Section 153 of The Insolvency and Bankruptcy Code, 2016.
The bankruptcy trustee for the purposes of this Chapter may after procuring the approval of the committee of creditors,—
- (a)carry on any business of the bankrupt as far as may be necessary for winding it up beneficially;
- (b)bring, institute or defend any legal action or proceedings relating to the property comprised in the estate of the bankrupt;
- (c)accept as consideration for the sale of any property a sum of money due at a future time subject to certain stipulations such as security;
- (d)mortgage or pledge any property for the purpose of raising money for the payment of the debts of the bankrupt;
- (e)where any right, option or other power forms part of the estate of the bankrupt, make payments or incur liabilities with a view to obtaining, for the benefit of the creditors, any property which is the subject of such right, option or power;
- (f)refer to arbitration or compromise on such terms as may be agreed, any debts subsisting or supposed to subsist between the bankrupt and any person who may have incurred any liability to the bankrupt;
- (g)make compromise or other arrangement as may be considered expedient, with the creditors;
- (h)make compromise or other arrangement as he may deem expedient with respect to any claim arising out of or incidental to the bankrupt's estate;
- (i)appoint the bankrupt to—
- (A)supervise the management of the estate of the bankrupt or any part of it;
- (B)carry on his business for the benefit of his creditors;
- (C)assist the bankruptcy trustee in administering the estate of the bankrupt.
Summary
- The bankruptcy trustee must obtain the prior approval of the committee of creditors before performing certain legal and commercial actions regarding the bankrupt's estate.
- These restricted actions include continuing or starting the bankrupt's business operations and initiating or defending any lawsuits concerning the estate.
- Creditors' approval is also mandatory to mortgage or pledge any property, to accept future payments for sold property, or to refer disputes to arbitration.
- The trustee requires this approval to appoint the bankrupt to supervise the estate, run the business for creditors, or assist in the estate's administration.
Practical examples
FAQ
1. Can a bankruptcy trustee carry on the business of a bankrupt under Section 153 of the Insolvency and Bankruptcy Code, 2016?
Yes, under Section 153 of the Insolvency and Bankruptcy Code, 2016, the bankruptcy trustee may carry on any business of the bankrupt as far as necessary for its beneficial winding up, but only after obtaining the approval of the committee of creditors.
2. Does the bankruptcy trustee need permission to appoint the bankrupt to manage their own estate under Section 153 of the Insolvency and Bankruptcy Code, 2016?
Yes, under Section 153 of the Insolvency and Bankruptcy Code, 2016, the bankruptcy trustee must procure the approval of the committee of creditors before appointing the bankrupt to supervise the management of the estate, carry on their business for the benefit of creditors, or assist in administration.
3. Can a bankruptcy trustee mortgage properties of the bankrupt to raise funds under Section 153 of the Insolvency and Bankruptcy Code, 2016?
Yes, under Section 153 of the Insolvency and Bankruptcy Code, 2016, the bankruptcy trustee is empowered to mortgage or pledge any property of the bankrupt's estate to raise money for paying debts, provided they first secure the approval of the committee of creditors.
Test yourself
Q1.Under Section 153 of the Insolvency and Bankruptcy Code, 2016, which of the following actions can a bankruptcy trustee perform without procuring the prior approval of the committee of creditors?
Q2.Under Section 153 of the Insolvency and Bankruptcy Code, 2016, if a bankruptcy trustee wishes to appoint the bankrupt to assist in administering the estate, what legal requirement must be fulfilled?
Q3.Under Section 153 of the Insolvency and Bankruptcy Code, 2016, what type of consideration can a bankruptcy trustee accept for the sale of the bankrupt's property with the approval of the committee of creditors?
Q4.Under Section 153 of the Insolvency and Bankruptcy Code, 2016, who is the approving authority when the bankruptcy trustee wants to mortgage or pledge any property of the bankrupt to raise money?