Corporate Restructuring, Valuation and Insolvency · Pre-Packaged Insolvency Resolution Process

Termination of Pre-Packaged Insolvency under Section 54N

Updated 11 October 2026 · Fact-checked

Section 54N tells the Adjudicating Authority how to end a pre-pack. When the resolution professional files for termination because no plan was approved in time, or the plan was rejected, or the committee of creditors votes 66% to terminate, the Authority must pass a termination order within thirty days. The corporate debtor bears the costs.

Understand Termination under Section 54N

A pre-packaged insolvency resolution process (pre-pack) is meant to be quick and debtor-friendly. It has a short clock and a base resolution plan already prepared. Sometimes it does not work. Section 54N is the exit door. It sets out when and how the Adjudicating Authority ends the process.

There are three triggers in the section. First, the resolution professional (RP) files an application under the proviso to section 54K(12). Second, the RP files under section 54D(3) because no plan was approved by the committee of creditors (CoC) within ninety days of the pre-packaged insolvency commencement date. Third, under section 54N(2), the RP tells the Authority that the CoC has decided, by at least 66% of voting shares, to terminate. This can happen any time after the commencement date but before the plan is approved under section 54K(4) or (12).

On the first two triggers, section 54N(1) says the Authority shall, within thirty days of the application, terminate the process by order. It must also say how pending avoidance proceedings continue. These are proceedings under Chapter III (avoidable transactions) and under sections 66 and 67A. On the third trigger, the Authority also passes an order under section 54N(1).

The costs rule is simple. Under section 54N(3), the corporate debtor bears the pre-pack process costs. This is different from a CIRP, where such costs would be part of insolvency resolution process costs.

There is a special case in section 54N(4). If the Authority had earlier passed an order under section 54J(2) and the process must now be terminated, the Authority must pass a liquidation order under section 33(1)(b)(i), (ii) and (iii), and the pre-pack costs become part of the liquidation costs. Section 54L(3) links in too. If the Authority rejects a plan that does not meet the requirements, it may also pass an order under section 54N. A different exit is section 54-O, where the CoC, by 66%, chooses to move the debtor into a regular CIRP instead of simply terminating.

Key rules to remember

Trigger 1 and 2: RP application: RP applies under proviso to s.54K(12) or s.54D(3) → Authority terminates within 30 days of application; Section 54D(3) application is filed on the day after the 90-day plan-submission period expires with no CoC-approved plan.
Trigger 3: CoC decision: CoC vote ≥ 66% of voting shares, after commencement date but before plan approval under s.54K(4) or (12) → Authority passes order under s.54N(1); The RP intimates the Authority of the decision. The Authority then passes the termination order.
Contents of termination order: Order = (i) terminate pre-pack + (ii) manner of continuation of avoidance proceedings (Chapter III, s.66, s.67A); Both parts are mandatory under s.54N(1).
Costs: On termination under s.54N(1): corporate debtor bears pre-pack costs; Section 54N(3).
Liquidation special case: Order under s.54J(2) passed earlier + termination required → liquidation under s.33(1)(b)(i)-(iii); pre-pack costs form part of liquidation costs; Section 54N(4) applies notwithstanding the rest of the section.
Related time limits: Process: 120 days from commencement date; plan to Authority: 90 days (s.54D); Missing the 90-day plan mark triggers the termination application.
Alternative exit: CoC vote ≥ 66% → CIRP (s.54-O); Authority decides within 30 days of intimation; The debtor must be eligible for CIRP under Chapter II. Pre-pack costs become CIRP costs.

How to solve Termination under Section 54N questions

Use this order for any question on how or why a pre-pack ends.

1Identify the trigger: no plan approved by day 90, plan not meeting requirements, CoC vote to terminate, or a failed plan after a section 54J(2) order.
2Check the conditions for that trigger. For the CoC route, test the 66% of voting shares and the timing (after commencement, before plan approval).
3Name the correct provision: section 54N(1), 54N(2) or 54N(4), with section 54D(3), 54K(12) proviso or 54L as the source.
4State what the Authority must do and by when: within thirty days, by order, terminate and provide for continuation of avoidance proceedings.
5State who bears the costs: the corporate debtor, or liquidation costs if section 54N(4) applies.
6Check the alternatives: CIRP under section 54-O or liquidation, and state which applies on the facts.
7Conclude with the final order and one practical point, such as the RP's filing or the continuing section 66 proceedings.

Quickest way: Trigger-Order-Cost check

When to use it: Use this for short-answer or case questions with limited time.

Trigger: write which of the three triggers applies.
Order: write 'terminate within 30 days, and provide for continuation of avoidance proceedings'.
Cost: write 'corporate debtor bears costs' unless a section 54J(2) order exists, then liquidation.
Alternative: if the CoC votes 66% to start CIRP, switch to section 54-O.

