CAIIB ABM Module C UNIT 25 MCQ – Resolution of Stressed Assets under Insolvency and Bankruptcy Code 2016

CAIIB ABM Module C UNIT 25 MCQ – Resolution of Stressed Assets under Insolvency and Bankruptcy Code 2016.

Question 1: When did the Insolvency and Bankruptcy Code come into effect?

A. 1st January 2016
B. 1st December 2015
C. 1st January 2017
D. 1st December 2016

Show Explanation

Correct Answer: D. 1st December 2016. The Insolvency and Bankruptcy Code, 2016, was implemented from this date.

Question 2: Why is the legislation related to reorganisation and insolvency resolution referred to as a ‘Code’ rather than an ‘Act’?

A. It is a temporary law subject to amendments.
B. It is a consolidation of amendments to existing laws.
C. It primarily deals with procedural guidelines.
D. It was enacted by a special committee.

Show Explanation

Correct Answer: B. It is a consolidation of amendments to existing laws. The legislation combines changes to previous laws concerning reorganisation and insolvency resolution.

Question 3: What is the definition of insolvency?

A. A legal declaration of bankruptcy.
B. The process of selling assets to repay debts.
C. A situation where an entity’s assets exceed its liabilities.
D. A situation where an entity’s liabilities exceed its assets and it is unable to pay its debt obligations.

Show Explanation

Correct Answer: D. A situation where an entity’s liabilities exceed its assets and it is unable to pay its debt obligations. This is the condition of being insolvent.

Question 4: What is the definition of bankruptcy?

A. The restructuring of debts.
B. The negotiation of payment terms with creditors.
C. The legal recognition that insolvency is beyond resolution.
D. A temporary inability to pay debts.

Show Explanation

Correct Answer: C. The legal recognition that insolvency is beyond resolution. Bankruptcy is the formal acknowledgement that an entity cannot resolve its insolvency.

Question 5: What is the role of a trustee in bankruptcy proceedings?

A. To advise the debtor on financial management.
B. To represent the debtor in court.
C. To sell the debtor’s property and discharge obligations to creditors.
D. To monitor the debtor’s financial activities.

Show Explanation

Correct Answer: C. To sell the debtor’s property and discharge obligations to creditors. The trustee is responsible for liquidating assets to pay off debts.

Question 6: Who assumes the role of the trustee under the Insolvency and Bankruptcy Code (IBC)?

A. The creditor.
B. The liquidator.
C. The resolution professional.
D. The adjudicating authority.

Show Explanation

Correct Answer: C. The resolution professional. Under the IBC, this role is assigned to the resolution professional.

Question 7: To which entities does Part-II of the Insolvency and Bankruptcy Code apply?

A. Individuals and partnership concerns.
B. Companies and Limited Liability Partnerships (LLPs).
C. Sole proprietorships.
D. Trusts and societies.

Show Explanation

Correct Answer: B. Companies and Limited Liability Partnerships (LLPs). Part II of the Code is specifically applicable to these entities.

Question 8: To which entities does Part-III of the Insolvency and Bankruptcy Code apply?

A. Companies and LLPs.
B. Individuals and partnership concerns.
C. Trusts and societies.
D. All corporate entities.

Show Explanation

Correct Answer: B. Individuals and partnership concerns. Part III of the Code covers these types of entities.

Question 9: Which of the following is the regulator for the Insolvency and Bankruptcy Code?

A. Reserve Bank of India (RBI)
B. Securities and Exchange Board of India (SEBI)
C. Insolvency and Bankruptcy Board of India (IBBI)
D. Ministry of Corporate Affairs (MCA)

Show Explanation

Correct Answer: C. Insolvency and Bankruptcy Board of India (IBBI). The IBBI is responsible for regulating the profession and processes of the IBC.

Question 10: Which professionals are licensed by the IBBI to manage insolvency resolution processes?

A. Chartered Accountants.
B. Company Secretaries.
C. Insolvency Professionals.
D. Management Consultants.

Show Explanation

Correct Answer: C. Insolvency Professionals. These professionals are authorised by the IBBI to handle various roles in the insolvency resolution process.

Question 11: What is the primary responsibility of Insolvency Professional Agencies (IPAs)?

A. To conduct insolvency proceedings.
B. To regulate financial institutions.
C. To promote professional standards among Insolvency Professionals.
D. To provide financial assistance to insolvent entities.

Show Explanation

Correct Answer: C. To promote professional standards among Insolvency Professionals. IPAs are tasked with ensuring high professional conduct among IPs.

Question 12: What is the role of Information Utilities (IUs) under the IBC?

A. To provide legal advice to insolvent companies.
B. To act as intermediaries between creditors and debtors.
C. To serve as repositories of financial information.
D. To conduct audits of insolvent entities.

Show Explanation

Correct Answer: C. To serve as repositories of financial information. IUs collect and authenticate financial data of entities under the Code.

Question 13: What type of information do Information Utilities (IUs) authenticate?

A. Legal documents.
B. Technical specifications.
C. Financial and credit transaction information.
D. Market analysis reports.

Show Explanation

Correct Answer: C. Financial and credit transaction information. IUs verify the authenticity of financial details provided by various entities.

Question 14: What is the usual composition of the Committee of Creditors (CoC)?

A. Operational creditors only.
B. Both financial and operational creditors.
C. Normally, only financial creditors.
D. Secured creditors only.

Show Explanation

Correct Answer: C. Normally, only financial creditors. The CoC primarily consists of those who have lent money to the corporate debtor.

