Resolution Plan Approval Under IBC
Three gates, three different tests: the RP checks compliance, the CoC judges commercially, the NCLT checks the law.
A resolution plan is the proposal that rescues the corporate debtor: who takes it over, how much creditors are paid and when, and how the business will be run. It has to clear three gates. The resolution professional checks it against the Code, the committee of creditors votes on it, and the NCLT approves it.
Each gate applies a different test, and confusing them is the commonest error in this part of the Limited Insolvency Examination. The rules below are as at the exam cut-off of 4 February 2025, with the 2026 changes set out separately.
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From Invitation to Approval
- 1
1. Invitation
The RP sets eligibility criteria with CoC approval and invites prospective resolution applicants (s. 25(2)(h)) by publishing an invitation for expressions of interest no later than day 60 (reg. 36A). A provisional and then a final list of applicants follow.
- 2
2. Request for resolution plans
Within 5 days of the final list, the RP issues the information memorandum, the evaluation matrix and the request for resolution plans (reg. 36B).
- 3
3. Submission
Applicants submit plans with an affidavit that they are eligible under section 29A (s. 30(1), reg. 39(1)). If the request allows it, the RP may permit one modification or run a challenge mechanism (reg. 39(1A)).
- 4
4. RP's compliance check
The RP confirms each plan meets s. 30(2) and presents only compliant plans to the CoC (s. 30(3)).
- 5
5. CoC vote
Approval needs at least 66% of voting share, after considering feasibility, viability and the manner of distribution, which may take into account the priority and value of each secured creditor's security (s. 30(4)).
- 6
6. NCLT approval
The RP files the approved plan (s. 30(6)). The NCLT approves it if it meets s. 30(2) and has provisions for effective implementation (s. 31(1)), or rejects it (s. 31(2)), which leads to liquidation (s. 33(1)(b)).
What Every Plan Must Contain (Section 30(2) and Regulation 38)
- checkPayment of insolvency resolution process costs in priority to other debts (s. 30(2)(a)).
- checkFor operational creditors: not less than the higher of their liquidation value under s. 53, or what they would get if the plan amount were distributed by the s. 53(1) priority (s. 30(2)(b)).
- checkFor dissenting financial creditors: at the cut-off, not less than their liquidation value under s. 53(1) (s. 30(2)(b)).
- checkManagement of the corporate debtor's affairs after approval, and implementation and supervision of the plan (s. 30(2)(c), (d)).
- checkNo contravention of any law in force; shareholder approvals needed under the Companies Act are deemed given (s. 30(2)(e) and Explanation).
- checkOperational creditors paid in priority over financial creditors, and dissenting financial creditors in priority over assenting ones (reg. 38(1)).
What the NCLT Does and Does Not Review
In Essar Steel (2019) the Supreme Court held that the NCLT's review is limited to the requirements of section 30(2). It cannot second-guess the CoC's commercial wisdom on how much each class receives, and the Code does not require secured and unsecured, or financial and operational, creditors to be paid equally. It also held that a successful applicant cannot be faced with undecided claims after approval: claims not part of the plan do not survive it.
Once approved, the plan binds the corporate debtor, its employees, members, creditors (including the Central and State Governments and local authorities for statutory dues), guarantors and other stakeholders (s. 31(1)). The moratorium ends (s. 31(3)(a)). The resolution applicant must obtain other statutory approvals within one year, but where the plan involves a combination under the Competition Act, CCI approval was needed, at the exam cut-off, before the CoC approved the plan (proviso to s. 31(4)); since 26 May 2026 it is needed before the plan is submitted to the NCLT.
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What the 2026 Amendment Changed
In force from 26 May 2026. Not part of the exam's cut-off law.
Dissenting financial creditors
Change
Floor is now the lower of liquidation value under s. 53, or their share if plan proceeds were distributed by s. 53(1) priority
Section
s. 30(2)(ba)
Monitoring
Change
Plan must provide for a monitoring committee of an IP, creditor representatives and the resolution applicant
Section
s. 30(2)(d)
CoC vote
Change
CoC must record reasons for approving the plan
Section
s. 30(4)
Split approval
Change
On a 66% CoC vote, the NCLT may approve implementation first and the distribution within 30 days after
Section
Second proviso to s. 31(1)
Defects
Change
NCLT may give the CoC notice to rectify before rejecting
Section
Proviso to s. 31(2)
Time limit
Change
NCLT to approve or reject within 30 days of receipt
Section
s. 31(2A)
CCI approval
Change
Needed before the plan is submitted to the NCLT, rather than before CoC approval
Section
Proviso to s. 31(4)
Clean slate
Change
Prior claims extinguished and licences protected, while claims against promoters and guarantors survive
Section
s. 31(5), (6)
| Point | Change | Section |
|---|---|---|
| Dissenting financial creditors | Floor is now the lower of liquidation value under s. 53, or their share if plan proceeds were distributed by s. 53(1) priority | s. 30(2)(ba) |
| Monitoring | Plan must provide for a monitoring committee of an IP, creditor representatives and the resolution applicant | s. 30(2)(d) |
| CoC vote | CoC must record reasons for approving the plan | s. 30(4) |
| Split approval | On a 66% CoC vote, the NCLT may approve implementation first and the distribution within 30 days after | Second proviso to s. 31(1) |
| Defects | NCLT may give the CoC notice to rectify before rejecting | Proviso to s. 31(2) |
| Time limit | NCLT to approve or reject within 30 days of receipt | s. 31(2A) |
| CCI approval | Needed before the plan is submitted to the NCLT, rather than before CoC approval | Proviso to s. 31(4) |
| Clean slate | Prior claims extinguished and licences protected, while claims against promoters and guarantors survive | s. 31(5), (6) |
How the Limited Insolvency Examination Tests This
A typical case study gives liquidation values and a plan: say ₹900 crore offered against a liquidation value of ₹600 crore, operational creditors owed ₹40 crore who would get nothing in liquidation, and a dissenting bank whose liquidation entitlement is ₹70 crore but which is offered ₹55 crore. You must check whether each class gets its statutory floor, whether 66% approved, and whether the NCLT can interfere with the split.
Two traps recur. First, treating the CoC's choice between two compliant plans as reviewable by the NCLT; after Essar Steel it is not. Second, the CCI timing: at the exam's cut-off, CCI approval must come before the CoC vote, not before the NCLT's order.
FAQs
What is the procedure for approval of a resolution plan under IBC?expand_more
The RP invites and receives plans, checks them against section 30(2), and presents compliant plans to the committee of creditors. The CoC approves one by at least 66% of voting share, and the NCLT approves it under section 31(1) if it meets section 30(2) and can be implemented.
Can the NCLT reject a resolution plan approved by the CoC?expand_more
Only for failing the legal requirements of section 30(2) or lacking provisions for effective implementation. It cannot reject a plan because it disagrees with the CoC's commercial judgement (Essar Steel, 2019).
What minimum amount must operational creditors get under a resolution plan?expand_more
The higher of what they would receive in liquidation under section 53, or what they would receive if the plan amount were distributed in the section 53(1) order of priority (section 30(2)(b)).
Next steps
- Section 29Aarrow_forward
- CCI Approvalarrow_forward
- Committee of Creditorsarrow_forward
- Essar Steel casearrow_forward
65 questions, case-study format, negative marking.