IBBI Limited Insolvency common mistakes
IBBI Limited Insolvency · Understand the traps and how to avoid them.
Reciting the statutory timelines (e.g., 14 days for admission decision, 180-day CIRP, 330 days outer limit) without knowing which clock starts when and which events stop or reset it - such as excluding the period of litigation or the time from filing to admission.
Candidates memorise isolated numbers from the Code and regulation summaries but never build a timeline map, so in scenario questions they apply the wrong start date or forget that certain periods are excluded by judicial precedent and the Regulations.
What to do instead
Build a one-page timeline chart for each process (CIRP, fast-track, liquidation, voluntary liquidation, personal insolvency) showing trigger event, statutory duration, exclusions, and extension authority. For each entry, note the exact provision (section and regulation) and one worked date example. Re-derive it from the bare Act text, not from memory.
Confusing the roles and powers of the resolution professional, the committee of creditors, and the adjudicating authority - for example stating the RP decides the resolution plan, or that the CoC can override the AA's approval.
These three actors are described across many sections and the candidate learns each in isolation, so the boundary of authority blurs under exam pressure and in scenario-based questions.
What to do instead
Create a responsibility matrix with rows for RP, CoC, AA, IBBI, and information utilities, and columns for key decisions (appointment, plan approval, avoidance transactions, liquidation trigger, fee fixation). Fill each cell with the provision that grants the power and the voting threshold where relevant. Test yourself by covering cells and reconstructing them.
Applying the wrong voting threshold - using 66% where 51% applies, or treating a simple majority of members present as sufficient - for CoC decisions such as plan approval, extension of CIRP, replacement of RP, or liquidation.
The Code uses different thresholds for different decisions and expresses them as percentages of votes of members present and voting, which candidates conflate with headcount majorities or with each other.
What to do instead
List every CoC decision that carries a threshold, state the exact percentage and the provision, and add a short note on whether it is of votes cast or of total votes. Practise with numeric scenarios where a member abstains or is excluded due to related-party status.
Treating the Insolvency and Bankruptcy Board of India as an adjudicator, or mixing up its regulatory, registration, and disciplinary functions with those of the Adjudicating Authority and the NCLAT.
The institutional architecture is spread across Part II and the Regulations, and candidates often learn the Board only through examination and registration provisions, missing its standard-setting and inspection powers.
What to do instead
Draw an institutional map: IBBI (regulation, registration, inspection, disciplinary action against professionals), AA (adjudication of applications and approvals), NCLAT (appeals), Supreme Court. For each, list two or three concrete powers with section references and one example of a decision only that body can take.
Missing the eligibility and disqualification conditions for a resolution applicant - especially the section 29A categories - and failing to check them against a fact pattern.
Section 29A is long and layered, and candidates skim it rather than working through each clause, so they miss connected persons, promoters, and persons holding an account classified as non-performing for the specified period.
What to do instead
Make a checklist of every 29A clause with a one-line test and a synonym for the persons covered. Apply it to three hypothetical applicants (a promoter, a connected person, a fund) and record which clause disqualifies each. Rehearse the connected-person definition separately.
Confusing avoidance transactions - preferential transaction, undervalued transaction, extortionate credit transaction, and fraudulent or wrongful trading - and applying the wrong look-back period or the wrong remedy.
The four categories share a section and similar language, and candidates memorise the names without the distinct periods, counterparties, and reliefs, so they misclassify a fact pattern.
What to do instead
Build a comparison table with columns for definition, look-back period, who can apply, relief available, and defences. Populate it from the bare provisions and then answer five short fact patterns, classifying each transaction and naming the period.
Confusing the order of priority of distribution in liquidation with the waterfall in a resolution plan, or misplacing secured creditors, workmen dues, and government dues in the hierarchy.
The liquidation waterfall is detailed and was amended, and candidates assume the same order applies to resolution plans, where the plan's own terms govern subject to the Code.
What to do instead
Write out the liquidation waterfall clause by clause with the provision numbers, then write a separate note explaining that a resolution plan's distribution need not follow that waterfall but must meet the minimum entitlement test. Compare the two in a table and test with a numeric example.
Getting the appeal routes and limitation periods wrong - filing before the wrong forum, missing the 30-day window, or assuming a further appeal lies as of right.
Appeals under the Code run to the NCLAT and then the Supreme Court with different conditions, and candidates generalise from civil procedure rather than checking the Code.
What to do instead
Make an appeal chart: decision, first appellate forum, limitation, whether delay can be condoned, second appellate forum, and the threshold for the Supreme Court. Add one example decision at each level and note where the Code departs from ordinary civil appeals.
Answering professional-conduct questions from general ethics intuition instead of the specific obligations in the regulations - confidentiality, independence, record-keeping, fees, and handling of client funds.
Candidates assume the professional standards are common sense and do not study the regulatory text, so they miss the specific prohibitions and disclosure duties tested.
What to do instead
Extract the conduct obligations from the applicable regulations into a checklist of duties and prohibitions, each with its provision. For each, write a two-line scenario showing a breach and the consequence, and review the checklist before the exam.
Treating personal insolvency and the fresh-start process as a scaled-down corporate CIRP, applying corporate thresholds, timelines, and creditor committees to individual debtors.
Most study material emphasises corporate insolvency, so candidates skim Part III and assume the same architecture applies, missing the distinct eligibility limits and the fresh-start criteria.
What to do instead
Build a separate one-page summary for personal insolvency covering who may apply, the monetary thresholds, the fresh-start eligibility conditions, the role of the resolution professional, and the repayment plan process. Contrast each point explicitly with the corporate equivalent so the differences are fixed in memory.