Section 126: Bankruptcy Order under the Insolvency and Bankruptcy Code, 2016
Section 126 specifies when the Adjudicating Authority must issue a bankruptcy order and when the bankruptcy application and order must be supplied to the bankrupt, creditors and bankruptcy trustee. It operates after the confirmation or nomination of a bankruptcy trustee under Section 125.
Text of Section 126 - Bankruptcy order
126. (1) The Adjudicating Authority shall pass a bankruptcy order within fourteen days of receiving the confirmation or nomination of the bankruptcy trustee under section 125.
(2) The Adjudicating Authority shall provide the following documents to bankrupt, creditors and the bankruptcy trustee within seven days of the passing of the bankruptcy order, namely:-
(a) a copy of the application for bankruptcy; and
(b) a copy of the bankruptcy order.
Section 126 explained: meaning and legal requirements
Section 126(1): Fourteen-day period for the bankruptcy order
The statutory trigger is receipt by the Adjudicating Authority of the confirmation or nomination of the bankruptcy trustee under Section 125. Section 126(1) requires the Authority to pass the bankruptcy order within fourteen days of that event. The fourteen-day period is not expressed as running from the original filing date of the bankruptcy application.
Under Section 125, the Insolvency and Bankruptcy Board of India (IBBI) confirms or nominates an insolvency professional, and the Adjudicating Authority appoints the trustee through the bankruptcy order. Thus, the trustee-selection step and the making of the order are linked.
Section 126(2): Documents to be provided within seven days
Within seven days after the bankruptcy order is passed, the Adjudicating Authority must provide both the bankruptcy application and the bankruptcy order to the bankrupt, creditors and bankruptcy trustee. This communication requirement gives the relevant participants access to the documents that initiated and formally commenced the bankruptcy process.
Section 126 does not itself prescribe the entire method of service, publication, claims verification or administration of the estate. Those matters must be read with the applicable rules, regulations and other provisions of the Code.
Timeline and statutory triggers
| Stage | Statutory reference | Requirement |
|---|---|---|
| Bankruptcy application | Sections 121-123 | Debtor or creditor files a qualifying application in accordance with the Code and applicable rules. |
| Trustee confirmation or nomination | Section 125 | IBBI confirms a proposed professional or nominates another professional, as applicable. |
| Bankruptcy order | Section 126(1) | Adjudicating Authority passes the order within 14 days of receiving the confirmation or nomination. |
| Supply of application and order | Section 126(2) | Both documents are provided to the specified parties within 7 days after the order. |
What follows a bankruptcy order?
A bankruptcy order is a significant legal event, but its consequences are governed by additional provisions. In particular, Section 127 addresses the validity and duration of the bankruptcy order, Section 128 deals with the effect of the bankruptcy order, and Section 129 concerns the statement of financial position. The exact rights and obligations of parties depend on these provisions and the applicable procedural framework.
The interim moratorium arising on a bankruptcy application under Section 124 ceases on the bankruptcy commencement date as stated in that provision. The consequences of a bankruptcy order should therefore not be confused with the interim protection available before the order.
Related provisions and definitions
- Adjudicating Authority: The forum exercising jurisdiction under the applicable provisions of the Code; for notified personal-guarantor matters, jurisdiction must be assessed with reference to Sections 60 and 179 and relevant case law.
- Bankruptcy trustee: An insolvency professional appointed under the Code to perform the statutory functions of a bankruptcy trustee.
- Section 121: Circumstances and period for making a bankruptcy application.
- Sections 122 and 123: Applications by a debtor and a creditor, respectively.
- Section 125: Confirmation or nomination of an insolvency professional as bankruptcy trustee.
- Sections 127 and 128: Validity and effects of the bankruptcy order.
Frequently asked questions
When must a bankruptcy order be passed under Section 126?
Within fourteen days after the Adjudicating Authority receives confirmation or nomination of the bankruptcy trustee under Section 125.
Who receives a copy of the bankruptcy order?
The bankrupt, creditors and bankruptcy trustee must be provided a copy of the bankruptcy application and a copy of the bankruptcy order within seven days after the order is passed.
Does the fourteen-day period begin when the application is filed?
No. Section 126(1) identifies receipt of the trustee confirmation or nomination under Section 125 as the starting point.
Does Section 126 apply automatically to every individual debtor?
No. Applicability must be checked against commencement notifications and the relevant personal-guarantor framework. The general individual and partnership-firm bankruptcy framework has not been uniformly commenced.
Official legal sources
Consult the official India Code repository for the Insolvency and Bankruptcy Code, 2016 and the IBBI legal framework for the Act, amendments, regulations and commencement notifications. For the full statutory framework, see The Insolvency and Bankruptcy Code 2016.
This article is general legal information and is not a substitute for reviewing current law, relevant orders and professional advice for a particular proceeding.