Bankruptcy Order for I & PFs (Sec. 121-148)

“(1) An application for bankruptcy of a debtor may be made, by a creditor individually or jointly with other creditors or by a

debtor, to the Adjudicating Authority in the following circumstances, namely; –

       (a)where an order has been passed by an Adjudicating Authority under sub-section 4 of section 100; or

       (b)where an order has been passed by an Adjudicating Authority under sub-section 2 of section 115; or

       (c)where an order has been passed by an Adjudicating Authority under sub-section 3 of section 118.

(2) An application for bankruptcy shall be filed within a period of three months of the date of the order passed by the

Adjudicating Authority under the sections referred to in subsection (1).

(3) Where the debtor is a firm, the application under sub-section (1) may be filed by any of its partners.” 



VL Note : –

“(1) The application for bankruptcy by the debtor shall be accompanied by –

       (a) the records of insolvency resolution process undertaken under Chapter III of Part III;

       (b)the statement of affairs of the debtor in such form and manner as may be prescribed, on the date of the application

       for bankruptcy; and

       (c) a copy of the order passed by the Adjudicating Authority under Chapter III of Part III permitting the debtor to apply

       for bankruptcy.

(2) The debtor may propose an insolvency professional as the bankruptcy trustee in the application for bankruptcy.

(3) The application referred to in sub-section (1) shall be in such form and manner and accompanied by such fee as may be

prescribed.

(4) An application for bankruptcy by the debtor shall not be withdrawn without the leave of the Adjudicating Authority. ” 



VL Note : –

“(1) The application for bankruptcy by the creditor shall be accompanied by-

       (a) the records of insolvency resolution process undertaken under Chapter III;

       (b) a copy of the order passed by the Adjudicating Authority under Chapter III permitting the creditor to apply for

       bankruptcy;

       (c)details of the debts owed by the debtor to the creditor as on the date of the application for bankruptcy; and

       (d)such other information as may be prescribed.

(2) An application under sub-section (1) made in respect of a debt which is secured, shall be accompanied with –

       (a) a statement by the creditor having the right to enforce the security that he shall, in the event of a bankruptcy order

       being made, give up his security for the benefit of all the creditors of the bankrupt; or

       (b) a statement by the creditor stating–

           (i) that the application for bankruptcy is only in respect of the unsecured part of the debt; and

           (ii) an estimated value of the unsecured part of the debt.

(3) If a secured creditor makes an application for bankruptcy and submits a statement under clause (b) of sub-section (2),

the secured and unsecured parts of the debt shall be treated as separate debts.

(4) The creditor may propose an insolvency professional as the bankruptcy trustee in the application for bankruptcy.

(5) An application for bankruptcy under sub-section (1), in case of a deceased debtor, may be filed against his legal

representatives.

(6) The application for bankruptcy shall be in such form and manner and accompanied by such fee as may be prescribed.

(7) An application for bankruptcy by the creditor shall not be withdrawn without the permission of the Adjudicating

Authority.” 



VL Note : –

“(1) When an application is filed under sections 122 or 123 –

       (a) an interim-moratorium shall commence on the date of the making of the application on all actions against the

       properties of the debtor in respect of his debts and such moratorium shall cease to have effect on the bankruptcy

       commencement date; and (b)during the interim-moratorium period –

            (i) any pending legal action or legal proceeding against any property of the debtor in respect of any of his debts shall

            be deemed to have been stayed;

            (ii) the creditors of the debtor shall not be entitled to initiate any legal action or legal proceedings against any

            property of the debtor in respect of any of his debts.

(2) Where the application has been made in relation to a firm, the interim moratorium under sub-section (1) shall operate

against all the partners of the firm as on the date of the making of the application.

(3) The provisions of this section shall not apply to such transactions as may be notified by the Central Government in

consultation with any financial sector regulator.” 



VL Note : –

“(1) If an insolvency professional is proposed as the bankruptcy trustee in the application for bankruptcy under section 122

or section 123, the Adjudicating Authority shall direct the Board within seven days of receiving the application for bankruptcy

to confirm that there are no disciplinary proceedings against such professional.

(2) The Board shall within ten days of the receipt of the direction under sub-section (1) in writing either –

      (a)confirm the appointment of the proposed insolvency professional as the bankruptcy trustee for the bankruptcy

      process; or

      (b)reject the appointment of the proposed insolvency professional as the bankruptcy trustee and nominate another

      bankruptcy trustee for the bankruptcy process.

