Can a resolution plan be modified and resubmitted?

During the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), the resolution plan is a critical element in determining the future of the company. Once a resolution plan is submitted by the resolution applicant, it is evaluated by the Committee of Creditors (CoC). However, if necessary, the resolution plan can be modified and resubmitted under certain conditions. These modifications are subject to the approval of the CoC and must comply with the procedural requirements laid out by the National Company Law Tribunal (NCLT).

Conditions for Modifying and Resubmitting a Resolution Plan

Committee of Creditors (CoC) Approval

If the CoC finds that the submitted resolution plan requires modifications, they can request the applicant to make changes. The applicant can then revise the plan based on the feedback or concerns raised by the CoC, and resubmit the modified version.

Material Changes or Additional Information

Modifications may be required if there is a need to incorporate material changes such as:

• Higher bids or improved financial offers for the company’s assets.
• Additional funding or revised terms for repayment to creditors.
• The inclusion of new information or details that were not previously considered or disclosed.

In Response to Queries or Objections

The CoC may have certain queries or objections regarding the plan’s feasibility, fairness, or compliance with the IBC guidelines. The resolution applicant is required to address these concerns by modifying the plan and resubmitting it for further evaluation.

Revised Terms Based on NCLT Directions

If the NCLT provides directions to modify the plan due to legal or regulatory reasons, the resolution applicant may need to adjust the terms accordingly. This ensures that the plan complies with the statutory requirements under the IBC.

Procedure for Modifying and Resubmitting the Resolution Plan

CoC Approval of Modification

The first step is that the Committee of Creditors (CoC) must approve the request for modifications. This approval is necessary before any changes can be made and resubmitted.

Resubmission to CoC

After making the necessary modifications, the resolution applicant will resubmit the updated plan to the CoC for further evaluation and approval. The CoC may review the revised plan to ensure it adequately addresses the concerns that prompted the modification.

Final Approval by CoC

Once the resolution plan has been modified and resubmitted, the CoC may vote again on the new plan. If the plan receives the required approval from the majority of creditors (typically 66% or more, depending on the type of creditors), it can then be forwarded to the NCLT for approval.

NCLT Approval

After the CoC approves the resolution plan (including any modifications), the plan is submitted to the NCLT for final approval. If the NCLT finds that the plan meets the legal and regulatory requirements, it will approve the plan and the company will be rescued or restructured as per the terms agreed upon.

Timeline Impact

Resolution Plan Submission: Typically, the resolution plan must be submitted within 180 days from the initiation of the CIRP (with a possible extension of up to 90 days). However, the process can be delayed if the plan requires modifications, as each resubmission and reconsideration by the CoC takes time.

Extended Timeframe: If modifications are significant, it may extend the total timeline, affecting the 180-day period. In such cases, the CIRP timeline may be extended by the NCLT to allow for proper evaluation and resolution.

Additional Approvals: Any further delays in obtaining approvals from the CoC or NCLT due to modifications could add weeks or even months to the resolution process.

Example of Modifying and Resubmitting a Resolution Plan

Example: XYZ Pvt. Ltd.

XYZ Pvt. Ltd. is undergoing CIRP due to financial distress. A resolution applicant, ABC Ltd., submits a resolution plan offering ₹100 crore for the company’s assets and a 70% repayment to the creditors.

Objection from CoC: During the review process, the CoC raises concerns regarding the low repayment rate and asks for a higher offer from the resolution applicant.

Modification and Resubmission: Based on the CoC's feedback, ABC Ltd. revises the offer, increasing the payment to ₹120 crore and enhancing the repayment terms for creditors. They resubmit the modified plan for approval.

CoC Approval: The CoC reviews the revised offer, and this time, the plan receives approval from 75% of the creditors.

NCLT Approval: After receiving the CoC's approval, the resolution plan is submitted to NCLT, which reviews the terms and grants final approval.

Outcome: The company is successfully resolved within the extended CIRP timeline, and creditors receive higher repayment than initially offered.

Conclusion

Yes, a resolution plan can be modified and resubmitted during the CIRP process under the Insolvency and Bankruptcy Code (IBC). Such modifications typically arise from feedback by the Committee of Creditors (CoC), legal concerns raised by the NCLT, or new developments that improve the financial offer to creditors. While the ability to modify a resolution plan is critical for ensuring a fair and viable outcome, it can extend the CIRP timeline and requires approval from both the CoC and NCLT.