Question 15: What is the voting power distribution among financial creditors in the Committee of Creditors (CoC)?

A. Equally, regardless of the amount owed.
B. Proportionate to their exposure to the corporate debtor.
C. Based on the seniority of the debt.
D. One vote per creditor.

Show Explanation

Correct Answer: B. Proportionate to their exposure to the corporate debtor. Voting rights are based on the amount of financial debt owed to each creditor.

Question 16: What is the quorum requirement for meetings of the Committee of Creditors (CoC)?

A. 51% of creditors by number.
B. 33% of creditors by value.
C. 66% of creditors by number.
D. 90% of creditors by value.

Show Explanation

Correct Answer: B. 33% of creditors by value. This is the minimum proportion of financial debt required for a CoC meeting to be valid.

Question 17: What majority is required by the Committee of Creditors to approve the withdrawal of an application for resolution under Section 12A?

A. 51%
B. 66%
C. 75%
D. 90%

Show Explanation

Correct Answer: D. 90%. A high threshold is set for withdrawing a resolution application.

Question 18: Which authority serves as the Adjudicating Authority for insolvency resolution of corporate entities?

A. Debt Recovery Tribunal (DRT)
B. High Court
C. National Company Law Tribunal (NCLT)
D. Supreme Court

Show Explanation

Correct Answer: C. National Company Law Tribunal (NCLT). The NCLT handles insolvency cases for companies and LLPs.

Question 19: Which authority serves as the Adjudicating Authority for insolvency resolution of individuals and partnerships?

A. National Company Law Tribunal (NCLT)
B. Debt Recovery Tribunal (DRT)
C. High Court
D. Supreme Court

Show Explanation

Correct Answer: B. Debt Recovery Tribunal (DRT). The DRT is the relevant authority for cases involving individuals and partnerships.

Question 20: What does the term ‘Moratorium’ under IBC refer to?

A. A meeting of creditors.
B. A period of suspension of legal actions against the corporate debtor.
C. The final stage of liquidation.
D. An audit of the corporate debtor’s accounts.

Show Explanation

Correct Answer: B. A period of suspension of legal actions against the corporate debtor. This prevents suits, asset transfers, and recovery actions during the resolution process.

Question 21: What is the minimum default amount required for initiating the Corporate Insolvency Resolution Process (CIRP)?

A. ₹50 lakh
B. ₹1 crore
C. ₹25 lakh
D. ₹10 lakh

Show Explanation

Correct Answer: B. ₹1 crore. This is the threshold for triggering CIRP.

Question 22: Who proposes the name of the Interim Resolution Professional (IRP)?

A. The Adjudicating Authority.
B. The Reserve Bank of India.
C. The applicant (Financial Creditor or Corporate Debtor).
D. The Insolvency and Bankruptcy Board of India.

Show Explanation

Correct Answer: C. The applicant (Financial Creditor or Corporate Debtor). The party initiating the CIRP suggests the IRP’s name.

Question 23: What is the primary role of the Interim Resolution Professional (IRP) upon appointment?

A. To audit the accounts of the Corporate Debtor.
B. To take control of the assets and affairs of the Corporate Debtor as a going concern.
C. To represent the Corporate Debtor in legal proceedings.
D. To negotiate with creditors for debt restructuring.

Show Explanation

Correct Answer: B. To take control of the assets and affairs of the Corporate Debtor as a going concern. The IRP manages the debtor’s operations during the interim period.

Question 24: Within how many days of appointment must the IRP make a public announcement of the commencement of CIRP?

A. 5 days
B. 7 days
C. 3 days
D. 10 days

Show Explanation

Correct Answer: C. 3 days. The IRP is required to notify the public of the CIRP initiation within this timeframe.

Question 25: What is the Information Memorandum (IM)?

A. A financial audit report.
B. A plan for restructuring the Corporate Debtor’s debts.
C. A compilation of all information about the Corporate Debtor.
D. A legal document outlining the rights of creditors.

Show Explanation

Correct Answer: C. A compilation of all information about the Corporate Debtor. The IM contains detailed information for prospective resolution applicants.

Question 26: What is the latest timeline for the Resolution Professional to publish an invitation for expression of interest from prospective resolution applicants, measured from the insolvency commencement date?

A. Not later than the thirtieth day
B. Not later than the forty-fifth day
C. Not later than the sixty-fifth day
D. Not later than the seventy-fifth day

Show Explanation

Correct Answer: D. Not later than the seventy-fifth day. The invitation for expression of interest must be published by the Resolution Professional by the seventy-fifth day from the insolvency commencement date.

Question 27: Besides basic information about the Corporate Debtor, what else must an Expression of Interest invitation specify?

A. Details of all admitted claims and their valuation reports.
B. The criteria fixed by the Committee of Creditors and ineligibility norms for prospective Resolution Applicants.
C. A detailed timeline for the entire Corporate Insolvency Resolution Process.
D. The proposed liquidation value of the Corporate Debtor’s assets.

Show Explanation

Correct Answer: B. The criteria fixed by the Committee of Creditors and ineligibility norms for prospective Resolution Applicants. An Expression of Interest must include the criteria set by the Committee of Creditors and the rules on who is ineligible to be a prospective Resolution Applicant.

Question 28: Who is considered a Resolution Applicant in the Corporate Insolvency Resolution Process?

A. Any person appointed by the Adjudicating Authority to oversee the process.
B. A person who submits a resolution plan to the Resolution Professional following the invitation for Expression of Interest, provided they are eligible.
C. An Insolvency Professional registered with the Insolvency and Bankruptcy Board of India.
D. A member of the Committee of Creditors.

