{"id":21948,"date":"2023-04-19T15:00:47","date_gmt":"2023-04-19T09:30:47","guid":{"rendered":"https:\/\/gstguntur.com\/?p=21948"},"modified":"2023-04-19T15:01:54","modified_gmt":"2023-04-19T09:31:54","slug":"individual-firm-insolvency-cs-professional-study-material","status":"publish","type":"post","link":"https:\/\/gstguntur.com\/individual-firm-insolvency-cs-professional-study-material\/","title":{"rendered":"Individual\/Firm Insolvency – CS Professional Study Material"},"content":{"rendered":"

Chapter 20 Individual\/Firm Insolvency – Corporate Restructuring Insolvency Liquidation & Winding Up Notes<\/a> is designed strictly as per the latest syllabus and exam pattern.<\/p>\n

Individual\/Firm Insolvency – Corporate Restructuring Insolvency Liquidation & Winding Up Study Material<\/h2>\n

Question 1.
\n\u201cCommitting default or failure of Resolution Plan may lead to liquidation of a body corporate under Insolvency and Bankruptcy Code, 2016 but could there be other circumstances for which a Tribunal may order for winding up?\u201d Examine and explain. (Dec 2018, 5 marks)
\nAnswer:
\nIn case the Resolution Professional is unable to come-up with a resolution plan approved by at least sixty six percent of the Committee of Creditors or the plan submitted does not confirm the requirements of the Code, the Tribunal may pass an order of liquidation of the Corporate Debtor in terms of Section 33 of the Insolvency and Bankruptcy Code, 2016 so also in case the approved resolution plan is contravened by the Corporate Debtor.<\/p>\n

Apart from the above, Section 271 of the Companies Act, 2013 enumerates circumstances such as company\u2019s own resolution, fraudulent or felony activities, default in filing financial statements or annual returns for more than 5 consecutive years or just and equitable reasons for which Tribunal may order liquidation. If the company has acted against the interests of the sovereignty and integrity of India, the security of the State then also it may be wound-up.<\/p>\n

\"Individual\/Firm<\/p>\n

Question 2.
\nExplain the objective and procedural requirements for issuance of Public Notice under section 102 of the Insolvency and Bankruptcy Code, 2016. (Dec 2019, 5 marks)
\nAnswer:
\nThe objective of Section 102 of the Insolvency and Bankruptcy Code, 2016 is to provide an opportunity to all the creditors to be a part of the repayment plan. Section 102 provides for the issuance of a public notice by the Adjudicating Authority inviting claims from the creditors of the debtor.<\/p>\n

Issuance of public notice – According to sub-Section (1) of Section 102 of the Code, the Adjudicating Authority shall issue a public notice within seven days of passing the order under section 100 inviting claims from all creditors within twenty-one days of such issue.<\/p>\n

According to sub-section (3) of Section 102 of the Code, such notice shall be-
\n(a) published in at least one English and one vernacular newspaper which is in circulation in the state where the debtor resides;
\n(b) affixed in the premises of the Adjudicating Authority; and
\n(c) placed on the website of the Adjudicating Authority.<\/p>\n

Inclusion of certain details – According to sub-section (2) of Section 102 of the Code, the notice under sub-section (1) shall include-
\n(a) details of the order admitting the application;
\n(b) particulars of the resolution professional with whom the claims are.to be registered; and
\n(c) the last date for submission of claims.<\/p>\n

\"Individual\/Firm<\/p>\n

Question 3.
\nBriefly comment on the rights of Secured Creditors in a Repayment Plan under Section 105 of the Insolvency and Bankruptcy Code, 2016. (Dec 2020, 5 marks)
\nAnswer:
\nSection 105 of the Insolvency and Bankruptcy Code, 2016 deals with repayment plan.<\/p>\n

According to Section 105 the debtor shall prepare, in consultation with the resolution professional, a repayment plan containing a proposal to the creditors for restructuring of his debts or affairs.<\/p>\n

The repayment plan may authorise or require the resolution professional to –
\n(a) carry on the debtor’s business or trade on his behalf or in his name; or
\n(b) realise the assets of the debtor; or
\n(c) administer or dispose of any funds of the debtor.<\/p>\n

