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

A bankruptcy order under section 126 is passed against Sharma & Co., a partnership firm with three partners: Anil, Bina and Chetan. Under the definition of 'bankrupt' in this Part, who is treated as bankrupt?

Each of the three partners is treated as bankrupt. The definition of bankrupt expressly includes each of the partners of a firm where a bankruptcy order under section 126 has been made against the firm, regardless of who signed documents or the partners' personal asset levels.

  1. AOnly the firm as an entity, and the partners are unaffected
  2. BOnly the managing partner who signed the loan documents
  3. CEach of the three partners of the firmCorrect
  4. DOnly those partners whose personal assets exceed the partnership debt

Explanation

Section 79(3)(b) defines a bankrupt to include each of the partners of a firm where a bankruptcy order under section 126 has been made against the firm. So Anil, Bina and Chetan are all bankrupt. Option A ignores this clause.

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