Section 145: Replacement of Bankruptcy Trustee under the Insolvency and Bankruptcy Code 2016
Section 145 of the Insolvency and Bankruptcy Code, 2016 provides the statutory procedure by which the committee of creditors may seek replacement of a bankruptcy trustee appointed under Section 125. It prescribes the voting requirement, application to the Adjudicating Authority, recommendation by the Insolvency and Bankruptcy Board of India, appointment of the replacement trustee and transfer of the bankrupt's estate.
Section 145 - Replacement of bankruptcy trustee
(1) Where the 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 the trustee in the manner provided in 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 replacement of the bankruptcy trustee.
(4) Within seven days of receipt of the application under sub-section (3), the Adjudicating Authority shall direct the Board to recommend a replacement bankruptcy trustee.
(5) Within ten days of the direction under sub-section (4), the Board shall recommend a bankruptcy trustee for replacement against whom no disciplinary proceedings are pending.
(6) The Adjudicating Authority shall appoint, by order, the bankruptcy trustee recommended by the Board under sub-section (5) within fourteen days of receiving the 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 the new trustee's appointment.
(8) The Adjudicating Authority may direct the earlier bankruptcy trustee to share all information concerning the bankruptcy process with the new trustee and to co-operate with the new trustee in such matters as may be required.
(9) The earlier bankruptcy trustee replaced under this section shall be released in accordance with Section 148.
(10) The bankruptcy trustee appointed under this section shall give notice of the appointment to the bankrupt within seven days of appointment.
Who can initiate replacement of the bankruptcy trustee?
The statutory power under Section 145 is exercised through the committee of creditors. If the committee considers that the bankruptcy trustee appointed under Section 125 should be replaced during the bankruptcy process, it may initiate the replacement procedure prescribed by Section 145.
Voting requirement for replacement
A replacement proposal must be approved at a meeting of the committee of creditors by a vote representing seventy-five per cent of the voting share. After the required vote, the committee may apply to the Adjudicating Authority for replacement of the trustee.
Role of the Adjudicating Authority and IBBI
On receiving the committee's application, the Adjudicating Authority must, within seven days, direct the Insolvency and Bankruptcy Board of India to recommend a replacement. The Board must make its recommendation within ten days and the recommended insolvency professional must have no disciplinary proceedings pending against that person.
Appointment of the replacement trustee
The Adjudicating Authority must appoint the bankruptcy trustee recommended by the Board within fourteen days of receiving the recommendation. This statutory sequence places the creditors' proposal, the Board's recommendation and the formal appointment by the Adjudicating Authority within a defined process.
Handover of the bankruptcy estate
On the date of appointment of the new bankruptcy trustee, the earlier trustee must deliver possession of the bankrupt's estate to the replacement trustee. The Adjudicating Authority may also direct the outgoing trustee to share information and co-operate with the incoming trustee to support continuity of the bankruptcy process.
Release of the earlier bankruptcy trustee
The trustee replaced under Section 145 is released in accordance with Section 148. Replacement and release are therefore connected but distinct statutory steps.
Notice to the bankrupt
The newly appointed bankruptcy trustee must give notice of the appointment to the bankrupt within seven days of appointment. This ensures that the bankrupt is formally informed of the person who will thereafter administer the bankruptcy process.
Related provisions
Section 145 should be read with Section 143 - Standard of conduct, Section 144 - Fees of bankruptcy trustee, Section 146 - Resignation by bankruptcy trustee, Section 147 - Vacancy in office of bankruptcy trustee, and Section 148 - Release of bankruptcy trustee.