(3) Where a bankruptcy trustee is not proposed by the debtor or creditor under section 122 or 123, the Adjudicating

Authority shall direct the Board within seven days of receiving the application to nominate a bankruptcy trustee for the

bankruptcy process.

(4) The Board shall nominate a bankruptcy trustee within ten days of receiving the direction of the Adjudicating Authority

under sub-section (3).

(5) The bankruptcy trustee confirmed or nominated under this section shall be appointed as the bankruptcy trustee by the

Adjudicating Authority in the bankruptcy order under section 126.” 



VL Note : –

“(1) The Adjudicating Authority shall pass a bankruptcy order within fourteen days of receiving the confirmation or

nomination of the bankruptcy trustee under section 125.0

(2) The Adjudicating Authority shall provide the following documents to bankrupt, creditors and the bankruptcy trustee within

seven days of the passing of the bankruptcy order, namely: –

     (a) a copy of the application for bankruptcy; and

     (b) a copy of the bankruptcy order” 



VL Note : –

“The bankruptcy order passed by the Adjudicating Authority under section 126 shall continue to have effect till the debtor is

discharged under section 138.” 


VL Note : –

“(1) On the passing of the bankruptcy order under section 126, –

      (a) the estate of the bankrupt shall vest in the bankruptcy trustee as provided in section 154;

      (b)the estate of the bankrupt shall be divided among his creditors;

      (c)subject to provisions of sub-section (2), a creditor of the bankrupt indebted in respect of any debt claimed as a

      bankruptcy debt shall not–

           (i) initiate any action against the property of the bankrupt in respect of such debt; or

           (ii) commence any suit or other legal proceedings except with the leave of the Adjudicating Authority and on such

           terms as the Adjudicating Authority may impose.

(2) Subject to the provisions of section 123, the bankruptcy order shall not affect the right of any secured creditor to realize

or otherwise deal with his security interest in the same manner as he would have been entitled if the bankruptcy order had

not been passed:

Provided that no secured creditor shall be entitled to any interest in respect of his debt after the bankruptcy commencement

date if he does not take any action to realise his security within thirty days from the said date.

(3) Where a bankruptcy order under section 126 has been passed against a firm, the order shall operate as if it were a

bankruptcy order made against each of the individuals who, on the date of the order, is a partner in the firm.

(4) The provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government in

consultation with any financial sector regulator.” 



VL Note : –

“(1) Where a bankruptcy order is passed on the application for bankruptcy by a creditor under section 123, the bankrupt

shall submit his statement of financial position to the bankruptcy trustee within seven days from the bankruptcy

commencement date. 

(2)The statement of financial position shall be submitted in the such form and manner as may be prescribed.

(3) Where the bankrupt is a firm, its partners on the date of the order shall submit a joint statement of financial position of

the firm, and each partner of the firm shall submit a statement of his financial position.

(4) The bankruptcy trustee may require the bankrupt or any other person to submit in writing further information explaining

or modifying any matter contained in the statement of financial position.” 


VL Note : –

“(1) The Adjudicating Authority shall–

       (a) send notices within ten days of the bankruptcy commencement date, to the creditors mentioned in –

            (i) the statement of affairs submitted by the bankrupt under section 129; or

            (ii) the application for bankruptcy submitted by the bankrupt under section 122.

       (b) issue a public notice inviting claims from creditors.

(2) The public notice under clause (b) of sub-section (1) shall include the last date up to which the claims shall be submitted

and such others matters and details as may be prescribed and shall be –

       (a) published in leading newspapers, one in English and another in vernacular having sufficient circulation where the

       bankrupt resides;

       (b) affixed on the premises of the Adjudicating Authority; and

       (c) placed on the website of the Adjudicating Authority.

(3) The notice to the creditors referred to under clause (a) of sub-section (1) shall include such matters and details as may

be prescribed” 



VL Note : –

“(1) The creditors shall register claims with the bankruptcy trustee within seven days of the publication of the public notice,

by sending details of the claims to the bankruptcy trustee in such manner as may be prescribed.

