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CS Professional · Insolvency and Bankruptcy - Law and Practice · Insolvency Resolution of Individuals and Partnership Firms

Vikram, a bankrupt trader in Jaipur, holds: (i) an unencumbered tool kit he needs for his work, (ii) an unencumbered life insurance policy in his wife's name, (iii) a second flat he owns, unencumbered, besides his single dwelling, and (iv) a car mortgaged to a bank and not necessary for his employment. Which items are clearly 'excluded assets' under the Code's definition?

Only the tool kit and the life insurance policy are excluded assets. Both are unencumbered and fall within the definition. The second flat is not covered because only a single dwelling unit is excluded, and the mortgaged car is encumbered, so it cannot be an excluded asset.

  1. A(i) and (ii) onlyCorrect
  2. B(i), (ii) and (iii)
  3. C(ii) and (iv) only
  4. D(i), (ii) and (iv)

Explanation

Excluded assets include unencumbered tools necessary for employment, and unencumbered life insurance policies in the name of the debtor or immediate family. Only a single dwelling unit (of prescribed value) is excluded, so the second flat is not. The mortgaged car is encumbered and so cannot qualify.

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