Section 30 of IBC – Insolvency and Bankruptcy Code, 2016 : Submission of resolution plan

The Insolvency and Bankruptcy Code, 2016 Part-II Insolvency Resolution and Liquidation for Corporate Persons Chapter-II Corporate Insolvency Resolution Process(CIRP) Section […]

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The Insolvency and Bankruptcy Code, 2016

Part-II Insolvency Resolution and Liquidation for Corporate Persons

Chapter-II Corporate Insolvency Resolution Process(CIRP)

Section 30: Submission of resolution plan.

*30. (1) A resolution applicantJ1 may submit a resolution plan 1[along with an affidavit stating that he is eligible1A under section 29A] to the resolution professional prepared on the basis of the information memorandum.

(2) The resolution professional shall examineJ2 each resolution plan received by him to confirmJ3 that each resolution plan—

(a) provides for the paymentJ4 of insolvency resolution process costs in a manner specified by the Board in priority to the 2[payment] of other debts of the corporate debtor;

3[(b)J5 provides for the paymentJ4 of debts of operational creditors in such manner as may be specified by the Board which shall not be less than-

(i) the amount to be paidJ4 to such creditors in the event of a liquidation of the corporate debtor under section 53; or

(ii) the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of section 53

whichever is higher, and provides for the payment of debts of financial creditorsJ6, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of section 53 in the event of a liquidation of the corporate debtor.

Explanation 1.-For removal of doubts, it is hereby clarified that a distribution in accordance with the provisions of this clause shall be fair and equitableJ7 to such creditors.

Explanation 2.-For the purpose of this clause, it is hereby declared that on and from the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019, the provisions of this clause shall also apply to the corporate insolvency resolution process of a corporate debtor-

(i) where a resolution plan has not been approved or rejected by the Adjudicating Authority;

(ii) where an appeal has been preferred under section 61 or section 62 or such an appeal is not time barred under any provision of law for the time being in force; or

(iii) where a legal proceeding has been initiated in any court against the decision of the Adjudicating Authority in respect of a resolution plan;

(c) provides for the management of the affairs of the Corporate debtor after approval of the resolution plan;

(d) the implementation and supervision of the resolution plan;

3A(e) does not contravene any of the provisions of the law for the time being in force;

(f) conforms to such other requirements as may be specified by the Board.

1[Explanation. -For the purposes of clause (e), if any approval of shareholders is required under the Companies Act, 2013 (18 of 2013) or any other law for the time being in force for the implementation of actions under the resolution plan, such approval shall be deemed to have been given and it shall not be a contravention of that Act or law.]

(3) The resolution professional shall presentJ8 to the committee of creditors for its approval such resolution plans which confirm the conditions referred to in sub-section (2).

4[(4) The committee of creditors may approve a resolution plan by a vote of not less than 5[sixty-six] per cent. of voting shareJ9 of the financial creditors, after considering its feasibility and viability, 6[the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of section 53, including the priority and value of the security interestJ6 of a secured creditor] and such other requirements as may be specified by the Board:J

Provided that the committee of creditors shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017, where the resolution applicant is ineligible under section 29A and may require the resolution professional to invite a fresh resolution plan where no other resolution plan is available with it:

Provided further that where the resolution applicant referred to in the first proviso is ineligible under clause (c) of section 29A, the resolution applicant shall be allowed by the committee of creditors such period, not exceeding thirty days, to make payment of overdue amounts in accordance with the proviso to clause (c) of section 29A:

Provided also that nothing in the second proviso shall be construed as extension of period for the purposes of the proviso to sub-section (3) of section 12, and the corporate insolvency resolution process shall be completed within the period specified in that sub-section.]

1[Provided also that the eligibility criteria in section 29A as amended by the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 shall apply to the resolution applicant who has not submitted resolution plan as on the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018.]

(5) The resolution applicant may attend the meeting of the committee of creditors in which the resolution plan of the applicant is considered:

Provided that the resolution applicant shall not have a right to vote at the meeting of the committee of creditors unless such resolution applicant is also a financial creditor.

(6) The resolution professional shall submit the resolution plan as approvedJ10 by the committee of creditors to the Adjudicating Authority.


Reference

*Effective from 01.12.2016.

1. Ins. by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, w.e.f. 06.06.2018.

1A. No requirement of any certificate from another person certifying eligibility of a resolution applicant- Circular No. IP/003/2018 dt. 03.01.2018.

2. Subs. by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, w.e.f. 06.06.2018, for the word “repayment”.

3. Subs. by the Insolvency and Bankruptcy Code (Amendment) Act, 2019, w.e.f. 16.08.2019[S.O. 2953(E)], for the clause:

“(b) provides for the 2[payment] of the debts of operational creditors in such manner as may be specified by the Board which shall not be less than the amount to be paid to the operational creditors in the event of a liquidation of the corporate debtor under section 53;”.

3A. Clarification regarding approval of resolution plans under section  30 and 31, vide GC-IBC/01/2017 dt. 25.10.2017.

4. Subs. by the Insolvency and Bankruptcy Code (Amendment) Act, 2018, w.e.f. 23.11.2017, for the sub-section:

“(4) The committee of creditors may approve a resolution plan by a vote of not less than seventy five per cent. of voting share of the financial creditors.”

