Section 224 of The Insolvency and Bankruptcy Code, 2016.
- (1)There shall be formed a Fund to be called the Insolvency and Bankruptcy Fund (hereafter in this section referred to as the "Fund") for the purposes of insolvency resolution, liquidation and bankruptcy of persons under the Code.
- (2)There shall be credited to the Fund the following amounts, namely—
- (a)the grants made by the Central Government for the purposes of the Fund;
- (b)the amount deposited by persons as contribution to the Fund;
- (c)the amount received in the Fund from any other source; and
- (d)the interest or other income received out of the investment made from the Fund.
- (3)A person who has contributed any amount to the Fund may, in the event of proceedings initiated in respect of such person under this Code before an Adjudicating Authority, make an application to such Adjudicating Authority for withdrawal of funds not exceeding the amount contributed by it, for making payments to workmen, protecting the assets of such persons, meeting the incidental costs during the proceedings or such other purposes as may be prescribed.
- (4)The Central Government shall, by notification, appoint an administrator to administer the fund in such manner as may be prescribed.
Summary
- This provision creates a dedicated fund named the Insolvency and Bankruptcy Fund, which supports insolvency resolution, liquidation, and bankruptcy of entities and individuals under the insolvency law.
- The fund is built using multiple sources of money, including grants from the central government, voluntary contributions from depositors, other miscellaneous sources, and interest earned from investing the fund's money.
- A person who has voluntarily contributed money can apply to get a portion of it back if they face insolvency proceedings.
- Any withdrawal is strictly limited and cannot exceed the total amount that the person originally contributed to the fund.
- The money withdrawn from the fund must be spent on specific allowed purposes, such as paying workmen, protecting business assets, or covering incidental legal costs.
- The Central Government must officially name an administrator to manage this fund.
Practical examples
FAQ
1. What is the primary purpose of the fund set up under Section 224 of the Insolvency and Bankruptcy Code, 2016?
Under Section 224 of the Insolvency and Bankruptcy Code, 2016, the fund is established to provide resources for insolvency resolution, asset liquidation, and bankruptcy processes of persons under the Code.
2. Can anyone who has paid into the fund get their money back under Section 224 of the Insolvency and Bankruptcy Code, 2016?
Yes, under Section 224 of the Insolvency and Bankruptcy Code, 2016, any contributor facing insolvency proceedings can apply to the tribunal to withdraw an amount up to, but not exceeding, their total past contributions.
3. What are the allowed uses of withdrawn money under Section 224 of the Insolvency and Bankruptcy Code, 2016?
According to Section 224 of the Insolvency and Bankruptcy Code, 2016, withdrawn funds must be used for making payments to workmen, protecting the contributor's assets, or meeting the incidental costs of the legal proceedings.
4. How is the Insolvency and Bankruptcy Fund managed under Section 224 of the Code?
Under Section 224 of the Code, the Central Government is responsible for officially appointing an administrator who will manage and run the fund.
Test yourself
Q1.Under Section 224 of the Insolvency and Bankruptcy Code, 2016, what is the absolute limit on the amount a contributor can withdraw during insolvency proceedings?
Q2.Under Section 224 of the Insolvency and Bankruptcy Code, 2016, which entity has the legal power to appoint the administrator of the fund?
Q3.Which of the following is NOT a specified source of money for the fund under Section 224 of the Insolvency and Bankruptcy Code, 2016?
Q4.Under Section 224 of the Insolvency and Bankruptcy Code, 2016, for which of the following purposes can a contributor apply to withdraw money from the fund?