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

Liquidator of Kaveri Steels Pvt Ltd rejects part of a claim of Rs 40 lakh made by Mehta Traders, admitting Rs 25 lakh. Which statement correctly reflects the Code?

The liquidator may admit part and reject part of a claim, but must record written reasons for the rejection. He must communicate his decision to both the creditor and the corporate debtor within seven days of admitting or rejecting the claim.

  1. AThe liquidator must record in writing the reasons for rejecting the part, and communicate his decision to the creditor and corporate debtor within seven daysCorrect
  2. BThe liquidator may reject the part without reasons if the amount is below Rs 20 lakh
  3. CThe liquidator must communicate the decision only to the creditor, within thirty days
  4. DThe liquidator cannot admit a claim in part; it must be wholly admitted or wholly rejected

Explanation

Section 40(1) permits admission or rejection in whole or in part, and rejection requires written reasons. Section 40(2) requires communication to both the creditor and the corporate debtor within seven days. The partial-admission option is wrong because the section expressly allows part admission.

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