Risk Management in Banking and Insurance · Management of Non-Performing Assets (NPAs)

Corporate Insolvency Resolution Process (CIRP) under IBC

Updated 11 October 2026 · Fact-checked

The Corporate Insolvency Resolution Process (CIRP) is the time-bound process under the IBC, 2016 to rescue a defaulting company. A creditor applies, a moratorium starts, a resolution professional runs the company, the committee of creditors votes on a plan, and the Adjudicating Authority approves it. If no plan is approved, liquidation follows.

Understand Corporate Insolvency Resolution Process under IBC

The IBC, 2016 gives lenders a time-bound way to recover from a defaulting company. The aim is to keep the business running if it can be saved, and to pay creditors in a fixed order of priority. For banks, it is a major route for NPA recovery, because control of the company moves away from the promoters.

The process starts when a financial creditor (such as a bank), an operational creditor or the corporate debtor itself applies to the Adjudicating Authority after a default. Once the application is admitted, a moratorium begins. During it, suits and recovery actions against the company stop, and assets cannot be sold off. This protects the value of the business while a solution is found.

An interim resolution professional takes over the management of the company, and the board's powers are suspended. The creditors' committee confirms or replaces the professional, who then works as the resolution professional (RP). The RP collects claims, prepares an information memorandum and invites resolution plans.

The committee of creditors (CoC) decides on the plan, and only the financial creditors vote on it. A resolution applicant submits a plan to the RP. Under Section 30, the RP checks each plan against the legal requirements and presents the conforming plans to the CoC. The CoC approves a plan by a vote of not less than 66% of the voting share of the financial creditors, after considering its feasibility and viability and the manner of distribution proposed. The RP then submits the approved plan to the Adjudicating Authority.

If the plan is approved, it binds all stakeholders. If the CoC does not approve a plan in time, or the plan is rejected, the company goes into liquidation. Assets are then sold and proceeds are distributed under the waterfall in Section 53.

Note that the Code also has a separate route, the pre-packaged insolvency resolution process, which starts at Section 54A. It is open to MSME corporate debtors (Section 54A(1)) and to other corporate debtors that meet the conditions in Section 54A(2). In it, financial creditors who are not related parties and hold at least 66% by value approve the proposed resolution professional (Section 54A(2)(e)) and the filing of the application (Section 54A(3)). That 66% by value is not the vote on the plan. Section 54L(1) lets the Adjudicating Authority approve a plan, already approved by the committee of creditors under Section 54K, if it meets the requirements in Section 30(2). Do not mix this route up with the regular CIRP.

Key rules to remember

CoC approval threshold (Section 30(4)): Approval needs votes ≥ 66% of the voting share of the financial creditors; Earlier it was 75%; the amended text says sixty-six per cent. Only financial creditors vote.
RP's duty on each plan (Section 30(2)): Plan must cover: CIRP costs, operational creditors, dissenting financial creditors, management, implementation, legality, Board requirements; The RP confirms this before presenting the plan to the CoC (Section 30(3)).
Minimum payment to operational creditors (Section 30(2)(b)): Payment ≥ higher of (i) amount they would get in liquidation under Section 53, or (ii) amount they would get if the plan's total distribution were made in the Section 53(1) order of priority; Compute both measures. The higher one is the floor. The plan's offer must be at least that floor.
Minimum payment to dissenting financial creditors: Payment ≥ amount they would get under Section 53(1) in liquidation; Applies to financial creditors who do not vote in favour of the plan. Distribution must be fair and equitable.
Priority of CIRP costs: CIRP costs are paid in priority to other debts of the corporate debtor; Section 30(2)(a).
Resolution applicant's vote (Section 30(5)): May attend the CoC meeting; no vote unless also a financial creditor; Prevents a conflict of interest in voting on its own plan.

How to solve Corporate Insolvency Resolution Process under IBC questions

Use this order for any question on the CIRP, from a short note to a case on a defaulting borrower.

1Identify who starts the process and the default that triggers it (financial creditor, operational creditor or the corporate debtor).
2State the immediate effects of admission: moratorium and appointment of the interim resolution professional, with the board's powers suspended.
3Name the RP's tasks: collect claims, prepare the information memorandum, invite plans, and check each plan under Section 30(2).
4Apply the CoC rules: only financial creditors vote, and the approval threshold is not less than 66% of the voting share.
5Test the plan against the minimum-payment rules for operational creditors and dissenting financial creditors.
6Trace the plan to the Adjudicating Authority, which approves or rejects it. State the result: a binding plan, or liquidation.
7End with a conclusion tied to the case, such as the expected recovery for the bank compared with liquidation.

Quickest way: Stage-wise checklist for CIRP questions

When to use it: Use it for MCQs and short notes when time is limited.

Write the sequence in one line: application, admission, moratorium, RP, CoC, plan, approval, liquidation if it fails.
Note who does what: the RP examines plans, the CoC votes, the Adjudicating Authority approves.
For numbers, convert votes into a percentage of voting share of financial creditors and compare with 66%.
For payment checks, compare the plan's offer with the Section 53 liquidation value for that creditor.

