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CS Professional · Drafting, Pleadings and Appearances · Appearance before other Regulatory and Quasi-judicial Authorities

Kaveri Agro Ltd is in CIRP and has run short of funds to pay workmen and protect its assets. Its resolution professional is advised that the company had earlier contributed Rs 40 lakh to the Insolvency and Bankruptcy Fund. Which course is consistent with section 224 of the Code?

The company may apply to the Adjudicating Authority for withdrawal of funds not exceeding the Rs 40 lakh it contributed. Section 224(3) permits this once proceedings under the Code have begun, for purposes such as paying workmen and protecting assets, not by free withdrawal or beyond the contribution.

  1. AThe company may apply to the Adjudicating Authority for withdrawal of funds not exceeding Rs 40 lakh, for purposes such as payments to workmen and protecting assetsCorrect
  2. BThe company may withdraw up to double the amount it contributed by applying to the Central Government
  3. CThe company may withdraw the funds freely without any application, as they are its own money
  4. DOnly the administrator of the Fund may apply, and contributors have no right to apply

Explanation

Section 224(3) allows a contributor, when proceedings are initiated against it under the Code, to apply to the Adjudicating Authority for withdrawal not exceeding its contribution, for paying workmen, protecting assets, meeting incidental costs or other prescribed purposes. The application is to the Adjudicating Authority, and the cap is the amount contributed, so Rs 40 lakh.

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