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

Liquidator Anil recovers Rs 40 lakh from a transferee after a successful avoidance application against Zenith Metals Ltd. How should the recovered value be treated under section 36 of the Code?

The recovered Rs 40 lakh forms part of the liquidation estate, because section 36(3)(f) includes assets or value recovered through avoidance proceedings. The liquidator holds the estate as a fiduciary for the benefit of all creditors, so it is distributed accordingly.

  1. AIt is excluded from the liquidation estate as a third-party asset
  2. BIt forms part of the liquidation estate as assets or value recovered through avoidance proceedings, held by the liquidator as fiduciary for all creditorsCorrect
  3. CIt is paid to the transferee's creditors only
  4. DIt is treated as personal assets of the shareholders

Explanation

Section 36(3)(f) includes any assets or their value recovered through avoidance proceedings in the liquidation estate, and section 36(2) requires the liquidator to hold the estate as a fiduciary for the benefit of all creditors. It is not a third-party asset under section 36(4).

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