Corporate Rehabilitation Act, 2018

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THE CORPORATE REHABILITATION ACT, 2018 
 
 
 
 
CHAPTER-I 
 
 
CONTENTS 
 
1. Short title, extent and commencement. 
                CHAPTER I 
            Preliminary 
2. Definitions 
3. Jurisdiction and powers of High Court 
4. Appeal and review 
5. Insolvency experts 
CHAPTER II 
                                                   Rehabilitation of Debtor 
6. Debtor 
7. Plan of Rehabilitation 
8. Commencement of a case 
9. Statement of affairs 
10. Mediation 
11. Notice of order of mediation 
12. Stay of actions against debtor 
13. Acceptance of plan of rehabilitation 
14. Confirmation of a plan of rehabilitation 
15. Implementation of plan of rehabilitation 
16. Revocation of confirmation of a plan of rehabilitation 
17. Dismissal of a case 
18. Conversion of a case 
19. Consequences of conversion 
 

 
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        CHAPTER III 
Administration of Debtor 
20. Appointment of administrator 
21. Effect of appointment of administrator 
22. Removal and termination of administrator 
23. Powers and duties of an administration 
24. Administration’s account 
25. Employment of professional persons 
26. Administration committees 
27. Powers and duties of administration committees 
28. Use, sale or lease of property 
29. Obtaining credit 
30. Assumption and rejection of executory contracts and unexpired leases 
31. Claims and interests 
32. Allowance of claims for administrative expenses 
33. Handover of property of debtor to administrator 
34. Avoidance of transfers 
35. Abandonment of property of debtor 
         CHAPTER IV 
         Miscellaneous 
36. Act not in derogation 
37. Act to override contracts, instruments, memorandum and articles 
38. Limitation 
39. Power to require delivery of property 
40. Power to make rules 
41. Power to make regulations 
42. Power to issue directives, circulars, guidelines, etc. 
43. Power to remove difficulties 
 
 
 
 
 
 
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THE CORPORATE REHABILITATION ACT, 2018 
 
ACT NO. IX OF 2018 
[13th March, 2018] 
 
 
An Act to provide for rehabilitation and re-organisation of distressed corporate entities 
 
WHEREAS it is expedient to provide for the rehabilitation and re -organisation of distressed 
corporate entities and their business so as to encourage economic growth and development; 
 
It is hereby enacted as follows: 
 
1. Short t itle, extent and commencement .—(l) This Act shall be  called the Corporate 
Rehabilitation Act, 2018. 
 
(2) It extends to the whole of Pakistan. 
 
(3) It shall come into force at once. 
 
CHAPTER I 
Preliminary 
 
2. Definitions.— (1) In this Act, unless there is anything repugnant in the subject or context,— 
 
 
(a) “administrator” means an administrator appointed under section 20; 
 
(b) “administration committee” means the committee of the creditors or shareholders 
of the debtor appointed under section 26; 
 
(c) “claim” or “debt” means right to payment, whether or not such right is reduced 
to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, 
disputed, legal, secured or unsecured and includes principal amoun t an d any 
mark-up, profit, return and other charges; 
 
(d) “Commission” means the Securities and Exchange Commission of Pakistan 
established under the Securities and Exchange Commission of Pakistan Act, 1997 
(XLII of 1997); 
 
(e) “Court” means the High Court having territorial jurisdiction; 
 
(f) “creditor” means an entity that has a claim against debtor that arose at the time of 
or before the commencement of a case under this Act; 
 
(g) “debtor” means a company specified under section 6; 
 
(h) “financial institution” shall have the same meaning as assigned to it under the 
Financial Institutions (Recovery of Finances) Ordinance, 2001 (XLVI of 2001); 
 
(i) “insolvency expert” means the expert specified under section 5; 
 
 
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(j) “interests” or “class of interests”  means any person or class of  persons liable to 
contribute to the assets of  a company in the event of its being wound up and 
includes the holder of any shares which are fully paid up; 
 
(k) “mediator” means the mediator appointed under section 10; 
 
 
(l) “Ordinance” means the Companies Ordinance, 2016 (VI of2016) or such other 
law in force for regulations of companies; 
 
(m) “order of mediation” means the order passed by the Court under section 10;  
 
(n) “plan of rehabilitation” means a plan of  rehabilitation of debtor defined under 
section 7; 
 
(o) “prescribed” means prescribed by rules or regulations made under this Act; 
 
 
(p) “property” means property of all description, whether movable or immovable, 
tangible or intangible, existing or future, claims for money, cash, and includes 
instruments that evidence title in property; 
 
(q) “qualifying creditors” means one or more creditors holding unpaid and overdue 
claims for an aggregate amount of not less than two -third of the value of assets 
of the debtor as per its latest balance sheet; 
 
(r) “regulations” means regulations made under this Act;  
 
(s) “rules” means rules made under this Act; 
 
(t) “security interest”  means a charge, mortgage, lien, hypothecation, pledge, 
assignment or any other encumbrance over a property; 
 
(u) “State Bank” shall have the same meaning as assigned to it under the State Bank 
of Pakistan Act, 1956 (XXXIII of 1956); and 
 
(v) “statement of  affairs” means statement of  particulars about the property and 
business of a debtor prepared under section 9. 
 
