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Question 1Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

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

  1. The High Court exercising ordinary original civil jurisdiction
  2. The National Company Law Appellate Tribunal
  3. The National Company Law Tribunal having jurisdiction over the corporate debtor Correct answer.
  4. The Debt Recovery Tribunal having jurisdiction over the guarantor

Explanation

Section 60(2) and (3) provide that where a corporate insolvency resolution process or liquidation proceeding of a corporate debtor is pending before an NCLT, an application relating to the insolvency resolution or bankruptcy of a personal guarantor of that corporate debtor shall be filed before the same NCLT. The DRT's jurisdiction over individuals applies only where no corporate process is pending.

Question 2Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

What is the minimum default amount that must be established for a financial creditor to initiate the corporate insolvency resolution process against a corporate debtor?

  1. Fifty lakh rupees
  2. Ten lakh rupees
  3. One crore rupees Correct answer.
  4. One lakh rupees

Explanation

Section 4 of the Code sets the minimum default for initiating insolvency resolution at one crore rupees, as notified. This threshold applies to applications by financial creditors, operational creditors and the corporate debtor itself. Applications below this amount are not maintainable before the adjudicating authority.

Question 3Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

A resolution professional seeks to include a creditor who did not submit a claim before the expiry of the last date for submission. Which statement best describes the correct approach under the CIRP Regulations?

  1. The claim must be rejected outright as time-barred
  2. The claim can be admitted only if the creditor is a financial creditor
  3. The claim can be admitted only with the prior consent of the committee of creditors
  4. The claim may be considered if submitted before approval of the resolution plan by the adjudicating authority, provided it is verified Correct answer.

Explanation

Regulation 12 of the CIRP Regulations permits the resolution professional to accept claims submitted after the stipulated date but before the resolution plan is approved by the adjudicating authority, subject to verification. There is no absolute bar merely because the last date has passed. Late claims are still subject to the information available with the resolution professional.

Question 4Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

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

  1. An insolvency professional registered with the Board and having an experience of ten years in insolvency
  2. An insolvency professional who is a director of an unrelated company
  3. An insolvency professional who is a chartered accountant in practice
  4. An insolvency professional who is a partner in a firm that is an operational creditor of the corporate debtor Correct answer.

Explanation

Section 22 read with the eligibility norms requires the resolution professional to be independent of the corporate debtor. A person connected with a firm that is an operational creditor of the corporate debtor has a conflict of interest and is ineligible. Mere directorship of an unrelated company or professional qualification does not by itself disqualify.

Question 5Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

The committee of creditors of a corporate debtor consists of which of the following?

  1. Financial creditors who are not related parties of the corporate debtor Correct answer.
  2. All creditors including operational creditors in proportion to their claims
  3. Only financial creditors who are related parties of the corporate debtor
  4. Only secured financial creditors and the resolution professional

Explanation

Section 21 provides that the committee of creditors comprises all financial creditors of the corporate debtor, but financial creditors who are related parties of the corporate debtor are excluded from the committee. Operational creditors are not members of the committee. This exclusion is designed to preserve independence in decision-making.

Question 6Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

A resolution plan submitted for approval must be approved by the committee of creditors by what voting share?

  1. A simple majority of the members present and voting
  2. Not less than seventy-five per cent of the votes of the committee
  3. Unanimous consent of all members
  4. Not less than sixty-six per cent of the votes of the committee Correct answer.

Explanation

Section 30(4) requires the resolution plan to be approved by a vote of not less than sixty-six per cent of the voting share of the committee of creditors. This threshold was reduced from seventy-five per cent by amendment. Unanimity is not required.

Question 7Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Under the Code, which of the following is not a ground for preferring a winding-up petition over insolvency resolution where the corporate debtor is a small company?

  1. The corporate debtor has committed a default exceeding the statutory threshold
  2. There is a pre-existing winding-up order of the court
  3. The corporate debtor is a small company as defined under the Companies Act, 2013
  4. The corporate debtor has no assets to cover the cost of the insolvency resolution process Correct answer.

