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CS Professional · Insolvency and Bankruptcy - Law and Practice · Liquidation of Corporate Person

Liquidator CS Arjun Rao of Delta Polymers Ltd wants to know how far stakeholders entitled to distribution under section 53 can influence his decisions. He consults two secured creditors on the sale strategy but not the workmen. Which statement is correct?

The liquidator may consult stakeholders entitled to distribution under section 53, but the consultation does not bind him. Records of the consultation must be made available to the stakeholders who were not consulted, in the manner specified by the Board.

  1. AThe consultation binds the liquidator, because the consulted creditors rank higher in the waterfall
  2. BThe liquidator may consult them, but consultation is not binding, and records of it must be made available to the stakeholders not consultedCorrect
  3. CThe liquidator may not consult any stakeholder without the Adjudicating Authority's order
  4. DThe liquidator must consult all stakeholders equally, and the consultation is binding if a majority agrees

Explanation

Section 35(2) empowers the liquidator to consult any stakeholder entitled to a distribution under section 53. The consultation is not binding. The records must be made available, in the manner specified by the Board, to the other stakeholders not consulted. Therefore the workmen can see the records, and the consulted creditors cannot bind him.

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