Chapter 2 (IBC Core)

अभ्यास sheet 2
(Practice Questions)

Note from the teacher:

Your efforts determine whether you clear the examination with flying colors or not, there is
no control on you to check whether you are writing the answers sincerely or not, but every
student who is determined to clear the examination kindly follow these rules:

1. Try and write all the answers in one sitting. (maximum 2 sitting)
2. Write the answers as you are writing the final examination.
3. Underline all the key words, follow proper alignment, and leave a line wherever
required.

1. An application for Corporate Insolvency Resolution Process (CIRP) was filed by a Bank (being Financial
Creditor) against RSI Ltd, which was admitted by the NCLT and an Interim Resolution Professional was
appointed, the Committee of Creditors (CoC) was constituted. Vijay, who was a member of the
suspended Board of Directors of RSI Ltd was neither allowed participation in CoC nor any information
considered confidential was given, either by the resolution professional or the Committee of Creditors.
Vijay made representations before the Adjudicating Authority to attend the meeting and for
information/documents. Will Vijay succeed in his claim for attending the Meeting of Committee of
Creditors and obtaining information about the CoC proceedings. ( J 19, 6 Marks, IBC OPEN BOOK)

2. Facts of the case :

Richa Infrastructure Limited engaged in the construction of roads is in default in repayment of loans due
to general slowdown in construction industry. Repeated follow-up by the financial institutions with the
Corporate Debtor, ‘Richa Infrastructure Ltd.’ for submitting its specific plan for repayment of dues did not
evoke any response.

One of the financial creditors filed a case against Richa Infrastructure Ltd. before the Debt Recovery
Tribunal.

Richa Infrastructure Ltd. had issued some cheques to some Operational Creditors. All the cheques issued
to creditors were dishonored/returned by the banker due to insufficient funds in the account.
Consequently, Operational Creditors issued legal notices to Richa Infrastructure Ltd, with clear intimation
that if due amount is not paid within 15 days from the date of receipt of legal notice, criminal complaint
shall be filed against Richa Infrastructure Ltd. under the Negotiable Instrument Act, 1881 and criminal
complaints were filed. After a joint lenders meeting, all the financial institutions unanimously decided to
apply under the provisions of the Insolvency and Bankruptcy Code, 2016 to the National Company Law
Tribunal (NCLT) for starting the process of Insolvency Resolution. Their application was admitted by NCLT
on 30th June, 2018 and orders were issued for commencement of a moratorium period of 180 days,

Shubhamm Sukhlecha (CA, CS, LLM) INSPIRE ACADEMY

 appointment of an Interim Resolution Professional and issue of public announcement inviting claims from
all concerned.

After public announcement and the responses thereto, following details were brought out :
(1) Financial debts due to unsecured creditors (F1) - `15 Crores
(2) Workmen’s due for the period of 24 months preceding the liquidation commencement date (F2)
- `25 Crores.
(3) Debts due to a secured creditor who has relinquished his security (F3) - `30 Crores .
(4) Amount due to the Central Government (F4) - `27 Crores.
(5) Debts due to a secured creditor after the enforcement of security interest (F5) - `36 Crores.

Insolvency Resolution Professional (IRP) approached the promoters, directors and officials of Richa
Infrastructure Ltd to provide the necessary information, documents, statutory records, books of accounts
to verify the claims filed by creditors. The promoters, directors and officials of Richa Infrastructure Ltd.
ignored the request of Resolution Professional.

M/s ANG & Associates, Chartered Accountants were the Statutory Auditors of Richa Infrastructure Ltd.
They audited the accounts for the financial year end March, 2018 of Richa Infrastructure Ltd. and
submitted the Annual Accounts for approval of the Board of Directors.

The Resolution Professional has appointed valuers and has received the valuation reports. The Resolution
Professional then started the efforts to get resolution proposals.