Explanation

Section 4(3) provides for the winding-up route where the corporate debtor has no assets to cover the costs of the insolvency resolution process, subject to conditions. Small company status, the default, or a pre-existing order are not the specific grounds under that provision for bypassing resolution. The question asks which is not such a ground, and absence of assets is a statutory ground.

Question 8Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Within how many days must the adjudicating authority ascertain the existence of a default and admit or reject an application for corporate insolvency resolution?

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

Explanation

Section 7(4) and Section 9(4) require the adjudicating authority to ascertain the existence of a default and admit or reject the application within fourteen days from the date of filing. The period is directory and subject to the overall time limits. Extensions beyond the statutory period are not contemplated by the Code.

Question 9Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Which of the following persons is not entitled to propose a resolution plan for a corporate debtor under the Code?

  1. An insolvency professional registered with the Board
  2. A person whose account has been classified as a non-performing asset for less than one year
  3. A person who is a wilful defaulter in respect of the corporate debtor Correct answer.
  4. A person who was not a promoter of the corporate debtor

Explanation

Section 29A bars a person who is a wilful defaulter from submitting a resolution plan. The disqualification applies to persons whose accounts have been classified as non-performing assets for more than one year, so a person whose account has been classified for less than one year is not automatically barred. Registered insolvency professionals and persons who were not promoters are not disqualified by that status alone.

Question 10Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

What is the outer limit for completion of the corporate insolvency resolution process, including permissible extensions, as per the Code?

  1. Three hundred and thirty days Correct answer.
  2. One hundred and eighty days
  3. Four hundred and fifty days
  4. Two hundred and seventy days

Explanation

Section 12 provides that the resolution process shall be completed within one hundred and eighty days from the date of admission, extendable by a further ninety days by the committee of creditors. The outer limit is therefore three hundred and thirty days. Further extensions are not contemplated for the ordinary process.

Question 11Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

The fast track corporate insolvency resolution process under Chapter IV of Part II applies to which of the following?

  1. Small companies, start-ups and unlisted companies with total assets below the notified threshold Correct answer.
  2. Only listed companies with a market capitalisation above the notified threshold
  3. All corporate debtors irrespective of size
  4. Only public sector undertakings

Explanation

Section 55 read with Section 56 allows the fast track process for small companies, start-ups and unlisted companies with total assets below the limit notified by the Central Government. It is not available to all corporate debtors. The process is designed to reduce timelines for smaller entities.

Question 12Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

A resolution professional discovers that a corporate debtor made a preferential transfer to a related party within the look-back period. Which authority determines whether the transaction is a preferential transaction?

  1. The Board through its disciplinary committee
  2. The National Company Law Appellate Tribunal
  3. The resolution professional, subject to the adjudicating authority's decision on the application Correct answer.
  4. The committee of creditors by a sixty-six per cent vote

Explanation

The resolution professional is required to identify preferential transactions and file an application before the adjudicating authority, which decides whether the transaction is preferential. The committee of creditors has no adjudicatory role in avoidance proceedings. The NCLAT hears appeals, not original avoidance applications.

Question 13Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

What is the look-back period for determining whether a transaction is an undervalued transaction under Section 45 of the Code, where the transaction is with a related party?

  1. One year preceding the insolvency commencement date
  2. Three years preceding the insolvency commencement date
  3. Six months preceding the insolvency commencement date
  4. Two years preceding the insolvency commencement date Correct answer.

Explanation

Section 45 provides a look-back period of two years for transactions with related parties and one year for transactions with other persons preceding the insolvency commencement date. The two-year period applies where the beneficiary is a related party. The one-year period applies to unrelated parties.

Question 14Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Which of the following is true about the moratorium declared under Section 14 of the Code?