(2) The words and expressions used but not defined in this Act shall have  the same meaning 
as assigned to them in the Ordinance. 
 
3. Jurisdiction and powers of High Court .— (1) The Court having jurisdiction under this 
Act shall be the High Court having jurisdiction over the place at which the registered office of the 
debtor or, as the case may be, the principal place of business of the debtor is situated. 
 
(2) Subject to the provisions of this Act, the Court shall,— 
 
(a) in exercise of its civil jurisdiction, have all the powers vested in a civil court  
under the Code of Civil Procedure, 1908 (Act V of 1908); 
 
 
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(b) in exercise of its criminal jurisdiction, have all the powers vested in a court 
exercising jurisdiction under the Code of Criminal Procedure,  1898 (Act V of 
1898); and 
 
(c) in exercise of its company jurisdiction, have all the powers vested in a court  
exercising jurisdiction under the Ordinance. 
 
(3) Notwithstanding anything contained in any other law, all matters coming before the Court 
under this Act shall be disposed of  expeditiously and final judgment shall be pronounced as soon as 
may be practicable and, except in extraordinary circumstances, the Court shall hear the case on day to 
day basis. 
 
4. Appeal and review.— (1) An appeal shall lie, at the instance  of any person aggrieved by 
an order made by a Judge of the High Court in the exercise of the jurisdiction conferred by this Act, 
in the same way and subject to the same provisions as an appeal lies against an order passed by a single 
Judge of that Court in exercise of its original civil jurisdiction. 
 
 (2) The Court may review, rescind or vary any order made by it under this Act. 
 
5. I nsolvency experts .—(1)The Commission shall, in consultation with the State Bank, 
maintain a panel of insolvency experts who shall be professionals having a minimum experience of 
fifteen years in the field of accountancy, banking, finance, law, management and sound knowledge of 
insolvency practices of the country. 
 
(2) An insolvency expert shall, for due performance of his functions under this Act, be entitled 
to such remunerations and privileges as may be prescribed by regulations. 
 
(3) The Commission may, by regulations, prescribe the code of conduct for the pa nel of 
insolvency experts to be appointed under this Act and organize training, capacity building and 
accreditation programmes for professional development of such insolvency experts. 
 
CHAPTER II 
Rehabilitation of Debtor 
 
6. Debtor.— A debtor shall be a company incorporated or registered under the Ordinance or 
previous companies legislation and shall not include— 
 
(a) a financial institution; 
 
(b) a company engaged in the business of insurance as defined in clause  (xxvii) of 
section 2 of the Insurance Ordinance, 2000 (XXXIX of 2000); 
 
(c) a company which has debts of less than hundred million Rupees or such other 
sum as the Federal Government may, by notification in the official Gazette, 
specify from time to time; 
 
(d) a company against which an order of dismissal under section 17 has been passed 
within the past five years; 
 
 
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(e) a company with respect to which a plan of rehabilitation has been confirmed 
under this Act within the past seven years; 
 
(f) a company against which a winding up order has already been passed; 
 
(g) a company which has resolved by special resolution that such company be wound 
up voluntarily; 
 
(h) a company against which execution proceedings are pending for satisfaction of 
one or more decrees for an aggregate sum not less than twenty-five percent of the 
value of its assets; or 
 
(i) a company which has availed relief under the BPD Circular No. 29 of 2002 issued 
by the State Bank. 
 
7. Plan of rehabilitation.— (l) A plan of rehabilitation shall specify the following m atters in 
relation to a debtor,— 
 
(a) claims and classes of claims against the debtor; 
 
(b) interests and classes of interests in the debtor;  
 
(c) claims and interests belonging to the debtor; 
 
(d) claims or interests that will not be impaired under the plan of rehabilitation; 
 
(e) claims or interests that will be impaired under the plan of rehabilitation; 
 
(f) places of business of the debtor, details of its assets and any secur ity interests 
created over such assets; 
 
(g) particulars of shareholders, directors and key management of the debtor; and 
 
(h) scheme of implementation of the plan of rehabilitation of the debtor.  
 
