Compilation of questions of Insolvency Code from ICAI new study material, all RTP’s

and MTP’s.
Compiled by CA Sanidhya Saraf.
Sanidhyasaraf@[Link]

Question 1
When will the provisions of insolvency and liquidation of corporate
persons be applicable on a corporate person?
Answer
The provisions relating to the insolvency and liquidation of corporate
debtors shall be applicable only when the amount of the default is
one lakh rupees or more. However, the Central Government may, by
notification, specify the minimum amount of default of higher value
which shall not be more than one crore rupees.
Question 2
Who may initiate corporate insolvency process against a corporate person?
Answer
The corporate insolvency process may be initiated against any defaulting corporate
debtor by -
(a) Financial creditor,
(b) Operational creditor
(c) Corporate debtor
Question 3
What is the Insolvency Resolution Process for financial creditors?
Answer
A financial creditor either itself or along with other financial creditors
may lodge an application before the Adjudicating Authority (National
Company Law Tribunal) for initiating corporate insolvency resolution
process against a corporate debtor who commits a default in
payment of its dues.
The financial creditor shall along with the application give evidence in
support of the default committed by the corporate debtor. He shall
also give the name of the interim resolution professional.
Where the Adjudicating Authority is satisfied that a default has
occurred and the application by the financial creditor is complete and
there is no disciplinary proceedings pending against the proposed
resolution professional, it may admit such application made by the
financial creditor. Otherwise, the application may be rejected.
However, the applicant may rectify the defect within seven days of
receipt of notice of rejection from the Adjudicating Authority.

Question 4
What is the Insolvency Resolution Process for operational creditors?
Answer
On the occurrence of default, an operational creditor shall first send
Compilation of questions of Insolvency Code from ICAI new study material, all RTP’s
and MTP’s.
Compiled by CA Sanidhya Saraf.
Sanidhyasaraf@[Link]

a demand notice and a copy of invoice to the corporate debtor.

The corporate debtor shall within a period of ten days of receipt of
demand notice notify the operational creditor about the existence of a
dispute, if there is any and record of pendency of any suit or arbitration
proceedings. He shall also provide the details of repayment of unpaid
operational debt in case the debt has or is being paid.
After the expiry of ten days, if the operational creditor does not
receive his payment or the confirmation of a dispute that existed even
before the demand notice was sent, he may file an application before
the Adjudicating Authority for initiating a corporate insolvency
resolution process.
The Adjudicating Authority shall within fourteen days of receipt of the
application, admit or reject the application. However, before
rejecting the application, an opportunity shall be given to the
applicant to rectify the defect within seven days of receipt of
rejection.
Question 5
What are the eligibility criteria for appointment of an Insolvency
Professional as a Resolution Professional for a corporate insolvency
resolution process?
Answer
As per Regulation 3 of Insolvency and Bankruptcy (Insolvency
Resolution) Regulation, 2016, an insolvency professional shall be
eligible for appointment as a resolution professional for a corporate
insolvency resolution process if he and all partners and directors of
the insolvency professional entity of which he is partner or director
are independent of the corporate debtor i.e.,
He is eligible to be appointed as an independent director on the
board of the corporate debtor u/s 149 of the Companies Act,
2013, where the corporate debtor is a company.
He is not a related party of the corporate debtor.
He is not an employee or proprietor or a partner of a firm of
auditors or company secretaries in practice or cost auditors of
the corporate debtor in the last three financial years.
He is not an employee or proprietor or a partner of a legal or
consulting firm that has or had any transaction with the
corporate debtor amounting to ten per cent or more of the gross
turnover of such firm in the last three financial years.

