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CS Professional · Corporate Restructuring, Valuation and Insolvency · Insolvency

Meridian Textiles Ltd is undergoing a process under the Code before the Adjudicating Authority. The company had earlier contributed Rs 40 lakh to the Insolvency and Bankruptcy Fund. It now applies to withdraw Rs 55 lakh to pay workmen and protect its assets. What is the position?

Meridian may withdraw only up to Rs 40 lakh. A contributor to the Insolvency and Bankruptcy Fund can apply to the Adjudicating Authority for withdrawal not exceeding its own contribution, for purposes such as paying workmen or protecting assets.

  1. AIt may withdraw up to Rs 55 lakh, as the purposes are permitted
  2. BIt may withdraw funds not exceeding Rs 40 lakh, which it contributedCorrect
  3. CIt may not withdraw anything, because only the Central Government can use the Fund
  4. DIt may withdraw only for paying workmen, not for protecting assets

Explanation

Under section 224(3), a contributor facing proceedings under the Code may apply to the Adjudicating Authority for withdrawal not exceeding the amount it contributed. Permitted purposes include paying workmen and protecting assets. The Rs 55 lakh request exceeds the Rs 40 lakh cap.

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