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

Ravi, a director of Sundaram Steels Pvt Ltd, knew months before the insolvency commencement date that there was no reasonable prospect of avoiding CIRP, yet continued to take on fresh supplier credit and did nothing to limit creditors' losses. Under section 66(2), on whose application during CIRP may the Adjudicating Authority direct him to contribute?

The resolution professional, by an application made during the corporate insolvency resolution process. The Authority may then direct the director to contribute if he knew or ought to have known insolvency could not be avoided and failed to exercise due diligence in minimising creditors' losses.

  1. AThe resolution professional, on an application made during CIRPCorrect
  2. BThe Registrar of Companies, only after liquidation begins
  3. CThe operational creditor with the largest claim
  4. DThe promoters' group, by a resolution

Explanation

Section 66(2) permits an application by the resolution professional during CIRP. The Authority may direct a director to contribute if before the insolvency commencement date he knew or ought to have known there was no reasonable prospect of avoiding CIRP and did not exercise due diligence in minimising creditor losses. Creditors and the Registrar are not named applicants.

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