A Comprehensive Guide to the Insolvency Professional Examination (Second edition)

Contents at a glance About the author. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi Table of contents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi Abbreviations used in this book . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xix Syllabus & Weightage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxi Chapter 1

Insolvency and Bankruptcy Code, 2016 [No. 31 of 2016] . . . . . . . . . . 1

Chapter 2

IBBI Rules and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303

Chapter 3

Relevant IBBI Notifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701

Chapter 4

The Companies Act, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 709

Chapter 5

The Indian Partnership Act, 1932 . . . . . . . . . . . . . . . . . . . . . . . . . . . 959

Chapter 6

The Limited Liability Partnership Act, 2008. . . . . . . . . . . . . . . . . . . 981

Chapter 7

The Indian Contract Act, 1872 (Sections 1 to 75 and 124 to 238). . 1003

Chapter 8

The Sale of Goods Act, 1930. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1035

Chapter 9

The Transfer of Property Act, 1882 (Sections 1 to 137) . . . . . . . . . 1047

Chapter 10

The Specific Relief Act, 1963 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1073

Chapter 11

The Negotiable Instruments Act, 1881 . . . . . . . . . . . . . . . . . . . . . . 1079

Chapter 12

The Recovery of Debts and Bankruptcy Act, 1993. . . . . . . . . . . . . 1095

Chapter 13

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002 (SARFAESI) . . . 1117

Chapter 14

Corporate Debt Restructuring Scheme, Strategic Debt Restructuring and Scheme for Sustainable Structuring of Stressed Assets (S4A of RBI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1135

Chapter 15

The Arbitration and Conciliation Act, 1996. . . . . . . . . . . . . . . . . . . 1145

Chapter 16

The Limitation Act, 1963. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1159

Chapter 17

General Awareness (Constitution, Economy, Financial Markets and Rights of Workman and Fundamental concept of Valuation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1185

Chapter 18

Finance and Accounts (Corporate Finance and Financial Analysis).1207

Chapter 19 19A 19B

Case Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1233 Summary of Case laws from orders of Hon’ble Supreme Court. . . 1233 Summary of Case laws from orders of High Court. . . . . . . . . . . . . 1239 ix

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Summary of Case laws from orders of NCLAT. . . . . . . . . . . . . . . . 1243 Summary of Case laws from orders of NCLT. . . . . . . . . . . . . . . . . 1255

Chapter 20

FAQs issued by IBBI (1st July 2018). . . . . . . . . . . . . . . . . . . . . . . . 1265

Chapter 21 21B

Model Question Paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1271 Model Question Paper (w.e.f. 31st December 2016 to 30th June 2017). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1271 Model Question Paper (w.e.f. 1st July 2017 to 31st December 2017). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1293 Model Question Paper (w.e.f. 1st January, 2018). . . . . . . . . . . . . . . 1317

21A 21C

CD Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1339 List of Supreme Court Cases upto 31st December 2017. . . . . . . . . . . . . . . . . . . . . . 1339 List of High Court Cases upto 31st December 2017. . . . . . . . . . . . . . . . . . . . . . . . . 1340 List of NCLAT Cases upto 31st December 2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1340 List of NCLT Cases upto 31st December 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1343

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Table of contents About the author. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi Contents at a glance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Abbreviations used in this book . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xix Syllabus & Weightage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxi Chapter 1 Insolvency and Bankruptcy Code, 2016 [No. 31 of 2016]. . . . . . . . . 1 1.1 Part I – Preliminary (Sections 1 to 3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.1.1 Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1.1.2 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1.2 Part II – Insolvency Resolution and Liquidation for Corporate Persons (Section 4 and 77) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 1.2.1 Chapter I – Preliminary (Section 4 and 5). . . . . . . . . . . . . . . . . . . . . 11 1.2.1.1 Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 1.2.1.2 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 1.2.2 Chapter II – Corporate Insolvency Resolution Process (Section 6 to 32). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 1.2.2.1 Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 1.2.2.2 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 1.2.3 Chapter III – Liquidation Process (Sections 33 to 54) . . . . . . . . . . . 55 1.2.3.1 Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 1.2.3.2 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 1.2.4 Chapter IV – Fast Track Corporate Resolution Process (Section 55 to 58). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 1.2.4.1 Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 1.2.4.2 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 1.2.5 Chapter V – Voluntary Liquidation of Corporate Persons (Sections 59) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 1.2.5.1 Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 1.2.5.2 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 1.2.6 Chapter VI – Adjudicating Authority for Corporate Persons (Sections 60 to 67). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 1.2.6.1 Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 1.2.6.2 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 1.2.7 Chapter VII – Offences and Penalties (Sections 68 to 77) . . . . . . . 100 1.2.7.1 Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 1.2.7.2 Nature of offence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 1.2.7.3 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 xi

