CS Professional · Insolvency and Bankruptcy - Law and Practice · Resolution Strategies (Elective 7.5)

In a pre-packaged insolvency resolution process of Vindhya Pharma Ltd, the corporate debtor's base resolution plan pays operational creditors in full but gives financial creditors only 70% of their confirmed claims. The committee of creditors approves it by 70% of voting shares and the promoters retain full control. Which statement is correct under section 54K?

The committee may approve the plan, but it must record reasons for approving it without promoter dilution. Operational creditors are unimpaired, so competing plans are not compulsory, and 70% exceeds the 66% requirement. Impairment of financial claims triggers the dilution-or-reasons rule in section 54K(14).

1. AThe committee may approve it, but because financial claims are impaired it must record reasons for approving a plan with no promoter dilutionCorrect
2. BThe base plan is invalid because any impairment of claims bars its approval
3. CThe resolution professional must invite competing plans because financial creditors' claims are impaired
4. DThe Adjudicating Authority may approve the plan without any committee vote because the operational creditors are paid in full