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CS Professional · Insolvency and Bankruptcy - Law and Practice · Corporate Insolvency Resolution Process

On admitting an application filed by a financial creditor against Kaveri Textiles Ltd, the Adjudicating Authority passes an order under section 13. Which of the following correctly describes what the order must do under that section?

The admission order under section 13 must declare a moratorium, cause a public announcement of the CIRP inviting claims, and appoint an interim resolution professional. These three steps happen together on admission; no liquidator is appointed and the moratorium is not postponed until the committee of creditors forms.

  1. ADeclare a moratorium, cause a public announcement calling for claims, and appoint an interim resolution professionalCorrect
  2. BDeclare a moratorium and appoint a liquidator, leaving the public announcement to the creditors
  3. CCause a public announcement only, with the moratorium to follow after the committee of creditors is constituted
  4. DAppoint a resolution professional and direct the corporate debtor's board to make the public announcement

Explanation

Section 13(1) requires the Adjudicating Authority, after admission under section 7, 9 or 10, to by order declare a moratorium under section 14, cause a public announcement of initiation of the CIRP and call for claims, and appoint an interim resolution professional. A liquidator is not appointed at this stage, and the moratorium is not deferred.

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