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

Rajan Traders, a contributor to the Insolvency and Bankruptcy Fund, has had no proceedings initiated against it under the Code. It nevertheless wishes to withdraw Rs 5 lakh from the Fund for general working capital. What is the position under Section 224?

Rajan Traders cannot withdraw. Section 224(3) permits withdrawal only when proceedings have been initiated against the contributor under the Code before an Adjudicating Authority. Without such proceedings the right does not arise, and general working capital is not a stated purpose.

  1. AIt may withdraw up to Rs 5 lakh by applying to the Adjudicating Authority
  2. BIt may withdraw if the Fund's administrator consents
  3. CIt cannot, because withdrawal is available only where proceedings under the Code have been initiated against the contributor before an Adjudicating AuthorityCorrect
  4. DIt may withdraw, but only for paying workmen

Explanation

Section 224(3) allows a contributor to apply for withdrawal only in the event of proceedings initiated in respect of such person under the Code before an Adjudicating Authority. With no proceedings, there is no right, and working capital is not a listed purpose anyway.

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