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CS Professional · Insolvency and Bankruptcy - Law and Practice · Introduction to Insolvency and Bankruptcy Code

A bankruptcy application under section 123 is filed by a creditor without proposing any bankruptcy trustee. The Adjudicating Authority receives it on 5 August. Which sequence correctly reflects the Code?

The Authority must direct the Board within seven days of receiving the application, so by 12 August, and the Board must then nominate a bankruptcy trustee within ten days of that direction. Sections 125(3) and 125(4) set this sequence, and the Authority appoints the nominee in the bankruptcy order.

  1. AThe Authority directs the Board by 12 August to nominate a trustee; the Board nominates within ten days of the directionCorrect
  2. BThe Authority itself appoints a trustee by 12 August without involving the Board
  3. CThe Board must nominate a trustee within seven days of the application; the Authority directs afterwards
  4. DThe Authority directs the Board within ten days; the Board nominates within seven days

Explanation

Under section 125(3) the Authority directs the Board within seven days of receiving the application to nominate a trustee, and under 125(4) the Board nominates within ten days of the direction. The nominated trustee is then appointed by the Authority in the bankruptcy order. The other options swap the periods or remove the Board.

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