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CS Professional · Insolvency and Bankruptcy - Law and Practice · Liquidation of Corporate Person

Kaveri Infra Ltd is in liquidation. Its secured creditor, Union Trust, realised its security and received Rs 12 crore against a debt of Rs 10 crore. Insolvency resolution process costs attributable to the realisation are Rs 50 lakh. What must Union Trust do?

Union Trust must account to the liquidator for the surplus over its debt and tender those funds. It must also transfer the insolvency resolution process costs deducted from its realisation to the liquidator, so both amounts join the liquidation estate.

  1. ARetain the entire Rs 2 crore surplus as interest and costs
  2. BAccount to the liquidator for the surplus and tender the surplus funds; the resolution process costs due are deducted from its realisation and transferred to the liquidatorCorrect
  3. CPay only the Rs 50 lakh costs to the liquidator and keep the surplus
  4. DPay the surplus to unsecured creditors directly in proportion to their dues

Explanation

Section 52(7) requires the secured creditor to account to the liquidator for surplus over its debt and tender the surplus funds. Section 52(8) requires insolvency resolution process costs to be deducted from realisation proceeds and transferred to the liquidator for the estate. Keeping the surplus is wrong.

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