Section 161 of the Insolvency and Bankruptcy Code, 2016: Notice to Disclaim Onerous Property
Section 161 explains when a bankruptcy trustee cannot disclaim onerous property after receiving a written request from an interested person and failing to decide within seven days. It must be read with Section 160, which governs the disclaimer of onerous property.
Section 161: Notice to disclaim onerous property
161. (1) No notice of disclaimer under section 160 shall be necessary if-
(a) a person interested in the onerous property has applied in writing to the bankruptcy trustee or his predecessor requiring him to decide whether the onerous property should be disclaimed or not; and
(b) a decision under clause (a) has not been taken by the bankruptcy trustee within seven days of receipt of the notice.
(2) Any onerous property which cannot be disclaimed under sub-section (1) shall be deemed to be part of the estate of the bankrupt.
Explanation.- For the purposes of this section, an onerous property is said to be disclaimed where notice in relation to that property has been given by the bankruptcy trustee under section 160.
Meaning and operation of Section 161
What is onerous property?
The Explanation to Section 160 defines onerous property as an unprofitable contract or other property forming part of the bankrupt's estate that is unsaleable, not readily saleable, or may give rise to a claim. The provision allows a bankruptcy trustee, subject to statutory safeguards, to disclaim such property.
What does the seven-day period mean?
An interested person may apply in writing to the bankruptcy trustee or the trustee's predecessor, asking for a decision on whether the property will be disclaimed. If the trustee does not make that decision within seven days after receiving the request, Section 161(1) prevents disclaimer in the circumstances described there. The seven-day rule concerns the trustee's decision, not a general period for filing every disclaimer.
What happens if the trustee does not decide?
Under Section 161(2), property that cannot be disclaimed by reason of sub-section (1) is deemed to remain in the bankrupt's estate. Section 161 does not itself transfer ownership to the person who sent the request.
What counts as a disclaimer?
The Explanation to Section 161 links disclaimer to the notice given by the bankruptcy trustee under Section 160. A mere intention to disclaim should not be confused with a legally effective disclaimer. Additional requirements may apply, particularly to leasehold interests.
Related provisions of the IBC
Section 160 - Onerous property of bankrupt
Section 160 permits the bankruptcy trustee to disclaim qualifying onerous property by notice, specifies effects on the bankrupt's rights and trustee's liabilities, and protects the rights or liabilities of third parties. For property claimed for the estate under Section 155, the trustee needs permission of the committee of creditors before issuing a disclaimer notice.
Section 162 - Disclaimer of leaseholds
Section 162 establishes additional safeguards for disclaimer of leasehold interests, including service of notice on interested persons and an opportunity to object within fourteen days. If an objection is filed, the disclaimer requires a direction of the Adjudicating Authority under Section 163.
Section 163 - Challenge against disclaimed property
Section 163 provides for applications to the Adjudicating Authority by specified interested or liable persons, including certain occupiers of dwelling houses, and permits appropriate vesting or delivery orders. Applicable procedural regulations and deadlines should also be checked.
Practical illustration
Suppose a bankruptcy estate includes a contract that may impose continuing losses. A person interested in that contract writes to the bankruptcy trustee asking whether it will be disclaimed. If the trustee receives the request but makes no decision within seven days, Section 161 restricts the trustee's ability to disclaim that property, and Section 161(2) treats it as part of the estate. The result in a particular case depends on the facts, the applicable bankruptcy process and related provisions.
Official legislation and regulatory resources
- Insolvency and Bankruptcy Code, 2016 - official IBBI-hosted text (PDF)
- IBBI legal framework - amendments, regulations and notifications
- India Code - official central legislation repository
Updated 23 October 2026. Statutory text is presented for reference; verify subsequent amendments, commencement notifications and regulations applicable to the particular bankruptcy proceeding.