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CS Professional · Corporate Restructuring, Valuation and Insolvency · Liquidation on or after Failing of Resolution Plan

After the liquidation costs are paid, Tapi Polymers Ltd has Rs 90 lakh for distribution. Unsecured financial creditors are owed Rs 60 lakh. Central and State Government dues for the last two years are Rs 30 lakh, and a secured creditor is owed Rs 30 lakh unpaid after enforcing its security. Assume no workmen or employee dues. How is the balance after the unsecured financial creditors shared?

After Rs 60 lakh goes to unsecured financial creditors, Rs 30 lakh remains. Government dues and the secured creditor's post-enforcement shortfall rank equally under clause (e), so they share it proportionately, receiving Rs 15 lakh each.

  1. ARs 30 lakh remains; Government dues and the secured creditor's shortfall share it equally in proportion, each getting Rs 15 lakhCorrect
  2. BRs 30 lakh goes entirely to Government dues
  3. CRs 30 lakh goes entirely to the secured creditor
  4. DRs 30 lakh is held for preference shareholders

Explanation

Unsecured financial debts at clause (d) take Rs 60 lakh, leaving Rs 30 lakh. Government dues and the secured creditor's unpaid balance after enforcement rank equally under clause (e). Their claims total Rs 60 lakh, so each is paid in equal proportion, which is 50 percent, giving Rs 15 lakh each, as per the Explanation to section 53.

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