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

Meera Engineering Pvt Ltd has contributed Rs 25 lakh to the Insolvency and Bankruptcy Fund. After proceedings are initiated against it before the Adjudicating Authority, it applies for Rs 30 lakh to protect its assets and meet incidental costs. Which statement is correct under Section 224?

Withdrawal is capped at Rs 25 lakh, the amount Meera Engineering contributed. Protecting assets and meeting incidental costs are valid purposes under Section 224(3), but the withdrawal cannot exceed the contribution, so the Rs 30 lakh request is too high.

  1. ARs 30 lakh may be withdrawn because protecting assets is a permitted purpose
  2. BThe withdrawal cannot exceed Rs 25 lakh, the amount it contributedCorrect
  3. COnly payments to workmen can be funded, so the application fails fully
  4. DThe Central Government must first notify the excess as a grant

Explanation

Section 224(3) permits withdrawal 'not exceeding the amount contributed'. Protecting assets and meeting incidental costs are listed purposes, so the application is not barred, but the cap is Rs 25 lakh. The option limiting use to workmen ignores the other purposes listed.

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