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

Bharat Alloys Ltd is being wound up by the Tribunal. The Company Liquidator wants to compromise a disputed claim of a creditor. Per Section 343 as given in the official text, what must the liquidator do?

The liquidator needs the sanction of the Tribunal. Section 343(1) permits compromises with creditors during winding up by the Tribunal only with Tribunal sanction, and the omitted Section 262 provides no alternative route.

  1. AObtain the sanction of the Tribunal before making the compromiseCorrect
  2. BObtain approval of the Central Government in every case
  3. CAct freely, as no sanction is ever needed
  4. DObtain sanction under Section 262

Explanation

Section 343(1) lets the Company Liquidator make a compromise with creditors only with the sanction of the Tribunal when the company is wound up by the Tribunal. Section 262 is omitted and cannot supply sanction. Sub-section (2) allows rules to dispense with sanction in prescribed circumstances, but none is stated here.

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