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CS Professional · Insolvency and Bankruptcy - Law and Practice · Insolvency Resolution of Individuals and Partnership Firms

Mr. Rohan Iyer runs a small printing business in Coimbatore and is unable to repay a trade creditor. The default amount is Rs 40,000. Assuming the Central Government has not notified any higher minimum default amount under the proviso, does Part III of the IBC apply to his insolvency matter?

Yes. Part III applies to individuals and partnership firms where the default is at least Rs 1,000, unless the Central Government notifies a higher figure, which cannot exceed Rs 1 lakh. A default of Rs 40,000 clears the Rs 1,000 threshold, so Part III applies.

  1. AYes, because Part III applies where the default is not less than Rs 1,000Correct
  2. BNo, because the minimum default for individuals is Rs 1 crore
  3. CNo, because Part III applies only to companies and LLPs
  4. DYes, but only if the default is at least Rs 1 lakh

Explanation

Part III applies to fresh start, insolvency and bankruptcy of individuals and partnership firms where the default is not less than Rs 1,000. The Central Government may notify a higher minimum, but not above Rs 1 lakh. With no notification, Rs 40,000 exceeds Rs 1,000, so Part III applies. The Rs 1 lakh figure is only the ceiling for any notified amount.

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