Lawsikho Blog

Learn about the process of approval and filing an application for the approval of a resolution plan, its key statutory and regulatory requirements, necessary documents, and drafting essentials. Ideal for insolvency professionals and lawyers, this guide endeavours to simplify a crucial step in the corporate insolvency resolution process.

Introduction 

In my previous article on “how to draft a resolution plan under Insolvency and Bankruptcy Code, 2016”, we learnt the nuances of drafting a resolution plan. In this article, we shall learn the process of inviting a resolution plan from the resolution applicant and approval from the CoC and NCLT.  

I distinctly remember the first time when I was given the task to draft an application for approval of a resolution plan. 

It was 2:13 a.m. when I, with ink-stained fingers and a cup of coffee (almost iced coffee!), finally leaned back in my chair. The faint light from my laptop screen reflected the final words of the document that I had spent the last twelve hours drafting- an application for the approval of a resolution plan.

Who would have thought that this law degree would bring me here: reviving a company’s financial collapse, playing part-time Sherlock Holmes, part-time Harvey Spector, and a full-time storyteller. This was not merely paperwork. It was a jig-saw puzzle of debt, business, law, and human survival.

Across the room, my senior, an insolvency professional leading the case, was scribbling notes- tangled arrows, dates, deadlines, and acronyms. 

For me, this case was personal. I had followed the Aksim Exports Pvt. Ltd’s journey from the moment the Corporate Insolvency Resolution Process (CIRP) was initiated. I had watched the public announcements getting issued, helped vet expression of Interest documents and seen prospective resolution applicants pitch their visions like they were auditioning for a second chance.

Now, as I pieced together the application for approval, I was telling that story: how the Committee of Creditors evaluated plans, debated revival strategies, voted with 66% or more in favor and chose the one they believed could revive the business. My job was to vividly, precisely, persuasively show that this plan ticked every box under section 30(2): feasibility, viability, legality, fairness. 

This application was not merely a compliance. It was more of a story of glorious redemption and conveying to the NCLT that this company’s story was not over yet.

Next morning at 10:30 am right before I was about to hit the “submit” button on the e-filing website, thinking to myself: this is an ending… and a new beginning.

What is the statutory and regulatory framework for the approval of a resolution plan? 

The approval of a resolution plan is only the final step. First, we must understand the process through which a resolution applicant is shortlisted and their plan is evaluated. So let us dive straight into it. 

It all begins with the issuance of an expression of interest (“EoI”). 

How is it issued? In which form? What are the contents? Timelines? Regulation 36A of the Insolvency and Bankruptcy of India (Insolvency Resolution for Corporate Persons) Regulations, 2016 (“Regulations”) answers it all for you. 

1. Issuance of EOI 

The Resolution Professional (“RP”) issues and publishes an invitation for EoI in Form G within 60 days (and not later) from the insolvency commencement date. Such a publication should appear in: 

• English and regional language newspapers;
• The website of the corporate debtor (if available); 
• The IBBI’s designated website. 

2. What are the contents of the EoI?

• Eligibility criteria for prospective applicants.
• Criteria for evaluation of resolution plans.
• Last date for submission of EoIs.
• Other relevant details as prescribed.

3. What are the contents of Form-G? 

• Name of the corporate debtor (the company in insolvency).
• Date of commencement of CIRP.
• Last date for submission of EoI.
• Eligibility criteria for resolution applicants.
• Criteria for evaluation of resolution plans.
• Details of the RP (name, registration number, contact).
• Address and manner in which EoI is to be submitted.

4. Submission and Evaluation

Prospective resolution applicants must submit their EoIs within 15 days from the date of invitation. Upon receipt of the EoI, the RP conducts due diligence to ensure applicants meet the eligibility criteria, particularly that it is in compliance with sections 25(h) and 29A of the IBC. 

5. What are the documents that should be annexed with the EoI? 

• Undertaking that the applicant meets the eligibility criteria set by the CoC, along with the documents showing that the applicant meets those criteria.
• Undertaking that the applicant is not ineligible under section 29A of the IBC, along with the documents substantiating the same, 
• Undertaking to inform the RP immediately if the applicant becomes ineligible during the CIRP. 
• Declaration that all information in the EoI is true and correct, and false information will lead to:

1. Ineligibility to submit a resolution plan.
2. Forfeiture of any refundable deposit.
3. Possible penal action under the IBC.

