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CS Professional · Insolvency and Bankruptcy - Law and Practice · Bankruptcy Order for Individuals and Partnership Firms

A bankruptcy order has been passed against Anil. Priya, an unsecured creditor holding a bankruptcy debt, wants to file a suit against Anil to recover her dues. Under section 128, what is the position?

Priya may commence the suit only with the leave of the Adjudicating Authority and on such terms as it imposes. Section 128(1)(c) restricts suits and actions against the bankrupt's property for bankruptcy debts, but the bar is not absolute or time-fixed.

  1. AShe may file the suit freely as the debt is unsecured
  2. BShe may commence the suit only with the leave of the Adjudicating Authority, on terms it may imposeCorrect
  3. CShe may file it only after thirty days from the bankruptcy commencement date
  4. DShe is barred absolutely from any proceeding for all time

Explanation

Section 128(1)(c) bars a creditor claiming a bankruptcy debt from initiating action against the bankrupt's property or commencing a suit or legal proceedings, except with the leave of the Adjudicating Authority and on its terms. The bar is not absolute, and the thirty-day period relates to secured creditors' interest.

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