Section 171: Proof of Debt under the Insolvency and Bankruptcy Code 2016
Section 171 of the Insolvency and Bankruptcy Code, 2016 deals with proof of debt in the bankruptcy process. It sets out the bankruptcy trustee's duty to call for proofs of debt and specifies the principal information and treatment applicable to creditor claims.
Meaning and purpose of Section 171
Proof of debt is the process through which a creditor establishes a claim against the bankrupt's estate for the purpose of the bankruptcy proceedings. Section 171 requires the bankruptcy trustee to notify creditors after preparation of the list of creditors under Section 132 and regulates the particulars of debt and security that a creditor must provide.
The provision also addresses decree-holder claims, interest, debts without a specific value, debts payable at a future date and the consequence of failure to file proof of security after notice.
Section 171 - Proof of debt
(1) The bankruptcy trustee shall give notice to each of the creditors to submit proof of debt within fourteen days of preparing the list of creditors under section 132.
(2) The proof of debt shall-
(a) require the creditor to give full particulars of debt, including the date on which the debt was contracted and the value at which that person assesses it;
(b) require the creditor to give full particulars of the security, including the date on which the security was given and the value at which that person assesses it;
(c) be in such form and manner as may be prescribed.
(3) In case the creditor is a decree holder against the bankrupt, a copy of the decree shall be a valid proof of debt.
(4) Where a debt bears interest, that interest shall be provable as part of the debt except in so far as it is owed in respect of any period after the bankruptcy commencement date.
(5) The bankruptcy trustee shall estimate the value of any bankruptcy debt which does not have a specific value.
(6) The value assigned by the bankruptcy trustee under sub-section (5) shall be the amount provable by the concerned creditor.
(7) A creditor may prove for a debt where payment would have become due at a date later than the bankruptcy commencement date as if it were owed presently and may receive dividends in a manner as may be prescribed.
(8) Where the bankruptcy trustee serves a notice under sub-section (1) and the person on whom the notice is served does not file a proof of security within thirty days after the date of service of the notice, the bankruptcy trustee may, with leave of the Adjudicating Authority, sell or dispose of any property that was subject to the security, free of that security.
Key legal points under Section 171
- Notice to creditors: The bankruptcy trustee must give notice to each creditor to submit proof of debt within fourteen days of preparation of the list under Section 132.
- Particulars of debt: A creditor's proof must contain full particulars of the debt, including when it was contracted and the creditor's assessed value.
- Particulars of security: Where security exists, its particulars, date and assessed value must also be disclosed.
- Decree holder: A copy of a decree against the bankrupt constitutes valid proof of debt.
- Interest: Interest may form part of the provable debt, but Section 171(4) excludes interest attributable to a period after the bankruptcy commencement date.
- Unvalued debt: The bankruptcy trustee estimates a bankruptcy debt that has no specific value, and that valuation becomes the provable amount.
- Future debt: A creditor may prove a debt payable after the bankruptcy commencement date as though it were presently owed, subject to the prescribed manner for dividends.
- Proof of security: If proof of security is not filed within thirty days after service of the notice, the trustee may seek leave of the Adjudicating Authority to dispose of the secured property free of that security.
Related provisions
Section 171 should be read in the context of the bankruptcy provisions in Part III of the Code. Section 132 concerns preparation of the list of creditors. Section 172 deals specifically with proof of debt by secured creditors. Sections 173 to 178 address mutual credit and set-off, dividends, distribution, creditor claims and priority of payment.
Page reviewed: 30 September 2026.