CHAPTER V ADMINISTRATION AND DISTRIBUTION OF THE ESTATE OF THE BANKRUPTCentral

Section 174 of The Insolvency and Bankruptcy Code, 2016. in hindi

(1)Whenever the bankruptcy trustee has sufficient funds in his hand, he may declare and distribute interim dividend among the creditors in respect of the bankruptcy debts which they have respectively proved.
(2)Where the bankruptcy trustee has declared any interim dividend, he shall give notice of such dividend and the manner in which it is proposed to be distributed.
(3)In the calculation and distribution of the interim dividend, the bankruptcy trustee shall make provision for—
1. (a)any bankruptcy debts which appear to him to be due to persons who, by reason of the distance of their place of residence, may not have had sufficient time to tender and establish their debts; and
2. (b)any bankruptcy debts which are subject of claims which have not yet been determined;
3. (c)disputed proofs and claims; and
4. (d)expenses necessary for the administration of the estate of the bankrupt.

Summary

The bankruptcy trustee has the authority to declare and distribute temporary payments, known as interim dividends, to creditors who have proved their claims.
The trustee must provide a notice detailing the interim dividend and how it will be distributed to the creditors.
When calculating these temporary payments, the trustee must set aside funds to cover the administration expenses of the bankruptcy process.
The trustee must make provisions for any claims that are currently disputed or have not yet been determined.
The trustee must reserve money for creditors who live far away and might not have had enough time to submit and prove their debts.

Practical examples

1Ramesh is appointed as the bankruptcy trustee for Rajesh. On August 15, 2026, Ramesh finds he has 500,000 rupees in cash available. He decides to declare an interim dividend of ten percent to all registered creditors and sends them a notice explaining that the money will be transferred directly to their bank accounts.

2In another case, Priya is managing a bankruptcy. She has 300,000 rupees to distribute but knows that a major creditor, Amit, lives in a remote village in Assam and has not sent his claim yet. Priya reserves 50,000 rupees specifically for Amit's potential claim before distributing the remaining cash as an interim dividend to the other creditors on October 1, 2026.

FAQ

1. Under what conditions can a trustee distribute an interim dividend under Section 174 of the Insolvency and Bankruptcy Code, 2016?

Under Section 174 of the Insolvency and Bankruptcy Code, 2016, the bankruptcy trustee can declare and distribute an interim dividend whenever there are sufficient funds in hand, provided they give notice of the dividend and the distribution method to the creditors who have proved their debts.

2. What expenses must a trustee reserve money for when calculating an interim dividend under Section 174 of the Insolvency and Bankruptcy Code, 2016?

Under Section 174 of the Insolvency and Bankruptcy Code, 2016, the trustee must make provision for the necessary expenses of administering the bankrupt person's estate before distributing any interim dividend.

3. Does a trustee have to consider undecided or disputed claims under Section 174 of the Insolvency and Bankruptcy Code, 2016?

Yes, under Section 174 of the Insolvency and Bankruptcy Code, 2016, the trustee is required to set aside funds for disputed proofs and claims, as well as bankruptcy debts that are the subject of claims that have not yet been determined.

Test yourself

Q1.Under Section 174 of the Insolvency and Bankruptcy Code, 2016, when can a bankruptcy trustee declare and distribute an interim dividend?

Q2.Under Section 174 of the Insolvency and Bankruptcy Code, 2016, which of the following is the trustee NOT mandatory to make provision for during the calculation of an interim dividend?

Q3.Under Section 174 of the Insolvency and Bankruptcy Code, 2016, what must the bankruptcy trustee do immediately after declaring an interim dividend?

Q4.Under Section 174 of the Insolvency and Bankruptcy Code, 2016, how are distant creditors protected during the distribution of temporary payments?

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