Common mistakes in Termination under Section 54N

Saying the Authority may terminate at its discretion.
Students confuse it with plan rejection, which is a discretionary finding.
Fix: Under section 54N(1) the Authority shall terminate within thirty days of the application. Rejection of a plan under section 54L(3) is the separate step that leads to a section 54N order.
Writing the CoC threshold as 75% or a simple majority.
The 75% figure is common for plan approval in regular CIRP.
Fix: Remember 66% of voting shares for terminating the pre-pack under section 54N(2) and for starting CIRP under section 54-O.
Forgetting the avoidance proceedings part of the order.
Students focus on the termination only.
Fix: Add that the order must provide for the manner of continuation of proceedings under Chapter III and sections 66 and 67A.
Saying pre-pack costs always go to the CIRP or to the creditors.
Mixing section 54N with section 54-O.
Fix: Under section 54N(3) the corporate debtor bears them. They join CIRP costs only under section 54-O, and liquidation costs under section 54N(4).
Treating termination and CIRP initiation as the same thing.
Both follow a CoC vote of 66%.
Fix: Termination ends the process. Under section 54-O the Authority terminates and also begins CIRP, appoints the RP as IRP, and the order is deemed an admission under section 7.
Missing the liquidation consequence in section 54N(4).
It is a notwithstanding clause tied to section 54J(2).
Fix: If an order under section 54J(2) was passed, termination leads to liquidation under section 33(1)(b)(i), (ii) and (iii).

Worked examples

Example 1

Aarav Components Pvt Ltd, an MSME, started a pre-pack on 1 March. By the end of the ninety-day period after the commencement date, the CoC has not approved any resolution plan. What must the resolution professional do, and what will the Adjudicating Authority do?

Show the solution

Provision: section 54D(2) requires the RP to submit the CoC-approved plan within ninety days of the commencement date.
Fact: no plan was approved within that period.
Section 54D(3): the RP shall, on the day after the expiry, file an application for termination of the pre-pack.
Section 54N(1)(b): on such application, the Authority shall within thirty days terminate the process and provide for the manner of continuation of avoidance proceedings, if any.
Section 54N(3): the corporate debtor bears the pre-pack costs.
Check section 54N(4): it applies only if an order under section 54J(2) had been passed. No such fact is given, so it does not apply.

Answer: The RP must file a termination application on the day after the ninety days end. The Authority must, within thirty days of the application, pass an order terminating the pre-pack and providing for continuation of avoidance proceedings. Aarav Components bears the costs.

Example 2

Midway through a pre-pack of Kaveri Textiles Ltd, before any plan is approved, creditors holding 70% of voting shares in the CoC vote to terminate the process. Is the vote valid, and what follows?

Show the solution

Provision: section 54N(2) permits the CoC to decide to terminate after the commencement date and before plan approval under section 54K(4) or (12).
Threshold: not less than 66% of voting shares. 70% is above 66%, so the vote is valid.
Timing: the facts say no plan is yet approved, so the timing condition is met.
Procedure: the RP intimates the Authority of the decision.
Result: the Authority shall pass an order under section 54N(1), terminating the process and providing for continuation of avoidance proceedings.
Costs: under section 54N(3), the corporate debtor bears the pre-pack costs.
Alternative: if the CoC had wanted a regular CIRP, it would use section 54-O, subject to the debtor being eligible under Chapter II.

Answer: The vote is valid. On the RP's intimation, the Authority passes a termination order under section 54N(1). Avoidance proceedings continue as the order directs, and Kaveri Textiles bears the costs.

Exam tips

Write the section numbers. Examiners reward 54N(1), (2), (3) and (4) tied to the right facts.
In case questions, first mark the trigger and the dates. The 90-day and 120-day limits are often hidden in the facts.
Always mention the 66% of voting shares and the thirty-day period when relevant.
Contrast termination under section 54N with CIRP initiation under section 54-O. A short comparison earns marks.
End with a clear conclusion on the order, the costs, and the continuing avoidance proceedings.

Practice questions from Pre-Packaged Insolvency Resolution Process

Termination under Section 54N: frequently asked questions

When does the Adjudicating Authority terminate a pre-pack under section 54N?

When the RP files an application under the proviso to section 54K(12) or under section 54D(3), the Authority terminates within thirty days of the application. It also passes the order when the RP intimates a CoC decision under section 54N(2) to terminate.

What vote does the CoC need to terminate a pre-pack?

Not less than 66% of the voting shares. The decision must be taken after the pre-packaged insolvency commencement date and before the plan is approved under section 54K(4) or (12).

Who pays the costs when a pre-pack is terminated?

Under section 54N(3), the corporate debtor bears the pre-pack costs. If section 54N(4) applies and liquidation is ordered, the costs form part of the liquidation costs.

Can a terminated pre-pack lead to CIRP?

Yes, but through section 54-O. The CoC, by at least 66% of voting shares, may resolve to start CIRP if the debtor is eligible under Chapter II. The Authority then terminates the pre-pack and starts CIRP within thirty days of the intimation.