Common mistakes in Corporate Insolvency Resolution Process under IBC

Saying operational creditors vote on the resolution plan.
Students think every creditor votes on the plan.
Fix: Under Section 30(4), the plan is approved by a vote of the financial creditors on their voting share. Operational creditors are protected by the minimum-payment rule in Section 30(2)(b), not by a vote on the plan.
Quoting the approval threshold as 75%.
Old notes and earlier versions of the Code used seventy-five.
Fix: The current Section 30(4) text says not less than sixty-six per cent. of voting share.
Saying the RP approves the resolution plan.
The RP handles the whole process, so students assume it also decides.
Fix: The RP examines and presents the plan. The CoC approves it, and the Adjudicating Authority then approves it.
Giving a dissenting financial creditor a share of more than the liquidation entitlement as a requirement.
Confusion between a floor and a fixed amount.
Fix: The rule sets a minimum: not less than the amount they would get under Section 53(1) in liquidation.
Mixing up the regular CIRP with the pre-packaged process.
Both use a resolution plan and the CoC, and Section 54L(1) refers to the requirements in Section 30(2).
Fix: The pre-pack (Section 54A onwards) is open to MSME corporate debtors under Section 54A(1) and to other corporate debtors that meet the Section 54A(2) conditions. The 66% by value approval of financial creditors, not being related parties, applies to proposing the RP (Section 54A(2)(e)) and to filing the application (Section 54A(3)). It is not the plan-approval vote. Say which route the question refers to.
Letting the resolution applicant vote on its own plan.
Students overlook Section 30(5).
Fix: The applicant can attend the meeting but has no vote unless it is also a financial creditor.

Worked examples

Example 1

In a CIRP of Sundaram Textiles Ltd, the financial creditors hold voting shares as follows: Bank A 40%, Bank B 30%, NBFC C 20%, Fund D 10%. A resolution plan is voted on. Bank A, Bank B and Fund D vote for it. NBFC C votes against. Is the plan approved by the CoC?

Show the solution

Votes in favour = 40% + 30% + 10% = 80% of the voting share.
The required threshold is not less than 66% of the voting share of the financial creditors (Section 30(4)).
80% ≥ 66%, so the threshold is met.
NBFC C dissented. It must still receive at least what it would get under Section 53(1) in liquidation.

Answer: Yes, the plan is approved by the CoC with 80% of the voting share. NBFC C, as a dissenting financial creditor, must be paid not less than its liquidation entitlement under Section 53(1).

Example 2

The RP received a plan for Kaveri Steels Ltd that offers operational creditors ₹8 lakh. If the corporate debtor were liquidated, operational creditors would receive ₹10 lakh under Section 53. If the plan's total distribution were made in the Section 53(1) order of priority, operational creditors would receive ₹12 lakh. Does the plan satisfy Section 30(2)(b)? Can the RP present it to the CoC?

Show the solution

Section 30(2)(b) sets the floor for operational creditors at the higher of two amounts.
Amount (i): what operational creditors would get in liquidation under Section 53 = ₹10 lakh.
Amount (ii): what they would get if the plan's total distribution were made in Section 53(1) order = ₹12 lakh.
Higher of the two = ₹12 lakh, so the floor is ₹12 lakh.
The plan offers ₹8 lakh, which is less than ₹12 lakh.
Under Section 30(3), the RP presents to the CoC only the plans that meet the conditions in Section 30(2).

Answer: No. The floor is ₹12 lakh, the higher of ₹10 lakh and ₹12 lakh. The plan offers only ₹8 lakh, so it does not satisfy Section 30(2)(b). The RP should not present it to the CoC under Section 30(3).

Exam tips

Write the CIRP stages in order. Examiners give marks for sequence and for naming who acts at each stage.
Always write the 66% threshold with the words voting share of financial creditors.
In case questions, calculate the percentage of votes first, then state the legal conclusion and the effect on the dissenting creditor.
Link the answer to NPA recovery: control moves from promoters, a moratorium protects assets, and the bank may recover more than in separate actions.
If a question mentions pre-packaged resolution, state that it is open to MSME corporate debtors (Section 54A(1)) and to other corporate debtors meeting the Section 54A(2) conditions. Add that financial creditors, not being related parties, holding at least 66% by value approve the proposed RP (Section 54A(2)(e)) and the filing of the application (Section 54A(3)). Do not call this the plan vote.

Practice questions from Management of Non-Performing Assets (NPAs)

Corporate Insolvency Resolution Process under IBC in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Corporate Insolvency Resolution Process under IBC: frequently asked questions

How does the IBC help banks recover NPAs?

It gives banks a collective, time-bound process in which the company's management changes hands and a moratorium protects its assets. Financial creditors vote on a plan. If the plan fails, liquidation distributes proceeds in a legal order of priority.

Who votes in the committee of creditors and what does it do?

Only the financial creditors vote on a resolution plan. The CoC considers the plans presented by the RP and approves one by not less than 66% of the voting share of the financial creditors, after looking at feasibility, viability and the manner of distribution.

Does the resolution professional approve the resolution plan?

No. The RP examines each plan against Section 30(2), presents the conforming plans to the CoC, and submits the plan approved by the CoC to the Adjudicating Authority. The CoC and the Adjudicating Authority decide.

What happens if no resolution plan is approved?

The company moves to liquidation. Its assets are sold and the proceeds are distributed according to the order of priority in Section 53.