However during the normal resolution process period of 180 days, no resolution proposal could be
finalized. The Committee of Creditors decided that Resolution Professional should get the extension as
per the provisions of Insolvency and Bankruptcy Code, 2016.

Based on the above facts, answer the following questions :

(a) Can a Financial Creditor proceed against a Corporate Debtor under the Insolvency and Bankruptcy
Code, 2016, when the matter is already pending before the Debt Recovery Tribunal ? Examine the
issue with the help of decided case law/ laws.
(b) Is it necessary that application for extension of time period of 90 days must be filed before the
completion of 180 days ? What precautions should be taken by Insolvency Professional while
applying to NCLT for extension of time period by 90 days ? Examine the issue by referring to
decided case law, if any.
(c) Can criminal proceedings under Section 138 of Negotiable Instrument Act, 1881 continue even
after initiation of Corporate Insolvency Resolution Process ? Examine the issue by referring to
decided case law, if any .
(d) Who will sign the Annual Financial Statements of the Corporate Debtor undergoing Corporate
Insolvency Resolution Process ?
(e) Can IRP take action against employees of the Corporate Debtor in terms of employment
agreement ? (D 19, 8 Marks each, IBC Open Book )
3. Can an assignee of Financial Contract make an application under Corporate Insolvency Resolution Process
? (D 19, 3 Marks, IBC OPEN BOOK )

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 4. Naveen Kumar, a Financial Creditor filed an Insolvency Application under Section 7 of Insolvency and
Bankruptcy Code, 2016 against M/s ABC Private Ltd, Corporate Debtor (Defaulter) before the National
Company Law Tribunal on 1st July, 2018.

National Company Law Tribunal after satisfying that the default has occurred and the application is
complete in all respects and all the related compliances have been met, admitted the application, by an
order passed on 10th July, 2018 and appointed Kamal Kishore as Interim Resolution Professional (IRP).

As per the Insolvency and Bankruptcy Code, 2016, state the following:
(i) Initiation date for the Corporate Insolvency Resolution Process
(ii) Date of commencement of Insolvency.
(iii) Date of issuance of Public Announcement.
(iv) Tenure of Interim Resolution Professional.
(v) Last Date for Creditors to file their Claims
(vi) Calculate Time Period for the completion of the Insolvency Resolution Process by the NCLT.
( D 19, 1 mark each * 6 = 6 Marks, IBC Open Book )
5. Under what circumstances Debtor is not entitled to make an application to the NCLT ? ( D 19, 3 Marks,
IBC Open Book )

6. If there is NO Financial Creditor, how will the Committee of Creditors be constituted? ( D 19, 4 marks, IBC
Open Book )

7. What will be the consequence if Demand of Debt is disputed ? ( D 19, 4 Marks, IBC Open Book )

8. What shall be included in ‘‘Financial Information’’ as defined under IBC, 2016 ? ( D 19 , 4 Marks , IBC Open
Book )

9. You are appointed as Resolution Professional by Committee of Creditors. You have made a public
announcement inviting Expression of Interest. Based on your invitation few Parties have submitted
Resolution plans. As per the provisions of Insolvency and Bankruptcy Code, 2016 (IBC, 2016) Resolution
Plans submitted should satisfy few criteria. As a Resolution Professional brief the criteria for a valid
Resolution Plan under IBC, 2016. ( D 20 , 6 Marks , IBC Open Book )
10. An Operational Creditor of a Company has made an application to National Company Law Tribunal (NCLT)
for initiating Corporate Insolvency Resolution Process (CIRP) for non-payment his dues for long time. The
NCLT ordered for commencement of CIRP. During the course of CIRP period Corporate Director has agreed
to settle the dues of Operational Creditor and requested him to withdraw the CIRP. Whether NCLT may
allow the withdrawal of application admitted under Insolvency and Bankruptcy Code, 2016 in the above
case. Will your answer differ, if the above application is made by Financial Creditor and subsequently
Corporate Debtor settle its dues? ( D 20 / 6 Marks / IBC Open Book )
11. A German Company (Operational Creditor) filed application under Section 9 of the Insolvency and
Bankruptcy Code, 2016 against PQR Private Limited (Corporate Debtor) alleging that the ‘Corporate
Debtor’ committed default in making the payment of certain operational dues. The Adjudicating Authority
(National Company Law Tribunal), admitted the application. Before, National Company Law Appellate
Tribunal (NCLAT), the Corporate Debtor has raised the question of jurisdiction of the National Company
Law Tribunal in entertaining the application Under Section 9 of the IBC, 2016. The Corporate Debtor

