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IBBI Limited Insolvency practice questions

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Question 1Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

Under the Insolvency and Bankruptcy Code, 2016, within how many days must the adjudicating authority ascertain the existence of a default from the records of an information utility or on the basis of other evidence, after admission of an application?

  1. Seven days
  2. Fourteen days Correct answer.
  3. Sixty days
  4. Thirty days

Explanation

Section 7(5) read with the proviso requires the Adjudicating Authority to ascertain the existence of a default within fourteen days of the filing of the application under Section 7. This applies where the application is complete and no disciplinary proceeding is pending against the proposed resolution professional.

Question 2Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

Which authority is empowered to initiate a corporate insolvency resolution process against a corporate debtor by filing an application as a financial creditor?

  1. Only an operational creditor with a decree from a court
  2. Only the Central Government through the regulator
  3. A financial creditor, whether alone or jointly with other financial creditors Correct answer.
  4. Only a financial creditor holding at least ten per cent of the total debt

Explanation

Section 7 permits a financial creditor either alone or jointly with other financial creditors to file an application for initiating CIRP. There is no minimum threshold of debt holding imposed on the financial creditor for filing.

Question 3Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

An operational creditor must deliver a demand notice to the corporate debtor before filing an application under Section 9. How long must the operational creditor wait after delivery of the demand notice before filing the application if the debtor does not pay or dispute?

  1. Twenty-one days
  2. Three days
  3. Seven days
  4. Ten days Correct answer.

Explanation

Section 8 requires the corporate debtor to pay the unpaid operational debt or show existence of a dispute within ten days of receipt of the demand notice. If the debtor fails to do so, the operational creditor may file an application under Section 9.

Question 4Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

Which of the following is the correct composition of the committee of creditors in a corporate insolvency resolution process?

  1. Financial creditors and, where no financial creditor is present, operational creditors as decided by the Adjudicating Authority Correct answer.
  2. Only the resolution professional and the suspended board of directors
  3. Only secured creditors of the corporate debtor
  4. All creditors of the corporate debtor including operational creditors

Explanation

Section 21 provides that the committee of creditors comprises all financial creditors of the corporate debtor. Where the corporate debtor has no financial creditors, the committee consists of operational creditors as the Adjudicating Authority decides.

Question 5Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

What is the maximum period for which a corporate insolvency resolution process may be extended, including any extension, under the Code?

  1. Four hundred and twenty days
  2. Two hundred and seventy days
  3. Three hundred and sixty days
  4. Three hundred and thirty days Correct answer.

Explanation

Section 12 provides that the CIRP must be completed within 180 days, extendable by a further 90 days by the Adjudicating Authority, making a maximum of 330 days including any extension.

Question 6Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

Under the Code, when does the moratorium under Section 14 become effective in relation to a corporate debtor?

  1. On the date the resolution professional is appointed by the committee of creditors
  2. On the date the application is filed before the Adjudicating Authority
  3. On the date the Adjudicating Authority passes the order admitting the application Correct answer.
  4. On the date the resolution plan is approved by the Adjudicating Authority

Explanation

Section 14 states that the moratorium takes effect from the date of the admission order by the Adjudicating Authority. Filing the application alone does not trigger the moratorium.

Question 7Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

Which of the following persons is disqualified from being appointed as a resolution professional under the Code?

  1. A person who is a member of a professional institute and holds a valid registration
  2. A person who is an undischarged bankrupt Correct answer.
  3. A person who has completed the required examination and training
  4. A person who has been practising as an insolvency professional for over ten years

Explanation

Section 206 read with the regulations disqualifies a person who is an undischarged bankrupt from being a resolution professional. Registration requires meeting eligibility and fitness criteria prescribed by the Insolvency and Bankruptcy Board of India.

Question 8Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

Under Section 29A, which category of persons is barred from submitting a resolution plan for a corporate debtor?

  1. A resolution applicant who is a financial creditor with a small claim
  2. A person who is a promoter of the corporate debtor and is classified as a wilful defaulter Correct answer.
  3. A foreign investor who has no prior dealings with the corporate debtor
  4. An unrelated third-party investor with no connection to the corporate debtor

Explanation

Section 29A disqualifies persons such as wilful defaulters, undischarged insolvents, and connected persons from submitting a resolution plan. A promoter classified as a wilful defaulter falls squarely within the disqualification.

