IBC Section 155: Estate of bankrupt

Section 155 of Insolvency and Bankruptcy Code, 2016: Estate of bankrupt

Official Bare Act Text

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

(1) The estate of the bankrupt shall include,-

(a) all property belonging to or vested in the bankrupt at the bankruptcy commencement date;

(b) the capacity to exercise and to initiate proceedings for exercising all such powers in or over or in respect of property as might have been exercised by the bankrupt for his own benefit at the bankruptcy commencement date or before the date of the discharge order passed under section 138; and

(c) all property which by virtue of any of the provisions of this Chapter is comprised in the estate.

(2) The estate of the bankrupt shall not include-

(a) excluded assets;

(b) property held by the bankrupt on trust for any other person;

(c) all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund; and

(d) such assets as may be notified by the Central Government in consultation with any financial sector regulator.

Legal Commentary & Landmark Judgments: Section 155

Section 155 defines the statutory composition and boundaries of the Estate of the Bankrupt, enumerating included assets and defining excluded properties.

Inclusion of All Property: Comprises all property belonging to or vested in the bankrupt at the commencement of the bankruptcy or acquired by or devolving on him before discharge.
Capacity to Exercise Powers: Includes the capacity to exercise and take proceedings for exercising all powers over property that might have been exercised by the bankrupt for his own benefit.
Statutory Excluded Assets: Explicitly excludes property held by the bankrupt on trust for any other person, tools of trade, essential household goods, and personal clothing necessary for basic living.

Key Landmark Precedents:

Embassy Property Developments v. State of Karnataka (2020) 13 SCC 308: The Supreme Court clarified that the insolvency estate comprises only assets and legal rights in which the debtor has genuine beneficial ownership, excluding third-party trust properties.
Dilip B. Jiwrajka v. Union of India (2024) 5 SCC 436: Affirmed that the exclusion of essential personal effects under Section 155 protects the fundamental dignity of the debtor while making all commercial wealth available for recovery.

Courtroom Practice & Strategic Litigation Guidance:

If a debtor attempts to shield commercial real estate by creating sham private family trusts, the trustee must file an application to declare the trust void as a fraudulent conveyance and bring the underlying assets into the Section 155 estate.