Section 170: Administration of Estate of Deceased Bankrupt
Section 170 explains how the estate of a person who dies during bankruptcy is administered, how proper funeral and testamentary expenses are treated, and what happens to any remaining surplus.
Section 170 - Statutory provision
170. (1) All the provisions of Chapter V relating to the administration and distribution of the estate of the bankrupt shall, so far as the same are applicable, apply to the administration of the estate of a deceased bankrupt.
(2) While administering the estate of a deceased bankrupt, the bankruptcy trustee shall have regard to the claims by the legal representatives of the deceased bankrupt to payment of the proper funeral and testamentary expenses incurred by them.
(3) The claims under sub-section (2) shall rank equally to the secured creditors in the priority provided under section 178.
(4) If, on the administration of the estate of a deceased bankrupt, any surplus remains in the hands of the bankruptcy trustee after payment in full of all the debts due from the deceased bankrupt, together with the costs of the administration and interest as provided under section 178, such surplus shall be paid to the legal representatives of the estate of the deceased bankrupt or dealt with in such manner as may be prescribed.
Meaning and scope of Section 170
Section 170 concerns a deceased bankrupt, meaning a person whose estate is subject to bankruptcy administration and who has died. It provides a specific rule for administering that estate under the Insolvency and Bankruptcy Code, 2016 (IBC).
1. Continuation of estate administration
Under sub-section (1), the provisions of Chapter V governing administration and distribution apply to a deceased bankrupt's estate so far as applicable. The bankruptcy trustee continues to deal with the estate in accordance with the relevant statutory framework. Section 169 separately provides for continuance of bankruptcy proceedings following death.
2. Proper funeral and testamentary expenses
Sub-section (2) requires the bankruptcy trustee to have regard to claims made by the deceased bankrupt's legal representatives for proper funeral and testamentary expenses incurred by them. Funeral expenses concern reasonable costs associated with the deceased's funeral; testamentary expenses generally relate to administering testamentary arrangements. Whether particular expenses are proper depends on the circumstances and applicable law.
3. Priority of those expenses
Sub-section (3) expressly provides that claims under sub-section (2) rank equally with secured creditors in the priority provided by Section 178. This priority is statutory; it does not mean that every expense claimed by a family member is automatically payable.
4. Distribution of any surplus
Under sub-section (4), any surplus remaining after payment in full of debts, administration costs and applicable interest under Section 178 is payable to the legal representatives of the deceased bankrupt's estate or otherwise dealt with as prescribed. Legal representatives do not take the surplus ahead of the statutory distribution process.
Practical illustration
Suppose an individual is subject to bankruptcy proceedings and dies before the estate has been fully administered. The bankruptcy trustee continues administering the estate under the applicable provisions. The legal representatives may submit claims for proper funeral and testamentary expenses. The trustee must address those claims according to Section 170 and the priority rules. Only after the required payments are made can any surplus be passed to the legal representatives or otherwise dealt with as prescribed.
Relationship with Sections 169 and 178
Section 169 addresses the continuance of bankruptcy proceedings on the bankrupt's death. Section 170 addresses administration of the deceased bankrupt's estate, expense claims and surplus. Section 178 sets out the priority of payment of debts in bankruptcy. These provisions should be read together.
Frequently asked questions
Does bankruptcy end when the bankrupt dies?
No. Section 169 provides that proceedings continue as if the bankrupt were alive, and Section 170 addresses the administration of the deceased bankrupt's estate.
Can legal representatives recover funeral expenses?
Section 170(2) requires the trustee to have regard to claims for proper funeral and testamentary expenses incurred by legal representatives. Section 170(3) specifies their priority.
Do heirs receive the bankrupt's assets immediately?
Not merely because the bankrupt has died. Under Section 170(4), any surplus is dealt with only after the debts, administration costs and applicable interest have been paid in accordance with the Code.
Legislation and official resources
For the governing legislation and subsequent changes, consult the India Code official legislation database and the Insolvency and Bankruptcy Board of India (IBBI). The operation and commencement of particular provisions should be checked against applicable notifications and current law.
Read the Insolvency and Bankruptcy Code, 2016 overview.
This article provides general legal information and is not a substitute for advice on a specific bankruptcy estate.