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

Before a pre-packaged process application is filed, Meghdoot Ltd obtains approval of its unrelated financial creditors for the proposed resolution professional. Unrelated financial debt totals Rs 200 crore, and creditors holding Rs 126 crore approved. What follows under section 54A(2)(e)?

The approval is insufficient. Section 54A(2)(e) needs approval from financial creditors who are not related parties, holding at least 66 per cent in value of such debt. Rs 126 crore of Rs 200 crore is 63 per cent, so the threshold is not met.

  1. AThe approval is valid, since 63 per cent exceeds a simple majority
  2. BThe approval is invalid, because 66 per cent in value of unrelated financial debt is required and 126 crore is only 63 per centCorrect
  3. CThe approval is valid only if the related parties also vote
  4. DThe approval is invalid, because unanimous approval is needed

Explanation

Section 54A(2)(e) requires approval from unrelated financial creditors representing not less than sixty-six per cent in value of their financial debt. 126/200 is 63 per cent, below the threshold. Related parties are excluded, and unanimity is not required.

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