25 VALUATION EXAMINATION MCQS FOR LAND & BUILDING WITH ANSWERS FOR PRACTICE
WITH A FOCUS ON 1 MARK CASE STUDIES
General Conceptual Questions on Land and Building in Insolvency
1. Under the Insolvency and Bankruptcy Code (IBC), who determines the valuation of land and buildings during insolvency proceedings?
A) National Company Law Tribunal (NCLT)
B) Resolution Professional
C) Creditors’ Committee
D) Insolvency and Bankruptcy Board of India (IBBI)
Answer: B) Resolution Professional
2. Which of the following is the primary purpose of the sale of land and building in liquidation under IBC?
A) To maximize the value for stakeholders
B) To pay taxes owed on the land and buildings
C) To transfer property ownership
D) To resolve disputes
Answer: A) To maximize the value for stakeholders
3. Who is responsible for conducting a due diligence review of land and building assets during insolvency proceedings?
A) The corporate debtor
B) The creditors’ committee
C) The resolution professional
D) The NCLT
Answer: C) The resolution professional
4. What happens if a corporate debtor’s land and building are found to be encumbered with debts during insolvency?
A) The assets are automatically excluded from liquidation
B) The encumbrances are settled before selling the property
C) The encumbrances are ignored
D) The property is sold with the encumbrances
Answer: B) The encumbrances are settled before selling the property
5. In a corporate insolvency resolution process (CIRP), if the debtor owns land and building, who can propose a resolution plan for the debtor’s assets?
A) The creditors’ committee
B) The resolution professional
C) The corporate debtor itself
D) The NCLT
Answer: B) The resolution professional
Sale and Liquidation Process Involving Land and Building
6. During the liquidation process under IBC, how are the proceeds from the sale of land and building distributed?
A) Equally among all creditors
B) First to secured creditors, then unsecured creditors
C) Based on the value of the property
D) To the debtor’s shareholders
Answer: B) First to secured creditors, then unsecured creditors
7. When land and buildings are sold as part of liquidation under IBC, who determines the minimum reserve price?
A) The NCLT
B) The creditors’ committee
C) The resolution professional
D) The debtor
Answer: C) The resolution professional
8. If a building is leased out by the corporate debtor during insolvency proceedings, who has the right to sell the property?
A) The lessee
B) The creditors
C) The resolution professional
D) The NCLT
Answer: C) The resolution professional
9. What is the priority of claims on the sale of land and building during the liquidation of a corporate debtor?
A) Employees, followed by secured creditors
B) Secured creditors first, followed by employees and unsecured creditors
C) Unsecured creditors before secured creditors
D) Unsecured creditors first, followed by employees
Answer: B) Secured creditors first, followed by employees and unsecured creditors
10. In a situation where land and buildings are sold as part of the liquidation, who approves the final sale?
A) The corporate debtor
B) The creditors’ committee
C) The NCLT
D) The resolution professional
Answer: C) The NCLT
Legal and Procedural Aspects of Land and Building in Insolvency
11. Which of the following actions is taken if there is a dispute over the ownership of land and building in insolvency proceedings?
A) The land and building are immediately excluded from the insolvency process
B) The property is placed in dispute resolution before proceeding with sale
C) The NCLT resolves the dispute
D) The resolution professional decides on ownership
Answer: B) The property is placed in dispute resolution before proceeding with sale
12. In case the land and building owned by a corporate debtor are mortgaged, what happens during the liquidation?
A) The mortgage remains with the debtor
B) The mortgage is nullified
C) The mortgage is settled, and the property is sold
D) The mortgage is transferred to the buyer
Answer: C) The mortgage is settled, and the property is sold
13. When a corporate debtor owns land and buildings that are used for business purposes, these are classified as what under the Insolvency and Bankruptcy Code?
A) Tangible assets
B) Non-tangible assets
C) Non-core assets
D) Personal assets
Answer: A) Tangible assets
14. In case the land and building are leased to a third party, what happens in the event of the corporate debtor’s insolvency?
A) The lease is terminated immediately
B) The land and building can still be sold by the resolution professional
C) The lease is transferred to the creditors
D) The lease is terminated only after the approval of the NCLT
Answer: B) The land and building can still be sold by the resolution professional
15. Who approves the terms of the resolution plan concerning the land and building assets of a corporate debtor?
A) The NCLT
B) The creditors’ committee
C) The resolution professional
D) The corporate debtor
Answer: B) The creditors’ committee
Real-Life Scenarios and Case Studies
16. If a corporate debtor has a building under construction during insolvency proceedings, what is the process for dealing with it?
A) The building is excluded from the liquidation process
B) The building is completed and sold as an asset
C) The building is left incomplete, and no action is taken
D) The creditors decide whether to complete the construction
Answer: B) The building is completed and sold as an asset
17. In an insolvency case, if land and buildings are encumbered by multiple lenders, how is the priority of claims determined?
A) All lenders have equal priority
B) The first lender in time has the first claim
C) The claims are prioritized based on the amount of debt
D) The NCLT decides the priority
Answer: B) The first lender in time has the first claim
18. When land and buildings are sold during liquidation, what happens if the sale does not cover the total claims of secured creditors?
A) The remaining debt is written off
B) Secured creditors are paid the remaining balance from other assets
C) The remaining debt is passed on to the debtor’s shareholders
D) The NCLT decides on the handling of the remaining debt
Answer: B) Secured creditors are paid the remaining balance from other assets
19. In the insolvency process, if a land and building asset is sold but the sale proceeds are insufficient to clear secured debt, what is the next step?
A) The land and building are returned to the debtor
B) The creditors agree to a settlement
C) The remaining debt is treated as unsecured
D) The asset is repossessed by the creditor
Answer: C) The remaining debt is treated as unsecured
20. If a company’s land and building are leased but the lease contract is void due to non-payment of rent, what happens to the property in the liquidation?
A) The land and building are automatically forfeited to the debtor
B) The land and building can be sold, and any outstanding rent is treated as a liability
C) The lease contract is reinstated, and the property cannot be sold
D) The resolution professional pays off the rent dues before selling the property
Answer: B) The land and building can be sold, and any outstanding rent is treated as a liability
Valuation and Market Considerations for Land and Building
21. What factors are considered when determining the market value of land and buildings during insolvency proceedings?
A) The original purchase price of the property
B) The location, condition, and potential for development
C) The value of the debts owed by the debtor
D) The number of creditors involved
Answer: B) The location, condition, and potential for development
22. Which of the following is a common issue faced during the liquidation of land and buildings?
A) Environmental liabilities or encumbrances
B) Buyers refusing to purchase
C) Disputes over the asset’s title
D) All of the above
Answer: D) All of the above
23. When a corporate debtor’s land and building are part of a mixed-use development (e.g., commercial and residential), how are the assets treated in insolvency proceedings?
A) The assets are sold separately based on their usage
B) The entire development is liquidated as a whole
C) The residential portion is excluded from liquidation
D) Only the commercial portion is liquidated
Answer: B) The entire development is liquidated as a whole
24. In a scenario where a debtor owns land that is part of a government-acquired project, how is this treated in insolvency proceedings?
A) The property is exempt from liquidation
B) The government retains its rights, and the debtor’s claims are disregarded
C) The debtor is entitled to the compensation from the project
D) The debtor’s rights over the property are unaffected by the insolvency
Answer: B) The government retains its rights, and the debtor’s claims are disregarded
25. When a land and building asset is sold during liquidation under IBC, who determines the terms of the sale agreement?
A) The corporate debtor
B) The creditors’ committee
C) The resolution professional
D) The NCLT
Answer: C) The resolution professional