(2) Subject to sub-section (1), a plan of rehabilitation may provide for the  following matters, 
in relation to a debtor,— 
 
(a) the settlement, restructuring or rescheduling of any claims or interests or classes 
of claims or interests; 
 
(b) the change of ownership and management of the debtor; 
 
(c) the sale of all or any assets of the debtor and the distribution of proceeds of such 
sale among holders of claims or interests; 
 
(d) the assumption, rejection or assignment of any executory contract or  unexpired 
lease of the debtor; 
 
(e) the enforcement of any claims or interests belonging to the debtor; and 
 
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(f) any other matter concerning rehabilitation of the debtor or dist ribution of 
proceeds of sale of property of the debtor. 
 
8. Commencement of a case.—(1) A debtor may file a petition in the Court for an order of  
mediation, which shall be supported by a plan  of rehabilitation, statement of  affairs and special 
resolution of the debtor approving the plan of rehabilitation. 
 
(2) The qualifying creditors may file a petition in the Court for an order of mediation against a 
debtor. 
 
(3) On first date of hearing, the Court shall issue notice to the parties listed in the petition 
through,— 
 
(a) registered post, acknowledgement due; 
 
(b) courier service; and 
 
(c) publication in one English language and one Urdu language daily newspaper of 
wide circulation in the country;  
 
and service duly effected in any one of the aforesaid modes shall be deemed to be valid service for the 
purposes of this Act. 
 
(4) The notice issued under sub-section (3) shall specify a date of hearing not later than twenty-
one days after completion of the service. 
 
(5) Any person interested of filing a written reply to the petition shall do so at least three days 
prior to the hearing and supply a copy of such reply to the party that filed the petition. 
 
(6) The Court may, where a prima facie case has been made out by the qualifying creditor for 
an order of mediation in relation to a petition filed under sub-section (2), direct— 
 
(a) the debtor to submit, within fifteen days, the statement of affairs in the Court; and 
 
(b) the qualifying creditor to submit, within thirty (30) days after submission of  the 
statement of affairs, a plan of rehabilitation of the debtor in the Court. 
 
9. Statement of affairs .— (1) The statement of affairs of a debtor shall be verified by an 
affidavit of the chief executive officer or a director of the debtor and shall contain the  following 
particulars, namely,— 
 
(a) the assets, debts and liabilities of the debtor; 
 
(b) the particulars of the creditors, stating separately the amount of secured debts and 
unsecured debts and in the case of  secured debts, particulars of the securities 
given, their value and the dates when they were given; 
 
(c) the debts due to the debtor and the particulars of the persons from whom such 
debts are due and the amount likely to be realized therefrom; 
 
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(d) where any property of the debtor is not in its custody or possession, the place 
where and the person in whose custody or possession such property is; 
 
(e) full address of the places where the business of the debtor was conducted during 
six months preceding the relevant date and the names and particulars of the 
persons in charge of the same; 
 
(f) details of any pending suits or proceedings in which the debtor is a party; 
 
(g) latest publically disclosed accounts and the last audited accounts; and 
 
(h) such other particulars as may be prescribed by regulations or as the Court may by 
order require. 
 
(2) Whoever intentionally files a statement of affairs which is false in material particulars or 
falsely denies his signature on any document before the Court, or fails to file the statement of affairs 
without just excuse when so ordered by the Court, shall be guilty of  an offence punishable with 
imprisonment of either description for a term which may ex tend to six months, or with fine, or with 
both. 
 
10. Mediation.— (1) The Court may, after notice and a hearing of the petition filed under 
section 8, pass an order for the appointment of insolvency experts to act as sole mediator or  joint 
mediators, as the case may be, in relation to the plan of rehabilitation filed in the Court. 
 
(2) The mediator appointed by the Court shall carry out mediation between the debtor and 
creditors or different classes of creditors to achieve acceptance of the plan of rehabilitation, whether 
with or without any modifications. 
 
(3) For due d ischarge of his functions under this Act, a mediator s hall have the following 
powers,— 
 
(a) to hold separate meetings of shareholders of the debtor and creditors or different 
classes of creditors; 
 
(b) to invite, scrutinize and determine claims and interest against the debtor;  
 
(c) to determine security interests created over the debtor’s assets; 
 
(d) to determine the debtor’ s assets available for satisfaction of  the claims  of the 
creditors; 
 
(e) to carry out valuation of the assets of the debtor through professional experts 
approved by the State Bank; and 
 
(f) any other power given by the Court, either on its own accord or on application of 
the Mediator, to carry out the functions under sub-section (1). 
 
(4) A mediator shall, from the date of his appointment, submit monthly progress reports and 
may refer any matter to Court for appropriate directions including for the purposes of— 
 
 
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(a) production of any records or property of the debtor in possession of any person; 
and 
(b) examination and attendance of any person concerned with affairs of the debtor.  
 
(5) The person filing the petition shall provide necessary funds to allow the mediator to perform 
the functions under this Act and, where required, the matter may be referred to the Court for necessary 
directions in this regard. 
 
