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CS Professional · Corporate Restructuring, Valuation and Insolvency · Role, Functions and Duties of IP, IRP and RP

A liquidator of Kaveri Steels Ltd wants to know which stakeholders entitled to a distribution under the waterfall he may consult before taking a decision on the sale of assets. Which statement is correct about such consultation?

The liquidator has a power, not a duty, to consult stakeholders entitled to distribution. Such consultation does not bind him, and the records of it must be made available to the other stakeholders who were not consulted, in the manner the Board specifies.

  1. AConsultation is mandatory and the liquidator is bound by the majority view
  2. BConsultation is not binding on him, and the records must be made available to stakeholders not consultedCorrect
  3. CConsultation is allowed only with secured creditors, and the records are confidential
  4. DConsultation requires prior approval of the Adjudicating Authority and is binding once held

Explanation

Section 35(2) gives the liquidator the power to consult any stakeholder entitled to a distribution under section 53. The consultation is not binding, and the records must be made available to the other stakeholders who were not consulted, in the manner specified by the Board. Hence mandatory, binding or confidential options are wrong.

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