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Corporate Restructuring, Valuation and Insolvency · Preparation and Approval of Resolution Plan

Section 31 IBC: Approval of Resolution Plan by NCLT

Updated 11 October 2026 · Fact-checked

Under Section 31 of the IBC, the Adjudicating Authority (NCLT) approves a resolution plan already approved by the committee of creditors if the plan meets Section 30(2) requirements and has provisions for effective implementation. Once approved, the plan binds the corporate debtor, employees, members, creditors, government authorities, guarantors and other stakeholders.

Understand Approval by the Adjudicating Authority under Section 31

A resolution plan first goes through the committee of creditors (CoC). The CoC approves it under Section 30(4). That is not the end. The plan becomes effective only when the Adjudicating Authority, the NCLT, approves it under Section 31.

The NCLT does a compliance check. It asks whether the plan, as approved by the CoC, meets the requirements of Section 30(2). It must also satisfy itself that the plan has provisions for its effective implementation. If both are met, it approves the plan by order.

The power of the NCLT is the power to approve or reject. Section 31(2) says that where it is satisfied the plan does not conform to the requirements of sub-section (1), it may reject the plan by order. In the exam, tie the answer to the statutory test and not to your own view of the commercial merits.

The key effect is binding force. The approved plan binds the corporate debtor and its employees, members and creditors. It also binds the Central Government, any State Government or local authority to whom statutory dues are owed, guarantors and other stakeholders involved in the plan. This is why one dissenting creditor or a statutory authority cannot stay outside the plan.

After approval, two things follow. The moratorium under Section 14 ceases to have effect. The resolution professional forwards all records of the CIRP and the plan to the Board (IBBI) for its database. The resolution applicant must also obtain necessary approvals under other laws within one year from the date of approval, or within the period provided in that law, whichever is later.

Key rules to remember

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.

How to solve Approval by the Adjudicating Authority under Section 31 questions

Use the provision, analysis, conclusion pattern. Most case questions test whether the plan meets the statutory test and who is bound.

  1. 1Identify the stage. Confirm the CoC has approved the plan under Section 30(4) and the plan is now before the NCLT.
  2. 2State Section 31(1): the NCLT approves if the plan meets Section 30(2) requirements.
  3. 3Check the facts for Section 30(2) compliance, such as payment of insolvency resolution process costs, management of the business and implementation terms.
  4. 4Check the proviso: does the plan have provisions for effective implementation? Look for timelines, funding and monitoring in the facts.
  5. 5Apply Section 31(2) if any requirement is missing: the NCLT may reject the plan by order.
  6. 6If approved, state the binding effect on each stakeholder named in the facts, including government dues.
  7. 7Add the consequences: moratorium ceases, records go to the Board, and other approvals within one year (Section 31(4)).
  8. 8Conclude clearly in one line: approved or rejected, and who is bound.

Quickest way: Test, bind, consequences

When to use it: Use when you have a short time and a fact-based question on approval or its effect.

  1. Write the test: Section 30(2) compliance plus effective implementation.
  2. Write the outcome: approve under Section 31(1) or reject under Section 31(2).
  3. List who is bound, matching names in the facts.
  4. Close with Section 31(3) and 31(4) consequences.
  5. Give one-line conclusion.

Common mistakes in Approval by the Adjudicating Authority under Section 31

  • Saying the NCLT approves the plan on its commercial merits.

    Students assume the tribunal reviews the deal like a CoC.

    Fix: Frame the NCLT's role as a compliance check against Section 30(2) and the effective implementation proviso.

  • Omitting the effective implementation proviso.

    It is a proviso and looks minor.

    Fix: Always write it as a separate condition. Examiners look for it.

  • Saying government dues are not covered by the plan.

    Students think statutory authorities stand outside the process.

    Fix: Section 31(1) expressly binds the Central Government, State Government and local authorities owed statutory dues.

  • Confusing Section 31 with Section 54L.

    Both are titled approval of resolution plan.

    Fix: Section 31 is for CIRP. Section 54L is for pre-packaged process, with a 30-day period for the NCLT to approve or reject and its own rule for the case where management does not change.

