Section 125: Appointment of Insolvency Professional as Bankruptcy Trustee
Section 125 of the Insolvency and Bankruptcy Code, 2016 sets out the procedure for confirming or nominating an insolvency professional to act as the bankruptcy trustee in a bankruptcy process under Part III of the Code.
What is a bankruptcy trustee?
Under Part III of the Code, a "bankruptcy trustee" is the insolvency professional appointed as trustee for the estate of the bankrupt under Section 125. The trustee performs statutory functions in the bankruptcy process after appointment by the Adjudicating Authority.
Section 125 - Statutory provision
(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 pending 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.
How Section 125 operates
The provision creates two routes. If the bankruptcy application proposes an insolvency professional, the Adjudicating Authority seeks confirmation from the Insolvency and Bankruptcy Board of India. If no professional is proposed, the Adjudicating Authority asks the Board to nominate one.
Proposed insolvency professional and disciplinary proceedings
Where an insolvency professional has been proposed under Section 122 or Section 123, Section 125 requires confirmation concerning pending disciplinary proceedings. The Board may confirm the proposed professional or reject that appointment and nominate another bankruptcy trustee.
Where no bankruptcy trustee is proposed
If the debtor or creditor has not proposed a bankruptcy trustee, sub-sections (3) and (4) require the Adjudicating Authority to seek a nomination from the Board and require the Board to make that nomination within the statutory period.
Appointment through the bankruptcy order
Confirmation or nomination under Section 125 does not by itself complete the statutory appointment. Under sub-section (5), the confirmed or nominated professional is appointed by the Adjudicating Authority as bankruptcy trustee in the bankruptcy order under Section 126.
Related official resources
For the current statutory framework, amendments, regulations, circulars and guidelines, refer to the Insolvency and Bankruptcy Board of India - Acts, the IBBI Legal Framework, and the India Code portal.