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CS Professional · Compliance Management, Audit and Due Diligence · Due Diligence

A bidder doing due diligence on Vikram Alloys Ltd., which is under liquidation, finds in an old file that the company's draft papers refer to section 325 (application of insolvency rules in winding up of insolvent companies) and section 269 (Rehabilitation and Insolvency Fund) as live provisions. The Company Secretary advises on their status. Which advice is correct?

Both sections 325 and 269 were omitted by the Insolvency and Bankruptcy Code, 2016 with effect from 15 November 2016. Documents treating them as live law are outdated, and the due diligence report should flag the reliance as an error.

  1. ABoth sections remain in force and apply to the winding up
  2. BSection 325 applies but section 269 is omitted
  3. CBoth sections were omitted by the Insolvency and Bankruptcy Code, 2016 with effect from 15 November 2016, so reliance on them is misplacedCorrect
  4. DBoth sections were omitted only for companies with paid-up capital above one crore rupees

Explanation

The official text shows both section 325 and section 269 omitted by the Insolvency and Bankruptcy Code, 2016 (section 255 and the Eleventh Schedule) with effect from 15-11-2016. The omission is general and not tied to capital size, so documents relying on them reflect outdated law and should be flagged in the due diligence report.

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