Resolution Plans Under the IBC – A Practical Guide for Investors, Creditors, and Corporate Debtors

Introduction

Since the enactment of the Insolvency and Bankruptcy Code, 2016 (IBC), resolution plans have emerged as the central mechanism for rescuing distressed companies and preserving value for stakeholders. Unlike liquidation, which brings closure, a resolution plan represents continuity of business, employment, and economic activity. Over the past nine years, India has witnessed over 600 successful resolution plans, realising more than INR 3.2 lakh crore for creditors as of mid-2025.

Yet, the process remains complex. Judicial interventions, inter-creditor disputes, and evolving regulatory frameworks continue to shape how resolution applicants (RAs), committees of creditors (CoC), and resolution professionals (RPs) approach this process. This article seeks to demystify resolution plans covering their structure, mandatory contents, eligibility criteria, challenges, and emerging trends.

Nature and Purpose of a Resolution Plan

A resolution plan is not a conventional contract but rather an offer submitted by a resolution applicant to the CoC. It seeks to reorganise, restructure, or revive the corporate debtor (CD) as a going concern, while maximising asset value and balancing stakeholder interests.

Key objectives include:

• Debt restructuring: Modifying repayment terms, converting debt into equity, or offering haircuts to creditors.
• Capital infusion: Bringing in fresh funds for working capital or expansion.
• M&A strategies: Mergers, amalgamations, or hive-offs of viable business units.
• Asset monetisation: Sale of non-core or underutilised assets.
• Operational turnaround: Changes in management, technology upgrades, or workforce rationalisation. 

The IBC framework prefers revival over liquidation. In practice, resolution plans have proven most effective in sectors such as aviation (Jet Airways), telecom (RCom group), steel (Bhushan Steel, Essar Steel), and real estate (Jaypee Infratech, Amrapali projects).

Eligibility of Resolution Applicants – Section 29A

One of the most litigated provisions of the IBC is Section 29A, which prescribes who cannot submit a resolution plan. The provision was introduced to prevent defaulting promoters and wilful defaulters from regaining control of their companies “on the cheap.”

Disqualifications include:

• Undischarged insolvents.
• Wilful defaulters.
• Persons in control of an NPA account for more than a year.
• Connected persons, joint actors, or related parties of disqualified applicants.

Exemptions and carve-outs (2023-2025 refinements):

• Financial entities (banks, funds, ARCs) are exempted from certain ineligibility triggers if they are not related parties of the CD.
• Strategic investors are allowed flexibility if they demonstrate financial capacity through net worth, assets under management, or committed capital.
• Judicial precedents (e.g., ArcelorMittal v Satish Kumar Gupta, Phoenix ARC v Spade Financials) continue to refine the scope of “control,” “related party,” and “management.”

Mandatory Contents of a Resolution Plan

Under Section 30(2) of the IBC and Regulation 38 of the CIRP Regulations, a resolution plan must cover the following essentials:

1. Payment of CIRP costs in priority.
2. Minimum payout to operational creditors in line with liquidation value.
3. Treatment of dissenting financial creditors (upfront payment obligation).
4. Implementation schedule and monitoring mechanism.
5. Management and control framework post-approval.
6. Treatment of avoidance transactions (preferential, undervalued, fraudulent, or extortionate).
7. “Clean slate” provision – ensuring immunity from past liabilities under Section 32A.

Failure to meet these statutory requirements renders a plan non-compliant, irrespective of its financial attractiveness.

Evaluation Matrix – A Crucial Tool

The evaluation matrix is devised by the CoC to ensure transparency and comparability of bids. Parameters often include:

• Upfront cash recovery.
• Net present value of payouts.
• Haircut offered.
• Equity participation by RA.
• Business continuity and employment preservation.
• Track record and credibility of the RA.

Post-2022 reforms require the CoC to record reasons when deviating from the matrix. Courts have generally upheld the “commercial wisdom of the CoC” (see K. Shashidhar v Indian Overseas Bank, Essar Steel judgment).

Distribution of Proceeds – The Equity vs. Equality Debate

• Disputes around distribution are among the biggest causes of delay.
• Operational creditors must receive at least liquidation value.
• Dissenting financial creditors are entitled to upfront settlement.
• Inter-se disputes among secured creditors (e.g., Reliance Infratel, Amtek Auto) have led to prolonged litigations.

In 2023, the MCA Discussion Paper proposed separating plan approval from distribution approval to prevent bottlenecks. While not yet legislated, this reform could significantly reduce delays.

