Functions and Powers explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The bankruptcy trustee has three statutory functions under Section 149 — investigating the affairs of the bankrupt, realising the estate and distributing the proceeds. Sections 151 and 152 give the legal capacity and operating powers that make those functions workable.
Three functions — Section 149
The functions and powers of the office start with what section 149 requires the trustee to do:
| Function | What it involves |
|---|---|
| Investigation of affairs | Examining the assets, liabilities and overall financial situation to establish the extent of the bankruptcy |
| Realisation of the estate | Selling assets to generate funds for creditors, typically by auction and at fair market value |
| Distribution of the estate | Distributing proceeds among creditors according to their claims, in compliance with legal priorities |
The order is not accidental. Investigation comes first because what can be realised is not known until the affairs have been examined, and because avoidable transactions found at that stage add to the pool that is later distributed.
Capacity — Section 151
For the purpose of performing these functions and powers, the bankruptcy trustee may, by official name:
- hold property of every description;
- make contracts;
- sue and be sued;
- enter into engagements in respect of the estate of the bankrupt;
- employ persons to assist;
- execute a power of attorney, deed or other instrument; and
- do any other act necessary or expedient for the exercise of these rights.
The trustee acts as the holder of an office, not as an individual. Property is held, contracts are made and proceedings are brought and defended in the official name.
That is what allows the estate to survive a change of office-holder. When a trustee is replaced under section 145, resigns under section 146 or a vacancy arises under section 147, the contracts, the litigation and the title do not have to be reassigned — the successor steps into the same office.
General powers — Section 152
While discharging the functions and powers of the office, the bankruptcy trustee may:
- sell portions of the bankrupt's property to realise funds for distribution;
- give receipts for money received, documenting financial transactions accurately;
- file claims for debts owed to the bankrupt and draw dividends from those claims;
- redeem pledged or hypothecated property, by giving the notice required by the relevant contract;
- transfer securities or other transferable property listed in the books of another person;
- bring or defend legal proceedings relating to claims against the bankrupt or the estate;
- investigate past transactions that may affect creditor returns, including identifying fraudulent transactions capable of being set aside for the creditors' benefit; and
- distribute the proceeds among creditors once the assets have been realised.
The power to redeem is easy to overlook
Where an asset of the estate is pledged or hypothecated, the trustee is not confined to letting the pledgee sell it. The trustee may redeem the property on notice under the contract and then realise it for the estate.
Whether that is worth doing is a commercial judgement: redemption costs the estate the secured amount now, in exchange for the whole realisable value later. Where the collateral is worth substantially more than the debt it secures, redeeming and selling captures that margin for the general body of creditors rather than leaving it to be recovered piecemeal.
Where these functions and powers stop
Sections 151 and 152 are exercisable by the trustee alone. A separate list of acts requires the approval of the committee of creditors under section 153 — carrying on the business, instituting or defending proceedings relating to estate property, accepting deferred consideration, mortgaging or pledging estate property to raise money, compromising claims and appointing the bankrupt to assist in the administration.
The dividing line is between administering the estate as it stands and taking commercial risk with it. Selling an asset is administration; borrowing against it is a decision for the creditors whose money is at stake.
Common mistakes
- Contracting or litigating in the individual's own name rather than the official name.
- Overlooking claims the bankrupt holds against others — they are assets to be proved and drawn upon.
- Treating investigation as optional once assets appear sufficient.
- Reading the section 152 functions and powers as covering acts reserved to the committee by section 153.