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

The committee of creditors of Himalaya Cement Ltd, in a pre-packaged process, wants to terminate the process before any resolution plan is approved. What is the minimum voting share needed for the CoC decision, and who bears the process costs once the Adjudicating Authority terminates under section 54N(1)?

The CoC needs approval by not less than 66 per cent of voting shares to terminate the process before plan approval. Once the Adjudicating Authority terminates, the corporate debtor bears the pre-packaged process costs, not the creditors or the resolution professional.

  1. AMajority of voting shares; costs borne by the creditors
  2. BSixty-six per cent of voting shares; costs borne by the corporate debtorCorrect
  3. CSeventy-five per cent of voting shares; costs borne by the resolution professional
  4. DSixty-six per cent of voting shares; costs borne by the financial creditors

Explanation

Section 54N(2) requires a CoC decision approved by not less than sixty-six per cent of the voting shares, intimated by the RP before plan approval. Under section 54N(3), on termination under sub-section (1), the corporate debtor bears the process costs. Other combinations misstate the threshold or the cost bearer.

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