THE INSOLVENCY AND BANKRUPTCY CODE (AMENDMENT) ACT, 2026 - PART – III

Submission of resolution plan

Section 30 of the Code provide the procedure for the submission of the resolution plan in CIRP by the prospective Resolution Applicants.  The Act made amendments to this section. Section 30(2) provides the procedure for the examination of the resolution plans submitted to the Resolution Professional. 

Section 30 (2) (b) of the Code provides that the resolution professional shall examine each resolution plan received by him to confirm that each resolution plan provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than-

1. the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53; or
2.  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 creditors, 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.

The Act proposed to delete the portion highlighted above.

The Act inserted a new Section 30(2)(ba).  This new section provides for the payment of financial creditors who did not vote for the resolution. This section provides for the payment of debts of the financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified, which shall not be less than the lower of the amount––

• to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53; or
• 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,

as the case may be.

The first explanation to this section clarified that a distribution in accordance with the provisions of this clause shall be fair and equitable to such creditors.

The second explanation to this section declared that the provisions of this sub-section as amended by the Act shall not apply to the corporate insolvency resolution process

where any of the following acts have first occurred, —

• the committee of creditors has approved a resolution plan under sub-section (4);
• the Adjudicating Authority has passed a liquidation order under sub-section (1) of section 33; or
• the committee of creditors has approved intimation to the Adjudicating Authority to initiate the liquidation under sub-section (2) of section 33,

as the case may be, on and before the date of commencement of the Act.

The Act substituted a new section for the existing Section 30(2)(d).  The newly substituted section 30(2)(d) provides that the resolution plan shall provide for the implementation and supervision of the resolution plan and constitution of a committee for this purpose consisting of a resolution professional or any other insolvency professional, representatives of a class or classes of creditors and the resolution applicant, subject to such conditions and in such manner as may be specified.

The Act amended Section 30(4) of the Code.  After incorporating the amendments in the said section, the said section will provide that the CoC may approve a resolution plan by a vote of not less than 66% of voting share of the financial creditors and record reasons for its approval, after considering its feasibility and viability,  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 interest of a secured creditor and such other requirements as may be specified by the Board.

Approval of Resolution Plan

Section 31 of the Code provides the procedure for approval of resolution plan by the CoC and then by the Adjudicating Authority.  The Act inserted a second proviso to Section 31(1) of the Code.  The newly inserted second proviso provided that the Adjudicating Authority may, on an application made by the resolution professional, with the approval of the

committee of creditors, by a vote of not less than 66% of the voting share, in such form and manner, and subject to such conditions as may be specified, first approve the implementation of the resolution plan and thereafter approve the manner of distribution provided therein within a period of thirty days from the date of approval of implementation of such resolution plan.

The Act inserted a proviso to Section 31(2) of the Code.  This proviso provides that the Adjudicating Authority may, before rejecting the resolution plan, give notice to the committee of creditors to rectify any defects in the resolution plan.

The Act also inserted a new section 31(2A) to the Code.  The newly inserted section 31(2A) provides that the Adjudicating Authority shall pass an order within a period of 30 days from the date of receipt of the resolution plan.  If the Adjudicating Authority has not passed an order within such period, it shall record the reasons for such delay in writing.

The Act proposed amendment in the proviso to Section 31(4) of the Code.  On incorporating the said amendment the proviso will read as ‘the resolution plan contains a provision for combination, the resolution applicant shall obtain the approval of the Competition Commission of India under that Act before the resolution plan is submitted to the Adjudicating Authority under sub-section (6) of section 30. 

The Act inserted a new Section 31(5) to the Code.  The newly inserted section 31(5) provides that notwithstanding anything contained in any other law for the time being in force and subject to sub-section (6), where a resolution plan has been approved under sub-section (1), a licence, permit, registration, quota, concession, clearances or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, associated with such resolution plan, shall not be suspended or terminated during the subsistence of the remaining period of such grants or rights, if the corporate debtor or, if applicable, the person whose resolution plan is approved under sub-section (1), complies with the obligations in respect of the remaining period of such grants or rights.

The newly inserted Section 31(6) of the Code provides that where the Adjudicating Authority approves the resolution plan under sub-section (1),––

1. unless otherwise provided in the resolution plan, any claim, against the corporate debtor and its assets under any other law for the time being in force, prior to the date of approval, shall be extinguished; and
2. no proceedings shall be continued or instituted against the corporate debtor or its assets on the basis of such claims, including proceedings for assessment of the claims.

The explanation I to this section clarified that nothing in this section shall affect a claim or any proceeding in respect of a person who was a promoter or in the management or control of the corporate debtor, a guarantor of the corporate debtor or any person having a joint liability or a joint and several liability with the corporate debtor, as the case may be.

The explanation II to this section clarified that if a person has a joint liability or a joint and several liability with the corporate debtor for payment of debt owed to a creditor before the approval of resolution plan, and such person makes a payment for such debt after the approval of the resolution plan, then any right of such person to be indemnified by the corporate debtor shall be extinguished.

The explanation II to this section clarified that the provisions of sub-sections (5) and (6) shall be deemed to apply to the resolution plan that is approved under sub-section (1), on and from the date of commencement of this Code, except for matters that have attained finality under this Code.