Section 160: Onerous Property of Bankrupt
Section 160 of the Insolvency and Bankruptcy Code, 2016 empowers the bankruptcy trustee to disclaim onerous property forming part of the bankrupt's estate. It defines onerous property, states the legal effect of a disclaimer and protects the rights of other persons affected by it.
Text of Section 160
(1) The bankruptcy trustee may, by giving notice to the bankrupt or any person interested in the onerous property, disclaim any onerous property which forms a part of the estate of the bankrupt.
(2) The bankruptcy trustee may give the notice under sub-section (1) notwithstanding that he has taken possession of the onerous property, endeavoured to sell it or has exercised rights of ownership in relation to it.
(3) A notice of disclaimer under sub-section (1) shall-
(a) determine, as from the date of such notice, the rights, interests and liabilities of the bankrupt in respect of the onerous property disclaimed;
(b) discharge the bankruptcy trustee from all personal liability in respect of the onerous property as from the date of appointment of the bankruptcy trustee.
(4) A notice of disclaimer under sub-section (1) shall not be given in respect of the property which has been claimed for the estate of the bankrupt under section 155 without the permission of the committee of creditors.
(5) A notice of disclaimer under sub-section (1) shall not affect the rights or liabilities of any other person, and any person who sustains a loss or damage in consequence of the operation of a disclaimer under this section shall be deemed to be a creditor of the bankrupt to the extent of the loss or damage.
Explanation.- For the purposes of this section, the term "onerous property" means-
(i) any unprofitable contract; and
(ii) any other property comprised in the estate of the bankrupt which is unsaleable or not readily saleable, or is such that it may give rise to a claim.
Meaning of Onerous Property
The Explanation to Section 160 defines onerous property in two categories. The first is an unprofitable contract. The second is property forming part of the bankrupt's estate that is unsaleable, not readily saleable, or is of such a nature that it may give rise to a claim.
Power of the Bankruptcy Trustee to Disclaim
Under Section 160(1), the bankruptcy trustee may disclaim onerous property by giving notice to the bankrupt or to a person interested in that property. Section 160(2) makes clear that the power may still be exercised even where the trustee has already taken possession, attempted to sell the property or exercised rights of ownership over it.
Effect of a Disclaimer
From the date of the notice, Section 160(3)(a) determines the bankrupt's rights, interests and liabilities in respect of the disclaimed onerous property. Section 160(3)(b) also discharges the bankruptcy trustee from personal liability relating to the onerous property from the date of the trustee's appointment.
Permission of the Committee of Creditors
Section 160(4) provides that where property has been claimed for the bankrupt's estate under Section 155, a disclaimer notice cannot be given without permission of the committee of creditors.
Rights of Other Persons and Loss Caused by Disclaimer
A disclaimer does not affect the rights or liabilities of another person. If a person sustains loss or damage because of the operation of a disclaimer under Section 160, Section 160(5) treats that person as a creditor of the bankrupt to the extent of the loss or damage.
Related Provisions: Sections 161 to 163
Section 161 contains provisions concerning notice to disclaim onerous property. Section 162 contains additional requirements for disclaimer of leasehold interests, while Section 163 provides for challenges against disclaimed property. These provisions should be read with Section 160 where the nature of the property or the circumstances of the disclaimer make them applicable.
Official Legal Resources
For the current statutory and regulatory framework, refer to India Code and the Insolvency and Bankruptcy Board of India. The IBBI legal framework provides Acts, regulations, notifications, circulars and guidelines issued under the Code.
Page reviewed: 30 September 2026.