Section 162: Disclaimer of Leaseholds
Section 162 of the Insolvency and Bankruptcy Code, 2016 places special safeguards on a bankruptcy trustee's disclaimer of a leasehold interest. Notice must be served on every interested person, and an interested person has fourteen days from service to object. If an objection is filed, the disclaimer can take effect only when the Adjudicating Authority directs so under Section 163.
Text of Section 162
(1) The bankruptcy trustee shall not be entitled to disclaim any leasehold interest, unless a notice of disclaimer has been served on every interested person and-
(a) no application objecting to the disclaimer by the interested person, has been filed with respect to the leasehold interest, within fourteen days of the date on which notice was served; and
(b) where the application objecting to the disclaimer has been filed by the interested person, the Adjudicating Authority has directed under section 163 that the disclaimer shall take effect.
(2) Where the Adjudicating Authority gives a direction under clause (b) of sub-section (1), it may also make order with respect to fixtures, improvements by tenant and other matters arising out of the lease as it may think fit.
What Section 162 Covers
A leasehold interest is treated separately from other onerous property because disclaimer can affect landlords, tenants, occupiers and other persons with interests arising from the lease. Section 162 therefore requires notice to every interested person before the bankruptcy trustee can disclaim the leasehold interest.
Fourteen-Day Period for Objection
Under Section 162(1)(a), an interested person may file an application objecting to the proposed disclaimer within fourteen days from the date on which the notice was served. If no such application is filed within that period, the statutory condition in clause (a) is satisfied.
Objection and Direction of the Adjudicating Authority
If an interested person files an objection, Section 162(1)(b) requires a direction from the Adjudicating Authority under Section 163 before the disclaimer can take effect. Section 163 identifies persons who may challenge a disclaimer and empowers the Adjudicating Authority to make appropriate orders concerning the disclaimed property.
Fixtures and Tenant Improvements
When the Adjudicating Authority directs that the disclaimer shall take effect, Section 162(2) also permits it to make such orders as it considers appropriate regarding fixtures, improvements made by a tenant and other matters arising out of the lease.
Relationship with Sections 160 and 161
Section 160 contains the general power of the bankruptcy trustee to disclaim onerous property and defines "onerous property" to include an unprofitable contract and certain property that is unsaleable, not readily saleable or may give rise to a claim. Section 161 deals with notice to disclaim onerous property. Section 162 adds specific requirements where the property concerned is a leasehold interest.
Commencement and Application
Section 162 was brought into force from 1 December 2019 in relation to the notified Part III framework. Its practical application depends on the category of debtor and the relevant commencement notifications, rules and regulations applicable to the proceeding.
Official Legal Resources
For authoritative material, refer to India Code for the Insolvency and Bankruptcy Code, 2016 and to the Insolvency and Bankruptcy Board of India for the legal framework, regulations, notifications, circulars and guidelines issued under the Code.
Page reviewed: 30 September 2026.