a. Whenever the commission shall function in any municipality having a school district coterminous therewith which is governed by the provisions of chapter seven of the Title Education (s. 18:7-1 et seq.), then, the Superior Court may take jurisdiction of an action brought by any creditors of such school district where the action is instituted by the plaintiff or plaintiffs on behalf of themselves and all other creditors of the school district for the approval of a plan of adjustment or composition of the claims of all creditors or of a class or classes of them similarly situated. The court may proceed in the action in a summary manner or otherwise, and the school district, the commission and all creditors of the school district shall be made parties to the action. Any creditor of the school district may appear and assert his rights.

b. In any such action, after hearing on the plan proposed or on the plan as modified by order and if such plan as proposed or modified is approved in writing by creditors representing eighty-five per centum (85%) in amount of the indebtedness affected thereby and by the school district and the commission, the Superior Court may authorize and approve such adjustment or composition if the court determines (1) that the school district is unable to pay in full according to their terms the claims proposed to be adjusted or composed, and perform its public functions and preserve the value of property subject to taxation, (2) that the adjustment or composition is substantially measured by the capacity of the school district to pay, (3) that it is in the interest of all the creditors affected thereby, and (4) that it is not detrimental to other creditors of the school district or of the municipality.

c. The plan of adjustment or composition so authorized and approved shall forthwith and without any further action of any kind be binding upon all the creditors included in such plan, whether or not they appear in such action, and in so far as said plan provides for the substitution of any new bonds, notes, or other obligations of the school district in place of any outstanding bonds, notes or other obligations or claims then outstanding, such substitution shall be effectual from and after such date as may be fixed by the court.

d. After the institution of any action provided for by this section and pending the determination thereof, the Superior Court may continue the stay provided by section 52:27-62 of this Title. In the event that a plan shall be authorized and approved pursuant to this article, the court shall retain jurisdiction of such action and thereafter no creditor whose claim is included in such adjustment or composition shall be authorized to bring any action or proceeding of any kind or character for the enforcement of his claim except with the permission of the court and then only to recover and enforce the rights given to him by such adjustment or composition.

e. Notwithstanding any provisions of this article, the commission shall not approve any adjustment or composition, or plan presented pursuant to this section, which provides for the reduction in the principal amount of any outstanding notes or bonds of the school district.

Amended by L.1953, c. 49, p. 885, s. 50.