Question 9Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

A creditor claims that a transaction entered into by the corporate debtor two years before the insolvency commencement date was undervalued. Under which provision would the resolution professional examine such a transaction?

  1. Section 25 dealing with duties of the resolution professional
  2. Section 66 dealing with fraudulent trading
  3. Section 45 dealing with undervalued transactions Correct answer.
  4. Section 43 dealing with preferential transactions

Explanation

Section 45 empowers the resolution professional to apply to the Adjudicating Authority for orders in respect of undervalued transactions. The look-back period depends on whether the transaction was with a related party or an unrelated party.

Question 10Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

A resolution professional discovers that the corporate debtor transferred an asset to an unrelated party at a grossly low price eighteen months before the insolvency commencement date. Within what look-back period can the transaction be challenged as undervalued?

  1. Five years
  2. One year
  3. Two years Correct answer.
  4. Six months

Explanation

Section 46 provides a look-back period of two years for undervalued transactions with persons other than related parties, and one year for transactions with related parties. Since the transferee is unrelated, the two-year period applies.

Question 11Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

Which of the following best describes the role of an information utility registered under the Code?

  1. It approves resolution plans submitted to the Adjudicating Authority
  2. It stores and authenticates financial information relating to debts owed to creditors Correct answer.
  3. It adjudicates disputes between creditors and the corporate debtor
  4. It conducts the corporate insolvency resolution process on behalf of creditors

Explanation

An information utility is registered with the Insolvency and Bankruptcy Board of India to collect, store and authenticate financial information relating to debts. Its records serve as evidence of default before the Adjudicating Authority.

Question 12Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

When must the resolution professional constitute the committee of creditors after the order of admission?

  1. Within seven days of the insolvency commencement date
  2. Within sixty days of the insolvency commencement date
  3. Within thirty days of the insolvency commencement date
  4. Within fourteen days of the insolvency commencement date Correct answer.

Explanation

Regulation 17 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 requires the resolution professional to constitute the committee of creditors within fourteen days of the insolvency commencement date.

Question 13Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

A resolution plan approved by the Adjudicating Authority is binding on which of the following?

  1. The corporate debtor and all stakeholders including dissenting creditors Correct answer.
  2. Only the operational creditors of the corporate debtor
  3. Only the resolution applicant and the resolution professional
  4. Only the financial creditors who voted in favour of the plan

Explanation

Section 31 provides that an approved resolution plan is binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the plan. Dissenting creditors within the committee are also bound.

Question 14Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

Under Section 12A, the Adjudicating Authority may allow withdrawal of an application admitted under Section 7, 9 or 10 on which basis?

  1. On a simple majority vote of the committee of creditors
  2. On an application made by the applicant with the approval of ninety per cent of the voting share of the committee of creditors Correct answer.
  3. On a written request by the resolution professional alone
  4. On the recommendation of the Adjudicating Authority's own motion

Explanation

Section 12A permits withdrawal of an admitted application only if the applicant files a request and the committee of creditors approves it with at least ninety per cent of the voting share. This high threshold reflects the collective nature of the process.

Question 15Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

In the context of a fast track corporate insolvency resolution process, what is the basic period within which the process must be completed, subject to extension?

  1. One hundred and eighty days
  2. Forty-five days
  3. One hundred and twenty days
  4. Ninety days Correct answer.

Explanation

Section 58 provides that the fast track process must be completed within ninety days from the insolvency commencement date, extendable by a further forty-five days. This is shorter than the regular CIRP timeline.

Question 16Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

Which of the following statements correctly describes the treatment of operational creditors under a resolution plan?

  1. They must receive payment before financial creditors in every case
  2. They are excluded from the resolution plan entirely
  3. They must receive the same amount as financial creditors in all cases
  4. They must receive at least the liquidation value payable to them under Section 53 Correct answer.

Explanation

Section 30 read with the regulations requires that operational creditors receive at least the amount they would be entitled to in the liquidation waterfall under Section 53. This ensures they are not worse off than in liquidation.