  1. It prohibits the institution of suits against the corporate debtor but permits execution of decrees already passed
  2. It applies only to secured creditors and not to unsecured creditors
  3. It remains in force until the resolution plan is implemented
  4. It prohibits the institution of suits and continuation of pending suits against the corporate debtor, including execution of decrees Correct answer.

Explanation

Section 14 imposes a moratorium prohibiting the institution and continuation of suits or proceedings against the corporate debtor, including execution of decrees. The protection extends to all creditors, secured and unsecured. The moratorium ceases when the resolution plan is approved or the process otherwise ends.

Question 15Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

A financial creditor assigns its debt to another person during the corporate insolvency resolution process. What is the consequence for membership of the committee of creditors?

  1. The assignee can participate only if the resolution professional consents
  2. The assignee becomes a member of the committee in place of the assignor Correct answer.
  3. The assignee must obtain the approval of the adjudicating authority
  4. The assignor continues to be a member until the plan is approved

Explanation

Section 21(4) provides that a financial creditor who assigns its debt to another person, whether during the process or otherwise, the assignee shall be treated as a financial creditor and becomes a member of the committee of creditors in place of the assignor. The resolution professional updates the committee accordingly.

Question 16Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Which of the following statements about the role of the resolution professional after approval of a resolution plan is correct?

  1. The resolution professional continues to manage the corporate debtor until the plan is implemented
  2. The resolution professional submits the plan to the adjudicating authority for approval and, upon approval, the plan is binding on the corporate debtor and stakeholders Correct answer.
  3. The resolution professional must seek fresh approval of the committee of creditors after the plan is approved
  4. The resolution professional becomes the liquidator automatically

Explanation

Section 30(6) requires the resolution professional to submit the plan to the adjudicating authority, and Section 31 makes the approved plan binding on the corporate debtor and the stakeholders involved. The resolution professional does not continue managing the corporate debtor after the plan is approved; management passes to the persons proposed in the plan. Fresh approval of the committee is not required after the adjudicating authority approves the plan.

Question 17Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

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

  1. Such proceedings are terminated and the approved plan is binding on all stakeholders Correct answer.
  2. Such proceedings continue subject to the resolution professional's consent
  3. Such proceedings are transferred to the National Company Law Appellate Tribunal
  4. All such proceedings revive automatically

Explanation

Section 31 provides that once the resolution plan is approved, it is binding on the corporate debtor and all stakeholders, and proceedings against the corporate debtor are terminated. This gives the plan finality and allows the corporate debtor to function under new management.

Question 18Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Under the Code, who can initiate the corporate insolvency resolution process against a corporate debtor?

  1. Only a secured creditor holding at least fifty per cent of the debt
  2. A financial creditor, an operational creditor, or the corporate debtor itself Correct answer.
  3. Only the corporate debtor through a special resolution
  4. Only a financial creditor

Explanation

Sections 6, 7, 8 and 10 allow a financial creditor, an operational creditor, or the corporate debtor itself to initiate the corporate insolvency resolution process. The Code does not restrict initiation to secured creditors or require a special resolution of the corporate debtor.

Question 19Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Which of the following best describes the information utility under the Code?

  1. A body that adjudicates insolvency disputes
  2. A government department that maintains the register of insolvency professionals
  3. A tribunal that hears appeals against the adjudicating authority
  4. An entity registered with the Board that stores and authenticates financial information of debtors Correct answer.

Explanation

Section 210 provides for the registration of information utilities with the Board. Their function is to store and authenticate financial information of debtors and make it available to creditors, thereby reducing the time taken to establish defaults. They do not adjudicate disputes or maintain registers of insolvency professionals.

Question 20Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

A corporate debtor has defaulted and an operational creditor has served a demand notice. Within how many days must the corporate debtor either pay the debt or show the existence of a dispute?

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

Explanation

Section 8(1) requires the operational creditor to deliver a demand notice, and Section 8(2) gives the corporate debtor ten days from receipt to pay the unpaid operational debt or to bring to the notice of the operational creditor the existence of a dispute or the record of pendency of a suit. If neither is done, the operational creditor may file an application under Section 9.

