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CS Professional · Corporate Restructuring, Valuation and Insolvency · Pre-Packaged Insolvency Resolution Process

In Rudra Engineering Ltd's PPIRP, the Adjudicating Authority had earlier passed an order under section 54J(2). The RP now applies for termination of the PPIRP under section 54D(3) because the CoC approved no plan in time. Which outcome follows under section 54N(4)?

Where an order under section 54J(2) had been passed and the process must be terminated, the Adjudicating Authority orders liquidation of the corporate debtor and declares that the pre-packaged process costs form part of the liquidation costs, instead of simply terminating the process.

  1. AThe process is terminated and the company returns to the promoters with PPIRP costs borne by the RP
  2. BThe Adjudicating Authority orders liquidation of the corporate debtor and declares PPIRP costs part of the liquidation costsCorrect
  3. CThe Adjudicating Authority orders a fresh PPIRP with a new RP for 120 days
  4. DThe process converts into a CIRP with PPIRP costs borne by the financial creditors

Explanation

Section 54N(4) overrides the rest of the section where an order under section 54J(2) was passed and termination is required: the Adjudicating Authority passes a liquidation order under section 33(1)(b)(i)-(iii) and declares PPIRP costs as part of liquidation costs. Plain termination with costs on the debtor applies only in other cases.

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