CS Professional June 2025 Question Paper Insolvency and Bankruptcy - Law and Practice

FOR CS PROFESSIONAL EXAM PREPARATION

CS Professional 2025
Question Paper ·
Insolvency and
Bankruptcy - Law and
Practice
EXAM YEAR TYPE

CS Professional 2025 Question Paper
SUBJECT DATE

Insolvency and Bankruptcy - Law and Practice June 2025

Notes · Sample Papers · Previous Year Papers · Mock Tests

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NEW SYLLABUS
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Roll No. ..................................... : 1 : OPEN BOOK EXAMINATION

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Time allowed : 3 hours
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Maximum marks : 100
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Total number of questions : 4 Total number of printed pages

NOTE : Answer ALL Questions.

1. (a) Read the following and answer the questions below based on the relevant case laws

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and the applicable provisions of the Insolvency and Bankruptcy Code, 20l6
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(‘‘IBC, 2016’’) and the Regulations. made thereunder in this regard.
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Facts of the case

Thakur Engineering Products Private Limited [‘‘the company’’] engaged in the business

Industrial Machinery supplies. It got Machinery supplies worth ` 21,10,11,054/- from

a supplier (‘Respondent’), which was due and payable by the company. Several cheques

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were issued by the company in favour of the respondent towards amounts payable

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for supplies, all of which were returned dishonoured for the reason ‘‘funds insufficient’’.

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As a result, the respondent issued a statutory demand notice under Section 138 read

ag with Section 141 of the Negotiable Instruments Act, l88l (‘‘NI Act’’), calling upon

the company and its three Directors, to pay the amount within 15 days of the receipt

of the notice.

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Subsequently, two cheques for a total amount of ` 90,80,123/- presented by the

respondent for encashment were returned dishonoured for the reason ‘‘funds insufficient’’.

A second demand notice was therefore issued under the same Sections by the respondent,

calling upon the company and the appellants to pay this amount within l5 days of

the receipt of the notice.

Since no payment was forthcoming pursuant to the two statutory demand notices,

two criminal complaints, were filed by the respondent against the company and the

appellants under Section 138 read with Section 141 of the Negotiable Instruments

Act before the Additional Chief Metropolitan Magistrate [‘‘ACMM’’]. Summons were

issued by the ACMM to the company and the appellants in both the criminal complaints.

Meanwhile, as a statutory notice under Section 8 of the IBC, 20l6 had been issued

by the respondent to the company, and an order was passed by the Adjudicating

Authority admitting the application under Section 9 of the IBC and directing

commencement of the corporate insolvency resolution process with respect to the

company, a moratorium in terms of Section 14 of the IBC was ordered.

Pursuant thereto, the Adjudicating Authority stayed further proceedings in the two criminal

complaints pending before the ACMM. In an appeal filed to the National Company

Law Appellate, Tribunal (‘‘NCLAT’’), the NCLAT set aside this order, holding that

Section 138, being a criminal law provision, cannot be held to be a ‘‘proceeding’’

within the meaning of Section 14 of the IBC, 20l6. In an appeal filed before the

Court, the Court ordered a stay of further proceedings in the two complaints pending

before the learned ACMM.

1/2025/INBLP/NS/OBE Contd. ........

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Subsequent thereto, since a resolution plan submitted by the promoters of the company

ma result of which, the moratorium order ceased to have effect. It maym.co
had been approved by the committee of creditors, the Adjudicating Authority approved
such planoas
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s e has been filed by the financial creditors of the company before the Adjudicating
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be added that at present, an application for withdrawal of approval of this resolution

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plan a
a Authority. Equally, an application to extend time for implementation of this plan has
been filed by the resolution applicant before the Adjudicating Authority. Both these
applications have yet to be decided by the Adjudicating Authority.

On the above background, referring the provisions of IBC, 2016 and applicable case
laws answer following questions :

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(i) What is the main purpose of the moratorium under Section l4 of the IBC,
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20l6, and how did the Supreme Court apply it to Section 138 of the NI
Act ?
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(ii) Why did the Supreme Court classify proceedings under Section 138 of the
NI Act as ‘‘criminal’’ for the purpose of the Section l4 moratorium ?