• Undertaking to keep all information confidential, not misuse information for undue gain/loss and to comply with the requirements of section 29(2) of the IBC.

6. Provisional and final lists: – Within 10 days from the last date of submission of EoI, the RP prepares a provisional list of eligible applicants. After addressing any objections on the list, a final list is prepared and shared with the CoC. 

Hope that till now we are clear about how the resolution applicants are finalised. 

Now let us move to the next part which is how a resolution plan finalised and approved as per regulation 36B of the Regulations. 

1. Within five days from the date of the final list, the RP shall issue the information memorandum, evaluation matrix and request for resolution plans (“RFRP”) to the resolution applicants in the final list. 

In case of modification to the RFRP, it is pertinent to note that any modification is considered a fresh issue and shall not be made more than once. 

2. The resolution applicants shall be granted a minimum period of 30 days for reverting with a resolution plan. 
3. The RFRP must not require payment of any non-refundable deposit for submission of or along with the resolution plan. 
4. The RFRP must mandate a provision for performance security, in case the plan is approved. It is pertinent to note that the said security shall be forfeited if the resolution applicant fails to implement the plan as per its terms and schedule. 
5. If no resolution plan is received, the RP may, with CoC’s approval, issue an RFRP for the sale of one or more assets of the corporate debtor. 
6. If the received plans are unsatisfactory, the RP may, with CoC’s approval, re-issue the RFRP to all proposed resolution applicants in the final list. 

That is how the RFRP is issued and the resolution plan is collated. Now let us understand the process of approval with the help of provisions of IBC and the regulations. 

An application for approval is filed under section 30(6) of the IBC wherein the resolution professional submits the resolution plan as approved by the CoC to the NCLT. This shall form the core of approval process. 

Now we shall see how the plan is approved as per regulation 39 of the Regulation. 

1. Submission of Resolution Plans 

• Only prospective resolution applicants included in the final list are permitted to submit resolution plans. Such plans must be submitted electronically. 
• The following documents shall be accompanied by the resolution plan: 

1. An affidavit affirming eligibility under section 29A of the IBC; 
2. An undertaking declaring that all information and records provided are true and correct and that if any information is found to be false, it will render the applicant ineligible and lead to forfeiture of any refundable deposit, and may attract penal action under the IBC. 

2.  When can a resolution plan get rejected? 

• If the plan is submitted after the deadline; 
• If the plan is submitted by a person not on the final list;  
• If the plan does not comply with the statutory and regulatory provisions. 

3. Submission to CoC 

The RP shall present to the CoC all resolution plans that comply with the IBC and the regulations therein, along with details of any transactions identified as avoidable transactions. 

4. Evaluation and voting 

Once the CoC has evaluated the resolution plan as per the evaluation matrix, it shall record deliberations on the feasibility and viability of each plan. 

The CoC shall vote on all compliant resolution plans simultaneously.

5. Voting outcomes

• In case of a single plan, if only one plan is put to vote, it is approved if it receives a 66% majority in voting share. 
• In case of multiple plans, the plan receiving the highest votes, not less than the requisite majority, is approved. In case of a tie with requisite votes, the CoC shall approve one plan as per a pre-declared tie-breaker formula. If no plan receives the requisite votes, the CoC shall re-vote on the plan with the highest votes, adhering to the CIRP timelines

7. Submission to NCLT 

The RP shall endeavor to submit the approved resolution plan to the NCLT at least 15 days before the maximum period for completion of CIRP along with a compliance certificate in Form H evidencing receipt of performance security. 

8. Communication of order 

Upon approval or rejection of the resolution plan by the NCLT, the RP shall promptly send a copy of the order to all participants and the resolution applicant

9. Intimation to creditors 

Within 15 days of the approval of the resolution plan, the RP shall inform each claimant about the principle or formula for payment of debts under the plan. 

