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Insolvency and Bankruptcy - Law and Practice · Pre-Packaged Insolvency Resolution Process (Elective 7.5)

Section 54N IBC: Termination of Pre-Packaged Insolvency Process

Updated 11 October 2026 · Fact-checked

Section 54N lets the Adjudicating Authority (AA) terminate a pre-packaged insolvency resolution process. On the resolution professional's application under 54K(12) proviso or 54D(3), the AA must pass the order within thirty days of the application. If the committee of creditors votes for termination by at least 66% of voting shares, the AA must pass an order under 54N(1); no separate period is stated. Switching to a CIRP is a separate route under section 54-O.

Understand Termination of the Process (Section 54N)

A pre-packaged insolvency resolution process (PIRP) is meant to be quick. It must be completed within 120 days of the pre-packaged insolvency commencement date, and the resolution professional (RP) must submit the plan approved by the committee of creditors (CoC) to the Adjudicating Authority within 90 days of that date. So the Code needs a clean exit if the process fails or the creditors lose faith in it. Section 54N is that exit.

The section works through the Adjudicating Authority (AA). Termination is never automatic. The RP files an application or intimates the AA, and the AA passes an order. That order does two things: it terminates the PIRP, and it provides for how avoidance proceedings under Chapter III, and proceedings under sections 66 and 67A, will continue.

There are three triggers. First, the RP files an application under the proviso to section 54K(12). Second, no plan is approved by the CoC within 90 days, so the RP must apply on the day after that period expires under section 54D(3). Third, at any time after the commencement date but before a plan is approved, the CoC decides by a vote of not less than 66% of voting shares to terminate. In that third case the RP intimates the AA, and the AA must pass the termination order.

The consequences matter for marks. The corporate debtor bears the PIRP costs if any. But if the AA had earlier passed an order under section 54J(2) and the process must now be terminated, the AA must order liquidation under section 33(1)(b)(i), (ii) and (iii), and the PIRP costs become part of the liquidation costs.

Do not confuse termination with conversion. Under section 54-O, the CoC, by at least 66% of voting shares, may resolve to start a CIRP if the debtor is eligible under Chapter II. The AA then terminates the PIRP and starts the CIRP in one order. That order is treated as an admission under section 7, and the CIRP begins on the date of the order.

Key rules to remember

AA's time to pass termination order (54N(1))
Order within 30 days of the RP's application
Applies to an application under the proviso to section 54K(12) or under section 54D(3).
CoC vote to terminate (54N(2))
Vote ≥ 66% of voting shares
Decision can be taken after the commencement date but before approval of the plan. The RP intimates the AA, and the AA shall then pass an order under 54N(1). Section 54N(2) does not state a separate 30-day period from the intimation.
Mandatory termination application (54D(3))
No plan approved within 90 days → RP applies on the day after expiry
The overall PIRP limit is 120 days from the commencement date.
Costs on termination (54N(3))
Corporate debtor bears PIRP costs, if any
This is the general rule when an order is passed under 54N(1).
Liquidation consequence (54N(4))
Order under 54J(2) earlier passed + termination → liquidation order under 33(1)(b)(i)-(iii)
PIRP costs are then included in liquidation costs.
Conversion to CIRP (54-O)
CoC vote ≥ 66% of voting shares; AA order within 30 days of intimation
Debtor must be eligible under Chapter II. The RP becomes IRP if he gives written consent.
Effect of 54-O order
Deemed section 7 admission; CIRP starts from date of order
PIRP costs become part of CIRP costs. Avoidance and section 66 and 67A proceedings continue.

How to solve Termination of the Process (Section 54N) questions

Use the same sequence for any question on termination or conversion of a PIRP. Always tie each conclusion to a trigger, a time-limit and a vote threshold.

  1. 1Identify the stage: has the plan been approved by the AA yet? Section 54N and 54-O vote routes apply only after the commencement date and before plan approval.
  2. 2Identify the trigger: RP application under 54K(12) proviso, failure to get a plan approved within 90 days (54D(3)), or a CoC decision to terminate.
  3. 3Check the vote: CoC decisions need at least 66% of voting shares. Test the arithmetic against the percentage given.
  4. 4Decide whether the CoC wants simple termination (54N) or a CIRP (54-O). Check that the debtor is eligible under Chapter II for CIRP.
  5. 5State the AA's order and time: for an RP application under 54N(1), the AA must pass the order within 30 days of the application. For a CoC decision to terminate under 54N(2), the AA must pass an order under sub-section (1). For a CIRP under 54-O(2), the AA must pass its order within 30 days of the RP's intimation.
  6. 6State the consequences: who bears the costs, whether liquidation follows under 54N(4), and what happens to avoidance proceedings.
  7. 7Conclude in one sentence applying the rule to the facts.

Quickest way: Trigger, vote, order, costs

When to use it: Use for short-answer or case questions where you must name the correct outcome quickly.