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1.4

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Part III – Insolvency Resolution and Bankruptcy for Individuals and Partnership firms (Sections 78 to 186). . . . . . . . . . . . . . . . . . . . . . . . . . 116 1.3.1 Chapter I Preliminary (Sections 78 to 79). . . . . . . . . . . . . . . . . . . . 116 1.3.1.1 Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 1.3.1.2 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 1.3.2 Chapter II – Fresh Start Process (Sections 80 to 93). . . . . . . . . . . . 122 1.3.2.1 Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 1.3.2.2 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 1.3.3 Chapter III – Insolvency Resolution Process (Sections 94 to 120). 138 1.3.3.1 Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 1.3.3.2 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 1.3.4 Chapter IV – Bankruptcy Order for Individuals and Partnership Firms (Sections 121 to 148). . . . . . . . . . . . . . . . . . . . . 164 1.3.4.1 Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 1.3.4.2 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 1.3.5 Chapter V – Administration and Distribution of the Estate of the Bankrupt (Sections 149 to 178). . . . . . . . . . . . . . . . . . . . . . . 189 1.3.5.1 Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204 1.3.5.2 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . 205 1.3.6 Chapter VI – Adjudicating Authority for Individuals and Partnership Firms (Sections 179 to 183). . . . . . . . . . . . . . . . . . . . . 215 1.3.6.1 Comments:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 1.3.6.2 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 1.3.7 Chapter VII – Offences and Penalties (Sections 184 to 187) . . . . . 221 1.3.7.1 Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 1.3.7.2 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 Part IV – Regulation of Insolvency Professionals, Agencies and Information Utilities (Sections 188 to 223). . . . . . . . . . . . . . . . . . . . . . . . . . 230 1.4.1 Chapter I – The Insolvency and Bankruptcy Board of India (Sections 188 to 195). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230 1.4.1.1 Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 1.4.1.2 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . 233 1.4.2 Chapter II – Powers and Functions of the Board (Sections 196 to 198). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235 1.4.2.1 Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239 1.4.2.2 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . 239 1.4.3 Chapter III – Insolvency Professional Agencies (Sections 199 to 205). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240 1.4.3.1 Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243 1.4.3.2 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . 243 1.4.4 Chapter IV – Insolvency Professionals (Sections 206 to 208). . . . 245 1.4.4.1 Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246

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1.4.4.2 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . 246 Chapter V – Information Utilities (Sections 209 to 216). . . . . . . . . 248 1.4.5.1 Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250 1.4.5.2 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . 250 1.4.6 Chapter VI – Inspection and Investigation (Sections 217 to 220). . 253 1.4.6.1 Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255 1.4.6.2 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . 255 1.4.7 Chapter VII – Finance, Accounts and Audit (Sections 221 to 223). 258 1.4.7.1 Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259 1.4.7.2 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . 259 Part V – Miscellaneous Finance, Accounts and Audit (Sections 224 to 255 along with Schedules) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260 1.5.1 Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289 1.5.2 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289 The Insolvency and Bankruptcy Code (Amendment) Act, 2018 . . . . . . . . . 295 1.4.5

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Chapter 2 IBBI Rules and Regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303 2.1 The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305 2.1.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 2.2 The Insolvency and Bankruptcy Board of India (Salary, Allowances and other Terms and Conditions of Service of Chairperson and Members) Rule, 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 2.2.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332 2.3 The Insolvency and Bankruptcy Board of India (Insolvency Professional Agencies) Regulations, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . 337 2.3.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348 2.4 The Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353 2.4.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371 2.5 The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. . . . . . . . . . . 375 2.5.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409 2.6 The Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423 2.6.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 468 2.7 The Insolvency and Bankruptcy Board of India (Model ByeLaws and Governing Board of Insolvency Professional Agencies) Regulations, 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 482 2.7.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 494 2.8 The Insolvency and Bankruptcy Board of India (Advisory Committee) Regulations, 2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 xiii

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2.14

2.15

2.16

2.8.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502 The Insolvency and Bankruptcy Board of India (Employees’ Service) Regulations, 2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 505 2.9.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 539 The Insolvency and Bankruptcy Board of India (Engagement of Research Associates and Consultants) Regulations, 2017 . . . . . . . . . . . . . . 542 2.10.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 546 The Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017 . 548 2.11.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585 The Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 591 2.12.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 617 The Insolvency and Bankruptcy Board of India (Inspection and Investigation) Regulations, 2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 627 2.13.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 637 The Insolvency and Bankruptcy Board of India (Procedure for Governing Board Meetings) Regulations, 2017. . . . . . . . . . . . . . . . . . . . . . 639 2.14.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 648 The Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . 651 2.15.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 685 The Insolvency and Bankruptcy Board of India (Grievance and Complaint Handling Procedure) Regulations, 2017. . . . . . . . . . . . . . . . . . . 690 2.16.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 696

Chapter 3

Relevant IBBI Notifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701

Chapter 4 The Companies Act, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 709 4.1 Chapter III Prospectus and Allotment of Securities (Sections 23 to 42). . . . 710 4.1.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 724 4.2 Chapter IV Share Capital and Debentures (Sections 43 to 72). . . . . . . . . . . 735 4.2.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 759 4.3 Chapter VAcceptance of Deposits by Companies (Sections 73 to 76A). . . . 777 4.3.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 780 4.4 Chapter VI Registration of Charges (Sections 77 to 87). . . . . . . . . . . . . . . . 785 4.4.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 789 4.5 Chapter VII Management and Administration (Sections 88 to 122). . . . . . . 793 4.5.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 813 4.6 Chapter IX Accounts of Companies (Sections 128 to 138). . . . . . . . . . . . . . 834 4.6.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 848

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4.8 4.9

4.10 4.11

Chapter XV Compromises, Arrangements and Amalgamations (Sections 230 to 240). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 859 4.7.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 875 Chapter XVII Registered Valuers (Sections 247). . . . . . . . . . . . . . . . . . . . . 881 4.8.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 882 Chapter XVIII Removal of names of the companies from the register of companies (Sections 248 to 252). . . . . . . . . . . . . . . . . . . . . . . . . 886 4.9.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 890 Chapter XX Winding up of the companies (Sections 270 to 323) . . . . . . . . 893 4.10.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 913 Chapter XXVII NCLT and NCLAT (Sections 407 to 434). . . . . . . . . . . . . . 923 4.11.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 935

Chapter 5 The Indian Partnership Act, 1932 . . . . . . . . . . . . . . . . . . . . . . . . . 959 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 959 Chapter 6 The Limited Liability Partnership Act, 2008 . . . . . . . . . . . . . . . . 981 6.1 Chapter II Nature of Limited Liability Partnership (Sections 3 to 10). . . . . 981 6.1.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 981 6.2 Chapter IV Partners and their Relations (Sections 22 to 25) . . . . . . . . . . . . 988 6.2.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 988 6.3 Chapter V Extent and Limitation of Liability of Limited Liability Partnership and Partners (Sections 26 to 31). . . . . . . . . . . . . . . . . . . . . . . . . 991 6.3.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 991 6.4 Chapter VII Financial Disclosures (Sections 34 to 41). . . . . . . . . . . . . . . . 992 6.4.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 992 Chapter 7 7.1

7.2

7.3 7.4

7.5

The Indian Contract Act, 1872 (Sections 1 to 75 and 124 to 238). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1003 Chapter I: Of communication, Acceptance and Revocation (Section 3 to 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1004 7.1.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1004 Chapter II: Of Contracts, Voidable Contracts and Void Agreements (Section 10 to 30) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1008 7.2.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1008 Chapter III: Of Contingent Contracts (Section 31 to 36) . . . . . . . . . . . . . . 1015 7.3.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1015 Chapter IV: Of the performance of contracts-contracts which mus be performed (Section 37 to 67. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1016 7.4.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1016 Chapter V: Of certain relations resembling those created by contract (Section 68 to 72) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1018 7.5.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1018 xv

A Comprehensive Guide to Insolvency Professional Examination, 2e

7.6 7.7 7.8 7.9

Chapter VI: Of the consequences of breach of contract (Section 73 to 75).1020 7.6.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1020 Chapter VII: Of Indemnity and Guarantee (Section 124 to 147) . . . . . . . . 1021 7.7.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1021 Chapter IX: Of Bailment(Section 148 to 181) . . . . . . . . . . . . . . . . . . . . . . 1026 7.8.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1026 Chapter X: Appointment and Authority of Agents (Section 182 to 238) . . 1028 7.9.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1028

Chapter 8 The Sale of Goods Act, 1930. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1035 8.1 Chapter I: Preliminary (Section 1 to 3), Chapter II: Formation of Contract of Sale, Formalities of Contract, Subject Matter of Contract, The Price, Conditions and Warranties (Section 4 to 17). . . . . . . 1035 8.1.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1035 8.2 Chapter V: Rights of Unpaid Seller Against the goods (Section 45 to 54), Chapter VI: Suits for Breach of the contract (Section 55 to 61). . . 1044 8.2.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1044 Chapter 9 The Transfer of Property Act, 1882 (Sections 1 to 137). . . . . . . 1047 9.1 Chapter I: Preliminary (Section 1 to 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . 1048 9.1.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1048 9.2 Chapter II: Transfers Of Property By act of Parties (Section 5 to 53A). . . 1049 9.2.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1049 9.3 Chapter III: Sale of Immovable Property (Section 54 to 57) . . . . . . . . . . . 1053 9.3.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1053 9.4 Chapter IV: Of Mortgages of Immovable Property and Charges (Section 58 to 104) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1054 9.4.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1054 9.5 Chapter V: Of Leases of Immovable Property (Section 105 to 117). . . . . . 1066 9.5.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1066 9.6 Chapter VI: Exchanges (Section 118 to 121) . . . . . . . . . . . . . . . . . . . . . . . 1067 9.6.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1067 9.7 Chapter VII: Gifts (Section 122 to 129). . . . . . . . . . . . . . . . . . . . . . . . . . . 1068 9.7.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1068 9.8 Chapter VIII: Transfer of Actionable Claim (Section 130 to 137). . . . . . . 1070 9.8.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1070 Chapter 10 The Specific Relief Act, 1963. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1073 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1073 Chapter 11 The Negotiable Instruments Act, 1881. . . . . . . . . . . . . . . . . . . . . 1079 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1079 xvi

Table of contents

Chapter 12 The Recovery of Debts and Bankruptcy Act, 1993. . . . . . . . . . . 1095 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1095 Chapter 13

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002 (SARFAESI). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1117 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1117 Chapter 14

Corporate Debt Restructuring Scheme, Strategic Debt Restructuring and Scheme for Sustainable Structuring of Stressed Assets (S4A of RBI). . . . . . . . . . . . . . . . . . . . . . . . . . . 1135 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1135 Chapter 15 The Arbitration and Conciliation Act, 1996 . . . . . . . . . . . . . . . . 1145 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1145 Chapter 16 The Limitation Act, 1963. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1159 16.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1159 16.2 Period of limitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1165 Chapter 17

17.1 17.2

General Awareness (Constitution, Economy, Financial Markets and Rights of Workman and Fundamental concept of Valuation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1185 Constitution, Economy, Financial Markets ETC. . . . . . . . . . . . . . . . . . . . . 1185 17.1.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1185 Fundamental concepts of Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1200 17.2.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1200

Chapter 18 18.1 18.2 18.3

Finance and Accounts (Corporate Finance and Financial Analysis). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1207 Finance and Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1207 18.1.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1207 Tax Planning. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1215 18.2.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1215 Central Goods and Service Tax Act, 2017. . . . . . . . . . . . . . . . . . . . . . . . . . 1216 18.3.1 Questions and Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1216

Chapter 19 19A 19B 19C 19D

Case Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1233 Summary of Case laws from orders of Hon’ble Supreme Court. . . 1233 Summary of Case laws from orders of High Court. . . . . . . . . . . . . 1239 Summary of Case laws from orders of NCLAT. . . . . . . . . . . . . . . . 1243 Summary of Case laws from orders of NCLT. . . . . . . . . . . . . . . . . 1255

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A Comprehensive Guide to Insolvency Professional Examination, 2e

Chapter 20

FAQs issued by IBBI (1st July 2018). . . . . . . . . . . . . . . . . . . . . . . 1265

Chapter 21 21B

Model Question Paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1271 Model Question Paper (w.e.f. 31st December 2016 to 30th June 2017). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1271 Model Question Paper (w.e.f. 1st July 2017 to 31st December 2017). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1293 Model Question Paper (w.e.f. 1st January, 2018). . . . . . . . . . . . . . . 1317

21A 21C

CD Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1339 List of Supreme Court Cases upto 31st December 2017. . . . . . . . . . . . . . . . . . . . . . 1339 List of High Court Cases upto 31st December 2017. . . . . . . . . . . . . . . . . . . . . . . . . 1340 List of NCLAT Cases upto 31st December 2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1340 List of NCLT Cases upto 31st December 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1343

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Abbreviations used in this book AA

Adjudicating Authority

AGM

Annual General Meeting

CA

Chartered Accountant

CD

Corporate Debtor

CEO

Chief Executive Officer

CFROI

Cash Flow Return on Investment

CS

Company Secretary

CSR

Corporate Social Responsibilities

CFO

Chief Financial Officer

CMA

Cost Accountant

CIRP

Corporate Insolvency Resolution Process

CVF

Cash Value Added

DCF

Discounted Cash Flow

DPIN

Designated Partner Identification Number

DRT

Debt Recovery Tribunal

DRAT

Debt Recovery Appellate Tribunal

EBITDA

Earning before Interest, Taxes, Depreciation & Amortization

ESOS

Employees Stock Option Scheme

FC

Financial Creditor

FCFF

Free Cash Flow to Firm

FSP

Fresh Start Process

FTCIRP

Fast Track Corporate Insolvency Resolution Process

GDR

Global Depository Receipts

GST

Goods and Services Tax

CGST

Central Goods and Service Act, 2017

IBBI

Insolvency and Bankruptcy Board of India(Board)

I & B Code

The Insolvency and Bankruptcy Code, 2016

ICAI-Cost

Institute of Cost Accountants of India

A Comprehensive Guide to Insolvency Professional Examination, 2e

ICAI

Institute of Chartered Accountants of India

ICSI

Institute of Company Secretaries of India

IGST

The Integrated Goods and Service Tax Act, 2017

IM

Information Memorandum

IPA

Insolvency Professional Agency

IP

Insolvency Professional

IRP

Interim Resolution Professional

IU

Information Utility

LLP

Limited Liability Partnership

LLPIN

Limited Liability Partnership Identification Number

MCA

Ministry of Corporate Affairs

MD

Managing Director

NCLT

National Company Law Tribunal

NCLAT

National Company Appellate Tribunal

NFRA

National Financial Reporting Authority

NIFM

National Institute of Financial Management

NISM

National Institute of Securities Markets

NSEIT

National Stock Exchange of India Ltd

OCF

Operating Cash Flow

OP

Operational Creditor

OPC

One Person Company

PCS

Practicing Company Secretary

QIB

Qualified Institutional Buyers

RP

Resolution Plan

RVG

Relative Value of Growth

SEBI

Securities and Exchange Board of India

TEV

Total Enterprise Value

VG

Value Growth

VLCP

Voluntary Liquidation of Corporate Persons

WACC

Weighted Average Cost of Capital

XBRL

Extensible Business Reporting Language

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Syllabus & Weightage* Syllabus, Format and Frequency of exam with effect from 1 July, 2018 The Board hereby specifies under regulation 3(3) of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016, the syllabus, format and frequency of the “Limited Insolvency Examination” (Examination) with effect from 1st July*, 2018 as under: I

Syllabus for Examination

The syllabus for the “Limited Insolvency Examination” is as under: Sl. No (a) (b)

(c)

Coverage Weight (%) The Insolvency and Bankruptcy Code, 2016 (Entire Code) 20 Rules and Regulations under the Bankruptcy Code (All 20 Rules and Regulations notified under the Code till 31st December, 2017) (i) The Companies Act, 2013 10 • Chapter III Prospectus and Allotment of Securities • Chapter IV Share Capital and Debentures • Chapter V Acceptance of Deposits by Companies • Chapter VI Registration of Charges • Chapter VII Management and Administration • Chapter IX Accounts of Companies • Chapter XV Compromises, Arrangements and Amalgamations • Chapter XVII Registered Valuers • Chapter XVIII Removal of names of the companies from the register of companies • Chapter XX Winding-up of the companies • Chapter XXVII NCLT and NCLAT (ii) The Partnership Act, 1932, and (iii) The Limited Liability Partnership Act, 2008 (Nature of LLP; Partners and their Relations; Limitation of Liability; Financial Disclosures)

*

As per the FAQs issued on 1st July 2018, the syllabus for Limited Insolvency Examination remains the same as the one applicable from 1st January 2018.

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A Comprehensive Guide to Insolvency Professional Examination, 2e

Sl. No (d)

(e)

(f)

(g) (h)

Coverage Weight (%) (i) The Indian Contract Act, 1872 (Voidable Contracts and 06 Void Agreements; Contingent Contracts; Performance of Contract; Novation, Rescission and Alteration of Contracts; Agency; Consequences of breach of Contract; Indemnity and Guarantee, Surety; Bailment and Pledge; Set off) (ii) The Sale of Goods Act, 1930 (Sale, Condition and Warranty, Seller’s Lien and Damages); (iii) The Transfer of Property Act, 1882. (iv) Specific Relief Act,1963. (v) Negotiable Instruments Act,1881. (i) The Recovery of Debts due to Banks and Financial 06 Institutions Act, 1993; (ii) The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002; and (iii) Corporate Debt Restructuring Scheme, Strategic Debt Restructuring, and Scheme for Sustainable Structuring of Stressed Assets (S4A of RBI) (iv) The Arbitration and Conciliation Act, 1996; (v) The Limitation Act, 1963.

General Awareness (Economy, Financial Markets, Rights 06 of Workmen under Labour Laws and fundamental concept of Valuation) Finance and Accounts (Corporate Finance, and Financial 06 Analysis, Liquidity Management, Tax Planning, GST) Case Laws- (There will be five questions carrying two 10 marks each from orders of Hon’ble Supreme Court, High Courts, NCLAT and NCLT relating to Corporate Insolvency Resolution, Corporate Liquidation, Voluntary Liquidation and Fast Track Resolution Process.)

Decisions of Supreme Court/High Courts Decisions of NCLAT Decisions of NCLT

(i)

xxii

- 1 Question - 2 Questions - 2 Questions

Transaction analysis on Corporate Insolvency Resolution.

There will one comprehension narrating the transaction.

(There will be four questions based on the case carrying two marks each.)

08

Syllabus & Weightage

Sl. No (j)

Coverage Transaction analysis on Individual Insolvency Resolution and Individual Resolution. There will one comprehension narrating the transaction. (There will be four questions based on the case carrying two marks each.)

Total

Weight (%) 08

100

This syllabus will be valid for examinations conducted from 1 January, 2018. st

II.

Format of Examination

The format of examination is as under: (a) The examination will be conducted online (computer-based in a proctored environment) with objective multiple-choice questions. (b) The duration of the examination will be two hours. (c) A candidate will be required to answer 87 questions in two hours for a total of 100 marks. (d) There will be negative marking of 25% of the marks assigned for the question. (e) Passing mark for the examination is 60%. (f) Passing candidates will be awarded a certificate by the Board. (g) A candidate will be issued a temporary mark sheet on submission of examination paper. (h) No workbook or study material will be provided.

III.

Frequency of Examination

The frequency of Examination is as under: (a) The examination centres are available at 100 + locations in the country. (b) The examination will be available from 1st January, 2018. (c) A candidate needs to enrol for examination at www.nism.ac.in**. He needs to select IBBI-Limited Insolvency Examination and enrol himself for the examination by choosing the time, the day and the examination centre for his examination. (d) A candidate needs to provide PAN and Aadhaar to enrol for the examination. (e) A candidate needs to pay examination fee of Rs.1500 (One thousand five hundred rupees only) online on every enrolment.

** Refer IBBI FAQs issued on 1st July 2018 for further details.

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