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CS Professional CRVI study materials
CS Professional CRVI study resources

CS Professional CRVI: Insolvency Resolution, Liquidation and Debt Recovery

CS Professional CRVI · Work through your exam, one topic at a time.

All guide sections

Insolvency Resolution, Liquidation and Debt Recovery

Domain overview

Insolvency Resolution, Liquidation and Debt Recovery tests resolution plan approval, liquidation waterfall, and the interplay between IBC, SARFAESI, and DRT. The examiner focuses on priority of claims and the binding effect of a plan.

Core rules

  • A resolution plan approved by the CoC and NCLT binds all stakeholders, including dissenting creditors and government authorities. Section 32A protects against certain liabilities.
  • Commercial wisdom of the CoC is generally non-justiciable, but the plan must meet section 30(2) requirements.
  • Liquidation under section 33 follows a public announcement and appointment of a liquidator.
  • Section 53 waterfall: insolvency resolution process costs; secured creditors and workmen dues for 24 months rank equally; wages and unpaid dues of employees; financial creditors; government and other dues; remaining equity.
  • SARFAESI allows secured creditors to enforce security without court intervention after a 60-day notice; DRT adjudicates debt recovery under the RDDBFI Act.
  • IBC proceedings have overriding effect under section 238, but secured creditors may realise security outside liquidation in limited circumstances.

Worked example

Liquidation proceeds are Rs 100 crore. Costs are Rs 10 crore, secured creditor claim is Rs 40 crore, workmen dues are Rs 20 crore, employee wages are Rs 10 crore, and financial creditor claim is Rs 30 crore. Pay costs first (Rs 10 crore). Secured creditor and workmen share the next Rs 60 crore equally in priority; the secured claim of Rs 40 crore and workmen claim of Rs 20 crore are paid. Rs 30 crore remains; employee wages take Rs 10 crore, leaving Rs 20 crore for financial creditors, who are partly paid. The reasoning is the statutory waterfall, not the security interest alone.

Traps

Putting government dues above financial creditors; assuming equity always gets a residual; treating SARFAESI as superior to IBC; ignoring the equal ranking of secured creditors and workmen; assuming a resolution plan needs 75% CoC approval.