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CS Professional · Insolvency and Bankruptcy - Law and Practice · Pre-Packaged Insolvency Resolution Process (Elective 7.5)

Mehta Components Pvt Ltd's pre-packaged process is terminated by an order under section 54N(1) because the committee of creditors voted to terminate. Who bears the pre-packaged insolvency resolution process costs, if any, and what is the position if the Adjudicating Authority had earlier passed an order under section 54J(2) (the order directing the corporate debtor's management to be handed to the resolution professional's control)?

The corporate debtor bears the costs on termination under section 54N(3). However, if an order under section 54J(2) was earlier passed, section 54N(4) requires the Adjudicating Authority to order liquidation and treat those process costs as part of the liquidation costs.

  1. AThe creditors bear them; on a 54J(2) order the costs are waived
  2. BThe corporate debtor bears them; with a 54J(2) order, liquidation is ordered and the costs form part of liquidation costsCorrect
  3. CThe resolution professional bears them; with a 54J(2) order, the costs are borne by the Board
  4. DThe corporate debtor bears them in all cases, with no liquidation consequence

Explanation

Section 54N(3) makes the corporate debtor bear the costs on termination. Under 54N(4), where an order under section 54J(2) was passed and termination is required, the Authority orders liquidation and declares the costs part of liquidation costs. The last option ignores 54N(4).

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