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Contingency Fund is a provision created in a Resolution Plan to avoid inevitable losses of creditors


The National Company Law Appellate Tribunal (NCLAT), Chennai Bench comprising Justice M. Venugopal, Judicial Member and Naresh Salecha, Technical Member was hearing an Appeal and held that the Contingency Fund is for the specific purpose of catering for Claims which were not determined and settled finally, at the time of the Resolution Plan.


The Appellant had filed an Application, before the Adjudicating Authority under Section 60(5) of the I & B Code, 2016, seeking reliefs including and mainly for issuance of direction to the Respondents, to make payment of a sum of Rs. 62,31,242/- towards the Applicant’s Claim from the `Contingency Fund’.


The Appellate Authority observed that a contingency Fund is a provision created in a Resolution Plan to avoid inevitable losses of creditors. It is made to include `Liabilities’ arising which are `uncertain’ and `inevitable in nature’ or pending under verification. The Appellate Authority noted that the Contingency Fund is for the specific purpose of catering for Claims which were not Determined and settled finally, at the time of the Resolution Plan. There was a stipulated time frame as provided in the Resolution Plan and the Fund after meeting the requirements of the Claims, ceased to exist. By no stretch of the imagination, it can be inferred that any Claim can be entertained after the Resolution Plan, was fully implemented and the new management of the ‘Successful Resolution Applicant’ had taken over.




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