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CS Professional · Drafting, Pleadings and Appearances · Appearance before other Regulatory and Quasi-judicial Authorities

Vindhya Cements Ltd is a corporate debtor in proceedings before the Adjudicating Authority. It had earlier contributed Rs 40 lakh to the Insolvency and Bankruptcy Fund. It applies to the Adjudicating Authority to withdraw Rs 55 lakh to pay workmen and protect its assets. Under section 224, what is the correct position?

The company may apply to the Adjudicating Authority for withdrawal not exceeding the Rs 40 lakh it contributed, for purposes like paying workmen and protecting assets. Section 224(3) caps the withdrawal at the contributed amount, so Rs 55 lakh cannot be withdrawn.

  1. AIt may apply for withdrawal only up to the Rs 40 lakh it contributed, for purposes such as paying workmen and protecting assetsCorrect
  2. BIt may withdraw Rs 55 lakh because the amount depends on the Adjudicating Authority's discretion alone
  3. CIt cannot withdraw anything because the Fund is only for the Central Government
  4. DIt may withdraw the amount only by applying to the Central Government's administrator, not the Adjudicating Authority

Explanation

Section 224(3) lets a contributor, when proceedings are initiated against it under the Code, apply to the Adjudicating Authority for withdrawal not exceeding the amount it contributed, for payments to workmen, protecting assets, incidental costs or prescribed purposes. Rs 55 lakh exceeds the Rs 40 lakh cap, and the application goes to the Adjudicating Authority.

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