Show Explanation

Correct Answer: B. A person who submits a resolution plan to the Resolution Professional following the invitation for Expression of Interest, provided they are eligible. A Resolution Applicant is defined as a person who submits a resolution plan after the invitation for Expression of Interest, subject to meeting the eligibility requirements.

Question 29: Which of the following persons is ineligible to be a Resolution Applicant?

A. An individual with an account classified as Standard Asset for less than one year at the time of submitting the Resolution Plan.
B. A person who has been convicted for an offence punishable with imprisonment for at least two years under a specified Act.
C. A financial entity that is a related party to the Corporate Debtor but is not a willful defaulter.
D. A person who was a promoter of the Corporate Debtor and whose account was classified as Non-Performing Asset for less than one year.

Show Explanation

Correct Answer: B. A person who has been convicted for an offence punishable with imprisonment for at least two years under a specified Act. A person convicted for certain offences with a punishment of imprisonment for at least two years is ineligible to be a Resolution Applicant.

Question 30: A person who is a promoter or has control over the management of a Corporate Debtor is ineligible to be a Resolution Applicant if their account has been classified as Non-Performing Asset for how long at the time of submitting the Resolution Plan?

A. At least six months
B. At least nine months
C. At least one year
D. At least eighteen months

Show Explanation

Correct Answer: C. At least one year. A promoter or person in control of the Corporate Debtor is ineligible if their account has been classified as NPA for at least one year when the Resolution Plan is submitted.

Question 31: Is a financial entity that is not a related party to the Corporate Debtor barred from being a Resolution Applicant even if its account with the Corporate Debtor is classified as NPA for more than one year?

A. Yes, all financial entities are barred if the account is NPA for more than one year.
B. No, this specific bar does not apply to financial entities that are not related parties.
C. Yes, unless they were the sole financial creditor.
D. No, but they require special approval from the Adjudicating Authority.

Show Explanation

Correct Answer: B. No, this specific bar does not apply to financial entities that are not related parties. The ineligibility criterion regarding accounts classified as NPA for at least one year does not apply to a financial entity that is not a related party to the Corporate Debtor.

Question 32: A person is ineligible to be a Resolution Applicant if they have been prohibited by SEBI from undertaking which activities?

A. Acting as a director in any company.
B. Trading in securities or accessing the securities markets.
C. Being a promoter of a corporate entity.
D. Participating in any resolution process under the Code.

Show Explanation

Correct Answer: B. Trading in securities or accessing the securities markets. A person prohibited by SEBI from trading in securities or accessing the securities markets is ineligible to be a Resolution Applicant.

Question 33: If a person has executed a guarantee for a Corporate Debtor under the Code, and such guarantee has been invoked by the creditor but remains unpaid, is that person ineligible to be a Resolution Applicant for that Corporate Debtor?

A. No, the invocation of a guarantee does not automatically lead to ineligibility.
B. Yes, if the invoked guarantee remains unpaid in full or part.
C. No, unless the unpaid amount exceeds a certain thresholD.
D. Yes, but only if they were also a promoter of the Corporate Debtor.

Show Explanation

Correct Answer: B. Yes, if the invoked guarantee remains unpaid in full or part. A person who has executed a guarantee for the Corporate Debtor which has been invoked by a creditor and remains unpaid in full or part is ineligible.

Question 34: What is the maximum number of days the Resolution Professional has from the issue of the provisional list of Resolution Applicants to issue copies of the Information Memorandum, Evaluation Matrix, and Request for Resolution Plans?

A. Two days
B. Five days
C. Seven days
D. Ten days

Show Explanation

Correct Answer: B. Five days. The Resolution Professional must issue these documents within five days of issuing the provisional list of prospective Resolution Applicants.

Question 35: How much time is allowed to a Resolution Applicant for submitting a Resolution Plan from the date of issue of the Request for Resolution Plans?

A. Minimum 15 days
B. Minimum 20 days
C. Minimum 30 days
D. Minimum 45 days

Show Explanation

Correct Answer: C. Minimum 30 days. The minimum time allowed to a Resolution Applicant for submitting a resolution plan is 30 days from the issue of the Request for Resolution Plans.

Question 36: What is the primary purpose of a resolution plan in the context of Corporate Insolvency Resolution Process?

A. To determine the liquidation value of the Corporate Debtor’s assets.
B. To provide a detailed history of the Corporate Debtor’s financial transactions.
C. To outline an action plan for the insolvency resolution of the Corporate Debtor and maximise the value of its assets.
D. To list all the creditors and the amounts of their admitted claims.

Show Explanation

Correct Answer: C. To outline an action plan for the insolvency resolution of the Corporate Debtor and maximise the value of its assets. A resolution plan is defined as an action plan for the insolvency resolution of the Corporate Debtor aimed at maximising the value of its assets.

Question 37: What should a resolution plan include regarding operational creditors and financial creditors?

A. A statement justifying why certain creditors will not be paid.
B. The amount payable under the plan to operational creditors and financial creditors.
C. A proposal to convert all operational debt into equity.
D. An offer of preferential treatment to related party creditors.

Show Explanation

Correct Answer: B. The amount payable under the plan to operational creditors and financial creditors. A resolution plan must contain a statement detailing the amount payable to both operational and financial creditors.

Question 38: If a Resolution Applicant or their related party has previously failed to implement another resolution plan approved by the Adjudicating Authority, what must the current resolution plan include?