5. Subs. by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, w.e.f. 06.06.2018, for the word “seventy-five”.

6. Ins. by the Insolvency and Bankruptcy Code (Amendment) Act, 2019, w.e.f. 16.08.2019[S.O. 2953(E)].


Judicial Pronouncements: 

J1. For challenge can be made by Resolution Applicant at various stages of the CIRP, refer Arcelormittal India Pvt. Ltd. Vs. Satish Kumar Gupta and Ors. [2018] ibclaw.in 31 SC, (p76,79&80).

J2. Duties of Resolution Professional regarding Resolution Plan examination, refer Arcelormittal India Pvt. Ltd. Vs. Satish Kumar Gupta and Ors. [2018] ibclaw.in 31 SC, (p77-79).

J3. Cases where the resolution plan does not meet the requirements of Section 30(2) of the IBC read with CIRP Regulations 37 and 38, refer Greater Noida Industrial Development Authority v. Prabhjit Singh Soni and Anr. (2024) ibclaw.in 53 SC (p54).

J4.Meaning of word “payment” and “amount to be paid”, refer Jaypee Kensington Boulevard Apartments Welfare Association & Ors. Vs. NBCC (India) Ltd. & Ors., (2021) ibclaw.in 63 SC, para 121 to 124.

J5. Interpretation of Section 30(2)(b):

  • Section 30(2)(b) refers to Section 53 not in the context of priority of payment of creditors, but only to provide for a minimum payment to operational creditors. However, this again does not in any manner limit the CoC from classifying creditors as financial or operational and as secured or unsecured. [Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta and Ors. (2019) ibclaw.in 07 SC, p92]
  • Once the requirements of Section 30(2)(b) are fulfilled, the distribution in accordance with its provisions is to be treated as “fair and equitable” to the Operational Creditors. [Pratap Technocrats Pvt. Ltd. & Ors. v. Monitoring Committee of Reliance Infratel Ltd. & Anr. (2021) ibclaw.in 148 SC]

J6. Treatment of Dissenting Financial Creditor and Secured Creditors

  • The dissenting creditors are deemed to have given their approval and are bound by the decision of the majority of the CoC. [Ebix Singapore Pvt. Ltd. v. CoC of Educomp Solutions Ltd. and Anr. (2021) ibclaw.in 153 SC, p109]
  • Full freedom and discretion has been given to the CoC to so classify creditors and to pay secured creditors amounts which can be based upon the value of their security, which they would otherwise be able to realise outside the process of the Code, thereby stymying the corporate resolution process itself. [CoC of Essar Steel India Ltd. v. Satish Kumar Gupta and Ors. (2019) ibclaw.in 07 SC, p92]
  • For treatment of the dissenting financial creditor and Secured Creditors, refer Jaypee Kensington Boulevard Apartments Welfare Association and Ors. v. NBCC (India) Ltd. and Ors. (2021) ibclaw.in 63 SC.

J7. Equality Principle in Resolution Plan:

  • The Explanation-1 to clause (b) is for removal of doubts and for clarification. [Jaypee Kensington Boulevard Apartments Welfare Association & Ors. Vs. NBCC (India) Ltd. & Ors., (2021) ibclaw.in 63 SC, p123].
  • For Equality Principle in Resolution Plan, Role of Resolution Applicant and Role of Committee of Creditors (CoC) in the CIRP, refer CoC of Essar Steel India Ltd. v. Satish Kumar Gupta and Ors. (2019) ibclaw.in 07 SC.
  • Fair and equitable treatment, in other words, is what is fair and equitable between the operational creditors as a class, and not between different classes of creditors. The statute has indicated that once the requirements of Section 30(2)(b) are fulfilled, the distribution in accordance with its provisions is to be treated as fair and equitable to the operational creditors. [Pratap Technocrats Pvt. Ltd. & Ors. v. Monitoring Committee of Reliance Infratel Ltd. & Anr. (2021) ibclaw.in 148 SC, p29].
  • No distinction can be made between Home Buyers who had approached RERA and obtained decree for refund and Other Homebuyers, both are remained the same as Homebuyers within a class. [Vishal Chelani & Ors. v. Debashis Nanda (2023) ibclaw.in 117 SC]

J8. Members of the erstwhile Board of Directors must be given a copy of Resolution Plans as part of documents that have to be furnished along with the notice of meetings. [Vijay Kumar Jain v. Standard Chartered Bank and Ors. (2019) ibclaw.in 24 SC]

J9. The “percent of voting share of the financial creditors” approving vis­ à ­vis dissenting is required to be reckoned. It is not on the basis of members present and voting as such. [K. Sashidhar v. Indian Overseas Bank and Ors. (2019) ibclaw.in 08 SC, p29]

J10. The Resolution Plan even prior to the approval of the Adjudicating Authority is binding inter se the CoC and the successful Resolution Applicant. The Resolution Plan cannot be construed purely as a ‘contract’ governed by the Contract Act, in the period intervening its acceptance by the CoC and the approval of the Adjudicating Authority. The ability of the Resolution Plan to bind those who have not consented to it, by way a statutory procedure, indicates that it is not a typical contract. [Ebix Singapore Pvt. Ltd. v. CoC of Educomp Solutions Ltd. and Anr. (2021) ibclaw.in 153 SC, p112]

J11. Commercial Wisdom/decision of CoC/Judicial Scrutiny of Resolution Plan:



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