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CS Professional · Insolvency and Bankruptcy - Law and Practice · Corporate Insolvency Resolution Process

In a corporate insolvency resolution process, the Adjudicating Authority is satisfied that the resolution plan approved by the committee of creditors meets the requirements of section 30(2). Which statement correctly describes the effect of its approval order under section 31?

An approved resolution plan binds the corporate debtor, employees, members, creditors, guarantors and other stakeholders, expressly including the Central and State Governments and local authorities owed statutory dues. Its binding effect arises from the Adjudicating Authority's approval order and does not depend on how a creditor voted.

  1. AThe plan binds only the creditors who voted in favour of it in the committee
  2. BThe plan binds the corporate debtor, its employees, members, creditors, guarantors and other stakeholders, including the Central Government, State Governments and local authorities owed statutory duesCorrect
  3. CThe plan binds the corporate debtor and financial creditors only; statutory authorities may claim dues separately
  4. DThe plan binds stakeholders only after the resolution professional files it with the Board

Explanation

Section 31(1) says the approved plan is binding on the corporate debtor and its employees, members, creditors (including the Central Government, any State Government or local authority owed statutory dues), guarantors and other stakeholders. It is not limited to creditors who voted for it or to financial creditors. Forwarding records to the Board is a separate step and does not condition the binding effect.

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