  1. Write the trigger: 54K(12) proviso, 54D(3), or CoC vote.
  2. Write the vote: 66% of voting shares, if the CoC is deciding.
  3. Write the AA's duty: order within 30 days of the RP's application under 54N(1); order under 54N(1) after a CoC decision under 54N(2); order within 30 days of intimation under 54-O(2).
  4. Write the route: termination (54N) or CIRP (54-O).
  5. Write the costs: debtor bears them; in a liquidation under 54N(4) they join liquidation costs; in CIRP they join CIRP costs.

Common mistakes in Termination of the Process (Section 54N)

  • Saying the AA has discretion to refuse termination when the CoC votes by 66%.

    Students assume every AA decision is discretionary.

    Fix: Section 54N(2) says that on the RP's intimation of such a decision, the AA shall pass an order under 54N(1).

  • Quoting a 51% or 75% vote for termination.

    Other parts of the Code use different thresholds, so numbers get mixed up.

    Fix: For termination under 54N(2) and for CIRP initiation under 54-O(1), the threshold is not less than 66% of voting shares.

  • Treating termination and CIRP initiation as the same thing.

    Both end the PIRP, so the sections blur.

    Fix: 54N ends the process. 54-O ends it and starts a CIRP in the same order, and only if the debtor is eligible under Chapter II.

  • Forgetting the 90-day trigger for the RP's application.

    Students remember only the 120-day outer limit.

    Fix: Under 54D(3), if no plan is approved by the CoC within 90 days, the RP files for termination on the day after expiry.

  • Saying liquidation always follows termination.

    Students link failure with liquidation.

    Fix: Liquidation under 54N(4) applies where the AA had earlier passed an order under section 54J(2) and the process is required to be terminated. Otherwise the order is a termination order.

  • Placing PIRP costs on the wrong party.

    The cost rules differ by outcome.

    Fix: Under 54N(3) the corporate debtor bears them. Under 54N(4) they form part of liquidation costs. Under 54-O(2) they form part of CIRP costs.

Worked examples

Example 1

Meridian Components Ltd is in a PIRP. Ninety days after the commencement date, the CoC has not approved any resolution plan. What must the RP do, and what must the AA do?

Show the solution
  1. Section 54D(2) requires the RP to submit the CoC-approved plan to the AA within 90 days of the commencement date.
  2. No plan was approved in that period, so section 54D(3) applies.
  3. The RP must file an application for termination on the day after the 90 days expire.
  4. Under 54N(1)(b) read with 54D(3), the AA must, within 30 days of the application, terminate the PIRP and provide for continuation of avoidance proceedings and proceedings under sections 66 and 67A.
  5. Under 54N(3), the corporate debtor bears the PIRP costs, if any, unless 54N(4) applies.

Answer: The RP must apply for termination on the day after the 90 days expire. The AA must pass a termination order within 30 days of the application. The debtor bears the PIRP costs, if any.

Exam tips

  • Write the section numbers with each point: 54N(1), 54N(2), 54D(3), 54-O. Cases reward provision, analysis, conclusion.
  • Always give the 66% of voting shares. Give the 30-day period with its correct trigger: the RP's application under 54N(1), or the RP's intimation under 54-O(2). For a CoC vote under 54N(2), say the AA shall pass an order under 54N(1).
  • Compare 54N and 54-O in a short table-like list of bullets: trigger, vote, order, costs.
  • Mention that avoidance proceedings and sections 66 and 67A proceedings continue. Examiners look for this detail.
  • In case problems, check the stage first. If a plan has already been approved, the vote routes in 54N(2) and 54-O(1) are no longer open.

Practice questions from Pre-Packaged Insolvency Resolution Process (Elective 7.5)

Termination of the Process (Section 54N): frequently asked questions

When can a pre-packaged insolvency process be terminated under section 54N?

When the RP applies under the proviso to section 54K(12) or under section 54D(3), or when the CoC decides by at least 66% of voting shares to terminate before a plan is approved. On an RP application, the AA passes the termination order under 54N(1) within 30 days. For a CoC vote under 54N(2), the AA passes an order under 54N(1).

How long does the AA have to pass the termination order?

Under section 54N(1), the AA must pass the order within thirty days of the date of the RP's application. Under section 54-O(2), the AA has thirty days from the RP's intimation of the CoC's decision to start a CIRP. For a CoC vote to terminate under 54N(2), the AA passes an order under 54N(1).

What happens to the PIRP costs after termination?

Under section 54N(3), the corporate debtor bears them. If liquidation is ordered under 54N(4), they are part of the liquidation costs. If a CIRP is started under 54-O, they are part of the CIRP costs.

Can creditors start a CIRP directly from a PIRP?

Yes. Under section 54-O, the CoC may resolve by at least 66% of voting shares to start a CIRP before plan approval, if the debtor is eligible under Chapter II. The AA then terminates the PIRP and starts the CIRP.