Question 21Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Which of the following is a correct statement about the liquidation process under the Code?

  1. The liquidator is appointed by the committee of creditors by a sixty-six per cent vote
  2. The liquidator must be a chartered accountant
  3. The liquidator is appointed by the Board
  4. The liquidator is appointed by the adjudicating authority and the liquidation estate is vested in the liquidator Correct answer.

Explanation

Section 34 provides that the adjudicating authority appoints the liquidator, and the liquidation estate is vested in the liquidator. The committee of creditors may replace the liquidator by a vote of sixty-six per cent, but the initial appointment is by the adjudicating authority. The liquidator must be an insolvency professional, not necessarily a chartered accountant.

Question 22Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

What is the order of priority of distribution of the proceeds of liquidation among stakeholders under Section 53 of the Code?

  1. Secured creditors, workmen dues, wages, government dues, other creditors
  2. Government dues, secured creditors, workmen dues, financial debts, other debts
  3. Workmen dues, insolvency resolution process costs, secured creditors, financial debts, government dues
  4. Insolvency resolution process costs, secured creditors, workmen dues for twenty-four months, wages for twelve months, financial debts, government dues, other debts Correct answer.

Explanation

Section 53 sets out the waterfall: insolvency resolution process costs and liquidation costs first, then secured creditors and workmen dues for twenty-four months, then wages for twelve months, then financial debts of unsecured creditors, then government dues, then other debts. The order is statutory and cannot be altered by agreement.

Question 23Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Which of the following is true about the insolvency resolution process of a partnership firm under the Code?

  1. The process is governed by Part III of the Code Correct answer.
  2. The process is governed by the Companies Act, 2013
  3. The process is governed by Part II of the Code
  4. The process is not available to partnership firms

Explanation

Part III of the Code governs the insolvency resolution and bankruptcy of individuals and partnership firms. The provisions applicable to corporate debtors under Part II do not apply to partnership firms. The process for partnership firms is administered by the Debt Recovery Tribunal.

Question 24Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

A resolution professional fails to perform duties diligently and causes loss to the corporate debtor. Which of the following is a consequence under the Code?

  1. The resolution professional is immune from liability as an officer of the process
  2. The resolution professional is personally liable to pay the entire debt of the corporate debtor
  3. The resolution professional is liable to be penalised by the Board and may be replaced by the committee of creditors Correct answer.
  4. The resolution professional's registration is automatically cancelled

Explanation

The Board may impose penalties on an insolvency professional for contravention of the Code or regulations, and the committee of creditors may replace the resolution professional by a sixty-six per cent vote. The resolution professional is not automatically liable for the entire debt, nor is registration automatically cancelled.

Question 25Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Which of the following statements about the National Company Law Appellate Tribunal's power in an appeal against an order of the adjudicating authority is correct?

  1. The NCLAT can only set aside the order and cannot pass any other order
  2. The NCLAT cannot interfere with an order approving a resolution plan
  3. The NCLAT can pass such orders as it thinks fit, including modifying the order Correct answer.
  4. The NCLAT can only remand the matter to the adjudicating authority

Explanation

Section 61 empowers the NCLAT to pass such orders as it thinks fit, which includes setting aside, modifying or remanding the order. It is not confined to setting aside or remanding. An appeal against approval of a resolution plan is maintainable before the NCLAT.

Question 26Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Under the Insolvency and Bankruptcy Code, 2016, which of the following is a ground on which the adjudicating authority must reject an application for initiation of corporate insolvency resolution process?

  1. The corporate debtor has filed its financial statements late
  2. The application is incomplete and the applicant has not rectified the defects within the time allowed Correct answer.
  3. The corporate debtor has a negative net worth
  4. The corporate debtor has defaulted on a loan guaranteed by a third party

Explanation

Section 9(5)(ii) and related provisions require the adjudicating authority to reject an application if it is incomplete or defective and the applicant fails to rectify the defects within seven days. Late financial statements, negative net worth, or a guarantee by a third party are not statutory grounds for rejection.

