Section 224 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.
Section 224 forms the Insolvency and Bankruptcy Fund "for the purposes of insolvency resolution, liquidation and bankruptcy of persons under the Code". It lists what is credited to the Fund, lets a contributor apply to the Adjudicating Authority to withdraw up to its own contribution when proceedings begin against it, and provides for an administrator. The Insolvency and Bankruptcy Code (Amendment) Act, 2026 adds a new source of credit and substitutes sub-section (3). This article follows the IBBI consolidated text of the Code amended up to 12 August 2021 and then shows the changes.
A Fund is formed. In the consolidated text it is credited with Central Government grants, contributions by persons, amounts from other sources, and investment income. A contributor that faces proceedings under the Code may apply to the Adjudicating Authority to withdraw funds not exceeding what it contributed, for payments to workmen, protecting assets, incidental costs or prescribed purposes. The Central Government appoints an administrator by notification. The 2026 Act adds a fifth credit, and makes the withdrawal rule apply as one limb of a substituted sub-section (3).
Section 224(1): the Fund and its purpose
"There shall be formed a Fund to be called the Insolvency and Bankruptcy Fund (hereafter in this section referred to as the 'Fund') for the purposes of insolvency resolution, liquidation and bankruptcy of persons under the Code."
This is a separate fund from the Fund of the Board in section 222 (see article 130). The Fund of the Board pays for the Board itself. The Fund formed here is for the processes of insolvency resolution, liquidation and bankruptcy.
Section 224(2): what is credited
As printed in the consolidated text, the following amounts are credited to the Fund:
| Clause | Credit |
|---|---|
| (a) | the grants made by the Central Government for the purposes of the Fund |
| (b) | the amount deposited by persons as contribution to the Fund |
| (c) | the amount received in the Fund from any other source; and |
| (d) | the interest or other income received out of the investment made from the Fund. |
Clause (b) is the one that creates contributors. The Code does not say how much a person must or may contribute, or on what terms; that is for the rules (section 239(2) and the other matters it lists).
Section 224(3): a contributor's withdrawal
"A person who has contributed any amount to the Fund may, in the event of proceedings initiated in respect of such person under this Code before an Adjudicating Authority, make an application to such Adjudicating Authority for withdrawal of funds not exceeding the amount contributed by it, for making payments to workmen, protecting the assets of such persons, meeting the incidental costs during the proceedings or such other purposes as may be prescribed."
The conditions are:
- the applicant has contributed an amount;
- proceedings have been initiated in respect of that person under the Code before an Adjudicating Authority;
- the application goes to that Adjudicating Authority;
- the amount withdrawn must not exceed what the person contributed; and
- the purposes are payments to workmen, protecting the assets of such persons, incidental costs during the proceedings, "or such other purposes as may be prescribed".
Example (invented). Ashoka Textiles Limited, a company, deposited a contribution to the Fund when it was in good standing. Proceedings are later initiated against it under the Code before the Adjudicating Authority. Under section 224(3) it may apply to withdraw funds up to its own contribution, for example to pay workmen. It cannot withdraw more than it put in. If the company's directors or lenders want to test a particular plan for using the Fund, a legal consultation can help read the text against the rules.
Section 224(4): the administrator
"The Central Government shall, by notification, appoint an administrator to administer the fund in such manner as may be prescribed." The Code gives no name or qualification. Section 239(2)(zj) is the rule-making matter for "the manner of administering the fund".
What the Amendment Act, 2026 changes
Section 67 of the Insolvency and Bankruptcy Code (Amendment) Act, 2026 (No. 6 of 2026) amends section 224 in two places.
| Provision | As printed in the consolidated text | After the 2026 Act |
|---|---|---|
| (2)(c) | "the amount received in the Fund from any other source; and" | "the amount received in the Fund from any other source;" (the word "and" is omitted) |
| (2)(d) | "...made from the Fund." | "...made from the Fund; and" |
| (2)(e) | none | "(e) amounts from such other sources as may be prescribed." |
| (3) | A person who has contributed ... may ... make an application ... for withdrawal of funds ... | Substituted: "The sums credited to the Fund may be utilised— (a) by a person who has contributed any amount to the Fund under clause (b) of sub-section (2), in the event of proceedings initiated in respect of such person under this Code before an Adjudicating Authority, by making an application to such Adjudicating Authority for withdrawal of funds not exceeding the amount contributed by it, for making payment to workmen, protecting the assets of such persons, meeting the incidental cost during the proceedings or such purposes as may be prescribed; and (b) for such other purposes and in such manner as may be prescribed." |
Reading the substitution: the old withdrawal right becomes clause (a) of a wider provision. The old text said "payments", "costs" and "such other purposes as may be prescribed"; the Act's clause (a) says "payment", "cost" and "such purposes as may be prescribed", and the Act adds clause (b), under which the sums credited may be utilised "for such other purposes and in such manner as may be prescribed". The two texts are not in conflict: the Act substitutes sub-section (3) as a whole, and the words above are the Act's own. The Act's drafting of the amendment to sub-section (2) numbers its three steps (a), (b) and (c) under the heading "(a) in sub-section (2)", a printing quirk that does not affect the result.
The matching rule-making changes are in section 69 of the Amendment Act, which substitutes clause (zi) of section 239(2) ("the other sources of amounts to be credited to the Insolvency and Bankruptcy Fund under clause (e) of sub-section (2) of section 224") and adds clauses (zia) and (zib) (the purposes under clause (a), and the other purposes and the manner under clause (b), of sub-section (3)). See article 139.
A related change in section 54. The Amendment Act, in amending section 54, inserts a sub-section (2A) under which the Adjudicating Authority, on the committee of creditors' decision to dissolve a corporate debtor, may order dissolution. Its proviso says that if any asset remains on the passing of that order, it "may be disposed of in such manner as may be specified, and the proceeds thereof shall be distributed for payment of the insolvency resolution process costs and any surplus remaining after payment of such costs shall be credited to the Insolvency and Bankruptcy Fund formed under section 224." This article does not explain section 54.
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.
Rules and regulations
The rules and the Board's regulations that implement the Fund are not in the texts consulted, other than the rule-making matters listed in section 239(2). Check the rules in force for contributions, withdrawals and the administrator.
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 the Fund or proceedings against a contributor?
If you are a contributor, a creditor or a director who needs to know how section 224 interacts with a process that has begun, bring the contribution record and the order of the Adjudicating Authority. Our team can walk through it in a legal consultation.
Key takeaways
- Section 224 forms the Insolvency and Bankruptcy Fund for insolvency resolution, liquidation and bankruptcy of persons under the Code.
- The consolidated text credits grants, contributions, amounts from other sources and investment income.
- A contributor facing proceedings may apply to the Adjudicating Authority to withdraw funds up to its contribution for the purposes the section lists.
- The Central Government appoints an administrator by notification.
- The 2026 Act adds a fifth credit, substitutes sub-section (3), and, in section 54, credits any surplus on dissolution to the Fund; it comes into force by notification, so check whether it has been notified.
Read next
- Sections 221 to 223: grants, the Fund of the Board, accounts and audit
- Sections 225 and 226: directions by the Central Government and supersession of the Board
- Section 239: power of the Central Government to make rules
- IBBI establishment, constitution and powers under sections 188 to 198
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.