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 referred to the Agreement reached between the parties and submitted that as per the Agreement and as
the Office of the Respondent is in Germany, any suit or case is maintainable only in the Courts at Germany.
No case can be filed in any Court in India. Discuss with reasoning whether the contention of the Corporate
Debtor is correct. ( J 21, 6 Marks, IBC Open Book )
12. Read the following carefully and answer the questions given at the end :

Pine Food Industries Limited (“PFIL”) is one of the top FMCG player and listed entity in India. It is a leading
manufacturer and marketer of various edible oils, food products and eatables. Its Authorized Capital is Rs.
252.00 crore and Paid-up Capital is Rs. 65.00 crore. PFIL has borrowed from various Banks and Financial
institutions in India and its borrowings were around Rs. 12,000 Crore.

Due to unprecedented crash in global prices of the oil seeds coupled with falling revenues in the oil
business gave a crippling blow to PFIL.

AB Bank and BC Bank filed an application under section 7 of the Insolvency and Bankruptcy Code, 2016
(“Code”) for initiating the insolvency resolution process against PFIL (hereinafter called as the Corporate
Debtor (“CD”)). After hearing both the parties, National Company Law Tribunal (“NCLT”) admitted the
petition filed. The Financial Creditor proposed the name of Kapoor to act as Interim Resolution
Professional (“IRP”).

An application was filed before NCLT by one of the creditors who made a claim before the Resolution
Professional (“RP”) stating that the CD owed to pay USD 10.00 crore, based on the Bills of Exchanges,
ordering the CD to pay this creditor for the goods supplied by another party. On making of such claim
before the RP, it has been rejected by him saying that it is not a Financial Debt as it is an Operational Debt
therefore, it could not be considered as Financial Debt as claimed by applicant therein.

Vijay Kumar Jain, suspended Director of the CD, filed an application before the NCLT under section 60(5)
of the Code seeking an order for setting aside the decision taken by the Committee of Creditors (“CoC”)
disallowing the erstwhile representatives of the Corporate Debtor including Vijay to participate in the CoC
meetings; declare that the CoC meeting is non est; direct the RP to ensure active participation of the
applicant in the meetings of CoC; provide all the documents and information to the applicant.
RP filed application in NCLT under section 43(1) of the Code for seeking reversal of the amounts that were
debited from the current accounts of the CD maintained with XYZ Bank which had been debited by the
XYZ Bank before the insolvency commencement date and were utilized against the payment of the dues
owed by the CD to a Bank in relation to the Letter of Credit issued by them.

The RP submits that the payment of the impugned amount lead to preferential treatment towards XYZ
Bank by the CD as such payment has the effect of putting Respondents (i.e. XYZ Bank) in a beneficial
position than it would have been in liquidation of the CD in accordance with Section 53 of the Code. It is
further stated by the RP that the payments of the impugned amount by the Corporate Debtor were not
in the “ordinary course of business” of the CD.

NCLT, vide its order, held that the respondent Bank, which had debited an amount aggregating to Rs.
65.98 crores from the current accounts of the Corporate Debtor is directed to reverse the said amount
within 30 days from the date of the said order. Since the resolution plan is already submitted and under
examination of the CoC without consideration of this amount, therefore the appropriation of this amount
will be decided by the CoC. XYZ Bank filed appeal in NCLAT against the order of NCLT.

