Section 153: Approval of Creditors for Certain Acts
Section 153 of the Insolvency and Bankruptcy Code, 2016 identifies specified acts that a bankruptcy trustee may undertake for the purposes of the relevant Chapter after procuring the approval of the committee of creditors.
Meaning and purpose of Section 153
The bankruptcy trustee administers the estate of the bankrupt and exercises statutory powers under the Code. While Section 152 provides general powers, Section 153 subjects certain significant acts to prior approval of the committee of creditors. These acts include carrying on the bankrupt's business where necessary for beneficial winding up, litigation concerning estate property, specified deferred-consideration sales, raising money against estate property, compromises and certain appointments of the bankrupt.
Text of Section 153 - Approval of creditors for certain acts
The bankruptcy trustee for the purposes of this Chapter may after procuring the approval of the committee of creditors,-
(a) carry on any business of the bankrupt as far as may be necessary for winding it up beneficially;
(b) bring, institute or defend any legal action or proceedings relating to the property comprised in the estate of the bankrupt;
(c) accept as consideration for the sale of any property a sum of money due at a future time subject to certain stipulations such as security;
(d) mortgage or pledge any property for the purpose of raising money for the payment of the debts of the bankrupt;
(e) where any right, option or other power forms part of the estate of the bankrupt, make payments or incur liabilities with a view to obtaining, for the benefit of the creditors, any property which is the subject of such right, option or power;
(f) refer to arbitration or compromise on such terms as may be agreed, any debts subsisting or supposed to subsist between the bankrupt and any person who may have incurred any liability to the bankrupt;
(g) make compromise or other arrangement as may be considered expedient, with the creditors;
(h) make compromise or other arrangement as he may deem expedient with respect to any claim arising out of or incidental to the bankrupt's estate;
(i) appoint the bankrupt to-
(A) supervise the management of the estate of the bankrupt or any part of it;
(B) carry on his business for the benefit of his creditors;
(C) assist the bankruptcy trustee in administering the estate of the bankrupt.
Acts requiring approval of the committee of creditors
Continuing the bankrupt's business
Clause (a) permits the trustee, after obtaining the required approval, to carry on the bankrupt's business only so far as may be necessary for winding it up beneficially. The provision therefore connects continuation of business with administration and beneficial winding up rather than unrestricted continuation of the enterprise.
Legal proceedings concerning estate property
Under clause (b), the trustee may bring, institute or defend legal actions or proceedings relating to property comprised in the bankrupt's estate after procuring the committee's approval.
Sale for deferred consideration
Clause (c) permits the trustee to accept consideration for sale of property where payment is due at a future time, subject to stipulations such as security. Because this can affect the timing and certainty of estate realisation, the statutory approval requirement applies.
Mortgage or pledge of estate property
Clause (d) permits property to be mortgaged or pledged for raising money to pay the bankrupt's debts, subject to approval of the committee of creditors.
Rights, options and other powers forming part of the estate
Clause (e) enables the trustee to make payments or incur liabilities where doing so may obtain, for the benefit of creditors, property that is the subject of a right, option or other power forming part of the estate.
Arbitration, compromise and arrangements
Clauses (f), (g) and (h) deal with arbitration, compromises and other arrangements concerning debts, creditors and claims arising out of or incidental to the bankrupt's estate. These powers are also conditioned on approval of the committee of creditors.
Appointment of the bankrupt to assist administration
Clause (i) permits the trustee to appoint the bankrupt to supervise management of all or part of the estate, carry on the business for the benefit of creditors, or assist the trustee in administering the estate.
Relationship with Sections 151 to 155
Section 151 states specified rights exercisable by the bankruptcy trustee in the trustee's official name. Section 152 provides general powers for administration of the estate. Section 153 adds a creditor-approval requirement for the particular acts listed in that provision. Section 154 concerns vesting of the bankrupt's estate in the trustee, while Section 155 addresses the estate of the bankrupt.