IBC Previous Year Questions & Exam-Pattern Practice (2026)

Correct answer: B. Creditors representing two-thirds in value must approve within seven days

Correct: (B). Why correct: The chapter states that where the company owes any debt, 'creditors representing two-thirds in value of the debt of the company shall approve the resolution... within seven days of such resolution.' Why others wrong: (A)/(C) use wrong value thresholds and time-limits; (D) is wrong — creditor approval is mandatory when debt is owed.

Correct answer: B. A statutory Code of Conduct under Section 208(2) and Regulation 7(2)(h) of the IBBI (Insolvency Professionals) Regulations, 2016, with inspection of records

Correct: (B). Why correct: The chapter states moral hazard is handled through the Code of Conduct in Section 208(2) (care and diligence, compliance with IPA bye-laws, allowing inspection of records, submitting proceeding records) and Regulation 7(2)(h) of the IBBI (Insolvency Professionals) Regulations, 2016 requiring adherence to the First Schedule Code of Conduct. Why others wrong: (A) personal guarantees per sale are not the prescribed mechanism; (C) the RBI does not approve each liquidation transaction; (D) compulsory loss-insurance is not the chapter's safeguard.

Correct answer: B. The concern is moral hazard; the safeguard is the Code of Conduct under Section 208(2) and the IBBI (Insolvency Professionals) Regulations, plus AA permission for related-party private sale

Correct: (B). Why correct: The chapter identifies exactly this risk — the possibility of the liquidator taking personal advantage by undervaluing and selling to related parties — as the 'moral hazard in liquidation', addressed by the Code of Conduct binding insolvency professionals under Section 208(2) and the First Schedule of the IBBI (Insolvency Professionals) Regulations, 2016; related-party private sale also needs prior AA permission. Why others wrong: (A) ignores the safeguards on related-party sales; (C) and (D) misidentify the core concern, which is conflict of interest/undervaluation, not delay or tax.

Correct answer: C. Not sell to a related party by private sale without prior permission of the AA, and avoid sale where collusion is suspected

Correct: (C). Why correct: The chapter states the liquidator 'shall not sell the assets without prior permission of AA by way of private sale to a related party' and must not proceed where there is reason to believe collusion exists, instead reporting to the AA. Why others wrong: (A) ignores the AA-permission safeguard; (B) is too absolute — private sale is permitted in defined circumstances after due process; (D) the consultation committee advises, it does not execute the sale itself.

Correct answer: B. Section 33 — it shall pass an order requiring the corporate debtor to be liquidated as per Chapter III of Part II

Correct: (B). Why correct: The chapter states Section 33 applies where the AA, before expiry of the resolution process, 'has not received the resolution plan or rejects the resolution plan under section 31... or if CoC decides to liquidate' and it shall order liquidation in the manner provided in Chapter III of Part II. Why others wrong: (A) Section 31 deals with approval of a received plan, not a deemed plan; (C) Section 59 is voluntary liquidation initiated by a solvent corporate person; (D) Section 52 is the secured creditor's option to relinquish/realise security, not a vesting of all assets.

Correct answer: C. 1, 2, 3 and 4

Correct: (C). Why correct: All four are required under Section 59(3): the directors' affidavit-verified declaration of solvency and no intent to defraud; audited financials for two years/since incorporation; a special resolution within four weeks appointing an IP as liquidator; and, where debt is owed, creditors holding two-thirds in value must approve within seven days. Why others wrong: (A)/(B)/(D) omit one or more mandatory conditions.

Correct answer: A. 1, 2 and 4 only

Correct: (A). Why correct: Statements 1, 2 and 4 are listed powers/duties under Section 35. Statement 3 is wrong — the chapter clarifies the liquidator 'shall not sell... to any person who is not eligible to be a resolution applicant.' Why others wrong: (B)/(C) include the incorrect statement 3; (D) is wrong for the same reason.

Correct answer: B. After the IBC, 'winding-up' under the Companies Act was redefined to include liquidation under the IBC, but Companies Act winding-up cannot be initiated for inability to pay or default

Correct: (B). Why correct: The chapter states that the Companies Act, 2013 was amended so 'winding-up' includes liquidation under the IBC, but Companies Act winding-up is now limited to reasons different from those for a CIRP — it 'cannot be initiated... for inability to pay or non-payment of debt or dues'; such cases go to the IBC. Why others wrong: (A) there is a clear statutory link via the amended definition; (C) winding-up for debt/default cannot be initiated under the Companies Act; (D) the winding-up concept still survives in the Companies Act for other grounds.

