Sections 157 and 158 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.
Section 157 puts the bankruptcy trustee in possession and control of the bankrupt's property, books, papers and records, and deems actionable claims assigned to him without notice. Section 158 makes void any disposition of property by the debtor between the date of filing of the application for bankruptcy and the bankruptcy commencement date.
The article follows the IBBI consolidated text of the Code amended up to 12 August 2021 (the "consolidated text").
The trustee takes possession and control of all property, books, papers and records relating to the estate or the bankrupt's affairs. Actionable claims in the estate are deemed assigned to him without any notice. A disposition of property by the debtor between filing of the application for bankruptcy and the bankruptcy commencement date is void, and the person who received the property gets no right against it even if he acted in good faith, for value and without notice of the filing.
Section 157: acquisition of control
Sub-section (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."
The object of the duty is wide: property, books, papers and records "relating to the estate of the bankrupt or affairs of the bankrupt". The property must either belong to the bankrupt or be in his possession or under his control. A bankrupt's records held at his office are caught, as are records held by others on his behalf if they are under his control. Section 156, covered in Sections 155 and 156 of this series, is the other half: it obliges the bankrupt, his banker or agent, or any other person having possession to deliver what the trustee must take.
Sub-section (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." Debts owed to the bankrupt and other claims of that kind pass to the trustee by deeming. The trustee does not need to serve notice of assignment on the person who owes the debt for the assignment to take effect as the section is printed. The text uses "things in actionable claims", which is quoted as printed.
If you are dealing with a trustee who is taking control of a business, a records dispute or an actionable claim, our legal dispute resolution team can look at the position with you.
Section 158: restrictions on disposition of property
Sub-section (1). "Any disposition of property made by the debtor, during the period between the date of filing of the application for bankruptcy and the bankruptcy commencement date shall be void."
There are two dates. The period opens on the date of filing of the application for bankruptcy and closes on the bankruptcy commencement date, which is the date the bankruptcy order is passed under section 126 (section 79(6)). A disposition inside that window is void. The section speaks of "the debtor", since he is not yet a bankrupt during the window.
Sub-section (2). A disposition under sub-section (1) "shall not give rise to any right against any person, in respect of such property, even if he has received such property before the bankruptcy commencement date in –" three conditions:
| Clause | Condition |
|---|---|
| (a) | Good faith |
| (b) | For value |
| (c) | Without notice of the filing of the application for bankruptcy |
Read literally, the sub-section removes protection even from a person who satisfies all three conditions. Elsewhere the Code protects such persons: section 159(5) and section 166(2) do give protection for good faith, value and absence of notice. Section 158(2) reads the other way; the text is quoted as printed and this article does not add a qualification.
Sub-section (3). "Property" for this section "means all the property of the debtor, whether or not it is comprised in the estate of the bankrupt, but shall not include property held by the debtor in trust for any other person." So the void rule is not limited to what ends up in the estate, but trust property is out.
How section 158 sits with vesting and the estate
The live post on bankruptcy estate vesting under section 154 covers the vesting of the estate in the trustee and names section 158 in its slug. This article takes section 158 on its own words. Section 155 defines the estate; section 158(3) deliberately casts a wider net by including property of the debtor "whether or not it is comprised in the estate".
A worked example
Lata Shetty files an application for bankruptcy on 5 March. On 12 March, before any order is made, she sells her scooter to a neighbour, Dev, for a fair price and Dev has no idea of the application. A bankruptcy order under section 126 is passed on 20 March.
Under section 158(1) the sale between 5 March and 20 March is a disposition made "during the period between the date of filing of the application for bankruptcy and the bankruptcy commencement date", so it is void. Under section 158(2) it does not give rise to any right against Dev's scooter, even though he took it in good faith, for value and without notice. The facts are invented, and the example shows only how the printed words operate; it is not a prediction of how any case would be decided.
Had Lata sold the scooter before 5 March, section 158 would not apply; whether that sale could be challenged would depend on the provisions for undervalued and preference transactions in sections 164 to 166, which are covered in Section 164 and Section 165 of this series.
What a creditor or buyer should check
- The date the application for bankruptcy was filed, not the date of the order.
- Whether the person transferring is "the debtor" in that window.
- Whether the property is the debtor's own or held in trust for another person.
- Whether the transfer was a "disposition" within the plain meaning of the word; the text does not define it.
Law around these sections
The Amendment Act, 2026 (No. 6 of 2026) has no clause that amends sections 157 or 158. It comes into force on the date or dates the Central Government notifies; the notification is not in the texts consulted, so check whether any change to a related provision has been notified.
For personal guarantors to corporate debtors, the Insolvency and Bankruptcy Board of India (Bankruptcy Process for Personal Guarantors to Corporate Debtors) Regulations, 2019 (the copy consulted is amended up to 02-06-2026) apply alongside Part III; no rules or regulations for other individuals or for partnership firms are in the texts consulted.
Amendments and notifications made after 12 August 2021, other than the Amendment Act, 2026, are not in the texts consulted and should be checked.
Need help with a transfer made around a bankruptcy filing?
If you bought property from someone who later turned out to be the subject of a bankruptcy application, or you are a trustee reviewing such a transfer, the dates decide the outcome. Our team can examine them with you through a legal dispute resolution engagement.
Key takeaways
- The trustee must take possession and control of property, books, papers and records relating to the estate or the bankrupt's affairs.
- Actionable claims in the estate are deemed assigned to the trustee without notice.
- Dispositions by the debtor between filing and the bankruptcy commencement date are void.
- A recipient gets no right in the property even if he acted in good faith, for value and without notice of the filing.
- "Property" in section 158 includes property outside the estate but excludes property held on trust.
Read next
- Sections 160 and 161: onerous property of the bankrupt and notice to disclaim
- Sections 155 and 156: estate of the bankrupt and delivery of property and documents to the trustee
- Bankruptcy order under section 126 and its effect
- Bankruptcy application under sections 121 to 123
Disclaimer: Based on the IBBI consolidated text of the Insolvency and Bankruptcy Code, 2016 amended up to 12 August 2021 and on the Insolvency and Bankruptcy Code (Amendment) Act, 2026 (No. 6 of 2026), which comes into force on the date or dates notified by the Central Government, as consulted on 2 October 2026. It explains the words of the statute only; commencement notifications, other amendments made after 12 August 2021, notified thresholds, the rules and IBBI regulations, and the way tribunals and courts apply these sections should be checked. This article is general information, not legal advice; check the official text before acting.