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CS Professional · Corporate Restructuring, Valuation and Insolvency · Preparation and Approval of Resolution Plan

The committee of creditors of Pragati Foods Ltd approved a resolution plan. On examination, the Adjudicating Authority finds the plan does not conform to the requirements for approval under section 31(1). What may the Authority do under section 31?

The Adjudicating Authority may reject the plan by an order. Under section 31(2), where it is satisfied that the plan does not conform to the requirements of section 31(1), rejection is the power given, and the section does not permit it to rewrite the plan or approve a non-conforming plan.

  1. AApprove the plan on condition that the resolution applicant pays a deposit
  2. BItself modify the plan terms and approve it
  3. CReject the plan by an orderCorrect
  4. DApprove the plan and direct the Board to cure the defects later

Explanation

Section 31(2) provides that where the Adjudicating Authority is satisfied that the plan does not conform to the requirements in section 31(1), it may by order reject the plan. The section gives no power to rewrite the commercial terms or to approve a non-conforming plan subject to later cure. Approval requires satisfaction that the plan meets section 30(2) and has provisions for effective implementation.

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