Question 27Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

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

  1. To adjudicate disputes between creditors and debtors
  2. To maintain the electronic records of financial information of debtors
  3. To act as a resolution professional or liquidator through its partners or directors who are insolvency professionals Correct answer.
  4. To provide legal representation to creditors in insolvency proceedings

Explanation

An insolvency professional entity is a company, firm, or LLP whose partners or directors are insolvency professionals. It can be appointed as resolution professional or liquidator, and it must ensure that the functions are performed by its qualified professionals.

Question 28Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Under the Insolvency and Bankruptcy Code, 2016, what is the maximum period for which a moratorium under Section 14 can be extended in a corporate insolvency resolution process?

  1. The moratorium is for a period of 270 days from the date of admission
  2. The moratorium continues until the resolution plan is approved or the liquidation order is passed Correct answer.
  3. The moratorium is for a period of 330 days from the date of admission
  4. The moratorium is for an initial period of 180 days and can be extended by 90 days

Explanation

Section 14 imposes a moratorium during the corporate insolvency resolution process. The moratorium remains in force until the resolution plan is approved by the adjudicating authority or an order for liquidation is passed. It is not limited to a fixed number of days but is co-terminous with the process.

Question 29Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Which of the following statements about the insolvency resolution process of a personal guarantor to a corporate debtor is correct?

  1. The personal guarantor's assets are always included in the corporate debtor's liquidation estate
  2. The personal guarantor is automatically discharged from liability once the corporate debtor's resolution plan is approved
  3. The personal guarantor's insolvency resolution process can be initiated independently under Part III of the Code Correct answer.
  4. The personal guarantor can be subjected to insolvency resolution only after the corporate debtor's resolution process is complete

Explanation

Part III of the Code deals with insolvency resolution and bankruptcy of individuals and partnership firms, including personal guarantors to corporate debtors. A creditor can initiate proceedings against a personal guarantor independently, subject to the Code and regulations.

Question 30Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

What is the time limit for a creditor to file a claim with the resolution professional after the public announcement is made under the Insolvency and Bankruptcy Code, 2016?

  1. Within twenty-one days from the date of public announcement
  2. Within seven days from the date of public announcement
  3. Within thirty days from the date of public announcement
  4. Within fourteen days from the date of public announcement Correct answer.

Explanation

Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 requires creditors to submit their claims to the resolution professional within fourteen days from the date of public announcement.

Question 31Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

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

  1. The committee consists of the resolution professional, financial creditors, and operational creditors
  2. The committee consists of all financial creditors and operational creditors with claims above a threshold
  3. The committee consists of financial creditors and the suspended board of directors
  4. The committee consists only of financial creditors, and operational creditors are not members Correct answer.

Explanation

Section 21 of the Code provides that the committee of creditors shall consist of all financial creditors of the corporate debtor. Operational creditors are not members of the committee, though they may attend meetings if invited.

Question 32Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Under the Insolvency and Bankruptcy Code, 2016, what is the effect of the approval of a resolution plan by the adjudicating authority on a guarantee provided by a personal guarantor to the corporate debtor?

  1. The guarantee is transferred to the resolution professional
  2. The guarantee is converted into equity of the corporate debtor
  3. The guarantee remains enforceable unless the resolution plan specifically provides otherwise Correct answer.
  4. The guarantee is automatically extinguished

Explanation

The Code does not automatically discharge a personal guarantor upon approval of a resolution plan. The Supreme Court in Lalit Kumar Jain v. Union of India held that approval of a resolution plan does not ipso facto discharge personal guarantors, and the guarantee remains enforceable unless the plan provides otherwise.

Question 33Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Which of the following statements about the liquidation estate under the Insolvency and Bankruptcy Code, 2016, is correct?

