Preparation and Approval of Resolution Plan: formula sheet

Key formulas

Section 30(2)(a): IRP costs

Plan must provide for payment of insolvency resolution process costs, in the manner specified by the Board, in priority to payment of other debts

Costs come first, before every other debt.

Section 30(2)(b): operational creditors

Payment to operational creditors ≥ the higher of (i) amount payable on liquidation under Section 53, and (ii) amount payable if the plan's distributable amount were distributed in Section 53(1) order of priority

The law says 'whichever is higher'. Liquidation value alone is not enough.

Section 30(2)(b): dissenting financial creditors

Payment to financial creditors who do not vote in favour ≥ amount payable to them under Section 53(1) on liquidation

Distribution must be fair and equitable (Explanation 1).

Section 30(2)(c)-(f): other conditions

Management of affairs after approval; implementation and supervision; no contravention of law; conformity with Board requirements

Shareholder approvals required under the Companies Act, 2013 or other law for actions under the plan are deemed given.

Regulation 38(1): priority of payment

Operational creditors paid in priority over financial creditors; dissenting financial creditors paid in priority over assenting financial creditors

If payment is in stages, dissenting financial creditors get at least pro rata payment and priority in each stage.

Regulation 38(1A) and (1B): statements

Statement on how interests of all stakeholders are dealt with; statement on any past failure to implement another approved plan by the applicant or related parties

Both are mandatory disclosures.

Regulation 38(2): plan must provide

(a) term and implementation schedule; (b) management and control during term; (c) adequate means of supervision; (d) manner of pursuing avoidance and fraudulent or wrongful trading proceedings and distributing proceeds

Clause (d) does not apply to plans submitted to the Adjudicating Authority on or before the date stated in its proviso.

Regulation 38(3): demonstration

Plan must show it addresses the cause of default, is feasible and viable, has provisions for effective implementation, has provisions for approvals and timeline, and that the applicant can implement it

Five items. Learn them as a list.

Regulation 38(3A): beneficial ownership and Section 32A

Statement of beneficial ownership of natural persons who ultimately own or control the applicant, plus an affidavit on eligibility or otherwise for the benefit of Section 32A

Inserted w.e.f. 23.12.2025.

Regulation 38(4): monitoring committee

CoC shall consider setting up a monitoring committee; it submits quarterly reports to the Adjudicating Authority

If the RP is a member, his monthly fee cannot exceed the monthly fee he received during CIRP.

Section 30(4): CoC approval

Vote of not less than 66% of voting share of financial creditors

CoC considers feasibility, viability and manner of distribution.

General bar

Ineligible if the person OR any person acting jointly or in concert with them falls in clauses (a) to (j) of Section 29A

Always check the person and the persons acting in concert.

Clause (a), (b)

Undischarged insolvent; wilful defaulter as per RBI guidelines under the Banking Regulation Act, 1949

Both are absolute bars on the text of the clauses.

Clause (c) NPA

Ineligible if, at the time of submission of the plan, the person has an account, or an account of a corporate debtor under their management or control or of which they are promoter, classified as NPA, AND at least one year has lapsed from the date of classification till the date of commencement of CIRP

Cure: pay all overdue amounts with interest and charges before submitting the plan. Both conditions (NPA at submission and one year gap) are needed.

Clause (c) exceptions

Bar does not apply to a financial entity that is not a related party of the corporate debtor; and for an NPA account acquired under a prior approved resolution plan, the bar does not apply for three years from the date of approval by the Adjudicating Authority

A financial creditor related only because of debt-to-equity conversion is not treated as a related party for this purpose.

Clause (d) conviction

Convicted for an offence punishable with imprisonment for two years or more under an Act in the Twelfth Schedule, or seven years or more under any other law

Bar ends two years after release from imprisonment. It does not apply to a connected person under Explanation I clause (iii).

Clause (e), (f)

Disqualified as director under the Companies Act, 2013; prohibited by SEBI from trading in securities or accessing securities markets

The clause (e) bar does not apply to a connected person under Explanation I clause (iii).

