- Section 235A: power of the Adjudicating Authority to impose penalties
- Sections 221 to 223: grants, fund of the Board, accounts and audit
- The IBC ecosystem: the four institutional pillars
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.