Resolution Plan

IBC, 2016 — Section 30

A plan proposed by a Resolution Applicant (potential acquirer) to resolve the Corporate Debtor's insolvency under the IBC. The plan must be approved by the Committee of Creditors with 66% vote and then confirmed by the NCLT. An approved resolution plan binds the corporate debtor, its employees, members, creditors (including governments and statutory authorities), guarantors and other stakeholders (Section 31(1)). Unless the plan otherwise provides, claims against the corporate debtor and its assets arising before approval are extinguished (Section 31(6)(a)); this does not affect claims against promoters, guarantors or persons jointly liable with the corporate debtor (Explanation I).

In practice, the resolution plan is the commercial outcome of a corporate insolvency — a proposal by a Resolution Applicant to take over and revive the corporate debtor, approved by the Committee of Creditors with a 66% vote under Section 30 of the IBC, 2016 and then sanctioned by the NCLT. For a financial creditor sitting on the CoC, voting on the plan is the decisive moment: it fixes how much of the admitted claim will actually be paid, in what form, and over what period, and the haircut accepted is rarely recoverable later. Once the NCLT confirms the plan it binds the corporate debtor, its creditors, guarantors and other stakeholders, including those who voted against it; unless the plan otherwise provides, claims against the corporate debtor and its assets that arose before approval are extinguished under Section 31(6)(a), though claims against promoters, guarantors and persons jointly liable with the corporate debtor are not affected. That finality cuts both ways: creditors who failed to file claims in time, or who under-valued their security in the CoC, lose out permanently. Operational creditors and dissenting financial creditors have limited, statute-defined entitlements. Well-advised creditors file and verify their claims fully before the plan is voted.