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CS Professional · Corporate Restructuring, Valuation and Insolvency · Regulatory Approvals of Scheme

A draft board note for Kaveri Textiles Ltd states that an arrangement with its creditors binds the company and the creditors under Section 321 of the Companies Act, 2013. Which statement correctly describes Section 321 in the official text?

Section 321 on arrangements binding the company and creditors has been omitted by the Insolvency and Bankruptcy Code, 2016 with effect from 15 November 2016. The board note is therefore wrong to rely on it. Section 263 is also omitted, so it cannot replace Section 321.

  1. ASection 321 is operative and binds creditors once a majority in value agrees
  2. BSection 321 is operative but only for companies being wound up voluntarily
  3. CSection 321 was omitted by the Insolvency and Bankruptcy Code, 2016 with effect from 15 November 2016Correct
  4. DSection 321 was omitted, but Section 263 now performs its function

Explanation

The official text records that Section 321 (Arrangement when binding on company and creditors) is omitted by the Insolvency and Bankruptcy Code, 2016, Section 255 and the Eleventh Schedule, with effect from 15-11-2016. The last option is wrong because Section 263 is itself omitted and cannot take over any function.

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