A. A statement denying any past failures.
B. A guarantee from a third party for successful implementation.
C. Details of such past failures.
D. An explanation of why the previous failure is irrelevant to the current plan.

Show Explanation

Correct Answer: C. Details of such past failures. The resolution plan must include details if the resolution applicant or its related parties have previously failed to implement another resolution plan approved by the Adjudicating Authority.

Question 39: A resolution plan must demonstrate that it is technically and financially what?

A. Ambitious and innovative.
B. Feasible and viable.
C. Conditional and flexible.
D. Provisional and subject to negotiation.

Show Explanation

Correct Answer: B. Feasible and viable. The resolution plan must demonstrate that it is technically and financially feasible and viable.

Question 40: After inspecting the resolution plans for compliance, who does the Resolution Professional submit them to for evaluation?

A. The Adjudicating Authority.
B. The Insolvency and Bankruptcy Board of India.
C. The Committee of Creditors.
D. The original promoters of the Corporate Debtor.

Show Explanation

Correct Answer: C. The Committee of Creditors. The Resolution Professional submits the compliant resolution plans to the Committee of Creditors for evaluation.

Question 41: How does the Committee of Creditors evaluate each resolution plan?

A. Based on negotiations with each Resolution Applicant.
B. Strictly as per the evaluation matrix.
C. Based on the highest amount offered for the Corporate Debtor’s assets.
D. Based on the recommendations of the Resolution Professional.

Show Explanation

Correct Answer: B. Strictly as per the evaluation matrix. The Committee of Creditors must evaluate each resolution plan strictly according to the evaluation matrix.

Question 42: Can a Resolution Applicant attend meetings of the Committee of Creditors where their resolution plan is being considered?

A. No, Resolution Applicants are strictly prohibited from attending CoC meetings.
B. Yes, as an observer.
C. Yes, as a voting member.
D. Yes, but only if invited by the Adjudicating Authority.

Show Explanation

Correct Answer: B. Yes, as an observer. A Resolution Applicant is allowed to attend Committee of Creditors meetings where the resolution plan is being considered, but only as an observer.

Question 43: Under what circumstances will the Adjudicating Authority typically order the liquidation of the Corporate Debtor during the Corporate Insolvency Resolution Process?

A. If a resolution plan is submitted but does not meet the minimum requirements.
B. If no resolution plan is received by the Resolution Professional or the received plans do not receive the required 66% votes from the Committee of Creditors.
C. If the Corporate Debtor’s net worth becomes zero.
D. If the Insolvency and Bankruptcy Board of India recommends liquidation.

Show Explanation

Correct Answer: B. If no resolution plan is received by the Resolution Professional or the received plans do not receive the required 66% votes from the Committee of Creditors. Liquidation is typically ordered if no resolution plan is received or if the plans received fail to get the necessary 66% approval from the CoC.

Question 44: Under the Code, when is a liquidation process automatically initiated?

A. When the Corporate Debtor files for bankruptcy.
B. Where the Corporate Insolvency Resolution Process fails because no resolution plan is received or approved by the Committee of Creditors.
C. When the Corporate Debtor’s liabilities exceed its assets.
D. When the Adjudicating Authority deems the Corporate Debtor to be insolvent.

Show Explanation

Correct Answer: B. Where the Corporate Insolvency Resolution Process fails because no resolution plan is received or approved by the Committee of Creditors. Liquidation is automatically initiated if the CIRP fails due to the absence or non-approval of a resolution plan.

Question 45: Can creditors representing 66% of the outstanding financial debt resolve to liquidate the Corporate Debtor at any time before the preparation of the information memorandum?

A. No, liquidation can only be initiated after the CIRP fails.
B. Yes, if they represent 66% of the financial debt and decide before the information memorandum is prepared.
C. No, the decision to liquidate rests solely with the Adjudicating Authority.
D. Yes, but only with the approval of the Corporate Debtor’s management.

Show Explanation

Correct Answer: B. Yes, if they represent 66% of the financial debt and decide before the information memorandum is prepared. Creditors holding 66% of the financial debt can resolve to liquidate the Corporate Debtor before the information memorandum is prepared.

Question 46: Who makes a public announcement stating that the Corporate Debtor is in liquidation upon their appointment?

A. The Adjudicating Authority.
B. The Committee of Creditors.
C. The Liquidator.
D. The Insolvency and Bankruptcy Board of India.

Show Explanation

Correct Answer: C. The Liquidator. The Liquidator is responsible for making a public announcement about the Corporate Debtor being in liquidation upon their appointment.

Question 47: In the public announcement of liquidation, what does the Liquidator invite stakeholders to submit?

A. Resolution plans.
B. Proof of claims.
C. Objections to the liquidation process.
D. Proposals for restructuring the Corporate Debtor.

Show Explanation

Correct Answer: B. Proof of claims. The liquidator invites proof of claims from stakeholders in the public announcement of liquidation.

Question 48: Within how many days of their appointment must the Liquidator invite proof of claims from stakeholders?

A. 3 days
B. 5 days
C. 7 days
D. 10 days

Show Explanation

Correct Answer: B. 5 days. The liquidator must invite proof of claims from stakeholders within 5 days of their appointment.

Question 49: What is the last date for any person claiming a stake in the Corporate Debtor to submit their claim during the liquidation process?

A. Within 15 days of the public announcement.
B. On or before the last date mentioned in the public announcement.
C. Within 30 days of the liquidation commencement date.
D. By the date the Liquidator prepares the stakeholder list.

Show Explanation

Correct Answer: B. On or before the last date mentioned in the public announcement. Claims must be submitted on or before the last date specified by the Liquidator in the public announcement.