Question 17Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

A financial creditor is dissatisfied with the decision of the resolution professional rejecting its claim. To whom should the creditor first prefer a grievance before approaching the Adjudicating Authority?

  1. The National Company Law Appellate Tribunal
  2. The Insolvency and Bankruptcy Board of India directly
  3. The Adjudicating Authority through an application under Section 60 Correct answer.
  4. The committee of creditors for a vote

Explanation

Section 60(5) empowers the Adjudicating Authority to entertain applications by or against the corporate debtor or corporate person, including grievances against the resolution professional's decisions. The creditor can seek relief before the Adjudicating Authority.

Question 18Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

Which of the following is a duty of the resolution professional under Section 25 of the Code?

  1. To manage the operations of the corporate debtor as a going concern Correct answer.
  2. To approve the resolution plan on behalf of the committee of creditors
  3. To decide the priority of claims in liquidation
  4. To adjudicate the claims of all creditors finally

Explanation

Section 25 lists the duties of the resolution professional, including taking control and management of the corporate debtor's assets and managing its operations as a going concern. Approval of the plan and adjudication of claims rest elsewhere.

Question 19Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

Under Section 53, in what order are the following paid in the liquidation waterfall?

  1. Secured creditors, insolvency resolution process costs, workmen dues, unsecured financial creditors
  2. Unsecured financial creditors, workmen dues, secured creditors, insolvency resolution process costs
  3. Workmen dues for twenty-four months, secured creditors, Crown debts, unsecured financial creditors
  4. Insolvency resolution process costs, workmen dues for twenty-four months, secured creditors, unsecured financial creditors Correct answer.

Explanation

Section 53 places insolvency resolution process costs and liquidation costs first, followed by workmen dues for twenty-four months, then secured creditors, then unsecured creditors. The statutory order determines distribution of proceeds.

Question 20Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

A company has defaulted on a debt owed to an operational creditor, who has obtained a decree from a civil court. Which condition must the operational creditor satisfy to file an application under Section 9?

  1. The operational creditor must obtain the consent of the committee of creditors
  2. The operational creditor must hold at least ten per cent of the total debt
  3. The debt must be due and payable and not disputed, and the demand notice must have been delivered Correct answer.
  4. The corporate debtor must have already been admitted to liquidation

Explanation

Section 9 requires that the operational debt be due and payable, that a demand notice under Section 8 be delivered, and that the debtor fail to pay or show a dispute within ten days. A decree is one way to establish the debt, but the statutory conditions must still be met.

Question 21Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

A resolution applicant submits a plan that proposes to pay financial creditors less than the liquidation value payable to them. What is the correct legal position?

  1. The plan is valid because the Code does not prescribe any minimum for financial creditors
  2. The plan is valid because the committee of creditors approved it by majority
  3. The plan is valid if the operational creditors are paid in full
  4. The plan violates the requirement that financial creditors receive at least the liquidation value Correct answer.

Explanation

Regulation 38 of the CIRP Regulations requires that the resolution plan provide for payment to financial creditors of at least the liquidation value payable to them. A plan falling below that floor does not meet the statutory requirement.

Question 22Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

A transaction was entered into by the corporate debtor with a related party three years before the insolvency commencement date. Can it be challenged as an undervalued transaction?

  1. No, because the look-back period for related parties is one year, which has expired Correct answer.
  2. Yes, because the look-back period for related parties is two years
  3. Yes, because there is no look-back period for related party transactions
  4. No, because related party transactions are exempt from challenge

Explanation

Section 46 read with the relevant provisions provides a look-back period of one year for undervalued transactions with related parties. A transaction three years before the insolvency commencement date falls outside that period and cannot be challenged on that ground.

Question 23Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

Which of the following is true about the powers of the Adjudicating Authority while approving a resolution plan under Section 31?

  1. It may reject the plan only if the corporate debtor consents
  2. It may modify the plan in any manner it considers appropriate
  3. It may approve the plan if it is satisfied that it meets the requirements of the Code Correct answer.
  4. It may direct the resolution professional to renegotiate the plan with creditors

Explanation

Section 31 requires the Adjudicating Authority to approve the plan if it is satisfied that the plan as approved by the committee of creditors meets the requirements of the Code. The authority does not have power to rewrite the commercial terms of the plan.

