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

The Part of the Code dealing with insolvency and bankruptcy of individuals and partnership firms applies where the amount of default is at least a prescribed minimum. Meera Textiles, a partnership firm, defaulted on ₹800. Without any Central Government notification raising the threshold, can this Part be applied to the firm?

No. The Part applies to individuals and partnership firms only where the default is not less than one thousand rupees, unless the Central Government notifies a higher amount up to one lakh rupees. A default of ₹800 is below the threshold.

  1. AYes, because the Part applies to every default of any amount
  2. BNo, because the minimum default is ₹1 lakh by statute
  3. CNo, because the default is below the statutory minimum of one thousand rupeesCorrect
  4. DYes, because the threshold applies only to individuals and not to firms

Explanation

Section 78 applies the Part to individuals and partnership firms where the default is not less than one thousand rupees, and the Central Government may notify a higher amount capped at one lakh rupees. With no notification, the floor is ₹1,000, so a default of ₹800 falls short. The ₹1 lakh figure is only a ceiling on any notified amount.

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