Contents of Resolution Plan redrawn, duties of RP redefined

IBBI notifies 3rd amendment to CIRP and Fast Track Regulations



Vallari Dubey


Resolution plans pursuant to Section 30 and Section 31 of the Insolvency and Bankruptcy Code, 2016 (“the Code”) will hereon be required to contain details of the Resolution Applicant along with the Connected Persons.

A time bound corporate insolvency resolution process is linked with good resolution plans that can feasibly protect the Corporate Debtor from the curse of liquidation. With this ideology, IBBI has brought third set of amendments to the CIRP Regulations and Fast Track Regulation of the Code.



 Amendment to CIRP Regulations and Fast Track Regulations

Details of Resolution Applicant and connected persons

New sub-regulation (3) to Regulation 38 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”) and Regulation 37 of the Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017 (“Fast Track Regulations”):


(3) A resolution plan shall contain details of the resolution applicant and other connected persons to enable the committee to assess the credibility of such applicant and other connected persons to take a prudent decision while considering the resolution plan for its approval.

Explanation: For the purposes of this sub-regulation,-

(i) ‘details’ shall include the following in respect of the resolution applicant and other connected person, namely:-

(a) identity;

(b) conviction for any offence , if any, during the preceding five years;

(c) criminal proceedings pending, if any;

(d) disqualification, if any, under Companies Act, 2013, to act as a director;

(e) identification as a willful defaulter, if any, by any bank or financial institution or consortium thereof in accordance with the guidelines of the Reserve Bank of India;

(f) debarment, if any, from accessing to, or trading in, securities markets under any order or directions of the Securities and Exchange Board of India,; and

(g) transactions, if any, with the corporate debtor in the preceding two years.


(ii) the expression ‘connected persons’ means-

(a) persons who are promoters or in the management or control of the resolution applicant;

(b) persons who will be promoters or in management or control of the business the corporate debtor during the implementation of the resolution plan;

(c) holding company, subsidiary company, associate company and related party of the persons referred to in items (a) and (b).



Details of specified transactions

Substitution of sub-regulation (2) to Regulation 39 and Regulation 38 of CIRP Regulations and Fast Track Regulations, respectively:


(2) The resolution professional shall submit to the committee all resolution plans which comply with the requirements of the Code and regulations made thereunder along with the details of following transactions, if any, observed, found or determined by him:-

(a) preferential transactions under section 43;

(b) undervalued transactions under section 45;

(c) extortionate credit transactions under section 50; and

(d) fraudulent transactions under section 66,


and the orders, if any, of the adjudicating authority in respect of such transactions.


Analysis of the amendments

Details of Resolution Applicant and connected persons

Prior to the amendment, there was no requirement for the Resolution Applicant to submit its details in the Resolution Plan. Post amendment, this requirement has been specifically included by Law.

A Resolution Plan is supposed to be the best treatment for the Corporate Debtor’s revival. Corporate Insolvency Resolution Process (“CIRP”) is essentially a time-bound process, where effective timelines have been provided to ensure speedy resolution and earlier recovery of the Corporate Debtor. The idea of the Code is to first assess the viability of the Corporate Debtor’s financials and existing capacity to revive or come out of indebtedness, therefore, mandating the process of resolution, including preparation of a Resolution Plan.

It is pertinent that a Resolution Plan is appropriate basis the needs of the Corporate Debtor and its various stakeholders. In its endeavor to ensure that best Resolution Plans are prepared and submitted in respect of a Corporate Debtor, the Insolvency an Bankruptcy Board of India (“IBBI”) seeks to add additional requirements for contents of a Resolution Plan.

By virtue of the said amendment, a Resolution Applicant shall ensure that the plan it submits has all the aforesaid details about the Applicant itself and any of the connected persons. This is will ensure greater transparency and disclose any relationship, direct or indirect that the Applicant may have with the Corporate Debtor. There might be instances where third party takeover, involving indirect acquisition by existing promoters or directors of the Corporate Debtor may be involved. It was therefore essential to plug the gap.

Also, it is in the best interest of all the stakeholders, that only realistic Resolution Plans are considered and admitted by the Committee of Creditors (“CoC”), saving a Corporate Debtor from the fall out of liquidation, which is otherwise fit for resolution under the Code. A poor Resolution Plan should not be the reason to drag a Corporate Debtor to liquidation, which could otherwise be revived.

This will further enhance the reliability of a Resolution Plan and ensure that it is viable and implementable.

Details of specified transactions

It is the duty of the Resolution Professional to submit all the Resolution Plans which are in compliance of the Code and its Regulations. However, post the aforesaid amendments; a Resolution Professional is bound to submit details of specified transactions along with the order of National Company Law Tribunal with respect to the same, if any.

Transactions viz. preferential transactional, undervalued transactions, extortionate credit transactions, fraudulent transactions should be studies, observed, found and/or determined by a Resolution Professional (“RP”) before submitting Resolution Plans to the CoC.

It shall be incumbent on the RP to ensure that the Corporate Debtor undergoes a detailed forensic audit/checking of the Corporate Debtor, before s/he makes affirmations before the CoC. Prior to the amendment, no such requirement existed and hence, the RP may make affirmations without confirmation. A Resolution Plan before CoC without any examination of the aforesaid transactions cannot be warranted of its correctness.

Ordinance issued for further amendments to the Insolvency and Bankruptcy Code, 2016

 Pursuant to changes recently inculcated in the Insolvency and Bankruptcy Code, 2016 (“Code”), focusing on background of Resolution Applicant for buying of stressed assets, the Cabinet has further given assent for subsequent changes to the Code, and sent to the President for approval. The same shall be laid before the Parliament in the winter session.

The Ordinance emphasizes on streamlining the process of selecting buyers of companies undergoing insolvency process. It has been initiated with a purpose of preventing willful defaulters and promoters with past records of fraud from buying insolvent companies at a discount.


The above-stated amendments are largely disclosure and transparency based; seeking to ensure that the process under law is full-proof of its intent and essentially covers all elements of objectives with the Code has been prepared. The responsibility has been reemphasized on a Resolution Applicant, who intends to decide the fate of an indebted Corporate and a Resolution Professional who is fundamentally taking charge of the going concern of such Corporate.



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