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

Liquidator Meera Rao is forming the liquidation estate of Deccan Infra Ltd. Which of the following is correctly excluded from the estate and cannot be used for recovery in liquidation?

Assets of an Indian or foreign subsidiary of the corporate debtor are excluded from the liquidation estate. By contrast, the debtor's shares in the subsidiary, its intellectual property, and encumbered assets, even if not in its possession, form part of the estate.

  1. AShares held by Deccan Infra in its wholly owned subsidiary
  2. BAssets of the Indian subsidiary of Deccan InfraCorrect
  3. CIntellectual property owned by Deccan Infra
  4. DEncumbered assets of Deccan Infra that are not in its possession

Explanation

Section 36(4)(d) excludes assets of any Indian or foreign subsidiary of the corporate debtor. However, section 36(3) includes shares held in a subsidiary, intellectual property, and encumbered assets whether or not in the debtor's possession. The key trap is confusing the subsidiary's assets with the debtor's shareholding in it.

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