10. Effectiveness of plan provisions 

Any provision in the resolution plan requiring consent from members or partners of the corporate debtor shall take effect notwithstanding that such consent has not been obtained. 

11. Protection for resolution professionals 

This regulation provides protection to the resolution professional against the actions of the corporate debtor prior to the insolvency commencement date.

12. Non-implementation grievance 

A creditor aggrieved by the non-implementation of an approved resolution plan may apply to the NCLT for appropriate directions being contempt proceedings, recovery of performance security, liquidation proceeding (if the resolution plan fails), etc.  

How to draft an application for the approval of a resolution professional? 

Upon reading my story in the introduction, you might picture me as some ace draftswomen who toils to achieve a perfect draft! Let me burst that bubble real quick. My first application? My super senior laughed it off in front of my senior and a junior colleague. The second one did not fare any good and was outrightly rejected because I overlooked crucial details that were non-negotiable. 

Embarrassing, is not it? 

But the application which finally succeeded was built on the foundation of those rejections. It served as a great preliminary draft to work on. What did I do right in the third draft? I am curious for you to learn so that you can avoid getting embarrassed like me to a certain degree. 

So the once Mr. T. Shankaran was appointed as the resolution professional, he proceeded with following the due process by issuing expressions of interest from potential resolution applicants through a public notice. Eligible applicants were shortlisted based on specified criteria and provided access to the information memorandum and evaluation matrix. They submitted resolution plans for examining compliance. Thereafter, the RP presented compliant plans to the CoC, for their evaluation. Of all the resolution plans which were presented to the CoC, the resolution plan submitted by Saksham Export Pvt. Ltd. was voted the most feasible by the CoC. So now let us draft an application for approval of Saksham.   

The application begins with the cause title and name of the parties. This being an interlocutory application, it is filed in your main petition itself. Thus, we also need to give the number of the main petition as well. 

BEFORE THE NATIONAL COMPANY LAW TRIBUNAL,

MUMBAI BENCH

         I.A.NO.___ OF 2023

IN

         C.P. (IB) 112/MB/2021

IN THE MATTER OF

vs. 

AND IN THE MATTER OF

T. Sankaran 

Resolution Professional

State the provision under which you are filing an application along with its purpose. 

APPLICATION BY THE RESOLUTION PROFESSIONAL OF AKSIM EXPORTS PVT. LTD. UNDER SECTION 30(6) OF THE INSOLVENCY AND BANKRUPTCY CODE, 2016, FOR APPROVAL OF RESOLUTION PLAN.

THE APPLICANT MOST RESPECTFULLY SHOWETH:

At the outset, give a brief introduction of the applicant/resolution professional and state that the plan was approved by the CoC. You also need to state the law (of the IBC as well as the Regulations) for the sake of clarity. 

1. The present application is filed by the Resolution Professional Mr. T. Shakaran (hereinafter referred to as “the Applicant”) in the matter of Aksim Exports Pvt. Ltd. (hereinafter referred to as “the Corporate Debtor”) for the purpose of seeking approval of the resolution plan from the Hon’ble Tribunal under section 30(6) of the IBC r/w regulation 39 (4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process For Corporate Persons) Regulations, 2016. The said resolution plan is approved by the Committee of Creditors (hereinafter referred to as “CoC”) unanimously in the 6^thCoC Meeting held on 10^th August, 2023.

Give a brief description of the corporate debtor consisting of its date of incorporation, registered office addresses and business. Stating this clause is not merely for the sake of information or background, this in a way also helps establish jurisdiction of the bench. 

2.  The Corporate Debtor was incorporated under the provisions of the Companies Act, 1956 on 13^th July, 2012, having its [insert a registered office address] and was engaged in the business of export of all kinds of goods to mainly African and European countries. 

As this interlocutory application emanates from a CIRP petition, you need to give a brief backdrop of the same consisting of under which section was the petition filed (under section 7 or 9?), vide which order was the petition admitted and the fact that the applicant was appointed as the resolution professional.  

3. That the Company Petition under section 7 was filed by FIB Bank Ltd. and this Hon’ble Tribunal was pleased to pass an order dated 3^rd February 2023, for the commencement of the CIRP of the Corporate Debtor and appointed Mr. T. Shankaran as the Interim Resolution Professional. Hereto annexed and marked as Annexure “1” is the copy of the order dated 3^rd February, 2023, passed by the Hon’ble Tribunal in Company Petition No. 112 of 2021.

