The IRP of Delta Ltd wants to raise interim finance by creating a security interest over a factory…
Section 20(2)(c) bars creating security over encumbered property for interim finance "without the prior consent of the creditors whose debt is secured over such encumbered…
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The IRP of Delta Ltd wants to raise interim finance by creating a security interest over a factory already mortgaged to Bank P. The factory's value is more than twice the debt secured on it. Under section 20(2)(c) of the Insolvency and Bankruptcy Code, 2016:
Answer and explanation
Correct answer C
Section 20(2)(c) bars creating security over encumbered property for interim finance "without the prior consent of the creditors whose debt is secured over such encumbered property". Its proviso dispenses with that consent "where the value of such property is not less than the amount equivalent to twice the amount of the debt". Since the factory is worth more than twice Bank P's debt, no consent is needed.
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