11. Notice of order of mediation .—(1) The person filing the petition under this Act shall 
provide the notice of the order of mediation to all interested parties within t hree days of the order 
through,— 
 
(a) registered post, acknowledgement due; 
(b) courier service; and 
(c) publication in one English language and one Urdu language daily  newspaper of 
wide circulation in the country; 
 
and service duly effected in any one of the aforesaid modes shall be deemed to be valid service for the 
purposes of this Act. 
 
(2) The notice of order of mediation shall specify the appointment of mediator and for filing 
of any claims against, and interests in, the debtor with the mediator within a period of fourteen days 
of publication of notice of the order of mediation. 
 
12. Stay of actions against debtor.— (1) In a case commenced under this Act, the Court may, 
on an application made to it by the debtor or an interested person, pass an order after notice and a 
hearing for— 
 
(a) preservation of assets of the debtor in such manner as the Court may deem fit in 
the circumstance of the case; and 
 
(b) protection of the debtor or its shareholders, directors and guarantors, 
 
Against any imminent adverse action, measure, process or proceeding commenced to recover a claim 
against the debtor or its shareholders, directors and guarantors through sale, transfer, repossession or 
mortgage of assets of the debtor or its shareholders, directors and guarantors, or by creating any rights 
or interests in relation to such assets. 
 
(2) The stay granted under sub-section (1) shall, if not earlier vacated, ipso facto cease to have 
effect on,— 
 
(a)  the confirmation of a plan under section 14; or 
 
(b)  the dismissal of the case under section 17. 
 
(3) Notwithstanding anything contained in sub -section (2), the Court may, on application of 
the qualifying creditors or an interested party and after notice and a hearing, grant such relief from the 
stay granted under sub-section (l) as may be necessary to prevent irreparable harm or loss to the interest 
of that party. 
 
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13. Acceptance of plan of rehabilitation .—(1) The acceptance or rejection of a plan of  
rehabilitation shall not be solicited from a holder of a claim or interest unless such holder is first 
provided with a copy of the plan. 
 
(2) A class of creditors shall be deemed to have accepted a plan of rehabilitation if such plan 
is accepted by the creditors holding at least two-thirds in value of such class. 
 
(3) A class of interests of the debtors, shall be deemed to have accepted a plan of rehabilitation 
if such plan is accepted by holders of at least two-thirds in value of interests of such class. 
 
(4) A class that is not impaired under a plan of rehabilitation and  each holder of a claim or 
interest of such  class are conclusively presumed to have accepted the plan and solicitation of 
acceptance with respect to such class from the holders of claims or interests of such class is not 
required. 
 
14. Confirmation of a plan of rehabilitation.— (1)The Court may, after notice and a hearing, 
confirm a plan of rehabilitation if the plan is in accordance with the provisions of this Act and 
 
(a)  with respect to each class of claims or interests,— 
(i) such class has accepted the plan; or 
(ii) such class is not impaired under the plan; and 
 
(b)   except to the extent that the holder of a particular claim has agreed to a different 
treatment of such claim, the plan provides that the holder of such claim will receive 
cash equal to the allowed amount of such claim. 
 
(2) The provisions of a plan of rehabilitation confirmed by the Court bind the debtor, any entity 
issuing securities under the plan, any entity acquiring property under the plan and any creditor or 
shareholder of the debtor, whether or not the claim or interest of such creditor or shareholder is 
impaired under the plan and whether or not such creditor or shareholder has accepted the plan. 
 
(3) The Court may refuse to confirm a plan if the principal purpose of the plan is avoidance of 
taxes, duties and fiscal charges levied under law. 
 
15. Implementation of plan of rehabilitation.— (1) The Court may, on the application of the 
debtor or qualifying creditors and after notice and a hearing, pass such directions as deemed 
appropriate for the purposes of implementation of the plan of rehabilitation and any person responsible 
for carrying out the plan or any part thereof shall comply with such directions. 
 
(2) The Court may direct the debtor and any other necessary party to execute or deliver or to 
join in the execution or delivery of any instrument required to effect a transfer of property dealt with 
by a plan of rehabilitation confirmed by the Court and to perform any other act, including the 
satisfaction of any charge, that is necessary for the consummation of the charge. 
 
16. Revocation of confirmation of a plan of rehabili tation.— (1) The Court may, on the 
application of any person aggrieved by the plan of rehabilitation, at any time within twelve months of 
the date of confirmation of the plan and after notice and a hearing, make an order, upon such terms as 
the Court thinks fit declaring the confirmation to have been void. 
 
 
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(2) The Court may pa ss an order under sub -section (1 ) if the order of confirmation to be 
declared void was procured by fraud. 
 
(3) An order under this section revoking an order of confirmation shall provide for all such 
measures as are necessary to protect any entity which has acquired rights in good faith reliance on the 
order of confirmation. 
  