Thereafter, you need to state that the resolution professional issued a public notice in 2 newspapers calling for submission of proof of claim from the creditors.  

4. That pursuant to receiving the order dated 3^rd February, 2023, the resolution professional issued a public announcement on 10^th February, 2023, in two newspapers, namely The Free Press Journal(English) and Navshakti (Marathi) for calling of submission of proof of claim from the creditors in appropriate Form “B” to Form “F”. The copy of the said Extracts of the public announcement in newspapers is annexed herewith and marked as Annexure “2”.

Did the resolution professional receive any response to the call for submission of claims? Yes, most definitely. State that here along with the claim amount. 

5. The Applicant received one financial claim from Rupa Infotech and Infrastructure Private Limited with a claim amount of Rs. 6,18,60,640/- being admitted and accordingly the CoC was constituted with voting share as below:

Name of financial creditor	Voting right	Voted for the resolution plan
FIB Bank Ltd.	100%	Yes

Next up, we need to state about the business carried out in the CoC meetings. It starts with the first meeting of the CoC wherein the status of claim of the creditors and appointment of resolution professional is discussed. 

6. That the first meeting of the CoC was conducted by the IRP on 10^th March, 2023 after the constitution of the CoC wherein, inter alia the status of the claim of the Creditors of the Corporate Debtor was apprised by the IRP to the CoC. The IRP was also confirmed as the RP in this meeting. The copy of the minutes of the first CoC meeting dated 10^th March, 2023, is annexed hereto and marked as Annexure “3”.

Thereafter, talk about the valuation of the assets of the corporate debtor as per the auditor’s report. 

7. That the Applicant in pursuance of its duty appointed two auditors on [state date of appointment of the auditor]  to conduct the valuation of the assets of the Corporate Debtor and their report was submitted to the Applicant on [give date of the auditor’s valuation report].  

In the next para, give a brief (in tabular form) about all the meetings conducted by the resolution professional with the CoC. This section is usually filled up by the resolution professional.

8. That the Applicant submits that there were in all 6 CoC meetings that were conducted during the CIRP of the Corporate Debtor. The relevant details of the said meetings are as given below: 

Meeting	Date	Main agenda of discussion	Important decisions ratified
1st CoC Meeting	10th March, 2023	Introduction of CIRP- Confirmation of RP appointment- Presentation of IM status	– RP appointment confirmed- Constitution of CoC ratified- Fee and expenses of IRP ratified
2nd CoC Meeting	25th April, 2023	– Approval of eligibility criteria for RAs- Approval of Form G draft- Timeline for EOI	– Expression of Interest invited- Eligibility criteria approved- Form G publication approved
3rd CoC Meeting	12th June, 2023	– Discussion on EOIs received- Approval of Evaluation Matrix- Granting access to VDR	– Evaluation matrix approved- Provisional list of eligible RAs approved- VDR access granted
4th CoC Meeting	24th July, 2023	Presentation of resolution plans- Preliminary discussions with RAs	– Resolution plans received taken on record- Clarifications sought from RAs
5th CoC Meeting	7th August, 2023	– Evaluation and scoring of resolution plans- Commercial negotiations	– Final shortlist prepared- Further negotiation authorized with top RAs
6th CoC Meeting	10th August, 2023	– Voting on resolution plan- Approval under section 30(4)	– Resolution plan approved with 66%+ vote- RP authorized to file application under section 30(6)

It is important to convey to the NCLT that all the necessary steps to arrive at this stage were complied with and that the process was not carried out in a haphazard manner. Here we go. First, mention the issuance and publishing of the expression of interest.  

9. That the Applicant published the Form G in two newspapers as per the statutory requirement in two newspapers, namely The Free Press Journal(English) and Navshakti (Marathi) for calling for Expression of Interest on 5th May, 2023. The copy of the said Extracts of the public announcement in newspapers is annexed herewith and marked as Annexure “4 ”. 

