Section 5 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.
This article covers section 5(12) to (23D) as per the IBBI consolidated text of the Code amended up to 12 August 2021. These are the working terms of the corporate process: when it starts, what it costs, who is an operational creditor and what counts as operational debt. The Insolvency and Bankruptcy Code (Amendment) Act, 2026 does not change these clauses; its changes to section 5 sit in the articles on clauses (1) to (11) and (24) to (28), listed under Read next. A supplier who is owed money and wants to know where it stands can start with a recovery notice.
The insolvency commencement date is the date of admission of the application under section 7, 9 or 10. An operational debt is a claim for goods or services (including employment) or for dues payable under any law to the Central Government, a State Government or a local authority. The insolvency resolution process period is one hundred and eighty days from the insolvency commencement date. Interim finance, process costs and pre-pack terms are also defined here.
Clauses (12) to (18): date, period, costs and liquidation
Insolvency commencement date (12). The date of admission of an application for initiating the corporate insolvency resolution process by the Adjudicating Authority under section 7, 9 or section 10, as the case may be. The text shows a proviso after this clause as omitted ("[***]"); nothing in it is printed as operative text. Do not mix it up with the initiation date in clause (11), which is the date the application is made.
Insolvency resolution process costs (13). (a) the amount of any interim finance and the costs incurred in raising such finance; (b) the fees payable to any person acting as a resolution professional; (c) any costs incurred by the resolution professional in running the business of the corporate debtor as a going concern; (d) any costs incurred at the expense of the Government to facilitate the insolvency resolution process; and (e) any other costs as may be specified by the Board.
Insolvency resolution process period (14). "the period of one hundred and eighty days beginning from the insolvency commencement date and ending on one hundred and eightieth day". Section 12 deals with extension; see our post on section 12 and do not read the period here as the outer limit.
Interim finance (15). Any financial debt raised by the resolution professional during the insolvency resolution process period, or by the corporate debtor during the pre-packaged insolvency resolution process period, "and such other debt as may be notified". What has been notified is not in the texts consulted.
Liquidation cost (16) and liquidation commencement date (17). Liquidation cost is any cost incurred by the liquidator during the period of liquidation, subject to regulations specified by the Board. The liquidation commencement date is the date on which proceedings for liquidation commence in accordance with section 33 or section 59.
Liquidator (18). An insolvency professional appointed as a liquidator in accordance with Chapter III or Chapter V of Part II, as the case may be.
Clause (19): officer
For Chapter VI and Chapter VII of Part II, "officer" means an officer who is in default, as defined in clause (60) of section 2 of the Companies Act, 2013 (18 of 2013), or a designated partner as defined in clause (j) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009), as the case may be. Check the current law for those provisions.
Operational creditor and operational debt (20), (21)
An operational creditor is a person to whom an operational debt is owed, and includes any person to whom such debt has been legally assigned or transferred. An operational debt is "a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority".
| Limb of clause (21) | Example |
|---|---|
| Claim in respect of the provision of goods | A manufacturer's invoice for components supplied to a corporate debtor |
| Claim in respect of the provision of services | A transporter's bill for freight |
| Claim in respect of employment | A worker's salary claim |
| Dues arising under any law and payable to the Central Government, a State Government or a local authority | Statutory dues payable to a government or local body |
Beyond the words printed, the Code does not elaborate. Our post on section 5(21) goes into the four limbs. The route an operational creditor takes starts with a demand notice under section 8, covered in a sibling article. Example. Kapoor Logistics supplies transport services to Sunrise Plastics Private Limited for six months and is unpaid. Kapoor Logistics is an operational creditor and the unpaid freight is an operational debt. A bank that lent Sunrise Plastics Rs 5 crore holds a financial debt instead, defined in clause (8).
Clauses (22) and (23): personal guarantor and personnel
A personal guarantor is "an individual who is the surety in a contract of guarantee to a corporate debtor" (22). Personnel includes "the directors, managers, key managerial personnel, designated partners and employees, if any, of the corporate debtor" (23). A corporate guarantor (5A) is the corporate counterpart, in the first article on section 5.
Clauses (23A) to (23D): pre-packaged process terms
These four clauses are inserted by the 2021 amendment and apply to Chapter III-A.
| Clause | Term | Meaning |
|---|---|---|
| (23A) | preliminary information memorandum | A memorandum submitted by the corporate debtor under clause (b) of sub-section (1) of section 54G |
| (23B) | pre-packaged insolvency commencement date | The date of admission of an application for initiating the pre-packaged insolvency resolution process under clause (a) of sub-section (4) of section 54C |
| (23C) | pre-packaged insolvency resolution process costs | Interim finance and raising costs; resolution professional fees and expenses, subject to section 54F(6); costs of running the business as a going concern under an order under section 54J(2); costs at the expense of the Government; any other costs as may be specified |
| (23D) | pre-packaged insolvency resolution process period | From the pre-packaged insolvency commencement date to the date of the order under section 54L(1), 54N(1) or 54-O(2), as the case may be |
They belong to the pre-packaged process of Chapter III-A.
Rules and regulations, and what to check
The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 implement the corporate process; the copy consulted is amended up to 9 June 2026 as printed under its title. 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 an unpaid-dues notice?
Knowing whether your dues are an operational debt decides the first step. Our team can help prepare the demand with a recovery notice that follows the statutory form of words, and talk you through what happens if the corporate debtor replies.
Key takeaways
- The insolvency commencement date is the date of admission; the initiation date is the date of making the application.
- The process period in clause (14) is one hundred and eighty days from the insolvency commencement date.
- Operational debt covers goods, services, employment and statutory dues to governments and local authorities.
- Interim finance includes "such other debt as may be notified"; check what has been notified.
- Clauses (23A) to (23D) apply to the pre-packaged process.
Read next
- Section 5: financial creditor, financial debt and dispute
- Section 5: related party, resolution applicant and voting share
- Section 8: demand notice by an operational creditor
- MSME Samadhaan: recover delayed payments
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.