(2) The creditor, in addition to the details of his claims, shall provide such other information and in such manner as may be

prescribed” 


VL Note : –

“The bankruptcy trustee shall, within fourteen days from the bankruptcy commencement date, prepare a list of creditors of

the bankrupt on the basis of –

(a) the information disclosed by the bankrupt in the application for bankruptcy filed by the bankrupt under section 118 and

the statement of affairs filed under section 125; and

(b) claims received by the bankruptcy trustee under sub-section (2) of section 130″ 



VL Note : –

“(1) The bankruptcy trustee shall, within twenty-one days from the bankruptcy commencement date, issue a notice for

calling a meeting of the creditors, to every creditor of the bankrupt as mentioned in the list prepared under section 132.

(2) The notices issued under sub-section (1) shall –

      (a) state the date of the meeting of the creditors, which shall not be later than twenty-one days from the bankruptcy

      commencement date;

      (b) be accompanied with forms of proxy voting;

      (c) specify the form and manner in which the proxy voting may take place.

(3) The proxy voting, including electronic proxy voting shall take place in such manner and form as may be specified.” 


VL Note : –

“(1) The bankruptcy trustee shall be the convener of the meeting of the creditors summoned under section 133.

(2) The bankruptcy trustee shall decide the quorum for the meeting of the creditors, and conduct the meeting only if the

quorum is present.

(3) The following business shall be conducted in the meeting of the creditors in which regard a resolution may be passed,

namely: –

      (a) the establishment of a committee of creditors;

      (b) any other business that the bankruptcy trustee thinks fit to be transacted.

(4) The bankruptcy trustee shall cause the minutes of the meeting of the creditors to be recorded, signed and retained as a

part of the records of the bankruptcy process.

(5) The bankruptcy trustee shall not adjourn the meeting of the creditors for any purpose for more than seven days at a

time.” 


VL Note : –

“(1) Every creditor mentioned in the list under section 132 or his proxy shall be entitled
to vote in respect of the resolutions in the meeting of the creditors in accordance with the voting
share assigned to him (2) The resolution professional shall determine the voting share to be assigned to each
creditor in the manner specified by the Board.
(3) A creditor shall not be entitled to vote in respect of a debt for an unliquidated
amount.
(4) The following creditors shall not be entitled to vote under this section, namely: –
(a) creditors who are not mentioned in the list of creditors under section 132 and
those who have not been given a notice by the bankruptcy trustee;
(b) creditors who are associates of the bankrupt.
” VL Note : –

“The bankruptcy trustee shall conduct the administration and distribution of the estate of
the bankrupt in accordance with the provisions of Chapter V.” VL Note : –

“(1) The bankruptcy trustee shall convene a meeting of the committee of creditors on
completion of the administration and distribution of the estate of the bankrupt in accordance
with the provisions of Chapter V.
(2) The bankruptcy trustee shall provide the committee of creditors with a report of the
administration of the estate of the bankrupt in the meeting of the said committee.
(3) The committee of creditors shall approve the report submitted by the bankruptcy
trustee under sub-section (2) within seven days of the receipt of the report and determine
whether the bankruptcy trustee should be released under section 148.
(4) The bankruptcy trustee shall retain sufficient sums from the estate of the bankrupt to
meet the expenses of convening and conducting the meeting required under this section during
the administration of the estate.” VL Note : –

“(1) The bankruptcy trustee shall apply to the Adjudicating Authority for a discharge
order –
(a) on the expiry of one year from the bankruptcy commencement date; or
(b) within seven days of the approval of the committee of creditors of the
completion of administration of the estates of the bankrupt under section 137, where
such approval is obtained prior to the period mentioned in clause (a). (2) The Adjudicating Authority shall pass a discharge order on an application by the
bankruptcy trustee under sub-section (1).
(3) A copy of the discharge order shall be provided to the Board, for the purpose of
recording an entry in the register referred to in section 196. ” VL Note : –

“The discharge order under sub-section (2) of section 138 shall release the bankrupt from
all the bankruptcy debts:
Provided that a discharge shall not –
(a) affect the functions of the bankruptcy trustee; or
(b) affect the operation of the provisions of Chapter IV and V of Part III:
(c) release the bankrupt from any debt incurred by means of fraud or breach of
trust to which he was a party; or
(d ) discharge the bankrupt from any excluded debt” VL Note : –