Now state who all gave a concrete response to the EoI and thereafter, who responded with an all-compliant resolution plan. 

10. That the Applicant submits it had received 12 queries from different entities however eventually only two of them ended coming forward with the EOI:

Sr. No.	Names
1.	Saksham Exports Pvt. Ltd.
2.	Naakam Exports and Imports Pvt. Ltd.

11.  The Applicant submits that out of the two prospective Resolution Applicants mentioned above, only one Saksham Exports Pvt. Ltd. came forward and submitted a Resolution Plan on 19^th July, 2023 which was in compliance with all the laws.

We all know by now that CIRP is a long-drawn process. Drafting of a resolution plan itself is a mammoth task. Thus, it may take longer than we think and so we need to inform the judge about the reason for such delay and extension of the period with the consensus of the CoC. 

12. That the Applicant submits that the CIRP was to be completed on 1^st August, 2023, however since the Resolution Plan by the Final Resolution Applicant was received just before the said date the CoC  needed some time to consider it. Therefore in its 4^th meeting, the CoC decided to extend CIRP period by 90 days and Application regarding the same was filed and allowed by this Hon’ble Tribunal on 10^th August, 2023. Hereto annexed  and  marked as Annexure “5” the Order of the Hon’ble Tribunal. 

Now state actions taken by the resolution professional to bring back the lost money under the avoidable transactions. 

13. That during the CIRP, the Applicant appointed an Auditor to conduct the forensic audit of the Corporate Debtor to determine if any transactions in the nature of PUFE had taken place prior to the commencement of the CIRP. That in the said forensic audit report, it was found out that certain preferential and fraudulent transactions were carried out by the suspended Board of Directors of the Corporate Debtor. The Applicant accordingly filed  Applications for the avoidance of the said transactions and to bring back the monies lost from the Corporate Debtor back to it under Regulation 35A of the IBBI Rules and Regulations 2016. Hereto annexed  and  marked as Annexure “6 colly” are the copies of the Applications filed by the Applicant.

State the fact that the resolution plan of Saksham Exports Pvt. Ltd. was unanimously voted in favour by the members of CoC. 

14. The Applicant put forward the Resolution Plan submitted by Saksham Exports Pvt. Ltd. to the CoC for its approval, since it was the only Resolution Plan received by the Applicant. The said Resolution Plan was voted upon in the 6^th CoC meeting and was approved by 100% voting. Hereto annexed and marked as  Annexure “7” is the copy of the 6^th CoC meeting.

What follows after the resolution plan is approved by the members of the CoC? Issuance of a letter of intent and the most importantly, deposit of earnest money. Elaborate a little below. 

15. That the Applicant after the approval of the Resolution Plan, issued the Letter of Intent on 16^th August, 2023 to the Successful Resolution Applicant (SRA) i.e. Saksham Exports Pvt. Ltd. and asked it to pay an earnest money deposit of Rs. 1,00,000/- (Rupees One Lac Only)  within three days from the receipt of the said Letter of Intent.  Hereto annexed and marked as  Annexure “8” is the copy of the Letter of Intent dated 16^th August, 2023.

Give some brief of the resolution plan. Locate key points on page numbers and state it here. 

16. Some of the salient features of the Resolution Plan submitted by the Resolution Applicant are as under:

Sr. No.	Payment Proposed	Amount in Rs.(Lakhs)	Remarks	Page No. of the Resolution Plan.
1.	CIRP Cost	15	As per the Resolution Plan, the CIRP cost shall not exceed the given amount.	26-29
2	Unsecured Financial Creditor	1.50	The said amount is 0.24% of the admitted claim of the Unsecured Financial Creditor.
3	Operational Creditors:     Statutory Dues/Government dues	00      00	The said liability stands extinguished after the approval of the Resolution Plan .
4.	Employees and Workmen	00	The said liability stands extinguished after the approval of the Resolution Plan .
5.	Unsecured Financial Creditors-Related Party	00	The Resolution Plan does not provide for  any amount against the admitted claim of the Unsecured Financial Creditors-Related Party
	Total Plan Outlay	16.50

The NCLT also needs to be convinced that the corporate debtor is in safe and able  hands and thus it is important to give a brief mainly on the business engaged in by the successful resolution applicant.  