  • Mixing up the consequences of approval.

    Students recall the moratorium but forget the Board record.

    Fix: Remember both: moratorium under Section 14 ceases, and the RP forwards records to the Board.

  • Treating the one-year period for other approvals as fixed.

    Students skip the 'whichever is later' wording.

    Fix: State: one year from approval or the period under that law, whichever is later.

Worked examples

Example 1

Alpha Steel Ltd is under CIRP. The CoC approves a resolution plan by the required vote. The plan meets Section 30(2) requirements and sets out funding, timelines and monitoring for implementation. The Income-tax Department, owed statutory dues, did not support the plan. Advise on the NCLT's approval and whether the department is bound.

Show the solution
  1. Provision: Section 31(1) requires the NCLT to approve a CoC-approved plan if it meets Section 30(2) requirements, after satisfying itself that the plan has provisions for effective implementation.
  2. Analysis: The plan meets Section 30(2). It has funding, timelines and monitoring, so effective implementation is satisfied.
  3. Binding effect: Section 31(1) binds the Central Government, State Government or local authority owed dues under any law, along with creditors and other stakeholders.
  4. The department's lack of support does not change this. Its dues are dealt with as the plan provides.

Answer: The NCLT should approve the plan by order under Section 31(1). Once approved, it binds the corporate debtor, its employees, members, creditors, guarantors and the Income-tax Department as a Central Government authority owed statutory dues.

Example 2

Beta Textiles Ltd's plan is approved by the CoC, but it has no funding source or timeline for payments. After the NCLT approves another company's plan, state the consequences under Section 31(3) and (4). Separately, state what the NCLT may do with Beta's plan.

Show the solution
  1. Beta: The plan lacks provisions for effective implementation, which the proviso to Section 31(1) requires the NCLT to check before approval.
  2. Under Section 31(2), where the plan does not conform to the requirements, the NCLT may reject it by order.
  3. Consequences of approval of a plan under Section 31(3): the Section 14 moratorium ceases to have effect, and the resolution professional forwards records of the CIRP and the plan to the Board for its database.
  4. Under Section 31(4), the resolution applicant obtains necessary approvals under other laws within one year from approval or within the period under that law, whichever is later.

Answer: The NCLT may reject Beta's plan under Section 31(2) because it has no provisions for effective implementation. On approval of any plan, the moratorium ceases, records go to the Board, and the applicant gets other approvals within one year or the period in that law, whichever is later.

Exam tips

  • Write provision, analysis, conclusion. Cite Section 31(1) first and the proviso next.
  • Pick out each stakeholder in the facts and say whether Section 31(1) binds it.
  • Quote the Code's word 'may' for rejection under Section 31(2). Do not say 'must reject'.
  • If the facts mention a pre-pack, switch to Section 54L and note its 30-day timeline.
  • Do not give case names unless you are certain of them. A correct section-based answer scores better than a doubtful citation.

Practice questions from Preparation and Approval of Resolution Plan

Approval by the Adjudicating Authority under Section 31 in other exams

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

Approval by the Adjudicating Authority under Section 31: frequently asked questions

Who approves a resolution plan under Section 31 of the IBC?

The Adjudicating Authority, which is the NCLT, approves it. It acts on a plan already approved by the committee of creditors under Section 30(4).

Who is bound by an approved resolution plan?

The corporate debtor, its employees, members and creditors are bound. So are the Central Government, State Governments and local authorities owed statutory dues, guarantors and other stakeholders involved in the plan.

When can the NCLT reject a resolution plan?

Under Section 31(2), where it is satisfied that the plan does not conform to the requirements in sub-section (1), it may reject the plan by order. This includes a plan that lacks provisions for effective implementation.

What happens to the moratorium after approval?

Under Section 31(3)(a), the moratorium order under Section 14 ceases to have effect once the plan is approved. The resolution professional also forwards the records and plan to the Board.

How is Section 54L different from Section 31?

Section 54L applies to the pre-packaged insolvency resolution process. The NCLT must act within thirty days of receiving the plan, and the effect of approval follows Section 31(1), (3) and (4) mutatis mutandis.