Question 24Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

An operational creditor's demand notice is disputed by the corporate debtor on the ground that the goods supplied were defective. What is the effect of such a dispute on the Section 9 application?

  1. The application must be admitted because the debt is undisputed in amount
  2. The application may be rejected if the dispute is genuine and pre-existing Correct answer.
  3. The application is automatically converted into a Section 7 application
  4. The application must be transferred to the NCLAT

Explanation

Section 9 requires the Adjudicating Authority to reject the application if it finds that the operational debt is disputed. A genuine pre-existing dispute about defective goods can justify rejection of the application.

Question 25Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

Which of the following best describes the concept of a 'fresh start' process under the Code for individuals?

  1. A process where the debtor's assets are sold to pay creditors in full
  2. A process where the debtor is discharged from qualifying debts without liquidation of assets Correct answer.
  3. A process where the debtor is prosecuted for insolvency offences
  4. A process where the debtor's business is reorganised under a resolution plan

Explanation

The fresh start process under Chapter III of Part III allows an eligible individual debtor with qualifying debts below the prescribed limit to obtain a discharge without liquidation of assets. It is distinct from the insolvency resolution and bankruptcy processes.

Question 26Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

Under the Insolvency and Bankruptcy Code, 2016, which adjudicating authority has jurisdiction over the corporate insolvency resolution process of a company?

  1. The National Company Law Tribunal Correct answer.
  2. The Commercial Court
  3. The Debt Recovery Tribunal
  4. The High Court

Explanation

Section 60 vests jurisdiction over corporate persons in the National Company Law Tribunal, which acts as the adjudicating authority for corporate insolvency resolution and liquidation. Debt Recovery Tribunals handle individual and partnership insolvency, and civil courts have no role in initiating CIRP.

Question 27Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

Which regulator is designated as the insolvency regulator under the Insolvency and Bankruptcy Code, 2016?

  1. The Insolvency and Bankruptcy Board of India Correct answer.
  2. The Securities and Exchange Board of India
  3. The Ministry of Corporate Affairs
  4. The Reserve Bank of India

Explanation

Section 188 establishes the Insolvency and Bankruptcy Board of India as the regulator with functions including registration of insolvency professionals and agencies, and framing regulations. It operates under the general oversight of the Central Government but is the statutory regulator under the Code.

Question 28Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

An insolvency professional is registered with the Insolvency and Bankruptcy Board of India. Which authorisation must the professional separately hold to act as a resolution professional for a corporate debtor?

  1. A certificate of practice issued by the Institute of Chartered Accountants of India
  2. A valid authorisation for assignment issued by the Board Correct answer.
  3. A registration certificate issued by the National Company Law Tribunal
  4. A no-objection certificate issued by the committee of creditors

Explanation

Regulations framed by the Board require an insolvency professional to hold a valid authorisation for assignment before accepting an assignment as resolution professional, liquidator, or bankruptcy trustee. The authorisation is issued and renewed by the Board through the insolvency professional agency framework.

Question 29Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

What is the maximum period of the corporate insolvency resolution process, including any extension granted by the adjudicating authority?

  1. 365 days
  2. 270 days
  3. 180 days
  4. 330 days Correct answer.

Explanation

Section 12 permits completion within 180 days, extendable by the adjudicating authority by a further 90 days on the committee's request, and the proviso caps the total at 330 days including time taken in legal proceedings. The 330-day outer limit is the ceiling for the entire process.

Question 30Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

A corporate debtor with a registered office in Pune has its financial creditor filing an application before the National Company Law Tribunal, Mumbai. Which provision governs the place of opening of the corporate insolvency resolution process?

  1. Section 10(1)
  2. Section 7(1)
  3. Section 60(1) Correct answer.
  4. Section 14(1)

Explanation

Section 60(1) provides that the corporate insolvency resolution process and liquidation of a corporate person shall be filed before the National Company Law Tribunal having territorial jurisdiction over the place where the registered office is located. Section 7 deals with initiation by a financial creditor, not with territorial jurisdiction.