Implementation Challenges

Despite a statutory timeline of 330 days, the average time for completing CIRP remains over 570 days (IBBI data, 2024). Delays arise from:

• Litigation: Eligibility disputes, challenges to CoC decisions, and regulatory approvals.
• Funding gaps: RAs struggling to arrange committed funds.
• Regulatory overlaps: PMLA attachments and SEBI proceedings continuing despite IBC protection.
• Stakeholder disputes: Workmen dues, tax authority claims, or dissenting creditors.
• Recent cases (Jet Airways, Reliance Infratel, Lavasa Corporation) illustrate how even approved plans can remain unimplemented for years.

Treatment of Historical Liabilities

Section 32A of the IBC gives the corporate debtor a “clean slate” post-approval, insulating it from prior offences and liabilities. However:

• Courts (Delhi HC in Rajiv Chakroborty v ED) have held that PMLA attachments may continue despite IBC protection.
• Tax liabilities and environmental claims often resurface, requiring careful drafting of indemnity and waiver clauses.
• Resolution applicants increasingly seek specific reliefs from NCLT — exemptions under the Companies Act, relief from past penalties, and protection against contingent liabilities.

Special Structures – Asset-wise Resolution

The 2022 amendment now permits submission of separate plans for distinct assets of the CD, rather than mandating a consolidated plan. This has enabled:

• Real estate projects being resolved phase-wise.
• Demerger of viable units while liquidating non-core assets.
• Hybrid approaches combining resolution and liquidation.
• For example, NCLT Chennai’s 2023 order in the Hindustan Photo Films matter approved a partial demerger resolution, while ordering liquidation of excluded assets.

Avoidance Transactions – Continuing Importance

Resolution plans must outline how pending avoidance applications (fraudulent, preferential, undervalued, extortionate) will be pursued. Post-2023, courts have emphasised that:

• Such applications survive beyond plan approval.
• Proceeds from these actions flow to creditors, not the RA.
• Costs are borne as per NCLT’s directions.
• This area has gained importance, with regulators scrutinising past promoter transactions more closely.

Recent Trends and Emerging Issues (2023-2025)

 (a) Real Estate Resolutions: Following SC judgments in Pioneer Urban Land and Amrapali, homebuyers are firmly recognised as financial creditors. Plans now routinely provide for project-wise funding and handover obligations.

(b) Cross-border Insolvency: The MCA’s 2024 consultation paper recommended adoption of the UNCITRAL Model Law on Cross-Border Insolvency. Once enacted, RAs with foreign creditors or overseas assets will face a more structured process.

(c) Group Insolvency: The experimental group insolvency framework, piloted in 2024 with the Videocon group, is expected to be formalised by 2026. This will allow group-level resolution strategies.

(d) ESG and Distressed Assets: Investors are increasingly factoring in ESG obligations when bidding for distressed companies in mining, infrastructure, and energy sectors. Plans now include commitments to environmental remediation, worker welfare, and governance improvements.

(e) Private Credit Funds as RAs: Domestic AIFs and global distressed debt funds (Apollo, Oaktree, Brookfield) are active bidders. The regime now recognises private credit vehicles as eligible resolution applicants, provided they demonstrate committed capital.

(f) Digitalisation and E-CIRP: The IBBI launched E-CIRP 2.0 in 2025, enabling electronic submissions, virtual CoC meetings, and AI-based claim verification. This is expected to cut process delays.

Best Practices for Prospective Resolution Applicants

1. Conduct deep diligence – legal, financial, tax, and operational.
2. Engage early with CoC – understand evaluation parameters.
3. Structure funding commitments – ensure certainty of capital.
4. Address regulatory overlaps – include reliefs for tax, PMLA, SEBI, and labour laws.
5. Plan for management continuity – propose credible directors and KMPs.
6. Incorporate monitoring mechanisms – monitoring committees, escrow arrangements, performance bonds.
7. Mitigate litigation risks – build contingencies for adverse orders.

Conclusion

Resolution plans under the IBC have transformed India’s insolvency landscape. They balance the dual goals of creditor recovery and corporate revival. While challenges remain like litigation delays, regulatory overlaps, and distribution disputes, the framework continues to evolve.

For investors, India offers a fertile distressed asset market, especially in real estate, steel, infrastructure, and renewables. For creditors, robust evaluation matrices and judicial deference to CoC decisions provide assurance. For corporate debtors, resolution plans represent a second chance at survival. As India prepares to integrate cross-border insolvency norms and group resolution frameworks, resolution plans will become even more sophisticated. Stakeholders must therefore adopt a strategic, well-researched, and legally compliant approach to maximise value in this dynamic regime.

Contributed by – Smita Paliwal