Question 6
What is the procedure of Insolvency Resolution Process for a Corporate Applicant?
Where a corporate debtor has committed a default, a corporate
applicant thereof may file an application for initiating corporate
insolvency resolution process with the Adjudicating Authority.
The corporate applicant shall furnish the information relating to books
Compilation of questions of Insolvency Code from ICAI new study material, all RTP’s
and MTP’s.
Compiled by CA Sanidhya Saraf.
Sanidhyasaraf@[Link]

of account and other documents and a resolution professional shall

be appointed as interim resolution professional.
The Adjudicating Authority may either accept or reject the application
within fourteen days of receipt of application. However, applicant
should be allowed to rectify the defect within seven days of receipt of
notice of such rejection.
Question 7
Is there any time limit for completion of the Insolvency Resolution Process?
Answer
Section 12 of the Code states that any Insolvency Resolution
Process shall be completed within a period of one hundred and
eighty days from the date of admission of the application to initiate
the process.
However the National Company Law Tribunal (NCLT) may on an
application made by the resolution professional, under a resolution
passed by the Committee of Creditors, by a vote of 75% of voting
shares, after consideration provide one extension which shall not
extend more than 90 days.
Question 8
What is the effect of order of moratorium?
Answer
Moratorium has been explained in Section 14 of the Code, during the
moratorium period the following acts shall be prohibited:
a) The institution of suits or continuation of any pending suits or
proceedings against the corporate debtor including execution
of any judgment, decree or order in any court of law, tribunal,
arbitration panel or other authority;
b) Transferring, encumbering, alienating or disposing of by the
corporate debtor any of its assets or any legal right or
beneficial interest therein;
c) Any action to foreclose, recover or enforce any security
interest created by the corporate debtor in respect of its
property including any action under the SARFAESI Act, 2002
d) The recovery of any property by an owner or lessor where
such property is occupied by or in the possession of the
corporate debtor.

Question 9
What is a Resolution plan?
Answer
A resolution plan is a proposal agreed to by the Debtors and Creditors
of an entity in a collective mechanism to propose a time bound solution
to resolve the situation of insolvency.
As per Section 30, the Insolvency Resolution Professional (IRP) within
Compilation of questions of Insolvency Code from ICAI new study material, all RTP’s
and MTP’s.
Compiled by CA Sanidhya Saraf.
Sanidhyasaraf@[Link]

the prescribed time i.e. 180 days or in case of extension 270 days,
where Fast Track Resolution within 90 days or in case of extension 135
days, is required to submit the Resolution Plan to Adjudicating
Authority (NCLT) prepared by the Resolution applicant on the basis of
information memorandum.
The Resolution Plan should provide for:
(i) payment of insolvency resolution costs;
(ii) repayment of the debts to operational creditors;
(iii) management of affairs of the Company after approval of the resolution
plan;
(iv) implementation and supervision of the resolution plan;
(v) does not contravene provisions of the law for the time being in force; and
(vi) conforms to such other requirement as may be specified by the Board.
Question 10
When can a corporate person initiate voluntary liquidation process?
Answer
Section 59 of the Code empowers a corporate person intending to
liquidate itself voluntarily if it has not committed any default to
initiate voluntary liquidation proceedings under the provisions of this
Code.
Any corporate person registered as a company shall meet the
following conditions to initiate a voluntary liquidation process:-
(a) A declaration from majority of the directors of the company verified by an
affidavit stating
i. That they have made a full inquiry into the affairs of the
company and have formed an opinion that either the
company has no debts or that it will be able to pay its debts
in full from the proceeds of assets to be sold in the
voluntary liquidation; and
ii. That the company is not being liquidated to defraud any person.
(b) The declaration shall be accompanied with the following documents, namely:
i. Audited financial statements and a record of business
operations of the company for the previous two years or for
the period since its incorporation, whichever is later;