Question 31Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

An operational creditor seeking to initiate corporate insolvency resolution must first deliver a demand notice. What minimum period must the corporate debtor be given to pay or show existence of a dispute?

  1. Thirty days
  2. Three days
  3. Seven days
  4. Ten days Correct answer.

Explanation

Section 8 requires the operational creditor to deliver a demand notice and the corporate debtor has ten days from receipt to pay the unpaid operational debt or to bring to notice the existence of a dispute or the record of pendency of a suit. Only after the ten-day period lapses without payment or dispute may an application under Section 9 be filed.

Question 32Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

Which of the following is a function of an insolvency professional agency registered with the Insolvency and Bankruptcy Board of India?

  1. Conducting valuation of the corporate debtor's assets
  2. Adjudicating disputes between creditors and the resolution professional
  3. Granting membership to insolvency professionals and monitoring their professional conduct Correct answer.
  4. Approving resolution plans on behalf of the committee of creditors

Explanation

Insolvency professional agencies admit insolvency professionals as members and exercise oversight over professional conduct, including disciplinary proceedings. They do not adjudicate disputes, approve plans, or perform valuations, which are separate functions under the Code.

Question 33Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

Which of the following debts is treated as an operational debt under the Code?

  1. A debenture subscription by a financial investor
  2. A term loan advanced by a bank
  3. A claim arising from the supply of goods to the corporate debtor Correct answer.
  4. An amount due under a forward contract to a financial creditor

Explanation

Section 5(21) defines operational debt as a claim in respect of provision of goods or services, including employment, or a debt arising under any law payable to the Central or State Government or a local authority. Bank loans and debenture subscriptions are financial debts.

Question 34Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

A financial creditor assigns its debt to a third party after the corporate insolvency resolution process has commenced. What is the consequence for the assignee under the Code?

  1. The assignment is void because claims cannot be transferred during the process
  2. The assignee becomes an operational creditor until the resolution professional recognises the transfer
  3. The assignee must obtain fresh admission of the application before exercising any rights
  4. The assignee automatically steps into the shoes of the financial creditor and may exercise all rights, including voting in the committee of creditors Correct answer.

Explanation

The Code permits assignment or transfer of debt, and the assignee steps into the shoes of the original financial creditor, including voting rights in the committee of creditors. The resolution professional is required to recognise the assignee upon being satisfied of the assignment.

Question 35Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

The committee of creditors has been constituted with three financial creditors holding 40, 35 and 25 percent of the voting share. What voting threshold is needed to approve a resolution plan?

  1. A simple majority of members present and voting
  2. Unanimous consent of all members
  3. Sixty-six per cent of the votes of the committee Correct answer.
  4. Sixty per cent of the votes of the committee

Explanation

Section 30(4) requires approval of a resolution plan by a vote of not less than sixty-six per cent of the voting share of the committee of creditors. The threshold is based on voting share, not on the number of members present.

Question 36Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

A resolution professional is of the view that a preference was given by the corporate debtor to a related party eighteen months before the insolvency commencement date. Which provision governs the look-back period for preferential transactions?

  1. Section 43 Correct answer.
  2. Section 66
  3. Section 45
  4. Section 68

Explanation

Section 43 deals with preferential transactions and prescribes a look-back period of two years for transactions with related parties and one year for unrelated persons. Section 45 concerns undervalued transactions, Section 66 fraudulent trading, and Section 68 the duty to report misconduct.

Question 37Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

A company's board resolves to initiate voluntary corporate insolvency resolution on the ground that it has defaulted on payment of a debt. What additional declaration must accompany the application under Section 10?

  1. A declaration that all secured creditors have consented to the process
  2. A declaration that the company is unable to pay its debts and that the application is not filed to defraud creditors Correct answer.
  3. A declaration that the company has no pending litigation
  4. A declaration that the company intends to liquidate its assets

Explanation

Section 10 requires the corporate applicant to furnish, along with the application, a declaration that the corporate debtor is unable to pay its debts and that the application is made to resolve insolvency and is not intended to defraud any person. Consent of all secured creditors or absence of litigation is not a precondition.