Question 50: How must financial creditors submit their claims during the liquidation process?

A. In person or by post.
B. Only electronically.
C. By any means, including oral submission.
D. Through their legal representatives only.

Show Explanation

Correct Answer: B. Only electronically. Financial creditors are required to submit their claims electronically during the liquidation process.

Question 51: How can operational creditors and other claimants submit their claims during the liquidation process?

A. Only in person.
B. Only by post.
C. Only by electronic means.
D. In person, by post, or by electronic means.

Show Explanation

Correct Answer: D. In person, by post, or by electronic means. Operational creditors and other claimants can submit their claims using any of these methods.

Question 52: What can the Liquidator do if they deem it necessary to establish claims?

A. Automatically reject any claim without sufficient proof.
B. Call for further evidence or clarification from a claimant.
C. Consult with the Committee of Creditors on the validity of claims.
D. Accept claims based solely on the initial submission.

Show Explanation

Correct Answer: B. Call for further evidence or clarification from a claimant. The Liquidator has the authority to request additional evidence or clarification from a claimant to verify their claim.

Question 53: What must a secured creditor necessarily produce to prove their claim as secured credit during the liquidation process?

A. A letter from the Corporate Debtor acknowledging the debt.
B. Bank statements showing the disbursal of the loan.
C. A certificate of registration of charge issued by the Registrar of Companies.
D. An agreement outlining the terms of the security interest.

Show Explanation

Correct Answer: C. A certificate of registration of charge issued by the Registrar of Companies. Secured creditors must provide a certificate of registration of charge from the ROC to prove their claim as secured.

Question 54: What does the Liquidator prepare based on the proofs of claims submitted and accepted, categorising the stakeholders?

A. An Information Memorandum.
B. A Resolution Plan.
C. A list of stakeholders.
D. An Evaluation Matrix.

Show Explanation

Correct Answer: C. A list of stakeholders. The Liquidator prepares a list of stakeholders based on the admitted claims.

Question 55: The list of stakeholders prepared by the Liquidator must include which of the following details?

A. The proposed distribution amount for each stakeholder.
B. The amounts of claim admitted, if applicable.
C. A history of the Corporate Debtor’s relationship with each stakeholder.
D. The voting share of each stakeholder.

Show Explanation

Correct Answer: B. The amounts of claim admitted, if applicable. The stakeholder list must detail the amounts of admitted claims.

Question 56: Within how many days from the last date for receipt of claims must the Liquidator file the list of stakeholders with the Adjudicating Authority?

A. Thirty days.
B. Forty-five days.
C. Sixty days.
D. Seventy-five days.

Show Explanation

Correct Answer: B. Forty-five days. The list of stakeholders must be filed with the Adjudicating Authority within forty-five days from the last date for receiving claims.

Question 57: Which of the following parties is allowed to inspect the list of stakeholders?

A. Only the Adjudicating Authority.
B. Only the Liquidator’s legal team.
C. Persons who submitted proofs of claim, and members, partners, directors, and guarantors of the Corporate Debtor.
D. Only the members of the consultation committee.

Show Explanation

Correct Answer: C. Persons who submitted proofs of claim, and members, partners, directors, and guarantors of the Corporate Debtor. These parties are entitled to inspect the stakeholder list.

Question 58: The list of stakeholders must be displayed on the website of which entity, if available?

A. The Insolvency and Bankruptcy Board of India.
B. The Adjudicating Authority.
C. The Corporate Debtor.
D. The Liquidator’s firm.

Show Explanation

Correct Answer: C. The Corporate Debtor. If the Corporate Debtor has a website, the stakeholder list must be displayed there.

Question 59: Within how many days from the liquidation commencement date must the liquidator constitute a consultation committee?

A. Thirty days.
B. Forty-five days.
C. Sixty days.
D. Seventy-five days.

Show Explanation

Correct Answer: C. Sixty days. The liquidator must form a consultation committee within sixty days from the liquidation commencement date.

Question 60: Based on what is the consultation committee constituted by the liquidator?

A. The instructions from the Adjudicating Authority.
B. The list of stakeholders prepared by the liquidator.
C. The resolution passed by the Committee of Creditors.
D. The recommendations of the Insolvency and Bankruptcy Board of India.

Show Explanation

Correct Answer: B. The list of stakeholders prepared by the liquidator. The consultation committee is constituted based on the stakeholder list.

Question 61: What is the composition of the consultation committee based on?

A. The value of claims admitted for different classes of stakeholders.
B. The chronological order in which claims were submitted.
C. The number of representatives nominated by the Adjudicating Authority.
D. The recommendations from the Corporate Debtor’s former management.

Show Explanation

Correct Answer: A. The value of claims admitted for different classes of stakeholders. The composition, specifically the number of representatives, is determined by the value of admitted claims for different stakeholder classes.

Question 62: If the claims of secured financial creditors who have relinquished their security interests are less than 50% of the liquidation value, what is the maximum number of representatives they can have on the consultation committee?

A. 1
B. 2
C. 4
D. There is no maximum limit in this case.

Show Explanation

Correct Answer: B. 2. If their claims are less than 50% of the liquidation value, secured financial creditors who relinquished security can have a maximum of 2 representatives.

Question 63: If the claims of unsecured financial creditors admitted during the liquidation process are at least 50% of the liquidation value, what is the maximum number of representatives they can have on the consultation committee?

A. 1
B. 2
C. 4
D. There is no maximum limit in this case.

Show Explanation

Correct Answer: C. 4. If their claims are at least 50% of the liquidation value, unsecured financial creditors can have a maximum of 4 representatives.

