Section 155: Estate of Bankrupt
Section 155 of the Insolvency and Bankruptcy Code, 2016 defines the property and rights that form part of the estate of a bankrupt and identifies specified property that is excluded from that estate.
Meaning and scope of Section 155
The estate of the bankrupt is the pool of property and statutory rights administered in the bankruptcy process. Section 155 identifies what enters that estate and what remains outside it. It should be read with Section 154, under which the estate vests in the bankruptcy trustee immediately from the date of the trustee's appointment.
The provision also protects specified categories of property from inclusion, including excluded assets, property held on trust for another person, specified workman or employee fund amounts, and assets notified by the Central Government in consultation with a financial sector regulator.
Text of Section 155 - Estate of bankrupt
(1) The estate of the bankrupt shall include,-
(a) all property belonging to or vested in the bankrupt at the bankruptcy commencement date;
(b) the capacity to exercise and to initiate proceedings for exercising all such powers in or over or in respect of property as might have been exercised by the bankrupt for his own benefit at the bankruptcy commencement date or before the date of the discharge order passed under section 138; and
(c) all property which by virtue of any of the provisions of this Chapter is comprised in the estate.
(2) The estate of the bankrupt shall not include-
(a) excluded assets;
(b) property held by the bankrupt on trust for any other person;
(c) all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund; and
(d) such assets as may be notified by the Central Government in consultation with any financial sector regulator.
Property included in the bankrupt estate
Property held at the bankruptcy commencement date
Section 155(1)(a) includes all property belonging to or vested in the bankrupt at the bankruptcy commencement date. The bankruptcy commencement date is therefore an important statutory reference point for identifying the estate.
Powers and proceedings relating to property
Section 155(1)(b) includes the capacity to exercise, and to initiate proceedings for exercising, powers in, over or in respect of property that the bankrupt could have exercised for the bankrupt's own benefit at the bankruptcy commencement date or before the discharge order under Section 138.
Property included by other provisions of the Chapter
Section 155(1)(c) also brings into the estate property that is comprised in it by virtue of other provisions of the same Chapter. The estate can therefore include property brought within it under related statutory provisions, including provisions dealing with after-acquired property.
Property excluded from the bankrupt estate
Excluded assets
Section 155(2)(a) excludes "excluded assets" from the estate. The expression is defined by the Insolvency and Bankruptcy Code and should be applied with the relevant statutory provisions and applicable rules or regulations governing the bankruptcy process.
Property held on trust
Property that the bankrupt holds on trust for another person is excluded under Section 155(2)(b). Such property is distinguished from property beneficially belonging to the bankrupt.
Provident fund, pension fund and gratuity fund amounts
Section 155(2)(c) excludes all sums due to any workman or employee from the provident fund, pension fund and gratuity fund. These protected amounts do not form part of the bankrupt estate under this provision.
Assets notified by the Central Government
Section 155(2)(d) enables exclusion of such assets as may be notified by the Central Government in consultation with any financial sector regulator. Applicable notifications should therefore be checked when determining the estate in a particular case.
Relationship with Sections 154, 156 and 159
Section 154 determines when the estate vests in the bankruptcy trustee. Section 156 addresses delivery of property, books, papers and other records to the bankruptcy trustee. Section 159 deals with after-acquired property and is relevant to property acquired or devolving upon the bankrupt after the bankruptcy commencement date.