17. The successful Resolution Applicant is in the business of export of machinery and spare parts. The Corporate Debtor was also in the similar business. Therefore the SRA through the present Resolution Plan is going to absorb the business of the Corporate Debtor into its own. 

Discuss numbers now! How much will be chipped in by the resolution applicant? Also give the source of the funds. 

18. The total financial proposal of the Resolution Applicant is Rs. 16.50 lakhs consisting of (i) amount payable to unsecured creditors and  amount for CIRP Cost from Effective Date till Closing Date. Out of the above, Resolution Applicant will bring in 100% of the total proposal amount.  Hereto annexed and marked as Annexure “9” is the copy of the Resolution Plan submitted by the Resolution Applicant.

19. The Applicant submits that the source of funds of the Resolution Applicant for meeting the abovementioned amount shall come from  the internal sources and  the reserves and surplus of the Resolution Applicant.

20. The compliance certificate (Form “H”) of the resolution professional as prescribed under Regulation 39(4) of CIRP Regulations has been annexed herewith and marked as Annexure “10 ”.

When there arises a question of implementation, you need to have all your measures in place. In the next paragraph, talk about the committees which shall oversee the implementation of the resolution plan. 

21. That the Applicant submits that the monitoring committee which shall oversee the implementation of the Resolution Plan shall consist of:- 

[insert here a table giving the names of the proposed member and his brief description]

We have reached the end the application. So sum it up! 

22. That in light of the above facts and circumstances, the present application is being submitted by the Applicant under section 30(6) of IBC seeking approval of this Hon’ble Tribunal for the Resolution Plan approved by the CoC. 

PRAYER

You want your applied to be allowed and the resolution plan to be submitted so state that here. 

The Applicant therefore prays as under:

1. To allow the present Application;
2. To approve the Resolution Plan approved by the Committee of Creditors in the Sixth  CoC Meeting dated 10^th August, 2023; 
3. Issue such other necessary orders as may be deemed fit in the matter.

Mr. T. Shankaran 

Resolution Professional,

Aksim Exports Pvt. Ltd. 

How is the application contested before the NCLT?

First, let us learn who can contest such an application?

1. Unsuccessful resolution applicants
2. Dissenting financial creditors
3. Operational creditors receiving less than liquidation value
4. Suspended board of directors
5. Shareholders
6. Other stakeholders affected by the plan

Grounds on which such an application can be contested 

1. Statutory Non-compliance: Objections that the plan violates provisions under section 30(2) of the IBC, such as:

• Non-compliance or violation of applicable laws and regulations;
• Unfair treatment of operational creditors and/or dissenting financial creditors
• Feasibility concerns

2. Procedural Irregularities: Challenges regarding the process followed, including:

• When the CoC was not constituted properly; 
• Insufficient notice periods for meetings;
• Irregularities in voting procedures;
• Deficiencies in information memorandum.  

3. Though NCLT generally avoids interfering with commercial wisdom of CoC, parties may challenge:

• Arbitrary or discriminatory treatment;
• Mala fide considerations in plan approval;
• Manifest injustice to certain stakeholders. 

What is the process to contest an application? 

1. Filing of Objections: Aggrieved parties must file formal objections along with supporting documentation and legal grounds once the resolution plan is submitted to the NCLT.
2. Hearings: NCLT conducts hearings where all parties including the resolution professional, successful applicant, and objecting parties present their arguments.
3. During the hearing, the resolution professional must be prepared to defend the process followed and explain how the plan complies with all statutory requirements.
4. Considering the material placed on record and the argument, the NCLT examines whether the plan meets all requirements under section 30(2) and whether the process was conducted fairly and passes an order accordingly. 

