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

Sunrise Finance holds a debt of Rs 40 lakh against Mr. Karan Joshi, secured by a mortgage. It applies for bankruptcy but wants to keep its security and proceed only for the portion not covered by the mortgage. What must the application be accompanied by?

The application must carry a statement that it relates only to the unsecured part of the debt, together with an estimated value of that unsecured part. Section 123(2)(b) provides this as an alternative to surrendering the security for the benefit of all creditors.

  1. AA statement that the application is only for the unsecured part of the debt, with an estimated value of that partCorrect
  2. BA statement that the creditor will give up its security, with no other statement allowed
  3. CA certificate from the debtor consenting to the application
  4. DA valuation report from the bankruptcy trustee

Explanation

Under section 123(2)(b), a secured creditor may state that the application is only for the unsecured part and give an estimated value of that part. The alternative in section 123(2)(a) is to give up the security, which this creditor does not want. Debtor consent and a trustee valuation are not required.

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