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

Ramesh Traders, a partnership firm in Jaipur, files an application under section 94 on 5 March. Its partners are Ramesh and Suresh, and Mahesh retired on 1 February. A creditor wants to sue Mahesh for a firm debt on 10 March, before the application is admitted. Which statement is correct?

The interim moratorium covers the partners of the firm as on the date of the application, here Ramesh and Suresh. Mahesh had already retired, so he is outside its protection. The moratorium starts on the application date, not on admission.

  1. AThe interim moratorium operates against Ramesh and Suresh, the partners on the date of the application, but not against Mahesh as a retired partnerCorrect
  2. BThe interim moratorium operates only against the firm and not against any partner
  3. CThe interim moratorium operates against all current and former partners of the firm
  4. DThe interim moratorium begins only when the application is admitted

Explanation

For a firm application, the interim moratorium operates against all partners as on the date of the application. Mahesh had retired before 5 March, so he is not covered. It begins on the date of the application, not on admission, which rules out the last option.

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