Insolvency and Bankruptcy Code, 2016 | Part III | Chapter V

Section 153: Approval of Creditors for Certain Acts

Section 153 of the Insolvency and Bankruptcy Code, 2016 (IBC) identifies actions a bankruptcy trustee may undertake only after obtaining approval of the committee of creditors. It covers continuing business, litigation, deferred sale proceeds, borrowing against estate assets, settlements and assistance from the bankrupt.

Key requirement: Approval of the committee of creditors must be procured before the bankruptcy trustee exercises any of the powers listed in Section 153. This provision concerns bankruptcy administration under Part III and should not be confused with the separate corporate insolvency approval regime under Section 28.

Meaning and scope of Section 153

A bankruptcy trustee is the insolvency professional administering the bankrupt's estate under the Code. The committee of creditors is the body of creditors constituted for the bankruptcy process under the applicable provisions. The estate of the bankrupt refers to property falling within the bankruptcy estate as determined by the Code, including Section 155 and relevant exclusions.

Section 153 acts as a safeguard for transactions and decisions that may materially affect the estate or creditor recoveries. The trustee must also comply with other applicable provisions, contractual restrictions and procedural requirements.

Acts requiring approval under Section 153

Clause (a): Continue the bankrupt's business

Carry on the bankrupt's business only so far as necessary to wind it up beneficially. This is a limited administration power, not an unrestricted authority to operate indefinitely.

Clause (b): Conduct estate-related litigation

Bring, institute or defend proceedings concerning property forming part of the bankruptcy estate.

Clause (c): Accept deferred sale consideration

Accept payment at a future date for estate property, subject to appropriate stipulations such as security.

Clause (d): Mortgage or pledge estate property

Use estate property as security to raise funds for payment of the bankrupt's debts.

Clause (e): Exercise estate rights and options

Make payments or incur liabilities to acquire property for creditors where an estate right, option or power permits it.

Clause (f): Arbitrate or compromise debts

Refer to arbitration or settle actual or alleged debts between the bankrupt and a person potentially liable to the bankrupt.

Clause (g): Arrange settlements with creditors

Reach a compromise or other expedient arrangement with creditors.

Clause (h): Settle estate-related claims

Compromise or arrange claims arising from or incidental to the bankruptcy estate.

Clause (i): Engage the bankrupt in administration

Appoint the bankrupt to supervise estate management, operate the business for creditors, or assist the trustee in administering the estate.

Under clause (i), the three permitted roles are specifically: (A) supervising management of the estate or part of it; (B) carrying on the business for creditors' benefit; and (C) assisting the trustee in administering the estate. Appointment of the bankrupt does not replace the trustee's statutory responsibilities.

How Section 153 differs from Sections 151 and 152

Section 151 describes the trustee's legal capacity, such as holding property, contracting, suing and being sued. Section 152 provides general powers including sale of estate property and collection of money. Section 153 specifically conditions the listed additional actions on committee of creditors approval. The provisions must be read together rather than treating the general powers as dispensing with an express approval requirement.

Related statutory provisions

Section 133: Summoning of meeting of creditors.
Section 134: Conduct of meeting of creditors.
Section 135: Voting rights of creditors.
Section 149: Functions of bankruptcy trustee.
Section 150: Duties of bankrupt towards bankruptcy trustee.
Sections 151 and 152: Rights and general powers of the trustee.
Sections 154 and 155: Vesting and composition of the bankrupt's estate.

Practical considerations for the trustee and creditors

Before undertaking a transaction covered by Section 153, the trustee should identify the relevant clause, place the proposal before the committee of creditors under the applicable meeting and voting framework, maintain a record of approval, and document why the proposed act benefits administration of the estate. The Code and applicable rules govern the precise procedure; Section 153 itself does not prescribe a standalone voting percentage.

Frequently asked questions

Is creditor approval required under Section 153?

Yes. Section 153 makes prior approval of the committee of creditors a condition for the specified acts.

Can the trustee continue the bankrupt's business?

Only so far as necessary for winding it up beneficially, and after obtaining the committee of creditors' approval.

Can the trustee settle litigation or claims?

Section 153 permits specified litigation, arbitration and compromises after committee approval, subject to other applicable legal requirements.

Official legal sources and further reading

Legal information updated for review on 23 October 2026. Check the latest notified amendments, rules and judicial decisions before relying on this explanation for a specific matter.