(2 marks)

(iii) In a case with similar facts, Supreme Court made a landmark decision, how

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. Process (CIRP) ?
does this decision affect the creditors who have initiated Section 138 proceedings

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against a company undergoing Corporate Insolvency Resolution

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(2 marks)

ag (iv) If a personal guarantor for Thakur Engineering
also issued a cheque which had bounced, would the Section l4 moratorium
apply to the personal guarantor ? Why or why not ?

(2 marks)

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(v) Whether arbitration proceedings are included under moratorium imposed under
Section l4 ? Explain in detail with the relevant provisions of the IBC, 2016.

(4 marks)

(vi) Whether moratorium imposed under Section 14 and 85 of IBC, 2016 are
subject specific ? Whether Section 14(1) applies only to legal proceedings ?
Explain in detail quoting the relevant provisions of the IBC.

(4 marks)

(b) Answer the following questions :

(i) Can a Resolution Professional withdraw or modify a successful Resolution Plan
submitted with the Adjudication Authority ? Answer with suitable provisions
of the IBBI Regulations and applicable case law.

(3 marks)

(ii) In the context of Bankruptcy and Insolvency process under IBC, 20l6, what
is the Swiss Challenge method for making an auction to get the best available
price ? Quoting applicable case laws, state whether Courts in India generally
accept the adoption of this method in the Bankruptcy and Insolvency process
under IBC, 2016.

(3 marks)

(iii) During the course of Liquidation process, if a liquidator finds that some stocks
of a Corporate Debtor is deteriorating very quickly and losing its present value,
what are the various courses of action available for the Liquidator. Answer
briefly quoting applicable case law.

(3 marks)

1/2025/INBLP/NS/OBE Contd. ........

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2. (a) Kulu Floriculture Private Limited is in the business of floriculture. The investment in

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plant and machinery is of ` 15 lakhs only. It has availed term loan of ` l2 lakhs
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e company earned a good profit up to 2 years. However, in the current financial
from a bank.
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The
a year, its turnover went down due to stiff competition from the local competitors. The
loan outstanding of the company also reduced from ` 12 lakhs to ` 9 lakhs, but
during the current year the company could not pay the instalment of the term loan,
as a result its account was classified as Non-Performing Asset (NPA) in the books

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of the bank. The company decides to initiate Pre-Packed Insolvency Resolution Process

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(PPIRP) and sought an opinion from one of the Insolvency Professional (IP). The

e mof the financial creditors. A declaration was also
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lameeting.
IP suggested to convene a meeting
made by the directors in gthe
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The company also passed a resolution in the
general meeting of the members.

Based on above background answer the following questions by selecting from the
choices given for each question (Write the correct answer in full) :

(i) For classification of any company as a MSME (Micro Classification) company
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the investment in Plant and Machinery should be :
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A. Not more than ` 25 lakh

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B. Not more than ` 50 lakh

C. Not more than ` 75 lakh

D. Not more than ` 100 lakh

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(ii) For initiation of the PPIRP the minimum amount of default should be :

A. ` One Lakh

B. ` 5 Lakh

C. ` 7 Lakh

D. ` 10 Lakh

(iii) Initiation of the PPIRP on the part of the corporate debtor is :

A. Optional

B. Mandatory

C. Subject to approval by Adjudicating Authority

D. At the discretion of the Court

(iv) In which form the company shall make an application for initiating PPIRP ?

A. Form 1

B. Form 2

C. Form 3

D. Form 4

(v) If in the given case, the company has no outstanding against the financial creditors,
but is unable to pay the dues to the operational creditors. How the meeting
shall be convened :

A. The company shall convene a meeting of operational creditors

B. The company shall convene a meeting of workmen

C. The company shall convene a meeting of employees

D. The company shall convene a meeting of operational creditors

who are not related parties of the corporate debtor

1/2025/INBLP/NS/OBE Contd. ........

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(vi) A declaration made by majority of the directors shall contain :

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A. The Corporate Debtor shall file an application for initiation within a
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C. The name of the IP approved by creditors to be appointed as the RP

D. All of the above

(vii) The members of the Corporate Debtor shall pass a special resolution :
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A. Approving the solvency of the CD

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B. Approving the filing of an application for initiating PPIRP
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C. Approving the appointment of Insolvency Professional

D. Approving the appointment of authorised representatives of creditors

(viii) Who shall prepare the Base Resolution Plan (BRP) under PPIRP ?