“(1) The bankrupt shall, from the bankruptcy commencement date, be subject to the
disqualifications mentioned in this section.
(2) In addition to any disqualification under any other law for the time being in force, a
bankrupt shall be disqualified from–
(a) being appointed or acting as a trustee or representative in respect of any trust,
estate or settlement;
(b) being appointed or acting as a public servant;
(c) being elected to any public office where the appointment to such office is by
election; and
(d) being elected or sitting or voting as a member of any local authority.
(3) Any disqualification to which a bankrupt may be subject under this section shall
cease to have effect, if –
(a) the bankruptcy order against him is modified or recalled under section 142;or
(b) he is discharged under section 138.
Explanation. – For the purposes of this section, the term “public servant” shall have
the same meaning as assigned to it in section 21 of the Indian Penal Code, 1860 (45 of 1860).” VL Note : –

“(1) A bankrupt, from the bankruptcy commencement date, shall, – (a) not act as a director of any company, or directly or indirectly take part in or be
concerned in the promotion, formation or management of a company;
(b) without the previous sanction of the bankruptcy trustee, be prohibited from
creating any charge on his estate or taking any further debt;
(c) be required to inform his business partners that he is undergoing a bankruptcy
process;
(d) prior to entering into any financial or commercial transaction of such value as
may be prescribed, either individually or jointly, inform all the parties involved in such
transaction that he is undergoing a bankruptcy process;
(e) without the previous sanction of the Adjudicating Authority, be incompetent to
maintain any legal action or proceedings in relation to the bankruptcy debts; and
(f) not be permitted to travel overseas without the permission of the Adjudicating
Authority.
(2) Any restriction to which a bankrupt may be subject under this section shall cease to
have effect, if –
(a) the bankruptcy order against him is modified or recalled under section 142; or
(b) he is discharged under section 138.
” VL Note : –

“(1) The Adjudicating Authority may, on an application or suo motu, modify or recall a
bankruptcy order, whether or not the bankrupt is discharged, if it appears to the Adjudicating
Authority that —
(a) there exists an error apparent on the face of such order; or
(b) both the bankruptcy debts and the expenses of the bankruptcy have, after the
making of the bankruptcy order, either been paid for or secured to the satisfaction of
the Adjudicating Authority.
(2) Where the Adjudicating Authority modifies or recalls the bankruptcy order under
this section, any sale or other disposition of property, payment made or other things duly done
by the bankruptcy trustee shall be valid except that the property of the bankrupt shall vest in
such person as the Adjudicating Authority may appoint or, in default of any such appointment,
revert to the bankrupt on such terms as the Adjudicating Authority may direct.
(3) A copy of the order passed by the Adjudicating Authority under sub-section (1) shall
be provided to the Board, for the purpose of recording an entry in the register referred to in
section 191.
(4) The modification or recall of the order by the Adjudicating Authority under subsection (1) shall be binding on all creditors so far as it relates to any debts due to them which form a part of the bankruptcy” VL Note : –

“The bankruptcy trustee shall perform his functions and duties in compliance with the
code of conduct provided under section 208. ” VL Note : –

“(1) A bankruptcy trustee appointed for conducting the bankruptcy process shall charge
such fees as may be specified in proportion to the value of the estate of the bankrupt.
(2) The fees for the conduct of the bankruptcy process shall be paid to the bankruptcy
trustee from the distribution of the estate of the bankrupt in the manner provided in section 178.” VL Note : –

“(1) Where Committee of creditors is of the opinion that at any time during the
bankruptcy process, a bankruptcy trustee appointed under section 125 is required to be
replaced, it may replace him with another bankruptcy trustee in the manner provided under this
section.
(2) The Committee of creditors may, at a meeting, by a vote of seventy-five per cent.
of voting share, propose to replace the bankruptcy trustee appointed under section 125 with
another bankruptcy trustee.
(3)The Committee of creditors may apply to the Adjudicating Authority for the
replacement of bankruptcy trustee.
(4) The Adjudicating Authority shall within seven days of the receipt of the application
under sub-section (3) direct the Board to recommend for replacement of bankruptcy trustee.
(5) The Board shall, within ten days of the direction of the Adjudicating Authority under
sub-section (4), recommend a bankruptcy trustee for replacement against whom no disciplinary
proceedings are pending.
(6)The Adjudicating Authority shall, by an order, appoint the bankruptcy trustee as
recommended by the Board under sub-section (5) within fourteen days of receiving such
recommendation.
(7) The earlier bankruptcy trustee shall deliver possession of the estate of the bankrupt
to the bankruptcy trustee appointed under sub-section (6), on the date of his appointment.
(8) The Adjudicating Authority may give directions to the earlier bankruptcy trustee-
(a )to share all information with the new bankruptcy trustee in respect of the
bankruptcy process; and
(b )to co-operate with the new bankruptcy trustee in such matters as may be
required. (9) The earlier bankruptcy trustee replaced under this section shall be released in
accordance with the provisions of section 148.
(10) The bankruptcy trustee appointed under this section shall give a notice of his
appointment to the bankrupt within seven days of his appointment” VL Note : –

