Om Bank holds security worth 40 crore rupees for a debt of 100 crore rupees owed by a company in…
The Explanation says that where the value of the relinquished security is less than the total debt, the creditor "shall be a secured creditor to the extent of the value of…
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Om Bank holds security worth 40 crore rupees for a debt of 100 crore rupees owed by a company in liquidation, and it relinquishes the security to the liquidation estate. Under the Explanation added to section 53(1)(b)(ii) in 2026:
Answer and explanation
Correct answer B
The Explanation says that where the value of the relinquished security is less than the total debt, the creditor "shall be a secured creditor to the extent of the value of such security interest", determined as specified, and for the rest "he shall be considered to be an unsecured creditor". So Om Bank shares in the second rank only up to the value of its security. The balance is treated as an unsecured debt.
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