  1. The liquidation estate includes assets that are subject to a security interest of a secured creditor Correct answer.
  2. The liquidation estate includes only the free assets of the corporate debtor
  3. The liquidation estate includes all assets of the corporate debtor, including those in respect of which the corporate debtor is a trustee
  4. The liquidation estate includes assets owned by third parties but in possession of the corporate debtor

Explanation

Section 36(3) of the Code provides that the liquidation estate includes assets over which the corporate debtor has ownership rights, including assets subject to a security interest. Secured creditors may either relinquish their security and claim in the liquidation or enforce their security outside the liquidation process.

Question 34Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

A financial creditor has a claim of ₹50 lakh against a corporate debtor. The corporate debtor defaults. The financial creditor wants to initiate corporate insolvency resolution process. Which of the following is a prerequisite for maintaining the application?

  1. The financial creditor must establish the existence of a default through records of an information utility or other evidence Correct answer.
  2. The financial creditor must propose a resolution plan along with the application
  3. The financial creditor must first obtain a decree from a civil court
  4. The financial creditor must deliver a demand notice to the corporate debtor

Explanation

Section 7(3) requires a financial creditor to furnish records of the default with an information utility or other evidence to establish the default. A demand notice is required for operational creditors under Section 8, not for financial creditors.

Question 35Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

During a corporate insolvency resolution process, the resolution professional seeks to avoid a transaction as an extortionate credit transaction under Section 50 of the Code. Within what period must the transaction have been entered into for it to be considered extortionate?

  1. Within one year preceding the insolvency commencement date
  2. Within three years preceding the insolvency commencement date
  3. Within two years preceding the insolvency commencement date Correct answer.
  4. At any time before the insolvency commencement date

Explanation

Section 50 of the Code allows the resolution professional to apply to the adjudicating authority to avoid an extortionate credit transaction entered into within two years preceding the insolvency commencement date. This look-back period is specific to extortionate credit transactions.

Question 36Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Under the Insolvency and Bankruptcy Code, 2016, which of the following is a correct statement about the powers of the resolution professional during the corporate insolvency resolution process?

  1. The resolution professional can declare dividends to shareholders of the corporate debtor
  2. The resolution professional manages the operations of the corporate debtor as a going concern with the approval of the committee of creditors for certain actions Correct answer.
  3. The resolution professional can initiate legal proceedings against the corporate debtor's promoters without the approval of the adjudicating authority
  4. The resolution professional can sell the assets of the corporate debtor without the approval of the committee of creditors

Explanation

Section 17 empowers the resolution professional to manage the operations of the corporate debtor as a going concern. However, certain actions, such as raising interim finance, creating security interests, or changing the management, require approval of the committee of creditors under Section 28.

Question 37Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

A corporate debtor has two financial creditors: Bank A with a claim of ₹80 crore and Bank B with a claim of ₹20 crore. At a meeting of the committee of creditors, a resolution plan is put to vote. Bank A votes in favour and Bank B votes against. What is the outcome?

  1. The resolution plan is approved because the majority of creditors by number voted in favour
  2. The resolution plan is rejected because Bank B dissents
  3. The resolution plan is approved because Bank A has more than 66% of the voting share Correct answer.
  4. The resolution plan is approved because Bank A has more than 50% of the voting share

Explanation

Under Section 30(4), a resolution plan must be approved by at least 66% of the voting share of the committee of creditors. Bank A has 80% voting share (80/100), which exceeds 66%, so the plan is approved.

Question 38Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Which of the following statements about the withdrawal of an application for corporate insolvency resolution process under Section 12A of the Code is correct?

  1. The application can be withdrawn only before the admission of the application
  2. The application can be withdrawn with the approval of the adjudicating authority, which may impose conditions Correct answer.
  3. The application can be withdrawn only if all creditors agree
  4. The application can be withdrawn at any time before the resolution plan is approved with the approval of 90% of the committee of creditors

Explanation

Section 12A allows withdrawal of an application with the approval of the adjudicating authority. The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 require that such withdrawal be approved by 90% of the committee of creditors, and the adjudicating authority may impose conditions.

