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CS Professional · Corporate Restructuring, Valuation and Insolvency · Preparation and Approval of Resolution Plan

Sundaram Textiles Ltd is in CIRP. The committee of creditors has approved a resolution plan, and the Adjudicating Authority is satisfied that it meets the requirements of section 30(2). The plan lists the dues of a State Government tax authority. Which statement correctly describes the effect of the approval order under section 31(1)?

An approved resolution plan binds the corporate debtor, employees, members, creditors, guarantors and other stakeholders, expressly including the Central Government, State Governments and local authorities owed statutory dues. Consent of each creditor is not needed, and dissenting or government creditors are also bound.

  1. AIt binds the corporate debtor, its employees, members, creditors, guarantors and other stakeholders, including the Central Government, State Governments and local authorities owed statutory duesCorrect
  2. BIt binds only the financial creditors who voted in favour of the plan
  3. CIt binds private creditors but not government authorities owed statutory dues
  4. DIt binds the corporate debtor only, and each creditor must separately consent

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. The option excluding government authorities contradicts the express wording. The plan therefore binds the State tax authority too.

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