Question 64: How does the consultation committee advise the liquidator?

A. By simple majority of members present and voting.
B. By a vote of not less than sixty-six per cent of the representatives present and voting.
C. By a unanimous decision of all members.
D. By providing non-binding recommendations.

Show Explanation

Correct Answer: B. By a vote of not less than sixty-six per cent of the representatives present and voting. The consultation committee provides advice through a vote requiring not less than 66% of the representatives present and voting.

Question 65: Is it mandatory for the liquidator to follow the advice given by the consultation committee?

A. Yes, the liquidator is legally bound to follow all advice.
B. No, but if the liquidator takes a different decision, they must record the reasons in writing and mention it in the next progress report.
C. Yes, unless the Adjudicating Authority provides alternative instructions.
D. No, the consultation committee’s role is purely advisory without any binding power.

Show Explanation

Correct Answer: B. No, but if the liquidator takes a different decision, they must record the reasons in writing and mention it in the next progress report. The liquidator is not required to follow the advice but must document reasons for deviating and report them.

Question 66: For the purpose of liquidation, the liquidator shall form an estate of the assets called the liquidation estate and hold it as a fiduciary for whose benefit?

A. The Adjudicating Authority.
B. The Corporate Debtor’s former management.
C. The Insolvency and Bankruptcy Board of India.
D. All the creditors.

Show Explanation

Correct Answer: D. All the creditors. The liquidator holds the liquidation estate as a fiduciary for the benefit of all creditors.

Question 67: Which of the following assets are excluded from the liquidation estate?

A. Assets that may or may not be in possession of the corporate debtor.
B. Assets owned by a third party which are in possession of the corporate debtor.
C. Tangible and intangible assets of the corporate debtor.
D. Movable and immovable properties of the corporate debtor.

Show Explanation

Correct Answer: B. Assets owned by a third party which are in possession of the corporate debtor. Assets belonging to a third party but in the Corporate Debtor’s possession are excluded from the liquidation estate.

Question 68: Which of the following is one of the powers and duties of the Liquidator?

A. To approve the resolution plan.
B. To conduct the business of the Corporate Debtor for its beneficial liquidation.
C. To negotiate with the Corporate Debtor’s former directors for a settlement.
D. To provide financial assistance to the Corporate Debtor.

Show Explanation

Correct Answer: B. To conduct the business of the Corporate Debtor for its beneficial liquidation. The Liquidator has the power to conduct the business of the Corporate Debtor for its beneficial liquidation.

Question 69: Can the Liquidator institute legal proceedings and suits (civil or criminal) on behalf of the Corporate Debtor?

A. No, only the Adjudicating Authority can initiate legal proceedings.
B. Yes, in the name or on behalf of the Corporate Debtor.
C. No, this power remains with the former management.
D. Yes, but only with the prior approval of the consultation committee.

Show Explanation

Correct Answer: B. Yes, in the name or on behalf of the Corporate Debtor. The Liquidator is empowered to institute legal proceedings in the name or on behalf of the Corporate Debtor.

Question 70: What must the Liquidator do if the liquidation cost exceeds the estimated liquidation cost provided in the Preliminary Report?

A. Seek additional funds from the Adjudicating Authority.
B. Adjust the distribution to stakeholders accordingly.
C. Explain the reasons for the excess cost.
D. Reduce their own fee to cover the difference.

Show Explanation

Correct Answer: C. Explain the reasons for the excess cost. If liquidation costs exceed the initial estimate, the Liquidator must provide an explanation.

Question 71: When the Corporate Debtor is liquidated, what must the Liquidator submit to the Adjudicating Authority along with the final report?

A. An Expression of Interest.
B. A resolution plan.
C. A compliance certificate.
D. An asset memorandum.

Show Explanation

Correct Answer: C. A compliance certificate. Along with the final report, the Liquidator must submit a compliance certificate to the Adjudicating Authority when the Corporate Debtor is liquidated.

Question 72: Where the assets of the Corporate Debtor have been completely liquidated, what application does the liquidator make to the Adjudicating Authority?

A. For the initiation of a new Corporate Insolvency Resolution Process.
B. For the dissolution of such Corporate Debtor.
C. For the appointment of a new Resolution Professional.
D. For the extension of the liquidation period.

Show Explanation

Correct Answer: B. For the dissolution of such Corporate Debtor. After complete liquidation of assets, the liquidator applies to the Adjudicating Authority for the dissolution of the Corporate Debtor.

Question 73: From what date does the Corporate Debtor cease to exist when the Adjudicating Authority orders its dissolution?

A. From the date of the liquidator’s final report.
B. From the date of the Adjudicating Authority’s order.
C. From the date the assets were completely liquidateD.
D. From the date the public announcement of liquidation was made.

Show Explanation

Correct Answer: B. From the date of the Adjudicating Authority’s order. The Corporate Debtor ceases to exist from the date the Adjudicating Authority issues the dissolution order.

Question 74: Within how many days from the date of the dissolution order must a copy of the order be forwarded to the Authority with which the Corporate Debtor is registered (ROC)?

A. 3 days.
B. 5 days.
C. 7 days.
D. 10 days.

Show Explanation

Correct Answer: C. 7 days. A copy of the dissolution order must be sent to the ROC within seven days of the order date.

Question 75: What is the primary objective of the Pre-packaged Insolvency Resolution Process (PIRP) for stressed MSMEs?

