Bunkruptcy Trustee, appointment of Bankruptcy Trustee, Duties and Right of Bankruptcy trustee

Introduction

Firm and Individual don't see any growth and revival in business, and still have tons of loans to pay.  

What would partnership firm/individual do when he is not able to serve this debt ?

Well, they can do something which will clear all his debt, so that such businessman/partnership firm get discharge from legal obligation from paying back the loan.

That something is bankruptcy. The person who manages lot of things during such process is Bankruptcy Trustee.

In this Post we will cover below things:

  1. What is Bankruptcy Process
  2. Who is Bankruptcy Trustee 
  3. How is Bankruptcy Trustee Appointed
  4. Functions of Bankruptcy Trustee
  5. Rights of Bankruptcy Trustee
Generally whoever will file for bankruptcy, his face will be like below. :)

Facepalm: The Wii U Games We're Seeing This Week Are Stuck At 720p ... 

 

 What is Bankruptcy Process ?

It's process. It's a legal Process wherein debts of debtor are discharged. This process also gives creditor some of their loan back by liquidating the assets of bankrupt.

If there is no future for business and that business have lots of loan, is there a point in continuing such business with loss? Of course NO. Instead sell all the assets and pay as much as possible to creditors. Mostly creditor won't get their entire money back, but at least they get something. If business had continued with losses, it might have been possible that creditors might have got nothing.

So this process is win win for both. Individual/Partnership Firms get a discharge from debt and they can start new business. This process also gives some money back to creditors.

In India, Insolvency and Bankruptcy Code, 2016 provides for bankruptcy process. Part 3, Chapter 4 and 5 deals with Bankruptcy.

Who is Bankruptcy Trustee

Bankruptcy Trustee is a person, who will manage the asset of bankrupt person. He will realize the assets of bankrupt and distribute over to creditors. IBC have provision of appointment of such person, rights of such person and duties of such person.

Appointment of Bankruptcy Trustee

Section 125 of the IBC provides for appointment of Bankruptcy Trustee.

Insolvency Professional is qualified to become a bankruptcy trustee. (Insolvency Professional is one who is registered with Insolvency and Bankruptcy Board of India)

When application is filed and name of insolvency professional as bankruptcy trustee is recommended, then Adjudicating Authority will ask IBBI to either confirm or reject such appointment. Board has to confirm/reject the appointment withing 10 days.

When application for bankruptcy don't contain any name as bankruptcy trustee, then Board will help in appointment of Bankruptcy Trustee. 

So in nutshell, bankruptcy trustee will either be appointed by Board or by a person who is initiating bankruptcy process.

Functions of Bankruptcy Trustee

Section 149 of IBC lays down various functions of Bankruptcy Trustee.

These functions are
  1. Investigate the affairs of bankrupt. (Why he got bankrupt, is he really bankrupt etc) 
  2. Realise the estate of bankrupt. (Sell his asset and collect the money)
  3. Distribute the estate of bankrupt. (Distribute the collected money among creditors)

These are functions of bankruptcy trustee. Apart from that he have lot of things to do like convening the meeting of Creditor, keep in talk with Adjudicating Authority(DRT in case of Individual/Partnership Firms), take in control of all the properties of bankrupt, fight legal cases for bankrupt etc. But section 149 mentions above 3 functions.

Rights of Bankruptcy Trustee

Main task of bankruptcy trustee is to get good amount from realising asset. To accomplish this, bankruptcy trustee had conferred with lots of rights.

Section 151 of IBC list down different rights of Bankruptcy Trustee. These rights are:

  1. Hold property of every description
  2. Make Contracts
  3. Sue and be sued. He can file suit against or suit can be filed against bankruptcy trustee
  4. enter into engagement in respect of the estate of bankrupt
  5. Employ persons to assist him
  6. Execute any power of attorney, deed or other instruments. (Of course he will have to enter into sale deed for selling properties )
  7. Do any other act which is necessary or expedient for the purpose of or in connection with such right.

Conclusion

Bankruptcy trustee is crucial in bankruptcy process. He have onerous task to perform. Good amount of power is conferred under the act to perform the functions of bankruptcy trustee.






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