“(1) A bankruptcy trustee may resign if –
(a) he intends to cease practising as an insolvency professional; or
(b) there is conflict of interest or change of personal circumstances which preclude
the further discharge of his duties as a bankruptcy trustee.
(2)The Adjudicating Authority shall, within seven days of the acceptance of the
resignation of the bankruptcy trustee, direct the Board for his replacement.
(3) The Board shall, within ten days of the direction of the Adjudicating Authority under
sub-section (2) recommend another bankruptcy trustee as a replacement.
(4) The Adjudicating Authority shall appoint the bankruptcy trustee recommended by
the Board under sub-section (3) within fourteen days of receiving the recommendation.
(5) The replaced bankruptcy trustee shall deliver possession of the estate of the bankrupt
to the bankruptcy trustee appointed under sub-section (4), on the date of his appointment.
(6) The Adjudicating Authority may give directions to the bankruptcy trustee who has
resigned –
(a) to share all information with the new bankruptcy trustee in respect of the
bankruptcy process; and
(b) to co-operate with the new bankruptcy trustee in such matters as may be
required.
( 7 )The bankruptcy trustee appointed under this section shall give a notice of his
appointment to the committee of creditors and the bankrupt within seven days of his
appointment.
( 8 )The bankruptcy trustee replaced under this section shall be released in accordance
with the provisions of section 148″ VL Note : –

“(1) If a vacancy occurs in the office of the bankruptcy trustee for any reason other than
his replacement or resignation, the vacancy shall be filled in accordance with the provisions of
this section.
(2) In the event of the occurrence of vacancy referred to in sub-section (1), the
Adjudicating Authority shall direct the Board for replacement of a bankruptcy trustee. (3) The Board shall, within ten days of the direction of the Adjudicating Authority
under sub-section (2), recommend a bankruptcy trustee as a replacement.
(4) The Adjudicating Authority shall appoint the bankruptcy trustee recommended
by the Board under sub-section (3) within fourteen days of receiving the recommendation.
(5) The earlier bankruptcy trustee shall deliver possession of the estate of the
bankrupt to the bankruptcy trustee appointed under sub-section (4), on the date of his
appointment.
(6) The Adjudicating Authority may give directions to the bankruptcy trustee who
has vacated the office –
(a) to share all information with the new bankruptcy trustee in respect of the
bankruptcy;
(b)to co-operate with the new bankruptcy trustee in such matters as may be
required.
(7) The bankruptcy trustee appointed under sub-section (4) shall give a notice of his
appointment to the committee of creditors and the bankrupt within seven days of his
appointment.
(8) The earlier bankruptcy trustee replaced under this section shall be released in
accordance with the provisions of section 148:
Provided that this section shall not apply if the vacancy has occurred due to temporary
illness or temporary leave of the bankruptcy trustee. ” VL Note : –

“(1) A bankruptcy trustee shall be released from his office with effect from the date
on which the Adjudicating Authority passes an order appointing a new bankruptcy trustee in
the event of replacement, resignation or occurrence of vacancy under sections 145, 146 or 147,
as the case may be.
(2) Notwithstanding the release under sub-section (1), the bankruptcy trustee who has
been so released, shall share all information with the new bankruptcy trustee in respect of the
bankruptcy process and co-operate with the new bankruptcy trustee in such matters as may be
required.
(3) A bankruptcy trustee who has completed the administration of the bankruptcy
process shall be released of his duties with effect from the date on which the committee of
creditors approves the report of the bankruptcy trustee under section 137.
” VL Note : –