A resolution plan is the point at which a corporate insolvency process moves from financial distress to deciding what happens to the business. Under the Insolvency and Bankruptcy Code, 2016 (IBC), the aim is not simply to recover money. The process seeks to keep the corporate debtor as a going concern, maximise asset value and balance stakeholder interests.
That makes the resolution plan central to the Corporate Insolvency Resolution Process (CIRP). Approval, however, is not automatic. The Committee of Creditors (CoC) exercises commercial judgment, while the National Company Law Tribunal (NCLT) checks whether the plan meets the law. The Supreme Court has repeatedly stressed that these roles are distinct.
What is a Resolution Plan under the IBC?
A resolution plan is a proposal submitted by an eligible resolution applicant for resolving the insolvency of the corporate debtor. It may involve restructuring debts, selling or transferring assets, changing management or control, or using other measures permitted by the Code.
Legal Requirements under Section 30
Section 30(2) provides the central legal test. A plan cannot be approved merely because it offers a strong financial proposal. It must satisfy the mandatory requirements of the Code and applicable regulations.
The plan must provide for insolvency resolution process costs in priority. It must also provide for payment to operational creditors and dissenting financial creditors in accordance with the statutory framework. It must address management after approval, implementation and supervision, and must not contravene any law in force.
These requirements are supplemented by the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Regulations 37 and 38 deal with the measures and mandatory contents of a plan, while Regulation 39 governs submission and consideration. The current framework also requires a resolution applicant to affirm its eligibility and the accuracy of information and records submitted with the plan.
Eligibility is equally important. Section 29A excludes specified persons, including certain persons connected with the corporate debtor’s management and persons facing specified financial or insolvency-related disqualifications.
The process also places responsibility on the resolution professional and the CoC to ensure that only compliant plans move forward. Under Regulation 39, a plan that does not comply with Section 30(2) cannot be considered. The framework may also permit a challenge mechanism where the request for resolution plans provides for it, allowing applicants to improve their proposals within the prescribed process.
Role of the Committee of Creditors
Once a plan satisfies the legal requirements, the CoC considers its commercial merits. Under Section 30(4), approval requires at least 66% of the voting share of financial creditors.
In Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, the Supreme Court recognised the central role of the CoC in deciding distribution, subject to the Code. Its commercial wisdom is not ordinarily open to judicial review when statutory requirements are satisfied.
This distinction is important. The CoC may assess the viability of the business, the feasibility of the proposed plan and the value offered to creditors. These are commercial questions. The tribunal’s role is not to decide whether another plan might have produced a better financial outcome.
Judicial Scrutiny by the NCLT
The NCLT’s role is limited, but it is not merely procedural. Under Section 31, it must satisfy itself that the CoC-approved plan meets Section 30(2). Once approved, the plan becomes binding on the corporate debtor, employees, members, creditors, guarantors and other stakeholders, as provided by the Code.
In K. Sashidhar v. Indian Overseas Bank, the Supreme Court held that the NCLT cannot examine the commercial wisdom of the CoC or substitute its own view on whether a plan should have been accepted. Its review is confined to the grounds permitted by the IBC.
In Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh, the Supreme Court further clarified that a resolution plan does not have to match the liquidation value merely because that value has been determined. The commercial decision remains with the CoC, subject to Section 30(2).
Where Judicial Scrutiny Begins and Ends
The distinction is straightforward. Courts can examine whether a plan complies with law. They cannot ordinarily decide whether the CoC made the best commercial choice.
The Supreme Court reiterated this position in a 2024 judgment, holding that where the Adjudicating Authority or Appellate Authority finds a shortcoming against Section 30(2) and Regulations 37 and 38, it may send the plan back to the CoC for reconsideration. What it cannot do is rewrite commercial terms or substitute its own view for that of the CoC.
This means judicial restraint does not remove judicial scrutiny. A plan that fails a mandatory statutory requirement can still be questioned. What the court cannot do is use that scrutiny as a way to renegotiate the commercial bargain already approved by the CoC.
Binding Nature and Withdrawal of Plans
The binding nature of a plan becomes particularly important once the CoC has approved it. In Ebix Singapore Pte. Ltd. v. Committee of Creditors of Educomp Solutions Ltd., the Supreme Court rejected an attempt to withdraw or modify a plan after CoC approval but before NCLT approval. The Court noted that permitting such withdrawals could trigger fresh negotiations, delay the CIRP and undermine certainty in the process.
The decision reinforces an important principle: once the statutory process reaches the relevant stage, a resolution applicant cannot treat the plan as an open-ended commercial offer that can simply be reconsidered when circumstances change.
Why Careful Drafting Matters
For a resolution applicant, compliance is not a box-ticking exercise. A plan must be legally workable, internally consistent and capable of implementation. Ambiguous payment structures, inadequate funding arrangements, conflicts with existing law or incomplete treatment of stakeholder claims can create serious issues at approval.
For the CoC and resolution professional, the process must also show that the plan was evaluated within the framework of the IBC and regulations. A commercially sound decision still needs a legally compliant foundation.
Conclusion
Resolution plans sit between commercial decision-making and statutory control. The CoC has the primary role in deciding whether a plan is commercially acceptable, while the NCLT ensures that the approved plan satisfies the requirements of the IBC.
The Supreme Court’s approach is consistent: judicial scrutiny is necessary, but limited. Courts can enforce the law and reject plans that fail mandatory requirements. They cannot step into the shoes of the CoC and decide which commercial outcome is preferable.
For participants in CIRP, that distinction is crucial. A resolution plan must be commercially credible, but it must also withstand legal scrutiny. Only then can a negotiated proposal become a binding resolution under the IBC.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. The content may not reflect the most current legal developments and is not guaranteed to be accurate, complete, or up-to-date. Readers should consult a qualified legal professional before taking any action based on the information provided. The authors and publishers disclaim any liability for any loss or damage incurred as a result of reliance on this article. This article does not create an attorney-client relationship.