Section 176 of The Insolvency and Bankruptcy Code, 2016.
- (1)Where the bankruptcy trustee has realised the entire estate of the bankrupt or so much of it as could be realised in the opinion of the bankruptcy trustee, he shall give notice—
- (a)of his intention to declare a final dividend; or
- (b)that no dividend or further dividend shall be declared.
- (2)The notice under sub-section (1) shall contain such particulars as may be prescribed and shall require all claims against the estate of the bankrupt to be established by a final date specified in the notice.
- (3)The Adjudicating Authority may, on the application of any person interested in the administration of the estate of the bankrupt, postpone the final date referred to in sub-section (2).
- (4)After the final date referred to in sub-section (2), the bankruptcy trustee shall—
- (a)defray any outstanding expenses of the bankruptcy out of the estate of the bankrupt; and
- (b)if he intends to declare a final dividend, declare and distribute that dividend among the creditors who have proved their debts, without regard to the claims of any other persons.
- (5)If a surplus remains after payment in full with interest to all the creditors of the bankrupt and the payment of the expenses of the bankruptcy, the bankrupt shall be entitled to the surplus.
- (6)Where a bankruptcy order has been passed in respect of one partner in a firm, a creditor to whom the bankrupt is indebted jointly with the other partners in the firm or any of them shall not receive any dividend out of the separate property of the bankrupt until all the separate creditors have received the full amount of their respective debts.
Summary
- The bankruptcy trustee must issue a notice of intent to declare a final dividend once the entire estate, or as much of it as possible, has been realized.
- The trustee's notice can alternatively state that no dividend or further dividend will be declared.
- The notice must require all creditors to establish their claims against the bankrupt's estate by a specified final date.
- The Adjudicating Authority has the power to postpone the specified final date on the application of any interested person.
- After the final date, the trustee must clear outstanding bankruptcy expenses before distributing the final dividend to creditors who proved their claims.
- The bankrupt is entitled to any surplus money that remains after paying all proved debts in full with interest and meeting all bankruptcy expenses.
Practical examples
FAQ
1. Who is entitled to the surplus money remaining after all debts are paid under Section 176 of the Insolvency and Bankruptcy Code, 2016?
Under Section 176 of the Insolvency and Bankruptcy Code, 2016, if any surplus remains after paying all the creditors in full with interest and covering all the expenses of the bankruptcy, the bankrupt person is entitled to receive that surplus.
2. Can a creditor claim a dividend after the final date has passed under Section 176 of the Insolvency and Bankruptcy Code, 2016?
Under Section 176 of the Insolvency and Bankruptcy Code, 2016, after the specified final date, the trustee distributes the final dividend only among the creditors who have already proved their debts, completely disregarding any other claims.
3. How are partner debts handled regarding separate property under Section 176 of the Insolvency and Bankruptcy Code, 2016?
Under Section 176 of the Insolvency and Bankruptcy Code, 2016, if bankruptcy is declared against one partner in a firm, a joint creditor of the firm cannot receive any dividend from the separate property of that partner until all of that partner's separate creditors are paid in full.
Test yourself
Q1.Under Section 176 of the Insolvency and Bankruptcy Code, 2016, who has the power to postpone the final date by which creditors must establish their claims?
Q2.Under Section 176 of the Insolvency and Bankruptcy Code, 2016, what must the bankruptcy trustee do immediately before distributing the final dividend?
Q3.Under Section 176 of the Insolvency and Bankruptcy Code, 2016, if a bankrupt person is a partner in a firm, when can a joint creditor of the firm receive a dividend out of the separate property of that bankrupt partner?
Q4.Under Section 176 of the Insolvency and Bankruptcy Code, 2016, who is entitled to any surplus assets left in the estate after all debts are paid in full with interest and all bankruptcy expenses are met?