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

Day 60 of a PPIRP of Gujarat Alloys Ltd: the resolution professional has not yet approached the Adjudicating Authority with any plan, and the CoC believes that a plan cannot be achieved. Which analysis is correct under sections 54D and 54N?

Before any plan approval, the CoC can decide to terminate the PPIRP by a vote of not less than 66 per cent of voting shares. The resolution professional then intimates the Adjudicating Authority, which passes a termination order under section 54N. Waiting for day 90 or a simple majority is not what the Code provides.

  1. AThe CoC cannot end the process before day 90; the RP must wait for the 54D(3) trigger
  2. BThe CoC may decide to terminate by a vote of not less than 66 per cent of voting shares, and the RP intimates the Adjudicating Authority, which then passes a termination orderCorrect
  3. CThe CoC may terminate by simple majority, and no order from the Adjudicating Authority is needed
  4. DThe process automatically terminates on day 60 as it is half the 120-day period

Explanation

Section 54N(2) lets the CoC, any time after commencement but before plan approval, decide by not less than 66 per cent of voting shares to terminate; the RP intimates the Adjudicating Authority, which passes an order under section 54N(1). Waiting for day 90 is not required, a simple majority is insufficient, and there is no automatic termination.

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