The NCLAT upheld the rejection of a ₹7 crore resolution plan under IBC, holding it failed to address the cause of default and violated mandatory statutory requirements.
NCLAT Upholds Rejection of ₹7 Crore Resolution Plan Under IBC
The National Company Law Appellate Tribunal (NCLAT) has upheld the rejection of a ₹7 crore resolution plan submitted under the Insolvency and Bankruptcy Code (IBC), ruling that it failed to rectify the root cause of the corporate debtor’s default. The decision reinforces the mandatory obligation under Section 30(3) of the IBC to address the cause of default before considering a plan viable.
The resolution plan was scrutinised for its inability to propose corrective measures for financial irregularities or governance lapses that contributed to the insolvency. The Adjudicating Authority, affirming earlier findings, held that merely offering a financial bid without corrective restructuring does not meet the compliance standards under Regulation 37(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.
"A resolution plan must not only be financially sound but must also cure the cause of default; otherwise, it fails on the threshold of admissibility,"
the Tribunal observed. This ruling sets a precedent for stricter evaluation of future resolution plans, especially in cases where misconduct or operational inefficiencies precipitated insolvency. Practitioners must ensure comprehensive remedial strategies are integral to proposed plans to survive scrutiny.
Citations
- In re: [Unnamed Corporate Debtor] (2026) NCLAT