Question 39Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Under the Insolvency and Bankruptcy Code, 2016, what is the consequence of a resolution professional failing to submit a resolution plan to the adjudicating authority within the prescribed time?

  1. The resolution professional is automatically replaced
  2. The committee of creditors is dissolved
  3. The adjudicating authority may extend the time for submission Correct answer.
  4. The corporate debtor is automatically liquidated

Explanation

The adjudicating authority has the power to extend the time for completion of the resolution process under Section 12. If the resolution professional fails to submit a plan within the extended period, the adjudicating authority may order liquidation. Automatic replacement or dissolution does not occur.

Question 40Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Which of the following is a correct statement about the rights of a secured creditor in the liquidation process under the Insolvency and Bankruptcy Code, 2016?

  1. A secured creditor is entitled to priority over all other creditors for the entire amount of its claim
  2. A secured creditor can enforce its security interest outside the liquidation process and claim the deficiency as an unsecured creditor Correct answer.
  3. A secured creditor cannot participate in the liquidation process if it enforces its security
  4. A secured creditor must relinquish its security interest and claim as an unsecured creditor

Explanation

Under Section 52, a secured creditor may choose to enforce its security interest outside the liquidation process. If it does so, it must inform the liquidator and can claim the deficiency as an unsecured creditor in the liquidation.

Question 41Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

A resolution professional has identified a preferential transaction under Section 43 of the Code. Which of the following is a relevant factor in determining whether a transaction is preferential?

  1. The transaction was disclosed in the financial statements of the corporate debtor
  2. The transaction resulted in a transfer of property to a creditor for a consideration that is not commensurate with the value of the property Correct answer.
  3. The transaction was entered into in the ordinary course of business
  4. The transaction was approved by the board of directors of the corporate debtor

Explanation

Section 43 defines a preferential transaction as one that transfers property to a creditor or a guarantor for a consideration that is less than the value of the property, and which has the effect of putting the creditor in a better position than other creditors. Transactions in the ordinary course of business are excluded.

Question 42Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Under the Insolvency and Bankruptcy Code, 2016, which of the following statements about the role of the information utility is correct?

  1. It provides financial information about debtors to creditors and resolution professionals Correct answer.
  2. It adjudicates disputes between creditors and debtors
  3. It approves resolution plans
  4. It appoints resolution professionals

Explanation

An information utility is registered with the Insolvency and Bankruptcy Board of India to collect and provide financial information about debtors. It stores information about debt, defaults, and security interests, which can be used to establish default.

Question 43Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

A corporate debtor has defaulted on a loan from an operational creditor. The operational creditor has served a demand notice. The corporate debtor disputes the existence of a debt. What is the consequence?

  1. The operational creditor can immediately file an application before the adjudicating authority
  2. The operational creditor can file an application only if the dispute is not genuine and the default is established Correct answer.
  3. The operational creditor must wait for the corporate debtor to pay the debt
  4. The operational creditor must first obtain a decree from a civil court

Explanation

Under Section 8 and 9, if the corporate debtor raises a genuine dispute, the operational creditor cannot maintain an application under Section 9. The adjudicating authority will reject the application if the dispute is genuine and the default is not established.

Question 44Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Which of the following statements about the insolvency resolution process of a partnership firm under the Insolvency and Bankruptcy Code, 2016, is correct?

  1. Partnership firms are covered under Part II of the Code for corporate insolvency resolution
  2. Partnership firms cannot be subjected to insolvency proceedings under the Code
  3. Partnership firms are covered under Part IV of the Code for cross-border insolvency
  4. Partnership firms are covered under Part III of the Code for insolvency resolution and bankruptcy Correct answer.

Explanation

Part III of the Code deals with insolvency resolution and bankruptcy of individuals and partnership firms. The provisions applicable to partnership firms are specified in the Code and the regulations made thereunder.

