Fraudulent initiation of insolvency proceedings attracts penalties for malicious or deceptive use of resolution and liquidation processes.

Penalty is attracted where insolvency-related proceedings are initiated fraudulently, maliciously, or for a purpose other than resolution of insolvency. The provision covers initiation of insolvency resolution process, liquidation proceedings, voluntary liquidation proceedings, and pre-packaged insolvency resolution process or creditor-initiated insolvency resolution process when commenced with intent to defraud any person. The adjudicating authority may impose a penalty of not less than one lakh rupees and up to one crore rupees.

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