Section 139 of IBC 2016: Effect of Discharge in Bankruptcy
Section 139 explains what a discharge order does for a bankrupt person, which debts remain enforceable, and why bankruptcy administration continues despite discharge.
Section 139 - Statutory provision
139. Effect of discharge. The discharge order under sub-section (2) of section 138 shall release the bankrupt from all the bankruptcy debt:
Provided that discharge shall not-
- affect the functions of the bankruptcy trustee; or
- affect the operation of the provisions of Chapters IV and V of Part III; or
- release the bankrupt from any debt incurred by means of fraud or breach of trust to which he was a party; or
- discharge the bankrupt from any excluded debt.
Meaning and scope of Section 139
A discharge order is an order of the Adjudicating Authority under Section 138. Its effect under Section 139 is to release the bankrupt from qualifying bankruptcy debts, rather than automatically wiping out every possible liability.
Bankruptcy debt is a defined term under Section 79 of the Code and must be read with the statutory definitions and exclusions applicable to the individual bankruptcy process. Excluded debt is also a defined category under Section 79; the statutory definition should be checked before deciding whether a particular liability survives discharge.
Four statutory exceptions to discharge
| Provision | Effect |
|---|---|
| Section 139(a) | The bankruptcy trustee continues to perform statutory functions after discharge where required. |
| Section 139(b) | The provisions governing the bankruptcy process under Chapters IV and V of Part III continue to operate. |
| Section 139(c) | Debts incurred through fraud or breach of trust involving the bankrupt are not released. |
| Section 139(d) | Excluded debts remain outside the benefit of discharge. |
Fraud or breach of trust
A bankrupt cannot rely on the discharge order to avoid a debt incurred by means of fraud or breach of trust to which the bankrupt was a party. Whether a particular debt falls within this exception depends on the facts and applicable legal findings.
Excluded debts
Section 139 expressly preserves excluded debts. The expression is not interchangeable with all unpaid debts: it is a statutory category defined by the Code. Examples within the statutory definition include specified court-imposed fines, certain maintenance liabilities and student-loan liabilities, subject to the wording of the law.
Discharge does not end estate administration
Discharge concerns the bankrupt's personal liability for qualifying debts. It does not, by itself, end the bankruptcy trustee's powers or duties. The administration, realisation and distribution of the estate remain governed by the applicable provisions of Part III, including Chapter V.
Related legal provisions
- Section 138: Discharge order - timing and application for discharge.
- Section 137: Completion of administration - committee review of the trustee's report.
- Section 136: Administration and distribution of estate - duties relating to the estate.
- Section 79: Definitions relevant to bankruptcy debts and excluded debts.
- Section 148: Release of the bankruptcy trustee, a distinct question from the bankrupt's discharge.
Applicability and commencement
Part III of the Code has been brought into force in stages. The individual insolvency and bankruptcy framework is operational for personal guarantors to corporate debtors under the relevant commencement notifications, while the position for other individuals and partnership firms depends on separate commencement. Readers should check current notifications, rules and regulations before applying these provisions to a particular case.
Frequently asked questions
Does a discharge order cancel every debt?
No. Section 139 preserves liabilities for fraud or breach of trust involving the bankrupt and excluded debts, among other statutory limitations.
Does the bankruptcy trustee stop working once discharge is granted?
No. Section 139 expressly provides that discharge does not affect the functions of the bankruptcy trustee.
Is discharge the same as completion of administration?
No. Discharge concerns release from qualifying bankruptcy debts; estate administration and the trustee's release are governed by separate provisions.
Official legal sources
- India Code - Insolvency and Bankruptcy Code, 2016
- Insolvency and Bankruptcy Board of India - Legal Framework
- Insolvency and Bankruptcy Code, 2016 - LawDadi guide
This article explains the statutory framework for general information. The operative text, commencement notifications and applicable regulations should be checked for the relevant proceeding.