Skip to content

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

A bankruptcy order under section 126 is passed against Shree Associates, a partnership firm with partners Dev, Esha and Farid. A creditor asks who is treated as a bankrupt, and separately, how limitation works for a suit the debtor wished to file during an earlier moratorium. Which pair of statements is correct under Part III?

Each of the partners becomes a bankrupt when a bankruptcy order is made against the firm, and the period of any moratorium is excluded when computing limitation for a suit or application in the debtor's name, notwithstanding the Limitation Act, 1963.

  1. AOnly the firm is a bankrupt; the moratorium period is counted in limitation
  2. BEach of the partners is a bankrupt; the moratorium period is excluded in computing limitation for suits or applications in the debtor's nameCorrect
  3. COnly the managing partner is a bankrupt; the moratorium period is excluded only with Tribunal permission
  4. DEach partner is a bankrupt only if individually insolvent; limitation runs during moratorium

Explanation

Section 79(3)(b) says each of the partners of a firm is a bankrupt where a bankruptcy order under section 126 is made against the firm. Section 179(3) excludes the moratorium period in computing limitation for suits or applications in the debtor's name, notwithstanding the Limitation Act, 1963. So the second option is correct.

Did you get it right without looking?

One question tells you little. A timed set on Bankruptcy for Individuals and Partnership Firms shows your real accuracy, how long you take and where you lose marks.

Practise Bankruptcy for Individuals and Partnership FirmsFree diagnostic mock

More Bankruptcy for Individuals and Partnership Firms questions