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CS Professional · Corporate Restructuring, Valuation and Insolvency · Liquidation on or after Failing of Resolution Plan

Liquidator Mr. Nair of Ganga Steels Ltd plans to sell a plant by private contract to Vikram Holdings, whose promoter is ineligible to be a resolution applicant. A creditor, Mr. Bose, says the liquidator may still proceed because section 35 permits sale by public auction or private contract. Which statement is correct?

The sale is impermissible. Although the liquidator may sell by public auction or private contract, the proviso forbids selling property or actionable claims of the corporate debtor to any person not eligible to be a resolution applicant, and consultation with stakeholders cannot cure this.

  1. AThe sale is valid since private contract is expressly permitted
  2. BThe sale is valid if the Adjudicating Authority is merely informed afterwards
  3. CThe sale is valid if the stakeholders consulted by Mr. Nair do not object
  4. DThe sale cannot be made to Vikram Holdings because the liquidator must not sell to a person who is ineligible to be a resolution applicantCorrect

Explanation

Section 35(1)(f) allows sale by public auction or private contract, but its proviso bars sale of the corporate debtor's property to anyone not eligible to be a resolution applicant. Consultation under section 35(2) is not binding and cannot override this bar.

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