Clause (g)

Promoter or in management or control of a corporate debtor in which a preferential, undervalued, extortionate credit or fraudulent transaction occurred and the Adjudicating Authority made an order under the Code

Exception: the transaction took place before the applicant acquired the corporate debtor under an approved resolution plan or a plan or scheme approved by a financial sector regulator or court, and the applicant did not contribute to it.

Clause (h)

Executed a guarantee for a creditor of a corporate debtor whose CIRP was admitted on that creditor's application, and the guarantee has been invoked and remains unpaid in full or part

A guarantee not invoked, or fully paid, does not bar.

Clauses (i), (j)

(i) Disability under foreign law corresponding to clauses (a) to (h); (j) a connected person not eligible under clauses (a) to (i)

Connected person: promoter or person in management or control of the applicant; person who will be promoter or in management or control of the corporate debtor's business during implementation; and the holding, subsidiary, associate company or related party of such persons.

Financial entity

Scheduled bank; certain foreign regulated entities; investment vehicles, FII, FPI, foreign venture capital investor; ARC registered with RBI; SEBI-registered AIF; other notified categories

They must meet criteria notified by the Central Government in consultation with the financial sector regulator.

CoC voting threshold (Section 30(4))

Approval needs votes ≥ 66% of the voting share of the financial creditors

Counted on voting share, not on number of creditors. Earlier threshold was 75%.

Operational creditors' minimum (Section 30(2)(b)(i)-(ii))

Payment to operational creditors ≥ higher of (a) liquidation amount under Section 53, (b) amount if plan money were distributed per Section 53(1) priority

The test is the higher of the two amounts, not either one.

Dissenting financial creditors' minimum

Payment to dissenting financial creditors ≥ amount they would get under Section 53(1) in liquidation

Applies to financial creditors who do not vote in favour.

Factors the CoC must consider

Feasibility and viability + manner of distribution (may reflect Section 53(1) priority and security interest) + other Board requirements

Record these in your answer as the basis of the vote.

Who votes

Financial creditors in the CoC vote; the resolution applicant has no vote unless also a financial creditor

Section 30(5) proviso.

Pre-packaged process (Section 54K(13))

Approval of base plan or selected plan needs votes ≥ 66% of the voting shares

Same threshold as Section 30(4), applied in the pre-pack Chapter.

Approval test (Section 31(1))

CoC-approved plan + meets Section 30(2) requirements + provisions for effective implementation → NCLT approves by order

Effective implementation is a proviso to Section 31(1). Say it in every answer.

Binding effect (Section 31(1))

Approved plan binds: corporate debtor, employees, members, creditors (including Central Government, State Government, local authority owed statutory dues), guarantors, other stakeholders

Binding on those involved in the plan, not on strangers to it.

Rejection (Section 31(2))

Plan does not conform to requirements → NCLT may reject by order

The Code says 'may', so state the rule as the Code words it.

Consequences of approval (Section 31(3))

(a) Section 14 moratorium ceases; (b) RP forwards records and plan to the Board

Two consequences. Do not mix them up.

Other approvals (Section 31(4))

Resolution applicant obtains approvals under other laws within 1 year from approval, or period in that law, whichever is later

Proviso: if the plan has a combination under section 5 of the Competition Act, 2002, CCI approval is needed before the CoC approves the plan.

Binding effect of approved plan

Section 31(1): NCLT approval order binds corporate debtor, employees, members, creditors (incl. Central and State Governments and local authorities for statutory dues), guarantors and other stakeholders

NCLT must first be satisfied that the plan meets section 30(2) and has provisions for effective implementation.

Effects of approval order

Section 31(3): (a) section 14 moratorium ceases; (b) RP forwards records and the plan to the Board

Both follow automatically once the order under section 31(1) is passed.

Time for statutory approvals

Section 31(4): later of (i) 1 year from NCLT approval, or (ii) the period provided in the relevant law

Applies to approvals required under any law for the time being in force.

CCI approval for combination

Proviso to section 31(4): CCI approval needed before CoC approves the plan

Applies where the plan contains a combination under section 5 of the Competition Act, 2002.

Plan to cover management and supervision

Section 30(2)(c) and (d): management of affairs after approval; implementation and supervision of the plan

This is the statutory hook for a monitoring committee.

