Section 163: Challenge Against Disclaimed Property
Section 163 of the Insolvency and Bankruptcy Code, 2016 identifies the persons who may challenge a disclaimer of property before the Adjudicating Authority and specifies the orders that may be made concerning vesting, delivery and compensation.
Text of Section 163
(1) An application challenging the disclaimer may be made by the following persons under this section to the Adjudicating Authority-
(a) any person who claims an interest in the disclaimed property; or
(b) any person who is under any liability in respect of the disclaimed property; or
(c) where the disclaimed property is a dwelling house, any person who on the date of application for bankruptcy was in occupation of or entitled to occupy that dwelling house.
(2) The Adjudicating Authority may on an application under sub-section (1) make an order for the vesting of the disclaimed property in, or for its delivery to any of the persons mentioned in sub-section (1).
(3) The Adjudicating Authority shall not make an order in favour of a person who has made an application under clause (b) of sub-section (1) except where it appears to the Adjudicating Authority that it would be just to do so for the purpose of compensating the person.
(4) The effect of an order under this section shall be taken into account while assessing loss or damage sustained by any person in consequence of the disclaimer under sub-section (5) of section 160.
(5) An order under sub-section (2) vesting property in any person need not be completed by any consequence, assignment or transfer.
Who May Challenge a Disclaimer
Section 163(1) permits three categories of persons to apply to the Adjudicating Authority: a person claiming an interest in the disclaimed property, a person under a liability in respect of that property, and, where the property is a dwelling house, a person who was occupying or entitled to occupy it on the date of the bankruptcy application.
Powers of the Adjudicating Authority
On an application under Section 163(1), the Adjudicating Authority may order that the disclaimed property vest in, or be delivered to, any of the persons specified in that sub-section. The provision therefore gives the Adjudicating Authority power to deal with the consequences of a disclaimer for persons directly affected by the property.
Compensation for a Person Under Liability
A person applying because he or she is under a liability in respect of the disclaimed property is subject to the condition in Section 163(3). An order in that person's favour may be made only where the Adjudicating Authority considers it just to do so for the purpose of compensating that person.
Loss or Damage Under Section 160
Section 163(4) links the challenge procedure with Section 160(5). When loss or damage caused by a disclaimer is assessed under Section 160(5), the effect of an order made under Section 163 must be taken into account.
Effect of a Vesting Order
Under Section 163(5), an order under sub-section (2) vesting property in a person does not require completion by any consequence, assignment or transfer. The statutory order itself therefore governs the vesting contemplated by the provision.
Relationship with Sections 160 to 162
Section 160 provides the bankruptcy trustee's general power to disclaim onerous property and addresses the effect of disclaimer. Section 161 deals with notice to disclaim onerous property. Section 162 imposes additional requirements for disclaimer of leasehold interests and expressly refers to a direction under Section 163 where an interested person objects.
Official Legal Resources
For authoritative statutory text and updates, refer to India Code and the Insolvency and Bankruptcy Board of India legal framework.
Page reviewed: 30 September 2026.