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

During a PIRP, after the commencement date but before the plan is approved, the committee of creditors of Lotus Engineering Pvt Ltd decides to terminate the process. What vote is needed, and who bears the PIRP costs once the Adjudicating Authority terminates it under section 54N(1)?

The committee of creditors must approve termination by a vote of not less than sixty-six per cent of the voting shares. Once the Adjudicating Authority passes the termination order, the corporate debtor bears the pre-packaged process costs, not the creditors or the resolution professional.

  1. ANot less than 66% of voting shares; the corporate debtor bears the costsCorrect
  2. BA simple majority of voting shares; the financial creditors bear the costs
  3. CNot less than 66% of voting shares; the resolution professional bears the costs
  4. DNot less than 75% of voting shares; the corporate debtor bears the costs

Explanation

Section 54N(2) requires a committee decision approved by not less than 66% of the voting shares. Section 54N(3) provides that on a termination order under section 54N(1), the corporate debtor bears the PIRP costs. The other options misstate the threshold or the party bearing costs.

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