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Hari, a director of Kiran Ltd, has lent it money at interest. Swastik Bank became a related party of…

The first proviso to section 21(2) denies a related-party financial creditor "any right of representation, participation or voting" in the committee, and a director is a…

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Hari, a director of Kiran Ltd, has lent it money at interest. Swastik Bank became a related party of Kiran Ltd only because it converted part of its loan into equity shares before the insolvency commencement date. In Kiran Ltd's committee of creditors:

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Correct answer A

The first proviso to section 21(2) denies a related-party financial creditor "any right of representation, participation or voting" in the committee, and a director is a related party under section 5(24)(a). The second proviso lifts this bar for a financial creditor regulated by a financial sector regulator that is a related party solely because of conversion or substitution of debt into equity before the insolvency commencement date. So Hari is kept out, but Swastik Bank participates.

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