CS Professional · Corporate Restructuring, Valuation and Insolvency

Preparation and Approval of Resolution Plan Under IBC

A resolution plan is a proposal by a resolution applicant to revive a corporate debtor. The committee of creditors approves it, and the Adjudicating Authority then approves it under section 31 if it meets the legal requirements. Once approved, it binds all stakeholders. You solve questions by checking contents, approvals, binding effect and implementation, in that order.

What this chapter covers

This chapter follows a resolution plan from drafting to implementation. You learn what the plan must contain, who may submit it, how the committee of creditors (CoC) approves it, how the Adjudicating Authority approves it under section 31, and how the plan is monitored after approval.

It sits in the middle of the Insolvency, Liquidation and Winding Up part of Paper 6. Earlier chapters on the corporate insolvency resolution process (CIRP), the CoC and the information memorandum lead into it. Later topics such as liquidation and avoidance transactions connect back to it, because a failed or rejected plan can end in liquidation.

The chapter mixes statute (section 31 of the Code) with regulation (regulation 38 of the CIRP Regulations). Exam questions are case-based. You are given facts about a plan and must state the provision, apply it to the facts and reach a conclusion.

Paper 6 is a written paper, and the insolvency part carries 40 marks. The resolution plan is the end point of CIRP, so case studies often land here. The rules are precise: priority of payment, mandatory contents, the one-year period for approvals and the monitoring committee. Students who know the exact conditions can write short, correct answers and gain marks that others lose on vague language. The chapter also supports your drafting and practical sense for the Insolvency elective, if you choose it.

Preparation and Approval of Resolution Plan: topics in the order to study them

1Resolution Plan: Meaning and Mandatory ContentsStart here, because every later step tests whether the plan meets these contents, so learn regulation 38 first.
2Resolution Applicant and EligibilityOnce you know the plan, learn who may submit it and the disclosures about the applicant and its related parties.
3Approval by the Committee of CreditorsThe CoC votes on the plan before it reaches the Adjudicating Authority, so this step must come before section 31.
4Approval by the Adjudicating Authority under Section 31This is the core provision: the satisfaction test, binding effect, rejection and the effect on the moratorium.
5Implementation, Monitoring and Post-Approval AspectsFinish with what happens after approval: approvals under other laws, monitoring committee and reporting.

How to prepare Preparation and Approval of Resolution Plan

Treat this chapter as a sequence of checks. Learn the law in the order a plan travels, then practise applying it to facts.

Read regulation 38 line by line and list the mandatory contents: priority of payment, statement on stakeholders, disclosure about past plan failures, term and schedule, management and control, supervision means, and avoidance transaction handling.
Learn the demonstration requirements under regulation 38(3): it addresses the cause of default, is feasible and viable, has provisions for effective implementation, provides for approvals and timeline, and shows the applicant's capability.
Note the newer additions: the beneficial-ownership statement and the affidavit on section 32A eligibility, and the limit on assigning undisclosed avoidance transactions.
Read section 31 in full. Write the binding effect, the proviso on effective implementation, rejection, the two consequences under sub-section (3), and the one-year period in sub-section (4).
Make a one-page flow from submission to CoC approval to Adjudicating Authority order to implementation, and add the statutory reference at each stage.
Practise two or three case-style answers. Use the pattern: provision, analysis of the facts, conclusion. State which creditor class is paid first and why.

Common mistakes in Preparation and Approval of Resolution Plan

Saying the CoC's approval is the final approval of the plan.
Fix: Always write both stages: CoC approval under section 30(4), then the Adjudicating Authority's order under section 31(1).
Stating the priority rule loosely, such as 'operational creditors get paid first' with no detail.
Fix: Write both limbs of regulation 38(1), and add the pro rata point for staged payments.
Confusing the one-year period in section 31(4) with a fixed one-year limit.
Fix: Quote the full condition: one year from approval or the period in the relevant law, whichever is later.
Treating the monitoring committee as compulsory.
Fix: Write that the CoC must consider setting one up, and then list its members, the fee cap for the resolution professional and the quarterly reports.
Listing the contents of a plan without applying them to the case facts.
Fix: Pick the content items that the facts touch, such as feasibility or cause of default, and say whether the plan satisfies them and why.
Using old regulation text, for example the earlier connected-person details in regulation 38(3).
Fix: Study the current regulation 38, where sub-regulation (3) now lists the demonstration requirements, and ignore the superseded wording.

Last-day revision: Preparation and Approval of Resolution Plan

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.

Preparation and Approval of Resolution Plan practice questions

Preparation and Approval of Resolution Plan in other exams

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

Preparation and Approval of Resolution Plan: frequently asked questions

What must a resolution plan contain?

Under regulation 38, it must set out payment priority, a statement on how it treats all stakeholders, the term and implementation schedule, management and control during its term, and means of supervision. It must also deal with avoidance transactions, show feasibility and viability, and include a beneficial-ownership statement and a section 32A affidavit.

What does the Adjudicating Authority check under section 31?

It checks that the plan, as approved by the CoC, meets the requirements of section 30(2). It must also be satisfied that the plan has provisions for its effective implementation. If the plan does not conform, it may reject it.

Who is bound by an approved resolution plan?

The plan binds the corporate debtor, its employees, members, creditors, guarantors and other stakeholders involved in the plan. This includes the Central Government, State Governments and local authorities to whom statutory dues are owed.

What happens to the moratorium after the plan is approved?

Under section 31(3)(a), the moratorium order passed under section 14 ceases to have effect once the plan is approved. The resolution professional must also forward the records and the plan to the Board for its database.

How long does the applicant have to get other approvals?

Under section 31(4), the applicant must obtain the necessary approvals under any law within one year from the date of approval, or within the period given in that law, whichever is later. A plan with a combination needs CCI approval before the CoC approves it.