Section 125 of the Insolvency and Bankruptcy Code, 2016: Appointment of an Insolvency Professional as Bankruptcy Trustee
Section 125 sets out how the Adjudicating Authority and the Insolvency and Bankruptcy Board of India (IBBI) arrange for an insolvency professional to serve as bankruptcy trustee. It distinguishes between applications that name a proposed professional and applications that do not.
What does Section 125 provide?
The provision forms part of the bankruptcy process for individuals and partnership firms under Part III of the Code, subject to the provisions actually brought into force and their applicable scope. The Adjudicating Authority is the competent forum under the Code; the Board means the IBBI, the insolvency regulator; and a bankruptcy trustee is the insolvency professional appointed to perform statutory functions in the bankruptcy process.
Section 125: Subsection-wise statutory requirements
Section 125(1): When a trustee is proposed
If an insolvency professional is proposed in an application under Section 122 (debtor's application) or Section 123 (creditor's application), the Adjudicating Authority must, within seven days of receiving the bankruptcy application, direct the Board to confirm that no disciplinary proceedings are pending against the professional.
Section 125(2): Board's response
Within ten days of receiving that direction, the Board must communicate in writing either:
- confirmation of the proposed insolvency professional as bankruptcy trustee; or
- rejection of the proposed appointment and nomination of another bankruptcy trustee.
Section 125(3): When no trustee is proposed
If the debtor or creditor has not proposed a bankruptcy trustee under Section 122 or 123, the Adjudicating Authority must, within seven days of receiving the application, direct the Board to nominate one.
Section 125(4): Board's nomination
The Board must nominate a bankruptcy trustee within ten days after receiving the Adjudicating Authority's direction under subsection (3).
Section 125(5): Formal appointment
The professional confirmed or nominated under Section 125 is appointed by the Adjudicating Authority in the bankruptcy order under Section 126.
Appointment process and statutory time limits
| Stage | Responsible authority | Time limit |
|---|---|---|
| Request confirmation of a proposed professional | Adjudicating Authority | Within 7 days of receiving application |
| Confirm or reject and nominate an alternative | IBBI | Within 10 days of receiving direction |
| Request nomination where no name is proposed | Adjudicating Authority | Within 7 days of receiving application |
| Nominate a professional | IBBI | Within 10 days of receiving direction |
| Make formal appointment | Adjudicating Authority | In bankruptcy order under Section 126 |
The seven-day and ten-day periods run from the different triggering events specified above; they are not a single universal deadline for issuing a bankruptcy order.
How the process works in practice
- Application: The debtor or creditor files under Section 122 or 123, as applicable, and may identify an insolvency professional.
- Regulatory check or nomination: The Adjudicating Authority seeks the Board's confirmation or nomination within the statutory period.
- Board's decision: The Board confirms the proposed professional or nominates an alternative, as the case may be.
- Bankruptcy order: The Adjudicating Authority appoints the trustee in its order under Section 126.
Related legal provisions
Section 121 specifies when an application for bankruptcy may be made. Section 122 governs an application by the debtor, including the option to propose a trustee. Section 123 governs an application by a creditor and contains a corresponding option. Section 124 addresses the interim moratorium following an application. Section 126 concerns the bankruptcy order and is the point at which the trustee is appointed. Professional conduct and eligibility also need to be read with the Code and applicable IBBI regulations.
Applicability and commencement
Part III of the IBC has not been brought into operation in the same manner for every category of individual and partnership debtor. The notified framework for personal guarantors to corporate debtors must be distinguished from provisions that are not generally operational for other individuals. The applicable forum, rules, regulations and commencement notifications should therefore be checked before using Section 125 in a particular case.
Frequently asked questions
Can a debtor or creditor select the bankruptcy trustee?
They may propose an insolvency professional in an application under Section 122 or 123, but confirmation or nomination involves the Board and formal appointment is made by the Adjudicating Authority under Section 126.
What happens if the proposed professional is not confirmed?
Under Section 125(2), the Board may reject the proposed appointment and nominate another bankruptcy trustee for the process.
What if the application does not name a trustee?
The Adjudicating Authority directs the Board to nominate a professional within seven days of receiving the application, and the Board has ten days from receipt of that direction to nominate.
Is the trustee appointed as soon as the application is filed?
No. Section 125(5) provides for appointment by the Adjudicating Authority in the bankruptcy order under Section 126.
Official legal sources
Read the Insolvency and Bankruptcy Code, 2016 on India Code and consult the IBBI legal framework for regulations, amendments and notifications relevant to bankruptcy trustees and personal guarantors.
For the broader statute and linked provisions, see The Insolvency and Bankruptcy Code 2016.
This article provides general legal information, not advice for a specific filing. Consult the currently applicable text, rules and notifications before taking procedural steps.