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A. The Corporate Debtor

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C. The Committee of Creditors

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(1×8 = 8 marks)

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(b) Violet Corp Limited (VCL) carries on the business of specialised chemicals used in
synthetic dyes and its businesses have spread across the globe. Due to environmental
impact its products lost markets and started facing financial difficulties. The Purple Bank
of India (PBI) one of its financial creditors had filed an application under Section 7
of the IBC, 2016 against VCL. The Adjudicating Authority passed order against VCL
initiating the Corporate Insolvency Resolution Process (CIRP) in the middle of 2022.
However, before kickstart of the aforesaid CIRP, one more Bankruptcy proceeding
was initiated against its overseas assets provided as security to a foreign Bank in a
European country, and a Trustee was appointed by the European court having jurisdiction
over its overseas properties. The Trustee has approached Adjudicating Authority (NCLT)
to recognize their proceedings and to halt Indian proceedings.

However, The NCLT declined to accept/consider the application and declared that their
proceedings as null and void, mentioning their reasons/observations. Aggrieved by the
decision, the Trustee made an appeal before the NCLAT to consider their appeal and
preyed relief as stated above.

In this background, state the decision for denial by the NCLT and also the decision
of the NCLAT by citing appropriate case law in this regard.

(6 marks)

(c) Kapil Kumar, a prominent businessman, had provided personal guarantees to several
financial institutions for loans extended to his company, ‘‘KK Enterprises Limited’’,
institutions invoked Kapil’s personal guarantees and initiated insolvency proceedings
against him under the Insolvency and Bankruptcy Code, 2016 (IBC, 2016), specifically

1/2025/INBLP/NS/OBE Contd. ........

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under the provisions related to personal guarantors to corporate debtors. Kapil challenged

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the validity of these proceedings, arguing that the notification bringing personal guarantors
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On this background, mentioning relevant provisions of the IBC, 2016 and applicable

a case laws answer the following questions :

(i) What is the significance of Section 1(3) of the IBC, 2016 in this case ?

(1 mark)

(ii) According to the Supreme Court’s ruling in a case with similar facts, what

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is the nature of a personal guarantor’s liability and what did the Supreme

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Court rule about the validity of the November 15, 2019 notification issued

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by the Ministry of Corporate

(2 marks)

(iii) What is the effect of the Supreme Court ruling on financial Creditors (Banks
and Financial Institutions) ?

(1 mark)

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(iv) What are the implications of the judgment for Corporate Debtor in a similar
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(1 mark)

ag (v) Which other provision (of a commercial law) had a significant bearing on the
decision of the Supreme Court in the above case ?

(1 mark)

1/2025/INBLP/NS/OBE P.T.O.

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(d) ‘‘Resolution Professional/Liquidator is facing possibility of physical assault and non-
co-operation from the various participants of the Corporate Insolvency Resolution
Process/Liquidation.’’ In the above situations whether Resolution Professional
(RP)/Liquidator can seek police protection by obtaining order from Adjudicating
Authorities (AA). Referring relevant case law brief whether AA has power to direct
the police authorities to assist the Resolution Professional or Liquidator and also brief
on the powers of AA under the above circumstances.

(5 marks)

3. (a) Bhuj Tools Co. Private Limited, was incorporated in the state of Gujarat with an
authorised and fully paid-up equity share capital was 20,00,000 equity shares of
` l0 each, stood at ` 2 Crore.

The promoters would not want like to carry on the business anymore and decided
to Voluntarily Liquidate the business of the Company. The Company being closely
held, the Shareholders of the Company has passed necessary resolution to liquidate
the Company and appointed one Parikh as Liquidator.

The 20,00,000 equity shares are held by the 4 persons :

Tessilis Technology, Italy 15,80,000

P Dave 2,00,000

Shah 2,00,000

Girija Kapadia 20,000

Total number of equity shares of `. 10 each fully paid up 20,00,000

1/2025/INBLP/NS/OBE Contd. ........

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The Balance Sheet as on Liquidation commencement date was as follows :

Surplus inom . co
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` 76,52,277

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The
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a Bank & Cash ` 94,48,300

Short Term Advances ` 2,03,977

Total : ` 96,52,277

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Expenses Paid ` `

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1. Liquidation Fee 11,62,000

2. Newspaper publications a g 6,900

3. Prof Fee–FEMA 25,000

4. RoC compliance 11,200

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5. GST, Income Tax, Audit etc., 1,77,000

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6. Accounting Expenses 17,700

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gla 7. NCLT Application Fee ag 28,000 2,58,900
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8. Misc. Expenses 20,500

Total Expenses made 14,48,300

1/2025/INBLP/NS/OBE P.T.O.