Appeal to NCLAT

Section 61(2): within 30 days; condonation up to 15 more days for sufficient cause

Appeal lies by any person aggrieved by the NCLT order.

Grounds of appeal against approval

Section 61(3): (i) contravention of law; (ii) material irregularity by RP during CIRP; (iii) operational creditors' debts not provided as specified by Board; (iv) CIRP costs not paid in priority; (v) non-compliance with other Board criteria

List is exhaustive for appeals against a section 31 approval order.

Pre-pack parallel

Section 54L(2): effects of section 31(1), (3) and (4) apply mutatis mutandis to pre-pack approval

NCLT decides within 30 days of receiving the plan under section 54L(1).

Quick revision

• Section 31(1): the Adjudicating Authority approves the plan if it meets the requirements of section 30(2), and the CoC has approved it under section 30(4).
• An approved plan binds the corporate debtor, its employees, members, creditors, guarantors and other stakeholders, including the Central Government, State Governments and local authorities owed statutory dues.
• Proviso to section 31(1): the Adjudicating Authority must be satisfied that the plan has provisions for its effective implementation.
• If the plan does not conform to the requirements, the Adjudicating Authority may reject it by order.
• After approval, the section 14 moratorium ceases to have effect.
• After approval, the resolution professional forwards all records and the plan to the Board for its database.
• Section 31(4): the applicant must obtain approvals required under any law within one year from the approval date, or within the period in that law, whichever is later.
• If the plan involves a combination under section 5 of the Competition Act, 2002, CCI approval must come before CoC approval.
• Regulation 38(1): operational creditors are paid in priority over financial creditors.
• Dissenting financial creditors with voting rights are paid in priority over assenting financial creditors, and at least pro rata in each stage if payment is staged.
• A plan must state how it deals with the interests of all stakeholders and disclose any past failure to implement an approved plan by the applicant or its related parties.
• The CoC shall consider a monitoring committee, which submits quarterly reports to the Adjudicating Authority.

Common mistakes

• Saying operational creditors must get only the liquidation value. Fix: Write both limbs and say 'whichever is higher'.
• Saying the CoC checks Section 30(2) conformity. Fix: The RP examines each plan and presents to the CoC only those that conform.
• Treating any NPA account as an automatic bar under clause (c). Fix: Check two things: the account is NPA at the time of submission and at least one year has lapsed from classification till commencement of CIRP. Then check the payment proviso.
• Ignoring persons acting jointly or in concert. Fix: Begin every answer by applying the test to the applicant and to those acting jointly or in concert, plus connected persons under clause (j).
• Writing that the CoC approves with 75% vote. Fix: Write 66% of the voting share of financial creditors under Section 30(4), and mention the 2018 change only as a contrast.
• Counting creditors by head instead of by voting share. Fix: Always compute the percentage of voting share. A single large creditor can decide the vote.
• Saying the NCLT approves the plan on its commercial merits. Fix: Frame the NCLT's role as a compliance check against Section 30(2) and the effective implementation proviso.
• Omitting the effective implementation proviso. Fix: Always write it as a separate condition. Examiners look for it.
• Saying approvals must be obtained within one year in all cases. Fix: Write 'one year from approval or the period provided in such law, whichever is later'.
• Counting the one-year period from the CoC approval. Fix: The period runs from the date the Adjudicating Authority approves the plan under section 31(1).

Exam tips

• Structure answers as provision, analysis, conclusion. Quote Section 30(2) and Regulation 38 by number.
• In number questions, compute the liquidation amount and the Section 53(1) amount separately, then pick the higher for operational creditors.
• Always name who acts: the applicant submits, the RP examines, the CoC approves, the Adjudicating Authority receives the approved plan.
• Use short lists for mandatory contents. Examiners reward complete lists, so include the Regulation 38 items beyond Section 30.
• Mention the Section 29A affidavit when the question touches on submission.
• Always quote 'Section 29A' and the clause letter. Use the exact words: 'acting jointly or in concert'.
• Draw out the conditions of clause (c): NPA at submission, one year gap, and the payment proviso. Examiners test these.
• Learn the exceptions along with each clause. Many questions turn on a proviso.