17. Dismissal of a case.—(1) Notwithstanding anything to the contrary in this Act, the Court 
may, on the application of any person concerned with the debtor or on its own accord, dismiss a case 
or may suspend all proceedings in a case under this Act at any time, if the Court determines that— 
 
(a) the continuation of proceedings would amount to an abuse of the judicial process; 
 
(b) the person filing the petition has failed to provide necessary funds for mediation 
after getting due opportunity in this regard; and 
 
(c) the media tor has not been able to fully perform one or more of the functions 
specified in section 10 within a period of twelve months from his appointment. 
 
(2) Unless the Court for any reason orders otherwise, the dismissal of a case does not affect 
the validity of any action taken during the pendency of a case. 
 
(3) Unless the Court for any reason orders otherwise, the dismissal of a case shall: 
 
(a)  re-instates,— 
 
(i) any proceeding or custodianship superseded under this Act; 
 
(ii) any transfer avoided under this Act; and 
 
(iii) any charge voided under this Act; 
 
(b)  vacates any order or transfer ordered under this Act; and 
 
(c)  re-vests the property of the estate in such person in which such property was vested 
before the commencement of the case under this Act. 
 
18. Conversion of a case. — (1) A case under this Act may, on an application made to the 
Court, be converted into winding up proceedings for the following reasons:— 
 
(a) failure to achieve the acceptance of plan of rehabilitation in twelve months from 
appointment of an administrator except where the administrator has been removed 
under section 22; or 
 
(b) the Court finds that a petition under this Act was filed by the debtor for fraud lent 
purposes. 
 
(2) The order of conversion under this section shall also provide for the appointment of a 
liquidator and the Court shall for such purpose exercise necessary jurisdiction under the Ordinance. 
 
 
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(3) An administrator appointed in a case under this Act shall not be appointed as liquidator in 
that case. 
 
(4) An application for conversion under this section shall not be filed by any party except— 
 
(a)  the debtor; 
 
(b)  the qualifying creditors; or 
 
(c)  the administrator appointed in the case. 
 
19. Consequences of conversion.— (1) Notwithstanding any provision of the Ordinance, an 
order of conversion under section 18 shall be deemed to be a winding up order by the Court under the 
Ordinance and the winding up of the debtor shall be deemed to have commenced on the date of 
commencement of the case under this Act. 
 
(2) Except as provided in sub-section (3), all proceedings subsequent to an order of conversion 
under section 18 shall be carried out in accordance with the provisions of the Ordinance, including the 
filing of appeal against such order and other remedies provided therein. 
 
(3) Following an order of conversion , a financial institution may initiate or continue with 
proceedings under the Financial Institutions (Recovery of Finances) Ordinance, 2001 (XLVI of 2001) 
without seeking permission from the Court under the Ordinance. 
 
CHAPTER III 
 
Administration of Debtor 
 
20. Appointment of administrator.—(1) The Court may, on a petition made by the qualifying 
creditors and after notice and a hearing, appoint an insolvency expert as administrator of the debtor at 
any time before confirmation of a plan of rehabilitation for one or more of the following reasons 
namely:— 
 
(a) the affairs or business of the debtor have been conducted or managed in a manner 
likely to be prejudicial to the interest of the debtor or qualifying creditors; 
 
(b) any director of the debtor or person concerned with the management of the debtor 
has been guilty of breach of trus t, misfeasance or other miscondu ct towards the 
debtor or qualifying creditors; 
 
(c) the affairs or business of the debtor have been conducted or managed with intent 
to defraud its shareholders or qualifying creditors or for a fraudulent or unlawful 
purpose, or in a manner oppressive of shareholders or qualifying creditors; 
 
(d) the affairs of the debtor have been so conduc ted or managed as to deprive th e        
qualifying creditors of their claims against the debtor in full or in part. 
 
(e) any project owned by the debtor is not in operation for over a period of two years 
or has been in operation intermittently or partially during the preceding two years; 
 
 
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(f) the accumulated losses of the debtor exceed sixty percent of its paid up capital; 
or 
 
(g) any project set up by, or belonging to, the debtor has not commenced operations 
or has not been operating smoothly or its production or performance has so 
deteriorated that— 
 
(i) the market value of its shares as quoted on the stock exchange or the net worth   
of its shares has fallen by more than seventy-five per cent of its par value; 
 
(ii) debt equity ratio has deteriorated beyond 9:1; or 
 
(iii) current ratio has deteriorated beyond 5:l : 
 
                               Provided that the party filing the petition under this section shall 
additionally demonstrate to the Court on balance of probabilities that the 
mediation has not been successful or is not like y to be successful in the 
circumstances of the case. 
 
(2) If an administrator dies or resigns during the pendency of case under this Act or is removed 
by the Court on just cause shown, then a substitute administrator shall be appointed immediately. 
 
