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CS Professional · Insolvency and Bankruptcy - Law and Practice · Professional and Ethical Practices for Insolvency Practitioners

In a pre-packaged insolvency resolution process of Sundaram Engineering Pvt Ltd, the resolution professional incurred fees and expenses before the committee of creditors was constituted. What is the correct treatment of these?

Fees and expenses incurred before the committee of creditors is constituted are subject to ratification by that committee once formed. Section 54F(6) provides this, and the committee may also impose limits and conditions on the resolution professional's fees and expenses.

  1. AThey are final and need no approval from anyone
  2. BThey are subject to ratification by the committee of creditorsCorrect
  3. CThey must be approved by the members of the corporate debtor
  4. DThey are payable only after the Board of Directors of the debtor approves them

Explanation

Section 54F(6) provides, in its second proviso, that fees and expenses for the period before constitution of the committee of creditors are subject to its ratification. The first proviso also lets the CoC impose limits and conditions on fees. Approval by members or directors is not provided.

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