Section 74 of IBC : Section 74: Punishment For Contravention Of Moratorium Or The Resolution Plan

Explanation using Example

Imagine a company, XYZ Corp, is going through insolvency proceedings, and the court has issued a moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016. This moratorium prohibits any legal action or enforcement against the company's assets.

Example 1: Despite the moratorium, the CEO of XYZ Corp decides to sell off a significant piece of company machinery to a friend below market value. This act violates the provisions of section 14. Under section 74(1), the CEO, knowing and wilfully breaching the moratorium, could face imprisonment of three to five years and/or a fine between one to three lakh rupees.

Example 2: A creditor, ABC Bank, aware of the moratorium, attempts to seize company assets for debt recovery. The bank manager who authorised this action could be held liable under section 74(2), facing a potential imprisonment of one to five years and/or a fine ranging from one lakh to one crore rupees.

Example 3: After the resolution plan is approved and binding, XYZ Corp's CFO deliberately fails to transfer the agreed shares to a creditor as per the plan. This contravention, as per section 74(3), could result in the CFO facing imprisonment of one to five years and/or a fine between one lakh to one crore rupees for wilfully violating the resolution plan's terms.