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

Rohit, an individual, has defaulted on a debt of Rs 800. The Central Government has not notified any higher minimum default amount. Can Part III of the IBC (fresh start, insolvency and bankruptcy of individuals) be applied to this default?

No. Part III applies only where the default amount is not less than one thousand rupees, unless the Central Government notifies a higher minimum capped at one lakh rupees. A default of Rs 800 is below that floor, so Part III does not apply.

  1. AYes, because Part III applies to any default of any amount
  2. BYes, because the minimum default is Rs 500
  3. CNo, because the default is below the minimum of Rs 1,000 under Part IIICorrect
  4. DNo, because Part III applies only to partnership firms

Explanation

Under section 78, Part III applies where the amount of default is not less than Rs 1,000. The Central Government may notify a higher minimum, capped at Rs 1 lakh. With no notification, the Rs 1,000 floor applies and Rs 800 falls short.

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