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Out of the Assets, Short Term Advances considered not realisable. Based on the
above facts and information answer the following questions :

(i) Calculate the final amount available for distribution to the shareholders.

(3 marks)

(ii) Prepare a shareholder-wise distribution schedule showing the amount to be
distributed to each shareholder and the percentage of the amount available
for each shareholder out of the total amount.

(6 marks)

(iii) What forms and returns to be filed with Registrar of Companies and within
what period at the commencement of Voluntary Liquidation. Whether any change
will happen in the Company status in the MCA ‘Master data’, upon approval
of this forms, if so, what status will be shown in the MCA portal.

(3 marks)

(iv) Whether the Company need to file Annual forms after commencement of
Voluntary Liquidation but before receiving the final order from NCLT.

(2 marks)

(v) Upon receipt of order from National Company Law Tribunal, whether any
communication to be made to Registrar, if yes, indicate the form and also
brief when the dissolution status of the Company will appear in the MCA
portal.

(2 marks)

1/2025/INBLP/NS/OBE Contd. ........

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(b) Match the following dictum/issue involved with the case law(s) based on ratios/decisions

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pronounced under IBC, 2016 :
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Case Title Sl. Issue
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No. No.
a Water Treaters Private
1. Shivam A The Court noted that the purpose of

Limited Vs. Union of India, the IBC is solitary as it has been

Secretary to Government, Ministry enacted to ensure that an industry under

of Corporate Affairs distress does not fade into oblivion and

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can be reviewed by virtue of the

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2. Swiss Ribbons Pvt Ltd and Another
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Vs. Union of India and Others a the Insolvency Code either prematurely
or for extraneous considerations or as
a substitute for debt enforcement
procedure

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3. Ultra Tech Nathdwara Cement Ltd C The Court held that Article 19(1)(g)

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Vs. Union of India and Others has not been infracted but has been

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saved by Article 19(6) as the

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Amendment Act is made in public

a interest, and it cannot be said to be
unreasonable restriction on the
Petitioners’ fundamental rights under
Article 19(1)(g)
1/2025/INBLP/NS/OBE P.T.O.

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4. Pioneer Urban Land and Infrastructure D The ‘right to sue’ accrues when a

Limited and Another Vs. Union of default occurs

India and Others

5. Arcelor Mittal India Pvt Ltd Vs. E The Adjudicating Authority observed

Satish Kumar Gupta and Others that the resolution plan cannot be
considered at the stage when the CoC
has, by majority decision, decided to
proceed with liquidation

6. K. Kishan Vs. Vijay Nirman Company F The Ministry of Corporate Affairs,

Limited Government of India stated that the

Directorate of Enforcement has no
jurisdiction to attach the property of the
Corporate Debtor, which is undergoing
corporate insolvency resolution process

7. State Bank of India Vs. Coastal G The Ministry of Corporate Affairs,

Projects Ltd. Government of India stated that the
Directorate of Enforcement has no

jurisdiction to attach the property of
the Corporate Debtor, which is
undergoing corporate insolvency
resolution process

1/2025/INBLP/NS/OBE Contd. ........

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8. B. K. Educational Services Pvt. Ltd. H The High Court was requested not to

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Vs. Parag Gupta and Associates enter into the debate pertaining to the

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validity of the Insolvency and

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Bankruptcy Code, 2016 or the

constitutional validity of the NCLT

9. The Deputy Director, Directorate of I It would render the remedy of appeal

Enforcement Vs Axis Bank and inefficacious and a circuit Bench be

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Others established at every place where

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remedy. On this point, the Attorney

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judgement of Madras Bar Association

will be followed and Circuit Benches

will be established as soon as it is

practicable

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J The Court held that the Bonafide third

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party claimant has a legitimate right to

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proceed ahead with enforcement of its

a claim in accordance with law not-

withstanding the order of attachment

under PMLA

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K It was held that a resolution applicant

has no vested right that his resolution

plan be considered, it is clear that no

challenge can be preferred to the

Adjudicating Authority at this stage

L Provisions of Section 7 of the code

are not unconstitutional, and the

principles of natural justice are implicit

in Section 7 of the code

M It felt that the latter action (that is

attachment under PMLA) is not

rendered irrelevant or unenforceable

(1×9=9 marks)

4. (a) Two appeals were preferred by the management of a Corporate Debtor (CD) against

two orders wherein the Adjudicating authority had passed orders of liquidation under

Section 33(1) of the Insolvency and Bankruptcy Board Code 2016 of companies

with certain directions to the liquidator.

