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

Mr. Desai, an individual debtor, died after the Adjudicating Authority passed an order permitting creditors to apply for bankruptcy. Arjun Finance wishes to proceed. Which combination of statements is correct under section 123?

The application may be filed against Mr. Desai's legal representatives, and Arjun Finance may propose an insolvency professional as bankruptcy trustee. Section 123(5) covers deceased debtors and section 123(4) allows the creditor's trustee proposal, so death does not abate the application.

  1. AThe application cannot be filed because bankruptcy abates on death
  2. BThe application may be filed against his legal representatives, and the creditor may propose an insolvency professional as trusteeCorrect
  3. CThe application may be filed only by the Official Receiver, who then appoints the trustee
  4. DThe application may be filed against his legal representatives, but the Tribunal alone selects the trustee

Explanation

Section 123(5) permits the application in case of a deceased debtor to be filed against his legal representatives, and section 123(4) lets the creditor propose an insolvency professional as bankruptcy trustee. Abatement and Official Receiver routes do not appear in these provisions, and the creditor's proposal is expressly allowed, which defeats the last option.

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