A. To facilitate the quick liquidation of stressed MSMEs.
B. To allow the stressed debtor and its creditors to quickly work out a plan to turn around the MSME corporate entity without a full bankruptcy process.
C. To provide a platform for selling the assets of stressed MSMEs through public auction.
D. To transfer the management control of stressed MSMEs to the creditors immediately upon default.

Show Explanation

Correct Answer: B. To allow the stressed debtor and its creditors to quickly work out a plan to turn around the MSME corporate entity without a full bankruptcy process. PIRP aims to enable a swift turnaround plan for stressed MSMEs through collaboration between the debtor and creditors, avoiding a prolonged bankruptcy process.

Question 76: What is the maximum default value for which the pre-pack framework is applicable to MSMEs?

A. Up to Rs. 50 lakh.
B. Up to Rs. 1 crore.
C. Up to Rs. 5 crore.
D. Up to Rs. 10 crore.

Show Explanation

Correct Answer: B. Up to Rs. 1 crore. The pre-packaged insolvency resolution process for MSMEs is applicable for default values up to Rs. 1 crore.

Question 77: PIRP can be contemplated after a period of how many years from the date of previous PIRP or CIRP?

A. One year.
B. Two years.
C. Three years.
D. Five years.

Show Explanation

Correct Answer: C. Three years. There must be a three-year cool-off period from any previous PIRP or CIRP before a new PIRP can be initiated.

Question 78: If a Corporate Insolvency Resolution Process (CIRP) has been recently filed against an MSME, when can a Pre-packaged Insolvency Resolution Process (PIRP) still prevail over the CIRP?

A. If the PIRP is filed after 14 days of the CIRP filing.
B. If the PIRP is filed within 14 days of the CIRP filing.
C. PIRP can never prevail over a filed CIRP.
D. Only if the Adjudicating Authority orders the CIRP to be set aside.

Show Explanation

Correct Answer: B. If the PIRP is filed within 14 days of the CIRP filing. If a PIRP is filed within 14 days of a CIRP filing, the PIRP will take precedence.

Question 79: What is the fundamental difference in the control model between CIRP and PIRP?

A. CIRP is debtor-in-possession, while PIRP is creditor-in-control.
B. CIRP is creditor-in-control, while PIRP is debtor-in-possession with creditor-in-control oversight.
C. Both CIRP and PIRP are purely debtor-in-possession models.
D. Both CIRP and PIRP are purely creditor-in-control models.

Show Explanation

Correct Answer: B. CIRP is creditor-in-control, while PIRP is debtor-in-possession with creditor-in-control oversight. CIRP is a creditor-controlled process, whereas PIRP is primarily debtor-in-possession but with creditor oversight.

Question 80: For an MSME with financial creditors, what percentage of financial creditors must vote in favour to initiate PIRP?

A. A minimum of 51 per cent.
B. A minimum of 66 per cent.
C. A minimum of 75 per cent.
D. A minimum of 90 per cent.

Show Explanation

Correct Answer: B. A minimum of 66 per cent. A minimum of 66 per cent of financial creditors must vote in favour for the initiation of PIRP in an MSME with financial creditors.

Question 81: If a corporate debtor MSME does not have any financial creditors, how can it approve the application filing for PIRP?

A. Through a simple majority resolution by shareholders.
B. Through a special resolution with a 75 per cent majority.
C. By obtaining consent from all operational creditors.
D. By seeking approval from the Adjudicating Authority directly.

Show Explanation

Correct Answer: B. Through a special resolution with a 75 per cent majority. An MSME without financial creditors can approve the PIRP application filing via a special resolution with a 75% majority.

Question 82: Who appoints the insolvency resolution professional in a PIRP, as approved by the creditors?

A. The Corporate Debtor’s management.
B. The Insolvency and Bankruptcy Board of India.
C. The Adjudicating Authority.
D. The largest operational creditor.

Show Explanation

Correct Answer: C. The Adjudicating Authority. The Adjudicating Authority appoints the insolvency resolution professional in a PIRP, based on the creditors’ approval.

Question 83: What is the time frame given for the completion of the entire PIRP process from the date of commencement?

A. 90 days.
B. 120 days.
C. 180 days.
D. 330 days.

Show Explanation

Correct Answer: B. 120 days. The entire PIRP process is to be completed within 120 days from the commencement date.

Question 84: Within how many days of the date of commencement must the Resolution Professional submit the resolution plan to the adjudicating authority in a PIRP, after approval by the committee of creditors?

A. 60 days.
B. 90 days.
C. 105 days.
D. 120 days.

Show Explanation

Correct Answer: B. 90 days. The Resolution Professional must submit the resolution plan to the Adjudicating Authority within 90 days of the commencement date after it has been approved by the Committee of Creditors.

Question 85: What happens if the resolution plan in a PIRP is not approved by the committee of creditors within the stipulated time?

A. The Adjudicating Authority will approve the plan.
B. The PIRP will stand terminated.
C. The process will automatically convert to CIRP.
D. The timeline for approval will be extended.

Show Explanation

Correct Answer: B. The PIRP will stand terminated. The PIRP terminates if the resolution plan is not approved by the Committee of Creditors within the given timeframe.

Question 86: Does Section 29A of IBC, which deals with ineligibility of resolution applicants, apply to the Pre-packaged Insolvency Resolution Process (PIRP)?

A. No, Section 29A is not applicable to PIRP.
B. Yes, the applicability of Section 29A has been extended to PIRP.
C. Only specific clauses of Section 29A apply to PIRP.
D. Section 29A applies only if the PIRP fails and leads to CIRP.