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 The main plea taken by the Appellant Bank is that the RP before filing an application under Section 43(1)
of the Code formed no independent opinion nor afforded an opportunity to the Appellant to explain about
the transactions in question.

The RP called for Expression of Interest (“EOI”). 28 prospective resolution applicants showed their interest
out of which two prospective resolution applicants were rejected as one was disqualified under Section
29 A of the Code (being related party) and the other was a financial investor who did not meet the criteria
in the EOI evaluation parameters.

The applicant reviewed the four Resolution Plans submitted by the Resolution Applicants and found that
only the plans submitted by 2 Resolution Applicants (RA1 and RA2) provided for the corporate insolvency
resolution of the Corporate Debtor as a whole and on a going concern basis.

The RP filed application under section 30(6) of the Code, seeking order for approval of the resolution plan
for the Corporate Debtor submitted by the consortium led by PAL (RA2) as approved by the members of
Committee of Creditors (CoC). The said resolution plan was approved by a vote share of 96.85%. RP filed
application in NCLT for approval of Resolution Plan.

While the said application was pending for consideration before the NCLT, Hon’ble Supreme Court, in
Vijay Kumar Jain Vs. Standard Chartered Bank & Ors pronounced the judgment. Under the Judgment of
Hon’ble Supreme Court, the approval of the NCLT to the resolution plan of RA2 was interdicted. In
compliance of the abovementioned Hon'ble Supreme Court order, NCLT by its order directed as follows :
“Resolution Professional is directed to comply with the directions of the Hon’ble Supreme Court and
submit the report within the stipulated time as provided by the Hon'ble Supreme Court.”
Thereafter, NCLT approved the Resolution Plan submitted by RA2 and passed orders and directions on
the reliefs and concession sought.

Since in Para 38, NCLT in their order rejected some of the relief sought, RA2 moved to NCLT for
modification of order of NCLT.

In the application filed, RA2 had sought substitution of Para 38 of the order of NCLT approving the
Resolution Plan of RA2 as under :

Existing Para 38.

Any relief sought for in the Resolution Plan, where the contract/agreement/ understanding/
proceedings/actions/notice etc is not specifically identified or is for future and contingent liability, is at
this moment rejected.”

Proposed Para
“All claims that were either not filed or not admitted during CIRP in terms of the provisions of the
Insolvency and Bankruptcy Code, 2016 shall stand extinguished. Further, claims admitted/ verified by the
Resolution Professional shall stand settled and extinguished as per the Resolution Plan.”

Resolution Plan approved by NCLT of RA2 leads to a 60% haircut for the lenders. RA2 completed its
acquisition of PFIL.

Referring decided case and relevant provisions of the Insolvency and Bankruptcy Code (IBC), 2016 and
Rules and Regulations made thereunder, answer the following questions :

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 (a) Whether formation of Joint Lender Forum will have any bearing over filing of this case or not ?
Brief, referring the provisions of IBC, 2016, who can initiate the case under the Code.
(b) In the instant case explain whether Vijay Kumar Jain succeeded in his contention. Referring
Supreme Court’s decision, discuss the role and position of suspended Board of Directors in the
Committee of Creditors. ( J 21, 10 Marks each , IBC Open Book )

13. A Resolution Professional appointed under Insolvency & Bankruptcy Code, 2016 (IBC, 2016), placed before
the Committee of Creditors (CoC), a Consortium of Banks, a Resolution Plan submitted to him. The CoC
approved the Resolution Plan and National Company Law Tribunal (NCLT), sanctioned it. As the
Liquidation Value is not sufficient and there is a hair-cut involved in the dues payable to the secured
financial creditors, nothing is provided for the Operational Creditors under the Resolution Plan. The
Operational Creditor aggrieved by the decision of the NCLT filed Appeal before National Company Law
Appellate Tribunal (NCLAT). The contention of the Operational Creditor is that the Resolution Plan
approved is not in compliance with the provisions of the Insolvency and Bankruptcy Code, 2016 and the
Regulations made thereunder :
Referring suitable case law answer whether the contention of Operational Creditor is Correct. ( J 21 , 6
Marks, IBC Open Book )
14. Images Gym Ltd. was granted credit facility of `100 lakh under consortium arrangements.

