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

During the pre-packaged process of Narmada Foods Pvt Ltd, before any plan is approved, the committee of creditors wants to end the process. The voting shares in favour are 70 per cent. The resolution professional intimates the Adjudicating Authority. What is the legal position under section 54N?

The decision is valid. A committee of creditors decision to terminate, approved by at least sixty-six per cent of voting shares before plan approval, obliges the Adjudicating Authority to pass a termination order under section 54N(1). Seventy per cent meets the threshold and no waiting period applies.

  1. AThe decision fails because unanimity is needed
  2. BThe decision fails because 75 per cent is needed
  3. CThe decision is valid and the Adjudicating Authority shall pass a termination orderCorrect
  4. DThe decision is valid only after the 90th day

Explanation

Section 54N(2) allows termination on a CoC decision approved by at least 66 per cent of voting shares, at any time after commencement but before plan approval. 70 per cent exceeds the threshold, and the Authority shall then pass an order under 54N(1). No 90-day wait is required.

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