Skip to content

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

Meridian Foods Pvt Ltd had contributed ₹40 lakh to the Insolvency and Bankruptcy Fund. Proceedings under the Code are later initiated against it before the Adjudicating Authority, and it wants to withdraw ₹55 lakh to pay workmen. Which statement is correct under Section 224?

Meridian may apply to the Adjudicating Authority, but any withdrawal is capped at the ₹40 lakh it contributed. Section 224(3) permits withdrawal for purposes such as paying workmen, yet never beyond the contributor's own contribution, so ₹55 lakh cannot be allowed.

  1. AIt may apply to the Adjudicating Authority, but the withdrawal cannot exceed ₹40 lakhCorrect
  2. BIt may withdraw ₹55 lakh if the amount is used for workmen
  3. CIt may withdraw the money directly from the administrator without any application
  4. DIt may apply to the Central Government, which can allow any amount

Explanation

Under Section 224(3), a contributor against whom proceedings are initiated may apply to the Adjudicating Authority for withdrawal not exceeding the amount it contributed. Permitted purposes include payments to workmen. The ₹55 lakh request exceeds the ₹40 lakh contribution, so only up to ₹40 lakh can be allowed.

Did you get it right without looking?

One question tells you little. A timed set on Introduction to Insolvency and Bankruptcy Code shows your real accuracy, how long you take and where you lose marks.

Practise Introduction to Insolvency and Bankruptcy CodeFree diagnostic mock

More Introduction to Insolvency and Bankruptcy Code questions