Question 38Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

A resolution professional rejects a claim filed by a creditor as time-barred. Which forum may the creditor approach to challenge that decision?

  1. The Insolvency and Bankruptcy Board of India by way of a complaint
  2. The committee of creditors by way of a representation
  3. The National Company Law Tribunal by way of an application Correct answer.
  4. The National Company Law Appellate Tribunal by way of an appeal

Explanation

A creditor aggrieved by the rejection of its claim by the resolution professional may apply to the National Company Law Tribunal, which has jurisdiction to decide the question of admission or rejection of claims. The Board does not adjudicate individual claims, and an appeal to the Appellate Tribunal lies against orders of the Tribunal, not directly against the professional's decision.

Question 39Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

Which of the following is a qualification required for a person to be registered as an insolvency professional with the Insolvency and Bankruptcy Board of India?

  1. Membership of an insolvency professional agency and fulfilment of the eligibility norms set by the Board Correct answer.
  2. A minimum of fifteen years of practice as a chartered accountant
  3. Approval by the committee of creditors of any corporate debtor
  4. A judicial office held for at least five years

Explanation

Registration as an insolvency professional requires the person to be a member of a registered insolvency professional agency and to satisfy the eligibility and examination requirements prescribed by the Board. Past judicial office or approval by a committee of creditors is not part of the eligibility criteria.

Question 40Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

During liquidation, the liquidator forms a stakeholders' consultation committee. What is the function of that committee?

  1. To approve the final distribution of assets in place of the Tribunal
  2. To adjudicate disputes between secured and unsecured creditors
  3. To approve the liquidator's remuneration and replace the liquidator
  4. To advise the liquidator on matters relating to the liquidation and assist in maximising value Correct answer.

Explanation

The stakeholders' consultation committee is constituted to advise the liquidator on matters relating to the liquidation process, including the sale of assets and distribution, and to assist in value maximisation. It does not appoint or remove the liquidator, adjudicate disputes, or replace the Tribunal's approval of distribution.

Question 41Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

A corporate debtor has a secured creditor whose security interest is not registered with an information utility. In the liquidation waterfall under Section 53, how is that secured creditor treated in respect of the secured asset?

  1. The secured creditor may realise its security and has priority over the secured asset, with the balance ranking as unsecured Correct answer.
  2. The secured creditor loses its security interest entirely
  3. The secured creditor is paid after all preferential creditors
  4. The secured creditor is treated as an unsecured creditor for the entire debt

Explanation

A secured creditor may either relinquish its security and rank as unsecured or realise its security, in which case the proceeds are applied to its debt and any shortfall ranks as an unsecured claim. The waterfall in Section 53 governs distribution of the proceeds of unencumbered assets.

Question 42Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

An application under Section 7 is filed by a financial creditor. Within what period must the adjudicating authority ascertain the existence of a default and admit or reject the application?

  1. Sixty days from the date of filing
  2. Thirty days from the date of filing
  3. Fourteen days from the date of filing Correct answer.
  4. Ninety days from the date of filing

Explanation

Section 7(4) requires the adjudicating authority to ascertain the existence of a default within fourteen days of the filing of the application. This period is intended to ensure speedy admission and is distinct from the overall CIRP timeline.

Question 43Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

A resolution plan proposes to keep the corporate debtor as a going concern and to pay off creditors over five years. Which requirement must the plan satisfy regarding the period of its implementation?

  1. The plan must be implemented before the expiry of the CIRP period
  2. The plan may specify any period, but it must be feasible and viable in the opinion of the committee of creditors Correct answer.
  3. The plan must provide for implementation within one year of approval
  4. The plan must not exceed the liquidation value timeline

Explanation

Section 30 requires the resolution professional to examine whether the plan is feasible and viable, and the committee of creditors must be satisfied on these aspects before approval. The Code does not prescribe a fixed implementation period, though the plan must address the interests of all stakeholders.

Question 44Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

What is the effect of the approval of a resolution plan by the adjudicating authority on proceedings pending against the corporate debtor in other forums?

