SVKMs NMIMS
Kirit P. Mehta School of Law
Programme: B.A., LL.B.(Hons.)/B.B.A., LL.B.(Hons.)
Year: V/Semester IX (Exam Year: 2024-2025)
Subject: Laws of Insolvency and Bankruptcy
Date: 16 Nov 2024 Time: 10:30 am - 12:30 pm (02:00 Hrs.)
Max Marks: 50
FINAL EXAMINATION(2024-2025)
Instructions:
1. This question paper contains 5 pages
2. Answer to each new question to be started on a fresh page.
3. Figure in right hand side indicates full marks
4. Attempt any 5 out of 7 questions.
1. (Attempt Any 5 Questions) 50
1. Global Metalworks Ltd., a medium-sized company engaged in manufacturing steel 10
components, has defaulted on its payment obligations towards several financial
creditors, including SteelFin Bank, a leading financial institution. SteelFin Bank files an
application under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, with
the National Company Law Tribunal (NCLT) to initiate the Corporate Insolvency
Resolution Process (CIRP) against Global Metalworks Ltd. During the course of the
CIRP proceedings, various issues arise:
The management of Global Metalworks Ltd. disputes the default, claiming that the
financial distress was caused by unforeseen global market fluctuations.
A group of operational creditors also files an intervention seeking their dues are not
included in the resolution plan.
The Insolvency Resolution Professional (IRP) appointed by the NCLT faces opposition
from the corporate debtor regarding the validity of the claims admitted by the creditors.
Page 1 of 5
In the given scenario, Explain the role of the Adjudicating Authority (NCLT) during the
CIRP proceedings under the IBC. What powers does it have during CIRP, ensuring
compliance with legal requirements. In your answer, demonstrate a clear understanding
of the powers and function of the Adjudicating Authority and its enforcement
mechanisms in ensuring the effective implementation of the CIRP from the admission of
application till the final disposal of the case.
2. Walter White entered into an agreement with Los Pollos Construction Co. to purchase a 10
3-BHK apartment in their upcoming residential project, for which he paid a total
consideration of ₹2.3 crore. As per the terms of the agreement, possession of the flat was
to be handed over within 36 months from the date of booking. However, despite a lapse
of 48 months, Los Pollos Construction Co. has failed to deliver the apartment, citing
financial difficulties and delays in obtaining requisite approvals. Several other
homebuyers in the project have similarly been impacted by this delay. Upon conducting
further research, Walter White discovers that, pursuant to the amendment to the
Insolvency and Bankruptcy Code, 2016 (IBC) in 2018, homebuyers are categorized as
Financial Creditors. He is now considering filing an application before the National
Company Law Tribunal (NCLT) against Los Pollos Construction Co.
Analyze the legal recourse available to Walter White as a Financial Creditor to initiate a
Corporate Insolvency Resolution Process (CIRP) against Los Pollos Construction Co.
under the IBC. Additionally, trace the evolution of homebuyers’ status from unsecured
creditors to financial creditors, citing relevant judicial pronouncements under the IBC.
3. Marsellus Wallace, the owner of ABC Pvt. Ltd., a company involved in various business 10
ventures, finds his company in deep financial trouble. ABC Pvt. Ltd. has accumulated
debts amounting to Rs. 3500 Crores, comprising both financial and operational
liabilities. One of the financial creditors, Vincent Vega Bank Ltd., initiates a Corporate
Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and
Bankruptcy Code (IBC), 2016, against ABC Pvt. Ltd. The National Company Law
Tribunal (NCLT) admits the application and declares a moratorium under Section 14 of
the IBC, which restricts certain legal actions against the corporate debtor.
1. A criminal complaint under Section 138 of the Negotiable Instruments (NI) Act was filed
by a supplier, Jules Winnfield Ltd., due to dishonor of cheques issued by ABC Pvt. Ltd.
2. A civil suit for recovery of a portion of the debt was filed by Mia Wallace Enterprises
before the civil court.
Furthermore, Marsellus Wallace had provided a personal guarantee for some of the loans
obtained by ABC Pvt. Ltd., and Vincent Vega Bank Ltd. has also initiated recovery
proceedings against Marsellus, seeking to enforce the personal guarantee.
In light of the above, analyze the following issues:
Page 2 of 5
1. Explain the extent of moratorium and what would be the impact of the moratorium
declared under Section 14 of the IBC on the two pending legal proceedings—(i) the
complaint under Section 138 of the NI Act, (ii) the civil recovery suit.
(6 Marks)
2. Will the moratorium declared under Section 14 of the IBC extend to Marsellus Wallace,
the personal guarantor, in light of the relevant ruling and case laws.