Show Explanation

Correct Answer: B. Yes, the applicability of Section 29A has been extended to PIRP. Section 29A, which specifies ineligible persons for submitting resolution plans, is also applicable to PIRP.

Question 87: In a PIRP, within how many days of the commencement must the MSME defaulter submit a base resolution plan to the resolution professional?

A. Immediately upon commencement.
B. Within two days.
C. Within seven days.
D. Within fifteen days.

Show Explanation

Correct Answer: B. Within two days. The MSME defaulter must submit a base resolution plan to the resolution professional within two days of the PIRP commencement.

Question 88: If the base resolution plan in a PIRP does not envisage payment to operational creditors in full, or if the plan is not approved by creditors, what can be done?

A. The plan is automatically rejected, and liquidation is initiated.
B. The Adjudicating Authority can modify the plan.
C. New bids from competing resolution applicants can be inviteD.
D. The operational creditors’ claims are extinguished.

Show Explanation

Correct Answer: C. New bids from competing resolution applicants can be invited. If the base plan doesn’t fully pay operational creditors or isn’t approved, competing bids can be invited.

Question 89: What is the default threshold for initiation of CIRP for all corporate debtors?

A. Up to Rs. 1 crore.
B. Over Rs. 1 crore.
C. Up to Rs. 5 crore.
D. Over Rs. 5 crore.

Show Explanation

Correct Answer: B. Over Rs. 1 crore. The default threshold for initiating CIRP for all corporate debtors is over Rs. 1 crore.

Question 90: Who can initiate a CIRP?

A. Only the Corporate Debtor.
B. Only Financial Creditors.
C. Financial Creditor, Operational Creditor, or the Corporate Debtor itself.
D. Only the Adjudicating Authority.

Show Explanation

Correct Answer: C. Financial Creditor, Operational Creditor, or the Corporate Debtor itself. CIRP can be initiated by any of these three parties.

Question 91: What is the maximum possible timeline for CIRP, including extensions?

A. 180 days.
B. 270 days.
C. 330 days.
D. 365 days.

Show Explanation

Correct Answer: C. 330 days. The maximum possible timeline for CIRP, including extensions, is 330 days.

Question 92: Who is generally in control of the management during CIRP?

A. The Corporate Debtor’s original management.
B. The Creditor in control.
C. An independent government administrator.
D. A committee of operational creditors.

Show Explanation

Correct Answer: B. The Creditor in control. During CIRP, the control of the Corporate Debtor typically shifts to the creditors.

Question 93: Who is generally in possession of the management during PIRP?

A. The Corporate Debtor.
B. The Creditor.
C. The Resolution Professional.
D. The Adjudicating Authority.

Show Explanation

Correct Answer: A. The Corporate Debtor. In a PIRP, the Corporate Debtor generally remains in possession of the management.

Question 94: How is the resolution plan typically handled in CIRP regarding prospective resolution applicants?

A. The Corporate Debtor submits a base plan.
B. EOIs are invited from all prospective resolution applicants.
C. The Committee of Creditors prepares the plan.
D. The Adjudicating Authority drafts the plan.

Show Explanation

Correct Answer: B. EOIs are invited from all prospective resolution applicants. In CIRP, Expressions of Interest are invited from all potential resolution applicants.

Question 95: What is a potential consequence of the failure of PIRP?

A. Automatic dissolution of the Corporate Debtor.
B. Termination of PIRP, or liquidation, or initiation of CIRP.
C. Mandatory conversion to a debt recovery tribunal process.
D. The Corporate Debtor is allowed to continue its operations without resolution.

Show Explanation

Correct Answer: B. Termination of PIRP, or liquidation, or initiation of CIRP. Failure of a PIRP can lead to its termination, followed by liquidation or the initiation of a standard CIRP.

Question 96: When does moratorium protection apply in CIRP?

A. From the date of commencement of CIRP.
B. From the date of filing of the application plea.
C. From the date the Committee of Creditors is constituteD.
D. From the date the resolution plan is approved.

Show Explanation

Correct Answer: B. From the date of filing of the application plea. Moratorium protection in CIRP starts from the date the application plea is filed.

Question 97: When does moratorium protection apply in PIRP?

A. From the date of filing of the application plea.
B. From the date of commencement of PIRP.
C. From the date the base resolution plan is submitteD.
D. From the date the Adjudicating Authority approves the initiation.

Show Explanation

Correct Answer: B. From the date of commencement of PIRP. Moratorium protection in PIRP applies from the date of its commencement.

Question 98: What percentage of Committee of Creditors votes is required to terminate the PIRP process?

A. Minimum 51%.
B. Minimum 66%.
C. Minimum 75%.
D. Minimum 90%.

Show Explanation

Correct Answer: B. Minimum 66%. The PIRP process can be terminated with a minimum of 66% CoC votes.

Question 99: What percentage of Committee of Creditors voting share is required under Section 12A to withdraw from CIRP?

A. 51%.
B. 66%.
C. 75%.
D. 90%.

Show Explanation

Correct Answer: D. 90%. A 90% voting share of the Committee of Creditors is needed under Section 12A to withdraw from CIRP.

Question 100: If promoters are not diluting equity as part of a PIRP resolution, what does the Committee of Creditors need to do?

A. Reject the resolution plan.
B. Seek Adjudicating Authority approval.
C. Record reasons for the decision.
D. Increase the payment to operational creditors.

Show Explanation

Correct Answer: C. Record reasons for the decision. In PIRP, if promoters do not dilute equity as part of the resolution, the CoC must record the reasons for their decision.