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

A bankruptcy order is passed against Sharma & Sons, a partnership firm with three partners, Anil, Sunil and Kavita. Under the definition of 'bankrupt' in Part III, who is treated as bankrupt?

Each of the partners is treated as bankrupt. The Code's definition of bankrupt expressly includes each of the partners of a firm where a bankruptcy order has been made against the firm, so Anil, Sunil and Kavita are all bankrupt, regardless of who signed or their profit share.

  1. AOnly the firm as an entity
  2. BOnly the partner who signed the loan documents
  3. CEach of the partners of the firmCorrect
  4. DOnly partners holding more than fifty per cent of profits

Explanation

The definition of bankrupt includes each of the partners of a firm where a bankruptcy order has been made against the firm. So Anil, Sunil and Kavita are all bankrupt. Limiting it to the signatory or majority partners has no basis in the definition.

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