IBC Laws Blog

Resolution Plan-A Jinnie in a Bottle – By CS. Himanshu Kohli

Insolvency & Bankruptcy Code, 2016, gives an opportunity to a financially sick company to regain its health by the way of Resolution. The resolution applicant in the process of Insolvency submits a resolution plan for revival of a corporate debtor. This article highlights the relevant points to be included in the resolution plan from the prism of various judgements and provision under the Code.

Himanshu Kohli
Company Secretary

Resolution Plan – A Jinnie in a Bottle


Insolvency & Bankruptcy Code, 2016 (the “Code”) was introduced  as a reform to improve the financial health of the banks. The objective of the Code is Resolution and the purpose of same being maximization of value of assets of the ‘Corporate Debtor’ and thereby for all creditors. In addition, the objective is to promote entrepreneurship, avaibility of credit and balance the interest of all stakeholders and not a ‘stakeholder’ or ‘a set of stakeholders’.  Therefore, this order of objective is sacrosanct*.

A resolution plan  is no less than a  Jinnie in a bottle for the stakeholders : as it offers an opportunity for  a corporate debtor to hit back to the economic mainstream; relief to the  creditors by receiving payment of their debts; a ray of hope for employees.

A Resolution Plan (“RP”) is a revival plan for an insolvent company (“Corporate  Debtor/CD”). It is a document prepared on the basis of information memorandum provided by the Resolution Professional projecting – Financial, Legal, Technical and Management strategies so as to bring the CD back on its feet in earnest. However, the Code does not spell out the shape, color and texture of the Resolution plan , which is left to the imagination of stakeholders*.. Having said that a resolution  plan is a revival plan,  therefore it is not  a process of sale that whosoever pays the highest price would get the corporate debtor; it is not an auction ; it is not recovery ; it is not liquidation rather a revival plan by bringing a  CD out of  Intensive Care Unit(ICU).    


Being a document of  highest importance to all the stakeholders of corporate debtor, the  onus of evaluating the RP is left to the majority decision of the CoC. The CoC  examine the  “feasibility and viability” of  all aspects of the RP, including the manner of distribution of funds among the various classes of creditors. Following are the contents that are required to be addressed while drafting  a resolution plan:

A. Informative Content

  1. Details of Resolution Applicant containing information and disclosure that it is eligible under Section 29A to present a Resolution Plan.
  2. Executive summary highlighting the key elements of the plans like Treatment of Claims of creditors viz Financial Creditors, Operational Creditors and Other Creditors and timeline for Implementation of a resolution plan. 

B. Business Plan and Financial Projection

A resolution plan can be bifurcated into a business plan and financial projection. A business plan must contain following :

  1. The profile of RA, its experience in the sector;
  2. Strength, Weakness, Opportunities and Threat (SWOT) analysis;
  3. Management team it proposes to appoint in the corporate debtor i.e. technical experts, directors on the board, retention of employees so forth and so on. Further, it must address the key business, legal, tax, intellectual property, employment, and liability issues. 
  4. The resolution plan submitted by the prospective resolution applicant must provide for measures as may be necessary for the insolvency resolution of the CD for maximization of the value of its assets, which may include transfer or sale of assets or part thereof, whether subject to security interests or not. The plan may provide for either satisfaction or modification of any security interest of a secured creditor and may also provide for reduction in the amount payable to different classes of creditors.
  5. Regulation 38 (3) of the IBBI (Insolvency Resolution Process for Corporate Person ) Regulations 2016 (the “Regulations”) requires the RP to demonstrate that it addresses  the cause of default and how it propose to turnaround with its plan – Business plan / financial projection .

C. Mandatory Content of the Resolution Plan

Regulation 38 (1)  lists down the mandatory content to be instigated in the resolution plan. Amount payable to Creditors –

i. Operational creditors

The Code under section 30 provides for the payment of debts of operational creditors which shall not be less than the amount to be paid to the OC in the event of liquidation of the corporate debtor in accordance to waterfall mechanism lined up under section 53 of the Code.

Further, in terms of Regulation 38, the amount payable under a resolution plan to the OC shall be paid in priority over the Financial Creditors, if any.

ii. Financial Creditors

Financial creditor is  the only one who has a say as well as a voting right to approve a plan. Therefore, it becomes necessary for a RA to lure the FC to crack the deal by offering more to FC.

iii. Balancing the Interest of all Stakeholders

The guiding light of the  Code i.e. the Preamble gives an insight as to what it sought to achieve through the Code which includes balancing the interest of all stakeholders – workers are paid , the creditors in the long run will be repaid in full, and shareholders /investors are able to maximize their investment. Therefore, each and every stakeholders should  be taken care  of .

iv. Implementation of resolution Plan

With respect to implementation of the plan, the Code under Regulation 38 (2) requires the RP to substantiate the  following : 

  • The terms of the plan and the implementation schedule like – (1) timeline for payment CIRP Cost, OC , dissenting FC and to other stakeholders if any (2) obtaining approval under Competition Commission Act, RBI in relation to ECBs , SEBI depending on case to basis. Further, actions like infusion of fresh equity, am
  • The management and the control of the business of the corporate debtor during its term ; and
  • Adequate mean for supervision of its implementation during which the RA may or may not propose RP to be a part of monitoring committee

To sum up, once the RP is approved by the committee of creditors under section 30 (4)  and subsequently by the AA by its order under section 31(2), the RP becomes binding on the CD and its employees, members, creditors , guarantors and other stake holders including the Central Government, any State Government, or any other local authority to whom statutory dues are owed. Section 238 of the Code having the overriding effect stipulates that in the case of any inconsistency between the provision of the Code and other laws the former shall prevail which is augmented by the Apex Court in its various judgments,  as and when the priority of Code was challenged. Lastly, Section 32 A of the Code which came into effect on 28th December 2019, gives immunity apropos to the liability of a CD for an offence (civil or/and criminal) committed prior to the commencement of the corporate insolvency resolution process.



The Opinions expressed in this article are that of the author(s).The facts and opinions expressed here do not reflect the views of http://www.ibclaw.in.

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