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CA Final · Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Corporate and Economic Laws

Case: Lotus Retail Ltd, a listed company, is undergoing CIRP under the Insolvency and Bankruptcy Code, 2016. The resolution professional (RP) invited resolution plans. The committee of creditors (CoC) comprises financial creditors only, with these voting shares: Bank A 35%, Bank B 30%, Bank C 20%, Fund D 15%. Bank A and Bank B support the plan submitted by Orion Ltd; Bank C and Fund D oppose it. Orion's promoters are not related to the corporate debtor. What is the position on the plan's approval by the CoC?

The plan is not approved. A resolution plan needs approval by the CoC with at least 66% of voting share, and the supporters hold only 65% (35% plus 30%). It falls one point short, although it needs no unanimity and CoC voting precedes NCLT approval.

  1. AThe plan is approved, as the supporting creditors hold 65% of voting share, above the required thresholdCorrect
  2. BThe plan is rejected because 75% is needed
  3. CThe plan fails because unanimity is required
  4. DThe plan needs NCLT approval before CoC voting

Explanation

A resolution plan must be approved by the CoC with at least 66% of voting share (after the 2019 amendment, 66%). Supporting votes are 35 + 30 = 65%, which is below 66%. Hence the plan fails the threshold, so none of the other options holds. Wait, the correct consideration: 65% is less than 66%, so the plan is not approved by the CoC.

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