1/2025/INBLP/NS/OBE Contd. ........

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Prior to this, two separate appeals were preferred by resolution applicant(s) in respect
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of the ‘Corporate Insolvency Resolution Process’ (CIRP) initiated against the above
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laresolution plan(s) and the ‘committee of creditors’ were directed to consider
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corporate debtor wherein opportunity was given to them to submit better revised

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However, subsequently, the resolution applicants withdrew their appeals.

Sekar, the appellant, raised concerns regarding the actions of the Iiquidator, Amit,

specifically regarding the handling of asset sales.
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The core issue was whether the liquidator had acted in accordance with the provisions

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of the IBC and the associated regulations, particularly regarding the maximization of
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asset value and the exploration of options like ‘‘going concern’’ sales.

The appellant argued that the liquidator’s actions, such as selling spare parts, were

detrimental to the company’s value and that a ‘‘going concern’’ sale should have

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been prioritized.

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and. provisions of the
c. o On the above background referring the relevant case law(s) m
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a (i) What are the primary duties of a liquidator under Section 35 of the IBC, 20l6 ?

(ii) What is the significance of ‘‘going concern’’ sales in the liquidation process ?

1/2025/INBLP/NS/OBE P.T.O.

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(iii) How does Regulation 32 of the IBBI (Liquidation Process) Regulations, 2016,
impact the liquidator's actions ?

(iv) In the given case, what concerns were raised by Sekar regarding the liquidator’s
actions ?

(v) What is the role of Section 230 of the Companies Act 2013, in the liquidation
process ?

(vi) What was the overall outcome of the court’s rulings in this case ?

(vii) How does this case contribute to the interpretation of the liquidator's powers
and duties under the IBC, 2016 ?

(viii) What are the implications of this case for future liquidation proceedings ?

(ix) What is the importance of maximising the value of the corporate debtors’ assets
during liquidation ?

(x) What is the difference between selling assets in piecemeal, and selling the company
as a going concern ?

(1×10=10 marks)

(b) Comment on the correctness of the following factual situations or statements referring
applicable provisions of the IBC, 2016 and Regulations made thereunder :

(i) In a Corporate Insolvency Resolution Process, there were no Financial Creditors
and only there were 25 Operational Creditors and Employees and workers.
Out of 25 Operational Creditors, 10 Operational Creditors formed a committee
within themselves including the 5 representatives of workers and employees.

1/2025/INBLP/NS/OBE Contd. ........

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(ii) Unlike a civil law, SARFAESI Act, 2002 does not provide any option to

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apply
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e Can the Secured Creditor prematurely close any in-built compensation clause l a
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(iii)
a to the directors, managerial personnel of the borrower as per their contractual

agreement under SARFAESI Act ?

(iv) A debtor having income of ` 6,000 per month and asset base of ` 25,000

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the debtor is embarrassed with huge debts, he wants to file an application

e mIBC, 2016.
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for fresh start under the

(v) ag Creditor to a Corporate Debtor has claimed that ‘‘the
One of the Financial

IBC, 2016 cannot prevail over the SARFAESI Act, 2002 as the later act

also a special act and having non obstante provisions’’

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As a part of ‘professional ethics’ prescribed by the IBBI, for registered Insolvency

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ag Professionals, charging a ‘‘Success Fee’’ in CIRP/Liquidation assignments (which denotes

fee maximization policy in common parlance) is not an ethical practice and Resolution

Professionals are barred from indulging in it.

1/2025/INBLP/NS/OBE P.T.O.

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So, Resolution Professionals shall restrict themselves, to the fees fixed by the Committee

of Creditors/Stakeholders Consultation Committee/Adjudicating Authority under the

IBC 2016.

Referring to Regulations/Guidelines issued by IBBI in this regard, explain the exceptions,
if any in the aforesaid general principles.

(5 marks)

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1/2025/INBLP/NS/OBE Contd. ........

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