(3) Notice of the appointment of administrator in every case under this  Act shall be given by 
the appointed administrator to all interested parties within three working days of his appointment and 
shall additionally be published in one English language and one Urdu language daily newspaper of  
wide circulation in the country and the notice shall provide for filing of any claims against, and 
interests in, the debtor with the administrator within a period of fourteen days of publication of the 
notice. 
 
(4) The Court may award such fees and expenses to an administrator as may be prescribed by 
regulations. 
 
21. Effect of appointment of administrator.—(1) On the appointment of an administrator,— 
 
(a)    all the powers of the directors, chief executive and other officers of the debtor 
shall cease, except as may be required under this Act and except so far as the 
Court may sanction the continuance thereof; and 
 
(b)    all the powers of a receiver appointed prior to the commencement of a case shall 
cease in relation to the property of the debtor. 
 
(2) Where an administrator is appointed, the debtor and its directors and management shall— 
 
(a)    cooperate with the administrator to enable him to perform his duties under this 
Act; 
 
(b)  surrender to the administrator all property of the debtor and any recorded 
information including books, documents, records and papers relating to the 
debtor; and 
 
 
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(c)     appear at any hearings at which its presence is required by either the administrator 
or an administration committee. 
 
22. Removal and termination of administr ator.— (1) The Court may, at any time before 
confirmation of a plan of rehabilitation, on request of an interested party and after notice and a hearing, 
terminate the administrator’ s appointment and restore the debtor to possession of its property and 
management of its business. 
 
(2) The Court, after notice and a hearing, may remove an administrator for mal-feasance, mal-
administration or gross negligence and appoint another administrator. 
 
(3) Whenever the Court removes an administrator under sub -section (2), such administrator 
shall also thereby stand automatically removed in all other cases  under this Act in which such 
administrator is then serving unless the Court makes orders otherwise. 
 
(4) A vacancy in office of the administrator during a case does not abate any pending action or 
proceeding and the successor administrator shall be substituted as a party in such action or proceeding. 
 
23. Powers and duties of an administrator.— (1) An administrator shall— 
 
(a)    operate the debtor’s business; 
 
(b)    prepare and submit in the Court the statement of affairs, where the debtor has not 
done so; 
 
(c)    except to the extent that the Court makes orders otherwise, investigate the acts, 
conduct, assets, liabilities and financial condition of the debtor, the operation of 
the debtor’s business and the desirability of the continuance of such business and 
any other matter relevant to rehabilitation of the debtor; 
 
(d)    as soon as practicable,— 
 
(i)  file a statement of any investigation conducted under clause (c) including 
any fact ascertained pertaining to fraud, dishonesty, incompetence, 
misconduct, mis -management or irregularity in the management of the 
affairs of the debtor; and 
 
(ii) transmit a copy or a summary of any such statement to the administration 
committees, mortgagee, receiver or charge holder and to such other entity  
as the Court designates; 
 
(e) adopt the plan of rehabilitation filed under this Act or seek modification of the   
plan or recommend the winding up of the debtor; 
 
(f) institute or defend any suit, action, prosecution or other legal proceeding, civil or 
criminal, in the name and on behalf of the debtor, to the extent necessary; 
 
(g) subject to approval of the administration committees, make any compromise or 
arrangement with creditors or p ersons claiming to be creditors  or having or 
alleging themselves to have any claim against the debtor; 
 
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(h) be accountable for all property of the debtor; 
 
(i) examine proofs of claim and object to the allowance of any claim that is improper; 
 
(j) unless the Court makes orders otherwise, furnish such information concerning the 
property and business of the debtor as is requested by an interested party; and 
 
(k) make and submit monthly reports, a final report and final accounts of the 
administration in the Court. 
 
(2) For due discharge of the functions under sub -section (1), the administ rator shall have the 
power to,— 
 
(a)    to do anything that is incidental to exercising a power set out in this section; 
 
(b)    to do anything that is necessary or convenient for the purpose of administering 
the affairs of the debtor; and 
 
(c)    not be liable for any loss or damages caused by any act or omission undertaken in 
good faith. 
 
24. Administrator’s account .— (1) Every administrator shall, during his tenure in office, 
present to the Court a comprehensive account of his receipts and payments and dealings as 
administrator together with such further information as may be relevant. 
 
(2) The administrator shall cause his account and all receipts and payments to be audited and 
send the audit report to the Commission, State Bank and the administration committees and to every 
shareholder, where a committee of shareholders has not been constituted, and submit one copy in the 
Court. 
 
25. Employment of professional persons.— (1) The administrator may employ one or more 
advocates, accountants, appraisers, auctioneers or other professional persons to represent or assist the 
administrator in  carrying out the administrator’ s duties under this Act on reasonable terms and 
conditions of employment with the prior approval of the administration committee of creditors. 
 