Orders that may be passes

1. Allowing an application; 
2. List of stakeholders on whom the resolution plan shall be binding; 
3. The approval of the resolution plan shall not be construed as waiver of any statutory obligations of the Corporate Debtor and shall be dealt by the appropriate authorities in accordance with law. Further in terms of the judgment of Hon’ble Supreme Court in the matter of Ghanshyam Mishra And Sons Private Limited V/S Edelweiss Asset Reconstruction Company Limited ([2021] 13 S.C.R. 737), on the date of approval of the Resolution Plan by the adjudicating authority, all such claims which are not a part of Resolution Plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim which is not a part of the Resolution Plan. 
4. The Memorandum of Association (MoA) and Articles of Association (AoA) shall accordingly be amended and filed with the Registrar of Companies (RoC), Mumbai, Maharashtra for information and record. The Resolution Applicant, for effective implementation of the Plan, shall obtain all necessary approvals, under any law for the time being in force, within such period as may be prescribed. 
5. The moratorium under section 14 of the IBC shall cease to have effect from this date. 
6. The Applicant shall supervise the implementation of the Resolution Plan and file status of its implementation before NCLT  from time to time, preferably every quarter. 
7. The Applicant shall forward all records relating to the conduct of the CIRP and the Resolution Plan along with a copy of this order to the IBBI for information. 
8. The Applicant shall forthwith send a certified copy of this Order to the CoC and the Resolution Applicant, respectively for necessary compliance. 

It is interesting to note that in certain circumstances, the NCLT may permit conditional implementation of the resolution plan that is when it directs successful resolution applicant to deposit a certain sum of money in the escrow account designated by the CoC before it proceeds with implementation. 

What renders an application defective?  

Some of the common procedural and substantive issues that may lead to rejection of the application are stated below: 

1. Non-compliance with section 30(2) of the IBC:

• Plan fails to provide for payment to operational creditors.
• Unequal or discriminatory treatment of stakeholders.
• Lack of feasibility, viability, or implementation mechanism.
  

2. Improper or incomplete CoC Approval:

• Resolution plan not approved with the required 66% voting share.
• Incomplete or missing documentation like CoC meeting minutes or voting records.

3. If the resolution applicant is ineligible to apply 
4. Incomplete or missing documentation such as absence of Form H (Compliance Certificate). 
5. Procedural Lapses:

• Plan filed outside the prescribed CIRP timelines.
• Failure to follow due process in notifying stakeholders or submitting filings to NCLT.

6. Violation of other laws such as taxation, SEBI, labor, environmental laws, etc.
7. Misrepresentation or Lack of Transparency:

• Suppression of material facts by the resolution applicant or the RP.
• False statements or concealment of liabilities.

Final thoughts 

Drafting an application for a resolution plan is not merely a procedural formality, it’s a critical step in shaping the future of a distressed enterprise. A well-prepared application reflects not just legal compliance, but also a deep understanding of the corporate debtor’s challenges and a clear vision for revival. It must be precise, persuasive, and compliant with the mandates of the IBC especially provisions like section 30 and the eligibility requirements under section 29A.

In essence, a resolution plan application is where strategy meets structure. For resolution applicants, it’s an opportunity to present a credible path to value recovery; for creditors, it offers a hope of maximized returns; and for the corporate debtor, it represents a chance at rebirth. Getting it right, factually, legally, and commercially can make all the difference between a failed attempt and a successful turnaround.

FAQs

1. Are any ancillary documents required to be filed along with the application? 

The NCLT Rules, 2016 prescribed that only an affidavit in support of such an application is needed to be filed. This being a part of ongoing proceeding, one need not file any other documents. 

2. Is this application listed any differently from the main petition?

No. Rules for listing this application are the same as that of the main petition. You may refer to my article “The Ultimate Guide on initiating CIRP” for more information. 

3. What is the court fee payable on such an application?

Rs. 1000/-  

4. What happens when the NCLT approves the plan despite objections? 

Aggrieved parties can appeal to the NCLAT within 30 days of the order.

5. What key components must a resolution plan include?

A resolution plan must typically include: payment proposals to various creditors, operational restructuring measures, management changes, funding arrangements, implementation timelines and feasibility analyses. It must also demonstrate how the business will remain viable after implementation.

6. What role do creditors play in the resolution plan process?

Creditors, particularly financial creditors, play a crucial role through creditors’ committees (often called Committee of Creditors or CoC). They evaluate submitted resolution plans, negotiate terms, and ultimately vote to approve or reject proposals based on specified majority thresholds.

