How a Resolution Plan Is Prepared and Approved Under the IBC

The Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 is designed around a single objective: resolving a defaulting company as a going concern wherever possible, rather than defaulting straight to liquidation. The resolution plan is the instrument that carries that objective — and preparing one that survives the layers of scrutiny built into the Code requires far more than a payment proposal.

Before the plan: the information memorandum

Once CIRP is admitted and a Resolution Professional (RP) is appointed, the RP compiles an Information Memorandum — a structured account of the corporate debtor's financial position, assets, liabilities, operations, and material litigation. This document is shared with prospective resolution applicants under confidentiality undertakings, since it forms the factual foundation on which any credible resolution plan has to be built.

Who is even eligible to submit a plan

Section 29A of the Code disqualifies a range of persons from submitting a resolution plan — including undischarged insolvents, wilful defaulters, persons whose accounts have been classified as non-performing for over a year without a credible remediation plan, and persons connected to such disqualified applicants. Screening resolution applicants against Section 29A at the outset avoids the far costlier problem of a plan being approved and later challenged on eligibility grounds.

What a compliant resolution plan must contain

Section 30(2) sets out mandatory contents: priority payment of the insolvency resolution process costs, payment to operational creditors of an amount not less than what they would receive in a liquidation (or, where higher, under the waterfall applicable to dissenting financial creditors), a clear implementation and monitoring mechanism, and provisions for the management and control of the corporate debtor going forward. A plan that is commercially attractive but silent on implementation mechanics, or that shortchanges operational creditors below the statutory floor, risks rejection regardless of its headline value.

• Payment waterfall compliant with Section 30(2) — CIRP costs first, statutory minimum for operational creditors, treatment of dissenting financial creditors.
• A realistic implementation and monitoring mechanism, naming who is accountable for executing the plan post-approval.
• Treatment of employees, guarantees, and ongoing contracts clearly addressed, not left ambiguous.
• Evidence of funding — the resolution applicant's capacity to actually deliver the payments proposed.

Approval by the Committee of Creditors

The approved plan goes before the Committee of Creditors (CoC), which evaluates feasibility and viability and must approve it with not less than 66% of the voting share. Indian courts — including the Supreme Court in the Essar Steel litigation — have repeatedly affirmed that the CoC's "commercial wisdom" in accepting or rejecting a plan is largely non-justiciable; the NCLT's role at this stage is not to second-guess commercial judgment but to confirm the plan's compliance with the Code.

Final approval by the NCLT

Once the CoC approves, the RP files the plan with the NCLT under Section 31. The Tribunal's examination is focused on statutory compliance — principally Section 30(2) — rather than the commercial merits already settled by the CoC. Once approved, the plan binds the corporate debtor, its employees, creditors, members, guarantors, and other stakeholders, including government authorities in respect of statutory dues.

Our approach

We advise resolution professionals, resolution applicants, and creditors at each stage of this process — from Section 29A eligibility screening through to drafting and vetting resolution plans designed to balance creditor recovery with commercial viability, and to hold up under the scrutiny the Code demands.