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CS Professional · Insolvency and Bankruptcy - Law and Practice · Pre-Packaged Insolvency Resolution Process (Elective 7.5)

Verma Textiles Pvt Ltd completed a corporate insolvency resolution process two years before the proposed initiation date. It is otherwise eligible and wants to initiate a pre-packaged insolvency resolution process. What is the legal position?

Verma Textiles cannot proceed. Section 54A(2)(a) requires that the corporate debtor has not undergone a pre-packaged process or completed a corporate insolvency resolution process in the three years before the initiation date, and a CIRP completed two years earlier falls within that period.

  1. AIt can proceed because only a liquidation order bars eligibility
  2. BIt can proceed if the financial creditors approve by a simple majority
  3. CIt cannot proceed because it completed a CIRP during the three years preceding the initiation dateCorrect
  4. DIt cannot proceed because the process is available only once in the life of a company

Explanation

Under section 54A(2)(a), the debtor must not have undergone a pre-packaged process or completed a CIRP during the three years preceding the initiation date. Two years is within that window, so creditor approval cannot cure the bar.

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