Under the consortium, there were 5 five banks, and credit facility provided by the respective banks were
as under :

A-One Bank Ltd. - Rs`45 lakh,

Best Bank Ltd. - Rs 20 lakh
Good Deal Bank Ltd. - Rs 15 lakh,
Credit Arrangers Bank Ltd. - `Rs10 lakh and
Your Bank Ltd - Rs 10 lakh

Among theses the A-One Bank Ltd. was the leader.

Images Gym Ltd. was engaged in the business of manufacturing and trading of Gym exercise machines.
However, due to poor demand of the products, the company could not sell out the machines and as a
result the account of the company with respective banks were classified as Non-performing Advances
(NPAs).

Apart from credit facility from the above banks, the company was also having outstanding dues of the
creditor, which the company was not able to pay-off. The total amount outstanding of such operational
creditors amounted `30 lakh.

The company has also not paid the salary to its employees and workers for the last 6 months and the total
dues amounted to `10 lakh.

The leader of the consortium filed Corporate Insolvency Resolution Process (CIRP) with the Adjudicating
Authority (AA) and proposed the name of Saket Sharma, as Interim Resolution Professional (IRP).

The AA accepted the application and appointed Saket Sharma as IRP and put moratorium.

Shubhamm Sukhlecha (CA, CS, LLM) INSPIRE ACADEMY

 The IRP constituted the Committee of Creditors (CoC) and first meeting of the CoC was called upon.

The operational creditors objected about the constitution of the committee and asked the IRP to include
operational creditors also in the CoC, which the IRP denied.

The CoC observed that IRP is not discharging his functions properly and was reluctant in calling the
expression of interest from Resolution Applicant(s), so they proposed for the change of the existing IRP
and appointment of the new Resolution Professional (RP) named as Anubhav Dutt.

The RP called the expression of interest from the eligible applicants and each proposal was placed before
the CoC, but no consensus had arrived at. The initial period of 180 days was going to elapsed so the CoC
through the RP sought extension which the Adjudicating Authority for further 90 days. The RP again called
the expression of interest from other Resolutionm Applicants, but it was also not agreed upon by the CoC
and after lapse of total 270 days, the Adjudicating Authority ordered for its liquidation and the present RP
was appointed as Liquidator.

The Liquidator sold off the assets of the Company and realised only `150 lakh, whereas the outstanding
dues of the various stakeholders remained as under.

Dues Of Rs in Lakhs
Fee payable as Resolution Professional 10
Fee payable as Liquidator 10
Dues of the banks with interest 110
Outstanding from Operational Creditors 30
Dues of Govts. 15
Workmen’s dues 10
Employee’s salary 15
Equity shareholders 30
Total 230
Based on the above information, answer the following questions:
(a) Mention the provisions relating to the constitution of the Committee of Creditors (CoC) under the
Insolvency and Bankruptcy Code, 2016. In the instant case, the IRP did not included the
Operational Creditors. Whether this action of the IRP was justified?
(b) Comment on the following:
(i) How the voting of share shall be determined in the meeting of the CoC, since in the given
case the finance was made available under the consortium arrangement.
(ii) What would have been the position of constitution of the CoC, if some of the operational
creditor had assigned their rights in favour of the financial creditor?
(c) What is the meaning of ‘Resolution Plan’ and ‘Resolution Applicant’? List out the persons not
eligible to be ‘Resolution Applicant’. ( D 21, (a) = 10 Marks (b) = 7 + 3 = 10 Marks (c) = 2 + 2 + 6 =
10 Marks , IBC Open Book )

Shubhamm Sukhlecha (CA, CS, LLM) INSPIRE ACADEMY