Section 140: Disqualification of Bankrupt under the Insolvency and Bankruptcy Code 2016
Section 140 of the Insolvency and Bankruptcy Code, 2016 specifies the statutory disqualifications that apply to a bankrupt from the bankruptcy commencement date and states when those disqualifications cease.
Section 140 - Disqualification of bankrupt
(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 appointment to that office is by election; and
(d) being elected or sitting or voting as a member of any local authority.
(3) A disqualification under this section ceases to have effect if the bankruptcy order is modified or recalled under Section 142, or if the bankrupt is discharged under Section 138.
When do the disqualifications begin?
The disqualifications begin from the bankruptcy commencement date. Under Section 79 of Part III of the Code, the bankruptcy commencement date means the date on which the Adjudicating Authority passes a bankruptcy order under Section 126.
Who is a bankrupt?
Section 79 defines a bankrupt for Part III to include a debtor adjudged bankrupt by a bankruptcy order under Section 126, each partner of a firm where a bankruptcy order under Section 126 has been made against the firm, and a person adjudged as an undischarged insolvent.
Disqualifications imposed by Section 140
Trustee or representative
A bankrupt cannot be appointed or act as a trustee or representative in respect of a trust, estate or settlement while the statutory disqualification remains in force.
Appointment as a public servant
A bankrupt is disqualified from being appointed or acting as a public servant. The Explanation to Section 140 states that, for this provision, the expression public servant has the meaning assigned to it in Section 21 of the Indian Penal Code, 1860.
Election to public office
A bankrupt is disqualified from being elected to a public office where appointment to that office is made by election.
Membership of a local authority
A bankrupt is also disqualified from being elected, sitting or voting as a member of a local authority.
When do Section 140 disqualifications end?
Section 140(3) provides two statutory events that end the disqualifications. They cease if the bankruptcy order is modified or recalled under Section 142, or when the bankrupt receives a discharge under Section 138.
Related IBC provisions
For proper context, read Section 140 with Section 138 - Discharge order, Section 139 - Effect of discharge, Section 141 - Restrictions on bankrupt, and Section 142 - Modification or recall of bankruptcy order.