IBC Section 157: Acquisition of control by bankruptcy trustee

Section 157 of Insolvency and Bankruptcy Code, 2016: Acquisition of control by bankruptcy trustee

Official Bare Act Text

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

(1) The bankruptcy trustee shall take possession and control of all property, books, papers and other records relating to the estate of the bankrupt or affairs of the bankrupt which belong to him or are in his possession or under his control.

(2) Where any part of the estate of the bankrupt consists of things in actionable claims, they shall be deemed to have been assigned to the bankruptcy trustee without any notice of the assignment.

Legal Commentary & Landmark Judgments: Section 157

Section 157 empowers the Bankruptcy Trustee to acquire control over the bankrupt's property, including seizure of assets situated in premises occupied by the bankrupt.

Statutory Right to Seize: The trustee may take possession and control of any property forming part of the estate, including seizing assets from the bankrupt's residential or business premises.
Warrant of Search and Seizure: The Adjudicating Authority may issue a search warrant authorizing the trustee or police officers to enter premises and seize concealed estate property.
Immunity for Bona Fide Seizure: The trustee incurs no personal civil liability for seizing property in good faith believed to belong to the bankrupt, subject to subsequent determination.

Key Landmark Precedents:

Dilip B. Jiwrajka v. Union of India (2024) 5 SCC 436: The Supreme Court recognized that search and seizure powers under Section 157 are necessary enforcement tools to prevent concealment of assets by dishonest borrowers.
Swiss Ribbons Pvt. Ltd. v. Union of India (2019) 4 SCC 17: Emphasized that insolvency trustees must have adequate statutory teeth to recover public money locked in defaulting hands.

Courtroom Practice & Strategic Litigation Guidance:

When seeking a search warrant under Section 157, the trustee's affidavit must set out specific intelligence (such as hidden safe-deposit lockers or undeclared godowns) to persuade the Adjudicating Authority to authorize entry.