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CS Professional · Corporate Restructuring, Valuation and Insolvency · Application for Corporate Insolvency Resolution Process

Kaveri Textiles Ltd's financial creditor files a section 7 application. The Adjudicating Authority finds that the proposed resolution professional named in it has a disciplinary proceeding pending against him. What is the legally correct course?

The Adjudicating Authority may reject the application because a disciplinary proceeding is pending against the proposed resolution professional, but before rejecting it must give the applicant notice to rectify the defect within seven days of receiving that notice. Immediate rejection without notice is not permitted.

  1. AAdmit the application, since default is established and the creditor's choice of professional is irrelevant
  2. BReject the application, but only after giving the applicant notice to rectify the defect within seven daysCorrect
  3. CReject the application immediately without any notice to the applicant
  4. DAdmit the application and appoint a different professional on its own motion

Explanation

Section 7(5)(b) permits rejection where a disciplinary proceeding is pending against the proposed professional. The proviso requires prior notice to the applicant to rectify the defect within seven days of receiving the notice. Immediate rejection ignores that proviso.

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