  1. Proceedings continue but the corporate debtor must defend them through the resolution professional
  2. All proceedings continue unaffected
  3. Proceedings in respect of claims covered by the plan stand abated and the plan is binding on all stakeholders Correct answer.
  4. Only proceedings before the Tribunal are stayed

Explanation

Once approved, the resolution plan is binding on the corporate debtor and its employees, members, creditors, guarantors, and other stakeholders, and claims covered by the plan are extinguished. This gives the successful resolution applicant a clean slate in respect of the resolved claims.

Question 45Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

A corporate debtor has a single financial creditor and no operational creditors. Who constitutes the committee of creditors?

  1. The sole financial creditor Correct answer.
  2. The resolution professional alone
  3. The sole financial creditor and the suspended board of directors
  4. The sole financial creditor along with the resolution professional as a member

Explanation

The committee of creditors comprises all financial creditors of the corporate debtor, and where there is only one financial creditor that creditor constitutes the committee. The resolution professional conducts the meetings but is not a member, and the suspended board has no role in the committee.

Question 46Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

A financial creditor has a right to vote in the committee of creditors. On what basis is the voting share of each financial creditor determined?

  1. In proportion to the security held by each creditor
  2. In proportion to the financial debt owed to that creditor, as assessed by the resolution professional Correct answer.
  3. Equally among all financial creditors
  4. In proportion to the date of filing of claims

Explanation

The voting share of a financial creditor is determined in proportion to the financial debt owed to that creditor, including interest and other dues, as assessed by the resolution professional. Equal voting or security-based voting does not reflect the statutory scheme.

Question 47Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

A resolution professional seeks to avoid a transaction on the ground that it was undervalued and entered into with the intention of defrauding creditors. Which provision empowers the resolution professional to make such an application?

  1. Section 20(1)
  2. Section 17(1)(a)
  3. Section 28(1)(a)
  4. Section 25(2)(j) read with Section 45 Correct answer.

Explanation

Section 25(2)(j) empowers the resolution professional to file applications for avoidance of transactions referred to in Chapters III and IV of Part II, which include undervalued transactions under Section 45. The other provisions deal with management of the corporate debtor's operations and do not create avoidance powers.

Question 48Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

A resolution applicant is a promoter of the corporate debtor against whom an order under Section 66 has been passed for fraudulent trading. How does the disqualification under Section 29A operate?

  1. The disqualification applies because the person is covered by the category of persons who have been subject to a Section 66 order Correct answer.
  2. The disqualification does not apply to promoters of the corporate debtor
  3. The disqualification applies only if the plan is submitted jointly with another applicant
  4. The disqualification applies only if the order was passed within the preceding one year

Explanation

Section 29A disqualifies a person who has been subject to an order under Section 66 for fraudulent or wrongful trading from submitting a resolution plan. The bar is not limited to a one-year look-back and applies to promoters as well.

Question 49Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

During the corporate insolvency resolution process, the resolution professional seeks to sell an asset of the corporate debtor outside the ordinary course of business. Whose approval is required?

  1. The suspended board of directors by a simple majority
  2. The adjudicating authority
  3. The committee of creditors by a vote of not less than sixty-six per cent Correct answer.
  4. The stakeholders' consultation committee

Explanation

Section 28 requires the resolution professional to obtain prior approval of the committee of creditors for actions specified therein, including sale of assets outside the ordinary course of business, by a vote of not less than sixty-six per cent. The adjudicating authority's approval is not required at this stage.

Question 50Insolvency and Bankruptcy Code, 2016 and related regulations (content domain not enumerated on the retrieved page)

A creditor holds a claim that is partly secured and partly unsecured against the corporate debtor in liquidation. How is the claim treated in the distribution under Section 53?

  1. The entire claim ranks as a secured claim
  2. The claim is extinguished unless the security is registered with an information utility
  3. The entire claim ranks as an operational debt
  4. The secured portion is realised from the security and the unsecured portion ranks with unsecured creditors Correct answer.

Explanation

A secured creditor may realise its security and prove the balance of its claim as unsecured, which then ranks in the waterfall along with other unsecured creditors. The Code does not elevate the entire claim to secured status merely because part of it is secured.