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

Meridian Textiles Pvt Ltd, a corporate debtor in CIRP, has a moratorium under section 14 in force. The NCLT approves a resolution plan under section 31(1). What is the effect on the moratorium?

The moratorium ceases to have effect once the NCLT approves the resolution plan. Section 31(3)(a) says that after the approval order the section 14 moratorium no longer operates. The one-year period concerns other statutory approvals by the resolution applicant, not the moratorium.

  1. AThe moratorium continues until the resolution applicant completes all regulatory approvals
  2. BThe moratorium ceases to have effect after the order of approvalCorrect
  3. CThe moratorium converts automatically into a liquidation moratorium
  4. DThe moratorium continues for one year from the approval order

Explanation

Section 31(3)(a) provides that after the order of approval the moratorium order passed under section 14 ceases to have effect. The one-year period in section 31(4) relates to obtaining approvals under other laws, not to the moratorium, so the option linking the two is wrong.

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