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CS Professional · Insolvency and Bankruptcy - Law and Practice · Introduction to Insolvency and Bankruptcy Code

Kaveri Textiles Ltd contributed ₹40 lakh to the Insolvency and Bankruptcy Fund. Later, proceedings are initiated against it under the Code before the Adjudicating Authority. Which statement correctly describes what Kaveri Textiles may do under Section 224?

Kaveri Textiles may apply to the Adjudicating Authority for withdrawal of funds not exceeding its own ₹40 lakh contribution. The money may be used for paying workmen, protecting assets, meeting incidental proceeding costs or other prescribed purposes.

  1. AApply to the Adjudicating Authority to withdraw funds not exceeding ₹40 lakh, for purposes such as paying workmen or protecting assetsCorrect
  2. BApply to the Board to withdraw up to twice its contribution for any purpose it chooses
  3. CApply to the Adjudicating Authority to withdraw any amount from the Fund, whatever it contributed
  4. DApply to the Fund's administrator to withdraw its contribution only after the process ends

Explanation

Section 224(3) lets a contributor, when proceedings are initiated against it, apply to the Adjudicating Authority for withdrawal not exceeding the amount contributed, for payments to workmen, protecting assets, incidental costs or other prescribed purposes. The cap is the contribution, and the application goes to the Adjudicating Authority.

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