(4 Marks)
4. RoShe Enterprises was undergoing a situation of being unable to repay their debts. 10
Their assets were also inadequate to liquidate and pay their financial creditors. The total
tune of their debt was Rs. 41 crores. It was noted that RoShe Enterprises had owned a 5
acres’ piece of land around the time the debt duration was ongoing. However, 117 days
prior to filing an application for insolvency the same land was sold for Rs. 1.5 crores
while its actual value was Rs. 5 crores. There was another small factory owned by Roshe
Enterprises which was transferred in the same of its promoter Mr. X’s daughter Ms. B
90 days before insolvency application could be filed. Mr. P, the resolution professional
noted these transactions. However, RoShe Enterprises was once a pioneer in the
manufacturing of gluten free flour, their research and development team had made
remarkable experiments & sought several approvals of the FSSAI. The machinery they
had was also cutting edge, capable of mass production and in very good condition. Mr. P,
the resolution professional was seeking plans from resolution applicants. One Jade
Limited which was in the news recently submitted a resolution plan. Upon inquiry, it
was noted that Jade Limited had their own set of defaults and accounts declared as NPA
for not paying their previous debts.
1. In the given scenario, Evaluate the application of the legal provisions related to the
avoidable transaction and provide its rationale in alignment with the current facts.
(5 marks)
2. In consonance to the situation above, analyse the law, its tenets in regards to the
eligibility to submit the resolution plan and provide whether Jade Limited can submit
a resolution plan.
(5 marks)
5. A large conglomerate, Corporate Giant Ltd., is undergoing insolvency proceedings 10
under the Insolvency and Bankruptcy Code (IBC). The company has multiple creditors,
including secured creditors (banks), unsecured creditors (suppliers), and operational
creditors (employees), etc. The company has total debts amounting to Rs. 1,200 crore.
After liquidation, the Resolution Professional is able to realize Rs. 500 crore by selling
the company’s assets.
Page 3 of 5
The creditors of Company X are categorized as follows:
Secured creditors: Rs. 500 crore
Unsecured creditors: Rs. 300 crore
Operational creditors: Rs. 200 crore
Employees' dues: Rs. 50 crore
Statutory dues (government taxes, etc.): Rs. 50 crore
The company's assets have been liquidated, and the funds are to be distributed
according to the waterfall mechanism outlined in the IBC. The insolvency resolution
coast was calculated to be 50 Crore. The secured creditors have relinquished their
security interest and opted to be part of the waterfall mechanism.
Analyze the application of the waterfall mechanism under the IBC in the given situation.
Evaluate the priority of claims and distribution of Rs. 500 crore amongst the different
classes of creditors, considering their claims (mathematical calculation - not
mandatory). Judge whether the waterfall mechanism under the IBC ensures a fair and
equitable resolution for all stakeholders, providing justifications for your assessment.
6. Alpha Corp, a small company under the Companies Act, defaults on a loan of INR 5 10
crore to Beta Bank. With assets valued at INR 12 crore and liabilities of INR 15 crore,
insolvency proceedings are initiated by Beta Bank on August 1, 2024, under the Fast
Track Corporate Insolvency Resolution Process (CIRP) of the Insolvency and
Bankruptcy Code (IBC), 2016. The IRP is appointed, and a public announcement is
made on August 20, 2024. The CoC is constituted, and at its first meeting, Alpha Corp
proposes a resolution plan with a one-time settlement of INR 6 crore over 18 months.
However, the CoC rejects this, and instead, a third-party investor, Gamma Capital,
offers to acquire Alpha Corp’s assets for INR 8 crore. The CoC, holding 70% of the
voting share, approves this plan and submits it to the NCLT for approval on October 22,
2024. Alpha Corp’s shareholders contest the valuation, claiming Gamma Capital’s offer
undervalues the company. They also argue that the fast track process timeline does not
allow sufficient time for a fair resolution and request an extension beyond the 90-day
limit. The CoC, on the other hand, seeks swift resolution, citing Gamma Capital’s offer
as the best available option.
As a consultant for the NCLT, examine whether Alpha Corp qualifies for the fast track
process under Section 55 of the IBC and if the request for an extension beyond the 90-
day limit is justified. Explain with the help of relevant provisions under the Insolvency
and Bankruptcy Code, 2016.
Page 4 of 5
7. A prominent Indian company, "Tech Innovations Pvt. Ltd.," has established operations 10
in several countries, including the United States and Singapore. Due to unforeseen
financial difficulties and subsequent insolvency proceedings initiated in India, the
company is facing complex legal challenges regarding its assets and operations in these
jurisdictions. Despite the lack of a formal legal framework for cross-border insolvency
in India, the creditors from the U.S. and Singapore have initiated proceedings in their
respective countries, which may significantly impact the resolution of Tech Innovations'
insolvency.
In light of the given situation, Analyze the current legal landscape in India concerning
cross-border insolvency. Discuss the implications of the absence of a formal framework
and identify major drawbacks of the current system. Critically analyze the effectiveness
of the current legal system, supported by relevant case studies or examples from other
jurisdictions.
Page 5 of 5