7. What approval threshold is typically required for a resolution plan?

Approval requires a 66% majority vote from the Committee of Creditors based on the value of financial debt. 

8. Can operational creditors vote on resolution plans?

No. Only the financial creditors can vote on the resolution plan. But the interests of operational creditors are well taken care of. 

9. What happens if no resolution plan is approved within the stipulated timeframe?

If no resolution plan receives approval within the mandated timeframe, the distressed company typically moves towards liquidation proceedings. 

10. How is the “liquidation value” relevant to resolution planning?

Liquidation value serves as a crucial benchmark in resolution planning, representing the estimated recovery if the company were liquidated rather than restructured. Resolution plans must typically offer creditors at least the liquidation value to be considered viable.

11. What regulatory approvals might be required for a resolution plan?

Depending on the industry and jurisdiction, resolution plans may require approvals from sector regulators (banking, insurance, telecommunications), competition authorities (for ownership changes), stock exchanges (for listed companies), and sometimes government ministries for sensitive sectors.

12.  Can existing shareholders retain ownership under a resolution plan?

It is possible. However, existing shareholders typically face significant dilution or  complete elimination of ownership in serious insolvency cases. 

13.  How are resolution plans evaluated by the adjudicating authority?

After creditor approval, the resolution plan is submitted to the adjudicating authority (such as the bankruptcy court or tribunal) that examines whether it complies with all legal requirements. The evaluation focuses on statutory compliance rather than business merits, which remain the creditors’ domain.

14.  Can a resolution plan be modified after submission?

Minor modifications may be permitted before approval, but substantial changes typically require resubmission and fresh voting by creditors. Once approved by creditors and confirmed by the adjudicating authority, the plan becomes binding and modifications become more restricted.

15. What personal liability do directors face during resolution planning?

In general, directors do not automatically face personal liability just because the company is undergoing a resolution process unless they have engaged in fraud, misconduct, or breach of duty.

16.  How are disputed claims handled in resolution plans?

Resolution plans must address how disputed claims will be treated. Options include setting aside reserves, establishing resolution mechanisms, or conditional distributions. The plan should provide clarity on treatment once such claims are finally determined. For instance, there is a provision for a resolution plan for a sum of say Rs. 5 crore towards disputed claims once adjudicated before a relevant authority or settled mutually between the parties. 

17. What happens if a resolution applicant fails to implement the approved plan?

Failure to implement an approved plan can trigger various consequences, including forfeiture of performance security and in severe cases, reversal of the process leading to liquidation. 

18. How are pre-packaged resolution plans different from standard resolution plans?

Pre-packaged or “pre-pack” resolution plans are negotiated substantially before formal insolvency proceedings begin. They streamline the process, reduce disruption and costs, and can be implemented more quickly once the insolvency process officially commences.

19.  What role does “feasibility” play in resolution plan approval?

Feasibility is a critical factor in resolution plan evaluation. Creditors and adjudicating authorities assess whether the plan is realistic and implementable based on industry conditions, financial projections, proposed funding arrangements, and the resolution applicant’s capability to execute the plan.

20.  Is there a specific format or template for a resolution plan?
    While no fixed format exists, regulatory guidelines or the RP may provide a structure focusing on key legal and financial disclosures.

21. Can promoters submit a resolution plan?
    Only if they are not disqualified under the law (e.g., not barred under section 29A of IBC or equivalent provisions).
    
22. Is the plan binding once approved?
    Yes, once approved by the CoC and the Adjudicating Authority (e.g., NCLT in India), the plan becomes binding on all stakeholders.

23. Are dissenting creditors bound by the approved plan?

Yes, once approved by the required CoC majority and the adjudicating authority, even dissenting creditors are bound by the terms.

24. Can a resolution plan include third-party guarantees or financial support?
    Yes, plans can include support from group companies, guarantors, or external financiers to strengthen financial viability. 
    
25. What are the practical challenges faced during the process of approval?/ What could make this process a little more difficult and time consuming?

Some of the key practical challenges that may attribute to the delay are negotiating with dissenting creditors, handling complex avoidable transactions and managing tight CIRP timelines.