Section 140: Disqualification of Bankrupt under the Insolvency and Bankruptcy Code, 2016
Section 140 specifies the legal disqualifications that apply to a person declared bankrupt, the date on which they begin, and the circumstances in which they cease.
Text of Section 140 - Disqualification of bankrupt
140. (1) The bankrupt shall, from the bankruptcy commencement date, be subject to the disqualifications mentioned in this section.
(2) In addition to any disqualification under any other law for the time being in force, a bankrupt shall be disqualified from-
- being appointed or acting as a trustee or representative in respect of any trust, estate or settlement;
- being appointed or acting as a public servant;
- being elected to any public office where the appointment to such office is by election; and
- being elected or sitting or voting as a member of any local authority.
(3) Any disqualification to which a bankrupt may be subject under this section shall cease to have effect, if-
- the bankruptcy order against him is modified or recalled under section 142; or
- he is discharged under section 138.
Explanation.-For the purposes of this section, the term "public servant" shall have the same meaning as assigned to it in section 21 of the Indian Penal Code.
Meaning and practical effect of Section 140
The section imposes specific statutory restrictions after the bankruptcy commencement date. These restrictions operate in addition to any other disqualification arising under a separate law; Section 140 does not replace eligibility requirements found in election, employment or other legislation.
| Provision | Disqualification or effect |
|---|---|
| Section 140(1) | The disqualifications begin on the bankruptcy commencement date. |
| Section 140(2)(a) | A bankrupt cannot be appointed or act as trustee or representative concerning a trust, estate or settlement. |
| Section 140(2)(b) | A bankrupt cannot be appointed or act as a public servant within the meaning used by the section. |
| Section 140(2)(c) | A bankrupt cannot be elected to public office where appointment is by election. |
| Section 140(2)(d) | A bankrupt cannot be elected, sit or vote as a member of a local authority. |
| Section 140(3) | Disqualifications under this section cease when the statutory conditions for modification or recall of the bankruptcy order, or discharge, are met. |
Important legal terms explained
Bankrupt and bankruptcy commencement date
Under Part III of the Code, a bankrupt is a debtor who has been adjudged bankrupt by a bankruptcy order. The bankruptcy commencement date is the date on which the Adjudicating Authority passes the bankruptcy order under Section 126. This date is important because Section 140 restrictions apply from that point, rather than merely from the filing of an application.
Public servant
The Explanation to Section 140 refers to the definition in Section 21 of the Indian Penal Code, 1860. Although the Bharatiya Nyaya Sanhita, 2023 replaced the IPC as the general penal statute from 1 July 2024, the express wording of this cross-reference should be read with applicable repeal, saving and interpretation provisions. Whether a particular role qualifies as public service depends on the statutory definition and relevant legal context.
Discharge and recall
Section 138 deals with the discharge order; Section 142 addresses modification or recall of the bankruptcy order. Section 140(3) identifies these as events ending the disqualifications imposed by Section 140. Separate restrictions under other laws may continue independently.
When do the restrictions start and end?
The restrictions start on the bankruptcy commencement date. They cease to operate under Section 140 when the bankruptcy order is modified or recalled under Section 142, or the bankrupt is discharged under Section 138. The effect of a modification should be assessed in light of the actual order made by the Adjudicating Authority.
Related provisions
Section 138 - Discharge order governs the discharge procedure. Section 139 - Effect of discharge describes its consequences and exceptions. Section 141 sets out further restrictions on a bankrupt, and Section 142 deals with modification or recall of bankruptcy orders.
Frequently asked questions
Does every person who owes money face these disqualifications?
No. Section 140 concerns a person who is bankrupt under the applicable bankruptcy framework; ordinary indebtedness alone does not trigger these restrictions.
Does discharge automatically remove all other legal restrictions?
No. Section 140(3) concerns disqualifications under this section. Other legislation may impose separate restrictions.
Can a bankrupt serve as a trustee?
Section 140(2)(a) prohibits being appointed or acting as trustee or representative in respect of a trust, estate or settlement while the disqualification applies.
Official legal sources
For current legislation, commencement notifications and subordinate regulations, consult the India Code official legislation portal, the Insolvency and Bankruptcy Board of India legal framework, and the Ministry of Corporate Affairs. Confirm any subsequent amendments or notifications before relying on the provision in a specific matter.
This article is general legal information and is not a substitute for advice on an individual proceeding.