Question 45Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Under the Insolvency and Bankruptcy Code, 2016, what is the time limit for the adjudicating authority to decide on an application for initiation of corporate insolvency resolution process?

  1. Within fourteen days from the date of filing Correct answer.
  2. Within seven days from the date of filing
  3. Within twenty-one days from the date of filing
  4. Within thirty days from the date of filing

Explanation

Section 7(4) and Section 9(4) require the adjudicating authority to ascertain the existence of a default within fourteen days from the date of filing of the application. This period may be extended if the application is incomplete.

Question 46Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Which of the following is a correct statement about the liability of a resolution professional for failure to perform duties under the Insolvency and Bankruptcy Code, 2016?

  1. The resolution professional is immune from liability for acts done in good faith
  2. The resolution professional's liability is limited to the fees received
  3. The resolution professional is personally liable for any loss caused to the corporate debtor due to negligence Correct answer.
  4. The resolution professional is liable only if the committee of creditors approves a resolution for liability

Explanation

Section 233 provides that a resolution professional shall be personally liable for any loss caused to the corporate debtor or its creditors due to his negligence or failure to perform his duties. The protection for acts done in good faith does not extend to negligence.

Question 47Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

In a corporate insolvency resolution process, the resolution professional has identified an undervalued transaction under Section 45 of the Code. The transaction was entered into with a related party. What is the look-back period for such a transaction?

  1. Four years preceding the insolvency commencement date
  2. Two years preceding the insolvency commencement date Correct answer.
  3. One year preceding the insolvency commencement date
  4. Three years preceding the insolvency commencement date

Explanation

Section 45(2) provides that for undervalued transactions, the look-back period is two years preceding the insolvency commencement date if the transaction is with a related party, and one year if with an unrelated party.

Question 48Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Which of the following statements about the powers of the National Company Law Appellate Tribunal (NCLAT) in an appeal against an order of the adjudicating authority under the Insolvency and Bankruptcy Code, 2016, is correct?

  1. The NCLAT can hear appeals on questions of law and fact and can pass any order it deems fit Correct answer.
  2. The NCLAT can enhance the punishment but cannot reduce it
  3. The NCLAT can only hear appeals on questions of law
  4. The NCLAT must remand the matter to the adjudicating authority for reconsideration

Explanation

Section 61 provides that the NCLAT may hear appeals against orders of the adjudicating authority and pass such orders as it thinks fit, including confirming, modifying, or setting aside the order. It can hear both questions of law and fact.

Question 49Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

A resolution plan approved by the committee of creditors is submitted to the adjudicating authority. The adjudicating authority finds that the plan does not provide for the payment of insolvency resolution process costs. What is the likely outcome?

  1. The adjudicating authority may approve the plan with a direction to the resolution professional to ensure payment of costs
  2. The adjudicating authority can approve the plan and the costs become payable from the liquidation estate
  3. The adjudicating authority must reject the plan Correct answer.
  4. The adjudicating authority can approve the plan and the costs are waived

Explanation

Section 30(2)(a) requires that a resolution plan must provide for the payment of insolvency resolution process costs in priority to other debts. If the plan does not make such provision, the adjudicating authority shall reject the plan.

Question 50Insolvency and Bankruptcy Code, 2016 and related regulations (Limited Insolvency Examination syllabus)

Under the Insolvency and Bankruptcy Code, 2016, what is the effect of the approval of a resolution plan on the claims of creditors that are not part of the plan?

  1. Such claims are extinguished and the creditors cannot pursue them against the corporate debtor Correct answer.
  2. Such claims remain enforceable against the corporate debtor after the plan is approved
  3. Such claims are paid in priority to the claims under the plan
  4. Such claims are automatically transferred to the resolution professional

Explanation

Section 31 provides that once a resolution plan is approved by the adjudicating authority, it is binding on the corporate debtor and its stakeholders, including creditors. Claims not included in the plan are extinguished, as held by the Supreme Court in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta.