HG & Co, a Partnership firm is currently facing the brunt of cash liquidity and is suffering to repay its debts. This has eventually resulted in initiating an Insolvency Resolution Process against the said partnershi

CS Professional · Insolvency - Law and Practice · PYQS · December 2024
HG & Co, a Partnership firm is currently facing the brunt of cash liquidity and is suffering to repay its debts. This has eventually resulted in initiating an Insolvency Resolution Process against the said partnership firm wherein H and G are partners of the firm. Following is the financial position of the HG & Co as at 31st March, 2024. Liabilities Amount (₹) Assets Amount (₹) Partners' Fixed Capital 1,00,000 Vehicles (Two Tempo Vans) 13,00,000 UIB Bank Working Capital Loan (Secured by 2 Tempos owned by the Firm) 10,00,000 Stocks (but only 50% is realizable) 6,00,000 Unsecured Overdraft from UIB Bank 5,00,000 Sundry Debtors (but only 75% is realizable) 4,00,000 Trade payables (10 Creditors) 10,00,000 Partners' Current Account 3,00,000 Following is the additional information: (i) Out of list of Creditors submitted by the Resolution Professional, one of the creditors is GH Works Private Limited from whom ₹3,50,000 is due. It is observed that Mr. G holds 30% shareholding and H holds 25% shareholding in GH Works Private Limited. (ii) In the said list prepared by the Resolution Professional, the name of one of the creditors, K for ₹1,00,000, has not been included in the list of Creditors as the proof of claim was not provided. (iii) 2 Tempos owned by the Firms is provided as security for the working capital loan obtained by the Firm. (iv) As per the list prepared by the Resolution Professional, ₹24,00,000 is the total debt payable to 10 Creditors including UIB Bank which has provided working capital loan and unsecured overdraft. The Resolution Professional has prepared a repayment plan with the following "Terms". (a) Continuation of business operations of HG & Co by the Resolution Professional in his name. (b) Sale of Stocks for the repayment to the creditors. In the light of the above information, answer the following questions stating the relevant provisions of the IBC, 2016. Whether the creditor 'K' and GH Works Private Limited can vote in the meeting of Committee of Creditors?

Answer & Explanation:

According to Section 109 of the Code, a creditor shall not be entitled to vote in respect of a debt for an unliquidated amount. A creditor shall not be entitled to vote in a meeting of the creditors if the name of the creditor is not mentioned in the list of creditors prepared under Section 104 of the Code, or if the creditor is an associate of the debtor. In the given case: 'K' cannot vote as his name is not mentioned in the list of creditors. GH Works Private Limited cannot vote as they are an 'Associate' of the debtor (since Mr. G holds 30% shareholding and H holds 25% shareholding in GH Works Private Limited, and H and G are partners of HG & Co).

Topics: Insolvency Resolution Process for Individuals and Partnership Firms

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