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CS Professional · Corporate Restructuring, Valuation and Insolvency · Regulatory Approvals of Scheme

Patel Chemicals Ltd is being wound up by the Tribunal. Its Company Liquidator proposes to make a compromise with a creditor who claims a contingent amount against the company. Under Section 343 of the Act, what must the liquidator do?

In a winding up by the Tribunal, the Company Liquidator needs the Tribunal's sanction to compromise creditor claims, including contingent ones, under Section 343. Rules may prescribe circumstances in which sanction is not needed. The Central Government's sanction is not the requirement.

  1. AObtain the sanction of the Tribunal, unless the rules prescribe circumstances allowing exercise without itCorrect
  2. BObtain the sanction of the Central Government in every case
  3. CProceed freely, as no sanction is ever needed
  4. DObtain sanction only if the claim exceeds the paid-up capital

Explanation

Section 343(1) lets the Company Liquidator compromise claims, including contingent ones, with the sanction of the Tribunal in a winding up by the Tribunal. Section 343(2) allows rules to permit exercise without sanction in prescribed circumstances. Central Government sanction is not required.

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