Question 11.
Wisdom Ltd. commits a default against the debts taken from the financial creditors. Mr. F, a
financial creditor initiated the corporate insolvency resolution process against the Wisdom Ltd. Mr.
X, another financial creditor, thereof files an application for initiating corporate insolvency
resolution process with an Adjudicating Authority. State the validity as to the filing of an application
by Mr. X for initiation of corporate insolvency resolution process?
Answer:
In the given problem, on commission of default by the Wisdom Ltd., Mr. F filed an application for
Compilation of questions of Insolvency Code from ICAI new study material, all RTP’s
and MTP’s.
Compiled by CA Sanidhya Saraf.
Sanidhyasaraf@[Link]

initiating corporate insolvency resolution process before adjudicating authority. Further, Mr. X
another financial creditor moved an application for initiation of insolvency resolution process
against the Wisdom Ltd.
According to the section 6 of the Code, where any corporate debtor commits a default, a financial
creditor, Operational creditor or the Corporate debtor itself may initiate insolvency resolution
process against such corporate debtor.
But as per Section 13 of the Code, once an application is admitted by the Adjudicating authority, it
shall by an order declare a moratorium for the purposes referred to in section 14. Then causes a
public announcement of the initiation of CIRP by IRP and call for the submission of claims under
section 15 and appoint an IRP in the manner as laid down in section 16 of the Code. Public
announcement lays down all the relevant information related to the CIRP. So that the all
creditors entitled under the law can raise their claim in this case.
So, no further application for initiation of CIRP against the same debtor ( i.e, Wisdom Ltd.) can be
initiated. So, Mr. X, cannot file an application on initiation of CIRP, however, is entitled under the law
to raise his claim in this case against the Wisdom Ltd.

Question 12.
Standard International Ltd. who is a foreign trade creditor havin g its office in Hong Kong wanted
to file a petition under insolvency and bankruptcy code 2016 on default of the debtor in India. It
moved a petition under section 9 of the code seeking commencement of insolvency process.
The foreign company was not having any office or bank account in India. Because of this, it
couldn’t submit a “certificate from financial institution” as required under the code. Whether the
petition is permissible under the Insolvency & Bankruptcy Code, 2016? Decide.
Answer:
Section 1 of the Insolvency and Bankruptcy Code, 2016 specifies of the
extent,commencement and applicability of the Code. According to this, it extends to the whole
of India and shall apply for insolvency, liquidation, voluntary liquidation or bankruptcy of any
company incorporated under the Companies Act, 2013 or under any previous law.
In view of this, the IBC Code, 2016 applies to the corporate debtor incorporated under the
Companies Act, 2013 or under any previous laws.
As per the definition of the Creditor given in section 3(10) of the Insolvency and Bankruptcy
Code, 2016, it means any person to whom a debt is owed and includes a financial creditor, an
operational creditor, a secured creditor, an unsecured creditor, and a decree holder. So, Standard
International Ltd. is a creditor under the purview of the Code.
As per the facts given in question, Standard International Ltd., is a foreign trade creditor. He
wanted to file a petition under the under Section 9 of the Insolvency and Bankruptcy Code, 2016
for commencement of Insolvency process against the defaulter in India. Standard
International Ltd. was not having any office or bank account in India.
As per the requirement of section 9 of the Code, along with application certain documents were
needed to be furnished by the creditor to the Adjudicating authority.
Being a foreign trade creditor, Standard International Ltd was also required to provide a copy of
certificate from the financial institutions maintaining accounts of the creditor confirming that there is no
payment of an unpaid operational debt by the corpo rate debtor. Since, Standard International Ltd.
was not having any office or bank account in India, it cannot furnish certificate from financial
institution as defined under the section 3(14) of the code. So, Petition under section 9 of the Code is
not permissible.
Question 13.
State the circumstances when persons are not entitled to make an application to
initiate corporate insolvency resolution process.
Suppose a corporate debtor has committed a default and is undergoing a corporate
insolvency resolution process. A corporate applicant Mr. X thereof files an application for
initiating corporate insolvency resolution process with an Adjudicating Authority. State
whether he (Mr. X) is entitled to make an application to initiate corporate insolvency
resolution process?