Correct answer: A. Going-concern sale under Regulation 32A and distribution of proceeds under the Section 53 waterfall, with liabilities staying with the corporate debtor

Correct: (A). Why correct: The chapter says going-concern sale is suited where assets derive value from each other (process units) and key regulatory approvals are difficult to replicate; on such a sale, liabilities 'likely to stay with Corporate Debtor & to be settled as per Section 53 from the proceeds of sale.' This integrates Regulation 32A (going concern) with the Section 53 waterfall. Why others wrong: (B) equity shareholders rank last, not first; (C) Section 59 is for solvent companies with no default, not this distressed liquidation; (D) related-party private sale needs AA permission and novation is not automatic.

Correct answer: C. A monthly profit-and-loss forecast for the resolution applicant

Correct: (C). Why correct: Regulation 5 lists a preliminary report, asset memorandum, progress reports, sale reports, minutes of consultation with stakeholders, and the final report prior to dissolution. A 'monthly profit-and-loss forecast for the resolution applicant' is not among them (there is no resolution applicant in liquidation). Why others wrong: (A), (B) and (D) are all expressly listed reports under Regulation 5.

Correct answer: B. Assign or transfer the not readily realisable asset through a transparent process, in consultation with the stakeholders' consultation committee, to a person eligible to submit a resolution plan

Correct: (B). Why correct: Regulation 37A defines a 'not readily realisable asset' to include contingent/disputed assets and those underlying proceedings under Sections 43–51 and 66, and allows the liquidator to assign or transfer such an asset through a transparent process, in consultation with the SCC under Regulation 31A, to a person eligible to submit a resolution plan. Why others wrong: (A) immediate write-off forgoes value the assignment route can capture; (C) in-specie distribution is not the prescribed treatment; (D) transfer must be to an eligible person, not the related party who controlled the asset.

Correct answer: C. ₹45 crore

Correct: (C). Why correct: Costs of ₹10 crore are paid first (Section 53(a)), leaving ₹60 crore for the equally-ranking class. Total claims in that class = ₹30 cr + ₹90 cr = ₹120 cr, which exceed the ₹60 cr available, so each is paid in equal proportion: 60/120 = 50%. Secured creditor receives 50% × ₹90 cr = ₹45 crore. Why others wrong: (A) full payment ignores the shortfall; (B) ₹60 cr is the whole pool, not the secured creditor's share; (D) ₹30 cr applies a wrong ratio.

Correct answer: B. Sale of the corporate debtor/business as a going concern

Correct: (B). Why correct: The chapter expressly states that going-concern/collective sale is suitable where value is driven by intangibles such as brand, trademark, customer contracts and distribution network (citing newspaper and retail businesses) and where business cash flow is positive; Regulation 32A requires the liquidator to first endeavour to sell as a going concern when it maximises value. Why others wrong: (A) itemised sale suits obsolete businesses with little revival chance; (C) scrap sale destroys intangible value; (D) in-specie distribution is not the prescribed value-maximising route here.

Correct answer: A. Both A and R are true, and R correctly explains A

Correct: (A). Why correct: The chapter and Section 53 place CIRP/liquidation costs first, then 'workmen's dues for 24 months' and 'debts owed to a secured creditor who has relinquished security' ranking equally (second), above wages of employees (12 months), unsecured financial creditors, and government dues. Thus A is true and R correctly explains why the relinquishing secured creditor outranks unsecured/government claimants. Why others wrong: (B) R does explain A; (C)/(D) both statements are true and R is the correct reason.

Correct answer: B. The plan fails, the repayment schedule is disturbed, and creditors must report the failure to the AA seeking liquidation

Correct: (B). Why correct: The chapter states that if the Resolution Applicant fails to bring in capital or there is inordinate delay, 'the resolution plan fails and the entire time schedule... gets disturbed' and creditors 'will have to report the failure of the plan to the Adjudicating Authority (AA) and obtain orders for the liquidation.' Why others wrong: (A) no automatic extension is provided; (C) debt-to-equity conversion is a plan term, not an imposed consequence of default; (D) dissolution is not automatic — liquidation must be ordered by the AA.