IBC Section 147: Vacancy in office of bankruptcy trustee

Section 147 of Insolvency and Bankruptcy Code, 2016: Vacancy in office of bankruptcy trustee

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

(1) If a vacancy occurs in the office of the bankruptcy trustee for any reason other than his replacement or resignation, the vacancy shall be filled in accordance with the provisions of this section.

(2) In the event of the occurrence of vacancy referred to in sub-section (1), the Adjudicating Authority shall direct the Board for replacement of a bankruptcy trustee.

(3) The Board shall, within ten days of the direction of the Adjudicating Authority under sub-section (2), recommend a bankruptcy trustee as a replacement.

(4) The Adjudicating Authority shall appoint the bankruptcy trustee recommended by the Board under sub-section (3) within fourteen days of receiving the recommendation.

(5) The earlier bankruptcy trustee shall deliver possession of the estate of the bankrupt to the bankruptcy trustee appointed under sub-section (4), on the date of his appointment.

(6) The Adjudicating Authority may give directions to the bankruptcy trustee who has vacated the office—

(a)to share all information with the new bankruptcy trustee in respect of the bankruptcy;

(b)to co-operate with the new bankruptcy trustee in such matters as may be required.

(7) The bankruptcy trustee appointed under sub-section (4) shall give a notice of his appointment to the committee of creditors and the bankrupt within seven days of his appointment.

(8) The earlier bankruptcy trustee replaced under this section shall be released in accordance with the provisions of section 148:

Provided that this section shall not apply if the vacancy has occurred due to temporary illness or temporary leave of the bankruptcy trustee.

Legal Commentary & Landmark Judgments: Section 147

Section 147 provides for filling a vacancy in the office of the Bankruptcy Trustee caused by death, resignation, or removal.

Occurrence of Vacancy: Triggered when a bankruptcy trustee dies, is removed by court order, or resigns under Section 146.
Board Nomination Mandate: The Adjudicating Authority directs the IBBI to nominate an eligible insolvency professional to fill the vacancy within ten days.
Continuity of Estate Vesting: Upon appointment, the estate of the bankrupt automatically vests in the successor trustee without requiring any conveyance or assignment.

Key Landmark Precedents:

Innoventive Industries Ltd. v. ICICI Bank (2018) 1 SCC 407: The Supreme Court emphasized that statutory transitions under the Code are seamless to prevent interruption of insolvency management.
State Bank of India v. V. Ramakrishnan (2018) 17 SCC 394: Held that automatic statutory vesting protects the estate from third-party adverse possession or encumbrances during trustee transitions.

Courtroom Practice & Strategic Litigation Guidance:

Successor trustees appointed under Section 147 should immediately issue public notices notifying financial institutions and civil courts of their appointment to prevent uncoordinated asset freezes.