Answer:
Persons not entitled to make application.
The following persons shall not be entitled to make an application to initiate corporate
insolvency resolution process -
(a) a corporate debtor undergoing a corporate insolvency resolution
process; or
(b) a corporate debtor having completed corporate insolvency resolution
process twelve months preceding the date of making of the
application; or
(c) a corporate debtor or a financial creditor who has violated any of the
terms of resolution plan which was approved twelve months before
the date of making of an application under this Chapter; or
(d) a corporate debtor in respect of whom a liquidation order has been
made.
In this section, a corporate debtor includes a corporate applicant in respect of such
corporate debtor. [Section 11]
As per the facts corporate applicant Mr. X seems to be a separate individual and not a
corporate applicant in respect of such corporate debtor who is undergoing a corporate
insolvency resolution process. So he shall be entitled to make an application to initiate
corporate insolvency resolution process.

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Question 14.
Mr. X, a Resolution professional in a liquidation process, on an examination of sale of
property of Corporate debtor finds that a transaction was made by the corporate debtor
to his relative within 6 months preceding the Insolvency Commencement date, was
undervalued.
Give the following answers in reference to the above situation-
 State the validity of the conduct of such transaction by corporate debtor
to his relative.
 What will be the consequences when resolution professional determines
such transactions undervalue and fails to report that same to NCLT?
 What order NCLT shall pass when Corporate Debtor entered into an
undervalued transaction?

Answer:
(b) Validity of the conduct of undervalued transaction: As per the provisions
given in section 45 of the Insolvency and Bankruptcy Code, 2016, Mr. X, a
resolution professional, on an examination of the transactions of the
Corporate Debtor, determines that certain transactions were made by
Corporate Debtor with a related party, within the period of two years
preceding the insolvency commencement date (in 6 months preceding the
Insolvency Commencement date), which were undervalued. Mr. X, shall
make an application to the NCLT to declare such transactions as void and
reverse the effect of such undervalued transaction and requiring the person
who benefits from such transaction to pay back any gains he may have
made as a result of such transaction.
Failure to report to NCLT of undervalued transactions: As per the stated
facts given in the light of the provisions laid in Section 47 of the Insolvency
and Bankruptcy Code, an undervalued transaction has taken place and Mr. X
(Resolution Professional) has not reported it to the NCLT, in such case, a
creditor , member or a partner of a Corporate Debtor, as the case may be,
may make an application to the NCLT to declare such transactions void and
reverse their effect in accordance with the relevant provisions of this Code.
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 Order of NCLT: Where the NCLT, after examination of the application made
above, is satisfied that undervalued transactions had occurred; and Mr. X
(RP) after having sufficient information or opportunity to avail information of
such transactions did not report such transaction, there it shall pass an order
of —
(a) restoring the position as it existed before such transactions and
reversing the effects thereof in the manner as laid down in section 45
and section 48 of the Code. The order of the Adjudicating Authority may
provide for the following:—
1. require any property transferred as part of the transaction, to be
vested in the corporate debtor;
1. release or discharge (in whole or in part) any security interest
granted by the corporate debtor
2. require any person to pay such sums, in respect of benefits received
by such person, to the Mr. X (RP), as the Adjudicating Authority may
direct; or
3. require the payment of such consideration for the transaction as
may be determined by an independent expert.
(b) requiring the Board(IBBI) to initiate disciplinary proceedings against Mr. X.

