Section 54L of The Insolvency and Bankruptcy Code, 2016.
54L. Approval of resolution plan.--(1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) or sub-section (12), as the case may be of section 54K, subject to the conditions provided therein, meets the requirements as referred to in sub-section (2) of section 30, it shall, within thirty days of the receipt of such resolution plan, by order, approve the resolution plan: Provided that the Adjudicating Authority shall, before passing an order for approval of a resolution plan under this sub-section, satisfy itself that the resolution plan has provisions for its effective implementation.
- (2)The order of approval under sub-section (1) shall have such effect as provided under sub-sections (1), (3) and (4) of section 31, which shall, mutatis mutandis apply, to the proceedings under this Chapter.
- (3)Where the Adjudicating Authority is satisfied that the resolution plan does not conform to the requirements referred to in sub-section (1), it may, within thirty days of the receipt of such resolution plan, by an order, reject the resolution plan and pass an order under section 54N.
- (4)Notwithstanding anything to the contrary contained in this section, where the Adjudicating Authority has passed an order under sub-section (2) of section 54J and the resolution plan approved by the committee of creditors under sub-section (4) or sub-section (12), as the case may be of section 54K, does not result in the change in the management or control of the corporate debtor to a person who was not a promoter or in the management or control of the corporate debtor, the Adjudicating Authority shall pass an order--
- (a)rejecting such resolution plan;
- (b)terminating the pre-packaged insolvency resolution process and passing a liquidation order in respect of the corporate debtor as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1) of section 33; and
- (c)declaring that the pre-packaged insolvency resolution process costs, if any, shall be included as part of the liquidation costs for the purposes of liquidation of the corporate debtor.
Summary
- If the National Company Law Tribunal is satisfied that the resolution plan approved by the lenders meets all legal requirements, it must pass an order approving it within thirty days.
- Before approving, the Tribunal must satisfy itself that the plan has proper provisions for its effective implementation.
- Once approved, the plan is legally binding on the corporate debtor, its employees, members, creditors, including government authorities, and guarantors.
- If the plan does not meet the legal requirements, the Tribunal must pass an order rejecting it and terminate the pre-packaged process.
- If the Tribunal previously ordered that the company's management be vested in the resolution professional due to fraud or gross mismanagement, and the approved plan does not change the management away from the promoters, the Tribunal must reject the plan, terminate the process, and order liquidation.
Practical examples
FAQ
1. Within what timeframe must the Tribunal pass an order approving or rejecting a plan under Section 54L of The Insolvency and Bankruptcy Code, 2016?
Under Section 54L of The Insolvency and Bankruptcy Code, 2016, the Adjudicating Authority must pass an order within thirty days of receiving the resolution plan from the resolution professional.
2. On whom is an approved resolution plan binding under Section 54L of The Insolvency and Bankruptcy Code, 2016?
Under Section 54L of The Insolvency and Bankruptcy Code, 2016, the approved plan is binding on the corporate debtor, its employees, members, creditors, including government authorities, guarantors, and other stakeholders.
3. What must the Tribunal satisfy itself of before passing an approval order under Section 54L of The Insolvency and Bankruptcy Code, 2016?
Under Section 54L of The Insolvency and Bankruptcy Code, 2016, the Adjudicating Authority must satisfy itself that the resolution plan has adequate provisions for its effective implementation.
4. Why must the Tribunal reject a plan if management was taken over under Section 54J, and how is the company affected under Section 54L of The Insolvency and Bankruptcy Code, 2016?
Under Section 54L of The Insolvency and Bankruptcy Code, 2016, if management was taken over under Section 54J for fraud or gross mismanagement, and the plan does not change control away from the promoters, the Tribunal must reject the plan, terminate the process, and order the liquidation of the corporate debtor.
Test yourself
Q1.Under Section 54L of The Insolvency and Bankruptcy Code, 2016, what is the statutory period within which the Adjudicating Authority must approve or reject an approved resolution plan?
Q2.Under Section 54L of The Insolvency and Bankruptcy Code, 2016, if the Adjudicating Authority rejects a resolution plan, which of the following orders must it also pass?
Q3.Under Section 54L of The Insolvency and Bankruptcy Code, 2016, what is the consequence if a company's management was taken over under Section 54J, and the proposed resolution plan fails to change the management or control away from the promoters?
Q4.Under Section 54L of The Insolvency and Bankruptcy Code, 2016, if a resolution plan is rejected and a liquidation order is passed because of a failure to change control after an order under Section 54J, how are the pre-packaged process costs treated?