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CS Professional · Corporate Restructuring, Valuation and Insolvency · Preparation and Approval of Resolution Plan

A plan for Deccan Cements Ltd was submitted to the Adjudicating Authority after the Fifth Amendment Regulations, 2025 commenced. It proposes to assign to the applicant an avoidance transaction that was not in the information memorandum and was not intimated to all prospective applicants before the last date for submitting plans. What is the position?

The plan cannot provide for such assignment. A plan must not assign avoidance or wrongful trading proceedings unless they were disclosed in the information memorandum and intimated to all prospective applicants before the last date for plan submission. The exemption covers only earlier-submitted plans, and committee approval cannot override it.

  1. AThe plan cannot provide for such assignment, because the sub-regulation bars itCorrect
  2. BThe plan may do so if the committee approves it by the required vote
  3. CThe plan may do so if the applicant pays the liquidation value
  4. DThe plan may do so only for fraudulent trading, not avoidance transactions

Explanation

Regulation 38(2A) says a plan shall not provide for assignment of avoidance or fraudulent or wrongful trading matters that were not both disclosed in the information memorandum and intimated to all prospective applicants before the last submission date. The proviso exempts only plans submitted on or before the 2025 amendment's commencement, and this one is later. A committee vote cannot cure a prohibition.

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