Question 15.
Mr. Madhyam, was appointed as an Interim resolution professional during the
Corporate Insolvency Resolution Process. What are the duties to be performed by Mr.
Madhyam in the given capacity?
Answer:
According to Section 18 of the Insolvency and Bankruptcy Code, 2016, Mr. Madhyam
as an Interim Resolution Professional shall perform the following duties:
(a) collect all information relating to the assets, finances and operations of
Corporate debtor including information relating to:
 Its business operations for the previous two years;
 Its financial and operational payments for the previous two years ;
 A list of assets and liabilities of Corporate Debtor as on the initiation
date; and
 Other specified matters;
(b) receive and collate all the claims submitted by creditors to him, pursuant
to the public announcement made by him under sections 13 and 15;
(c) constitute a committee of creditors;
(d) monitor the assets of Corporate Debtor and manage its operations until a
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 Resolution Professional (RP) is appointed by the committee of creditors;
(e) file information collected with the information utility, if necessary and
(f) take control and custody of the assets over which Corporate Debtor has
ownership rights like plot, factory building, debtors, etc.
(g) perform such other duties as may be specified by IBBI.

Question 16.
Samridhi Pvt. Ltd. is declared as defaulter against Shubham cooperative Bank Ltd.
for financial debt of ` 10 cr. against the business transactions. State in the given
situation whether the Shubham cooperative Bank can initiate the insolvency resolution
process against Samridhi Pvt. Ltd. under the provisions of the Insolvency & Bankruptcy
Code.
Answer:
Section Power of Central Government to authorise Reserve Bank for issuing
35 AA- directions to banking companies to initiate insolvency resolution process.
New The Central Government may, by order, authorise the Reserve Bank to
insertion issue directions to any banking company or banking companies to initiate
insolvency resolution process in respect of a default, under the
provisions of the Insolvency and Bankruptcy Code, 2016.
IBC Accordingly IBC Code can be initiated under Section 7 only when RBI
Code issues direction to the bank.

Question 17.
What is the priority order in case of liquidation in insolvency code?

Distribution of proceeds from the sale of the liquidation assets: The proceeds
from the sale of the liquidation assets shall be distributed in the following order of
priority —
(a) the insolvency resolution process costs and the liquidation costs paid in
full;
(b) the following debts which shall rank equally between and among the
following :—
(I) workmen's dues for the period of twenty-four months preceding
the liquidation commencement date; and
(II) debts owed to a secured creditor in the event such secured
creditor has relinquished security in the manner set out in section
52;
(c) wages and any unpaid dues owed to employees other than workmen
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 for the period of twelve months preceding the liquidation
commencement date;
(d) financial debts owed to unsecured creditors
(e) the following dues shall rank equally between and among the
following:—
(I) any amount due to the Central Government and the State
Government including the amount to be received on account of
the Consolidated Fund of India and the Consolidated Fund of a
State, if any, in respect of the whole or any part of the period of
two years preceding the liquidation commencement date;
(II) debts owed to a secured creditor for any amount unpaid following
the enforcement of security interest;
(f) any remaining debts and dues;
(g) preference shareholders, if any; and
(h) equity shareholders or partners, as the case may be.

Question 18.
Can a financial creditor in respect of whom there is no default file an
application of resolution?
Answer:
Yes, a financial creditor for whom there is no default can still file an
application against a corporate debtor provided, the corporate debtor
has a default against some other financial creditor. However, in that case,
he can only file joint application with the financial creditor for whom
there is default.

Question 19.
Can an assignee of a financial contract make an application under
corporate insolvency resolution process?
Answer:
Yes, as per Regulation 4 of Insolvency and Bankruptcy (Adjudicating
Authority) Rules, 2016 where an applicant of corporate insolvency resolution
is an assignee or transferee of a financial contract the application shall be
accompanied with a copy of the assignment or
transfer agreement and other relevant documents as may be required to
demonstrate the assignment or transfer.
.
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Questions of IBC Code-Compilation of New Study Material , 2 attempt rtps and new and old
syllabus MTP’s.
Compiled by CA Sanidhya Saraf

Question 20.
Can an applicant withdraw its application for insolvency process?
Answer:
Yes, as per Regulation 8 of Insolvency and Bankruptcy (Adjudicating Authority)
Rules, 2016 an applicant may withdraw application for insolvency process by
making a request to the Adjudicating Authority. However, such a withdrawal may
not be made after the application has been admitted by the adjudicating authority.

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