Section 161: Notice to Disclaim Onerous Property
Section 161 of the Insolvency and Bankruptcy Code, 2016 regulates the consequence where a person interested in onerous property asks the bankruptcy trustee to decide whether the property will be disclaimed. It must be read with Section 160, which contains the bankruptcy trustee's substantive power to disclaim onerous property.
Text of Section 161
(1) No notice of disclaimer under section 160 shall be necessary if-
(a) a person interested in the onerous property has applied in writing to the bankruptcy trustee or his predecessor requiring him to decide whether the onerous property should be disclaimed or not; and
(b) a decision under clause (a) has not been taken by the bankruptcy trustee within seven days of receipt of the notice.
(2) Any onerous property which cannot be disclaimed under sub-section (1) shall be deemed to be part of the estate of the bankrupt.
Explanation.- For the purposes of this section, an onerous property is said to be disclaimed where notice in relation to that property has been given by the bankruptcy trustee under section 160.
Meaning and Purpose of Section 161
Section 161 provides a procedure by which a person interested in onerous property can require the bankruptcy trustee, or the trustee's predecessor, to decide whether the property should be disclaimed. The request must be made in writing.
The Seven-Day Rule
After receiving the written request, the bankruptcy trustee has seven days to take a decision on whether the onerous property should be disclaimed. Section 161(1) specifies the statutory consequence where the trustee does not take that decision within the seven-day period.
Effect on the Bankruptcy Estate
Section 161(2) provides that onerous property which cannot be disclaimed under sub-section (1) is deemed to form part of the estate of the bankrupt. This provision links the notice procedure directly to the composition and administration of the bankruptcy estate.
Meaning of Disclaimer under Section 161
The Explanation clarifies that, for Section 161, onerous property is treated as disclaimed where the bankruptcy trustee has given a notice concerning that property under Section 160.
Section 160 and Onerous Property
Section 160 defines "onerous property" to include an unprofitable contract and other property comprised in the estate of the bankrupt which is unsaleable, not readily saleable, or may give rise to a claim. Section 160 also provides for the trustee's notice of disclaimer, the effect of disclaimer, committee of creditors permission in specified circumstances and the treatment of loss or damage suffered by another person.
Related Provisions
Section 162 deals with disclaimer of leaseholds, while Section 163 provides for challenge against disclaimed property. Sections 164 to 168 deal with matters including undervalued transactions, preference transactions, effect of orders, extortionate credit transactions and obligations under contracts. These provisions form part of the wider statutory framework for administration of the bankrupt's estate.
Official Legal Resources
For authoritative and updated material, refer to India Code for the Insolvency and Bankruptcy Code, 2016 and to the Insolvency and Bankruptcy Board of India for the current legal framework, including applicable regulations, notifications, circulars and guidelines.
Page reviewed: 30 September 2026.