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

A bankruptcy order is passed against Rajan & Sons, a partnership firm in Coimbatore, on 10 June. Its partners on that date are Rajan and his son Vikas. Vikas retired on 1 May, and Meera joined as a partner on 5 June. Another creditor, Bright Supplies, holds an unsecured debt claimed as a bankruptcy debt. Which statement is correct?

The order operates against Rajan and Meera, the partners on the date of the order, not the retired Vikas. Bright Supplies, holding an unsecured bankruptcy debt, can commence a suit only with the leave of the Adjudicating Authority on terms it imposes.

  1. AThe order operates against Rajan, Vikas and Meera because all were partners during the year
  2. BThe order operates against Rajan and Meera, and Bright Supplies needs the Adjudicating Authority's leave to sueCorrect
  3. CThe order operates against Rajan only, being the senior partner, and Bright Supplies may sue Meera freely
  4. DThe order operates against Rajan and Vikas, since the debt arose while they were partners

Explanation

The order operates against each individual who is a partner on the date of the order. On 10 June these are Rajan and Meera, as Vikas retired earlier. Bright Supplies, a creditor of a bankruptcy debt, cannot sue or act against the bankrupt's property without the Adjudicating Authority's leave.

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