The repayment plan shall include the following, namely:
\n(a) justification for preparation of such repayment plan and reasons on the basis of which the creditors may agree upon the plan
\n(b) provision for payment of fee to the resolution professional
\n(c) such other matters as may be specified.<\/p>\n

\"Individual\/Firm<\/p>\n

Question 4.
\n\u201cA discharge order in case of individual or firm insolvency permits the debtor to start business afresh having freed from the qualifying debts of the insolvent past. Explain briefly the provisions relating to discharge order. (Aug 2021, 3 marks)
\nAnswer:
\nAccording to Section 79(2)(13) of the Insolvency and Bankruptcy Code, 2016 \u201cdischarge order means an order passed by the Adjudicating Authority discharging the debtor under sections 92,119 and section 138, as the case may be.<\/p>\n

Section 92 of the Insolvency and Bankruptcy Code, 2016 provides for the passing of a discharge order by the adjudicating authority at the end of the moratorium period for discharge of the debtor from the qualifying debts.<\/p>\n

Further, the discharge order shall also provide for the discharge of penalties, penal interest and other sums owed under any contract, in respect of the qualifying debts, from the date of the application for fresh start to the date of the discharge order. A discharge order discharges only the debtor. Such discharge order is recorded in the financial history of the debtor.<\/p>\n

Section 92 does not discharge the debtor from any debt not included in 92 (2) and from any liability not included in Section 92(3).<\/p>\n

\"Individual\/Firm<\/p>\n

Question 5.
\n\u201cAny modification suggested by creditors need consent of the debtor in respect of Repayment plan in case of individual or firm insolvency\u201d. Comment briefly on the statement narrating the provisions in respect of conducting meetings and rights of secured creditors to attend. (Aug 2021, 3 marks)
\nAnswer:
\nSection 108 of the Insolvency and Bankruptcy Code, 2016 provides for the conduct of meeting of creditors by the resolution professional. In the meeting, the creditors may decide to approve, modify or reject the repayment plan.<\/p>\n

If modifications are suggested by the creditors, the Resolution Professional ensure that consent of the debtor is obtained for each modification.<\/p>\n

The meeting of the creditors shall be conducted in accordance with the provisions of sections 108 to 111 of the Code. In the meeting of the creditors, the creditors may decide to approve, modify or reject the repayment plan. A secured creditor if attends any such meeting shall be deemed to have relinquished the security unless submits an affidavit for unsecured part of the debt, if any.<\/p>\n

\"Individual\/Firm<\/p>\n

Question 6.
\nWhat are rights of Secured Creditors in relation to Repayment Plan in case of insolvency of individual or firm?
\nAnswer:
\nSection 110 sets out the rights of the secured creditors \u00a1n a repayment plan prepared under the present chapter i.e., Chapter Ill of Part Ill of the Code. A secured creditor may or may not like to give up on his right to enforce security during the period of implementation of the repayment plan. A secured creditor participating in the meetings of the creditors and voting in relation to the repayment plan will be required to give up his right to enforce his security.<\/p>\n

However, in the event the secured creditor does not want to give up hfs right to enforce his security, he may vote on the repayment plan in respect of his unsecured debt, and his consent will be required if any term of the repayment plan affects his right to enforce security.<\/p>\n

\"Individual\/Firm<\/p>\n

Question 7.
\nComment on effect of order of adjudicating authority on repayment plan?
\nAnswer:
\nSection 115 provides that a repayment plan approved by the adjudicating authority under section 114 is binding on all the creditors mentioned in the repayment plan as well as the debtor and take effect as if proposed by the debtor in the meeting.<\/p>\n

\"Individual\/Firm<\/p>\n

Individual\/Firm Insolvency Notes<\/strong><\/p>\n

Initiation of insolvency resolution process by debtor
\nAccording to sub-section (1) of section 94, a debtor who commits a default may apply, either personally or through a resolution professional, to the Adjudicating Authority for initiating the insolvency resolution process, by submitting an application.<\/p>\n

Application for insolvency resolution by Partner of firm
\nSub-section (2) makes it clear that where the debtor is a partner of a firm, such debtor shall not apply under this Chapter (i.e., Chapter III of Part III) to the Adjudicating Authority in respect of the firm unless all or a majority of the partners of the firm file the application jointly.<\/p>\n

Debts in respect of which application cannot be submitted (Excluded debt)<\/p>\n