(2) In cases of emergency, the administrator may appoint a person and submit the details of 
terms and conditions of such appointment along -with due reasons thereof to the administration 
committee of creditors.  
 
26. Administration committees .— (1) The administrator shall appoint a committee of  
creditors and may appoint an additional committee of shareholders, if the administrator deems 
appropriate in a case. 
 
(2) The administration committees shall have adequate representation of different classes of 
creditors and shareholders of the debtor, as the case may be. 
 
(3) On request of an interested party, the Court may make order directing the administrator to 
appoint such additional members of  an administration committee as the Court finds necessary to 
ensure adequate representation of creditors and shareholders, as the case may be. 
 
 
Page 16 of 19 
 
27. Powers and duties  of administration committees .— (1) An administration committee  
shall perform the functions given to it under this Act and in this regard may— 
 
(a)    consult the administrator concerning the administration of the case;  
 
(b)    review the acts, conduct, assets, liabilities and financial condition of  the debtor, 
the operation of the debtor’ s business and the desirability  of the continuance of 
such business and any other matter relevant to the plan of rehabilitation; and 
 
(c)   participate in the finalization of the plan and file with the Court acceptance or 
rejection of the plan, if necessary. 
 
(2) As soon as practicable after the appointment of an administration committee under this Act, 
the administrator shall meet with such commit tee to transact such business as  may be necessary and 
proper. 
 
(3) The powers of an administration committee shall terminate upon the confirmation of a plan 
of rehabilitation or upon the conversion of a case into winding up proceedings. 
 
28. Use, sale or lease of property .—(1) Th e administrator may enter into transactions 
concerning the business and property of the debtor, including the use, sale or lease of the property, in 
the ordinary course of business. 
 
(2) The administrator may use, sell or lease property of the debtor in a manner other than in 
the ordinary course of business only after consultation with the administration committees. 
 
29. Obtaining credit.— (1) The administrator may, to the extent allowed by the administration 
committees, obtain unsecured credit and incur unsecured debt in the course of debtor’s business which 
shall be allowable as an administrative expense. 
 
(2) Where the administrator is unable to obtain unsecured credit for the debtor, the 
administration committees may allow the administrator, on such terms  and conditions as deemed 
appropriate by the committees, to obtain credit secured by a superior or equal security interest on the 
property of the debtor that is subject to an existing security interest: 
 
Provided that the same has been approved by the holder of the existing security interest on the 
property of the debtor on which such superior or equal security interest is proposed to be granted. 
 
30. Assumption and rejection of executory co ntracts and unexpired leases. —(1) The 
administrator may, with the prior approval of the Court, assume or reject any executory contract or 
unexpired lease of the debtor including— 
 
(a) any executory contract relating to the employment or services of any person; and 
 
(b) any unexpired lease of immovable property. 
 
(2) The administrator may not reject any executory contract or unexpired lease without giving 
notice of his intent to reject to all parties to such executory contract or unexpired lease. 
 
 
Page 17 of 19 
 
(3) Any party which is prejudiced by the debtor’ s rejection of an  executory contract or 
unexpired lease may file a claim for damages and such claim shall be deemed to be a breach of such 
contract or lease occurring immediately prior to the date of filing of the petition. 
 
31. Claims  and interests .— (1) Within fourteen days of the publication of the notice of 
appointment of administrator, proof of any claims or interests shall be filed with the administrator by 
the creditors, shareholders or interested parties, as the case may be. 
 
(2) Any person who does not timely file a claim or interest will be deemed to have no claim or 
interest against the debtor unless the delay in filing the claim or interest is condoned, after notice and 
a hearing, by the Court for just cause shown. 
 
(3) Any party aggrieved by a determination of the administrator of any claims and interests 
may prefer an appeal to the Court which shall determine the amount of such claims or interests. 
 
32. Allowance of claims for administrative expenses.— (1) After notice and a hearing there 
shall be allowed administrative expenses, from time to time, including— 
 
(a)     the actual, necessary costs and expenses of preserving the business and property 
of the debtor, including 
 
(i)     any credit facility obtained by the debtor; 
 
(ii)    wages, salaries or commissions for services rendered after the appointment 
of administrator; 
 
(iii)  payment for raw materials supplied to the debtor for its business; and 
 
(iv)   payment for goods supplied to the debtor in the ordinary course of its   
business; and 
 
(b)  the fees and expenses awarded to the administrator under section 20. 
 
(2) Administrative expenses allowed under this section shall have priority  over all other 
expenses and claims. 
 
33. Handover  of property of debtor  to administrator. — (1) Any person in possession, 
custody or control of a property that the administrator may use, sell or lease under this Act shall deliver 
such property to the administrator or account for the value of such property. 
 
(2) Any person who owes a debt to the debtor, which is due for payment, payable on demand 
or payable on order, shall pay such debt to or on the order of the administrator, except to the extent 
that such debt may be approved by the administrator to be offset against a claim of such person against 
the debtor. 
 
(3) After notice and a hearing, the Court may excuse compliance with any provision of this 
section, if the interests of creditors would be better se rved by, not handing over possession , custody 
or control of such property to the administrator. 
 
 
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34. Avoidance of transfers.— (1) Except as provided under sub-section (2), an administrator 
may, with the approval of the Court, avoid a transfer of an interest of the debtor in property in favour 
of a creditor where such transfer— 
 
(a)  is made on account of an antecedent debt owed by the debtor before such transfer; 
 
(b)  is made— 
 
(i)     within six months before the date of the appointment of the administrator; 
or 
 
(ii)  if the  creditor is an insider, within one year before the date of the  
appointment of the administrator; and 
 
(c)    enables such creditor to receive more than what such creditor would have received 
otherwise. 
 
(2) The administrator shall not avoid a transfer where such transfer is,— 
 
(a)    intended by the debtor and the creditor to be a contemporaneous  exchange for 
new value given to the debtor and is a substantially contemporaneous exchange; 
 
(b)    made in payment of a debt incurred by the debtor in the ordinary course of business 
and according to ordinary business terms; or 
 
(c)    for the benefit of a creditor to the extent that such creditor gives new value to or 
for the benefit of the debtor subsequent to the transfer. 
 
(3) To the extent that a transfer is avoided under  this section, the Court may al low the 
administrator to recover the property transferred or the value of such property from the initial 
transferee or subsequent transferee. 
 
(4) For the purposes of this section the expression, “new value” means money worth in goods, 
services or new credit or released by a transferee of property previously transferred to such transferee 
in a transaction that is neither void nor voidable by the administrator under law, including proceeds of 
such property, but does not include an obligation substituted for an existing obligation. 
 
35. Abandonment of property of debtor.—(1) After notice and a hearing, the administrator 
may abandon any property of the debtor that is burdensome or that is of inconsequential value and 
benefit to the debtor. 
 
(2) On request of an interested party and after notice and a hearing, the Court may order the 
administrator to abandon any property of the debtor that is burdensome or that is of inconsequential 
value and benefit to the debtor. 
  
 
 
 
 
 
 
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CHAPTER IV 
 
Miscellaneous 
 
36. Act not in derogation.—This Act shall be in addition to and not in derogation of any other 
law. 
 
37. Act to override contracts, instruments, memorandum and articles.—Save as otherwise 
expressly provided in this Act, the provisions of this Act shall have effect notwithstanding anything 
to the contrary contained in any contract, instrument, memorandum or articles of a company or in any 
agreement executed by a company or in any resolution passed by the company in a general meeting 
or by its directors,  whether the same is registered,  executed or passed, before or after the 
commencement of this Act. 
 
38. Limitation.— (l) Except as provided otherwise in this Act, the provisions of the Limitation 
Act, 1908 (IX of 1908) shall apply to the proceedings under this Act. 
 
(2) Notwithstanding anything contained in the Limitation Act, 1908 (IX of 1908), in computing 
the time within which an administrator may institute a suit for the recovery of any debt due to the 
debtor, the period which elapses between the filing of a petition under the is Act and the passing of 
order of mediation under this Act or period of one year, which ever be greater, shall be excluded. 
 
39. Power to require delivery of property .—Without prejudice to any obligation imposed 
under any other provision, the Court may at any time after passing order of mediation under this Act 
require any trustee, receiver, banker, agent, officer or employee or former officer or employee or 
auditor of the debtor to pay, deliver, convey, surrender or transfer forthwith or within such time as the 
Court directs, to the administrator, if one has been appointed, any money, property or books and papers 
including documents in his hands to which debtor is prima facie entitled, which is not subject to any 
charge. 
 
40. Power to make rules .—The Minister -in-charge of the Federal Government may, by 
notification in the official Gazette, make such rules as may be necessary to carry out the purposes of 
this Act. 
 
41. Power to make regulations.—The Commission may, by notification in the official 
Gazette, make regulations in respect of the matters expressly required in this Act to be prescribed by 
the Commission. 
 
42. Power to issue directives, circulars, guidelines, etc.—The Commission may, from time 
to time, issue such directives, circulars and guidelines as may be necessary for carrying out the 
purposes of this Act, the rules or regulations made thereunder. 
 
43. Power to remove difficulties. —If any difficulty arises in giving effect to the provisions 
of this  Act, the Minister -in-charge of the  Federal Government may, by notification in the official 
Gazette, make such order not inconsistent with the provisions of this Act and as may be necessary to 
remove the difficulty. 
 
___________ 
 
 
RGN Date: 24-07-2025