This article explains Section 30 of the Insolvency and Bankruptcy Code, 2016 (IBC) in a clear and straightforward way. It covers how resolution plans are submitted and approved to help struggling companies recover while ensuring creditors are treated fairly. The information is based on legal documents, court rulings, and official sources to provide a complete understanding for everyone, including legal experts, creditors, and policymakers.
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What is Section 30 of the IBC?
Section 30 of IBC is a key part of India’s insolvency law, which helps companies facing financial trouble get back on track. It outlines the process for creating, reviewing and approving a resolution plan or a roadmap to revive the company. The plan ensures that creditors, such as banks (financial creditors) and suppliers (operational creditors), are treated fairly, and it sets clear rules to make the process transparent and efficient.
Below, we break down the main parts of Section 30 to make it easy to understand.
How Resolution Plans Are Submitted
Anyone interested in saving the company, called a resolution applicant, can submit a resolution plan to the resolution professional, who oversees the insolvency process. The plan must follow an information memorandum, which provides details about the company’s finances and operations. The applicant also needs to include a signed statement (affidavit) confirming they are eligible under Section 29A. This section prevents certain people or companies, like those with major loan defaults, from submitting plans.
How Plans Are Reviewed and Approved
The resolution professional checks the plan to make sure it meets specific requirements. For example:
It must prioritize paying the costs of the insolvency process, like legal fees.
Operational creditors (e.g., suppliers) should get at least as much money as they would if the company were liquidated (sold off).
The plan must explain how the company will be run after approval, how it will be carried out, and ensure it follows all laws.
Once the resolution professional confirms the plan meets these standards, it is sent to the Committee of Creditors (CoC), which is made up mostly of financial creditors like banks. The CoC votes on the plan, and it needs at least 66% of the voting share to pass. They consider whether the plan is practical, fair, and likely to succeed.
Putting the Plan into Action
If the CoC approves the plan, the resolution professional sends it to the Adjudicating Authority, usually the National Company Law Tribunal (NCLT), for final approval. The NCLT checks that everything is in order before giving the green light. Over the years, Section 30 has been updated (in 2018 and 2019) to make the voting process smoother and clarify rules about who can submit plans.
Breaking Down Section 30’s Sub-Sections
Section 30 has six sub-sections, each covering a specific part of the resolution plan process. Here’s what they mean in simple terms:
Section 30(1): Submitting the Plan
The resolution applicant submits the plan to the resolution professional, including a signed statement confirming they meet Section 29A eligibility rules. No extra certificate is needed.
Section 30(2): Checking the Plan
The resolution professional reviews the plan to ensure it:
Pays insolvency costs first.
Gives operational creditors at least what they’d get in liquidation (based on Section 53).
Explains how the company will be managed after approval.
Details how the plan will be carried out.
Follows all laws and any rules set by the Insolvency and Bankruptcy Board of India (IBBI).
Section 30(3): Presenting to the CoC
The resolution professional shares the plan with the CoC if it meets the requirements, so they can review and vote on it.
Section 30(4): CoC Approval
The CoC votes on the plan, and it needs at least 66% of the financial creditors’ votes to be approved. They check if the plan is workable, fair, and follows the priority rules for payments (as per Section 53).
Section 30(5): Attending CoC Meetings
The resolution applicant can attend CoC meetings to discuss the plan but can’t vote unless they are also a financial creditor.
Section 30(6): Final Approval
After CoC approval, the resolution professional sends the plan to the Adjudicating Authority (like the NCLT) for final approval.
Additional Notes and Rules
Explanation 1 (Section 30(2)): The plan must distribute money fairly among creditors, without favoring one group over another.
Explanation 2 (Section 30(2)): Added in 2019, this applies to plans that haven’t been resolved or are under appeal (per Sections 61 or 62).
Provisos (Section 30(4)): If the plan is rejected, the company may go into liquidation. New plans can be invited, and some applicants under Section 29A may get up to 30 days to clear their dues to become eligible.
Changes to Section 30 Over Time
Section 30 has been updated to fix practical issues and make the process better:
Original Law: Started on December 1, 2016.
2018 Amendment: Lowered the CoC voting requirement from 75% to 66% (effective November 23, 2017) to make approvals easier.
2019 Amendment: Made sure the rules applied to ongoing cases, effective August 16, 2019.
What the Courts Have Said
Court rulings have helped explain how Section 30 works. Some important Supreme Court decisions include:
Arcelormittal India Pvt. Ltd. vs. Satish Kumar Gupta (2018): Explained the resolution professional’s role in reviewing plans.
Jaypee Kensington (2021): Clarified how “payment” works under Section 30(2) to ensure fair distribution.
Essar Steel (2019): Set rules for treating creditors equally and fairly.
K. Sashidhar (2019): Confirmed how voting shares are calculated for CoC approval.
Proposed Updates and What’s Next
In January 2023, the IBBI suggested changes to Section 30 to improve oversight after plans are approved. They proposed that the CoC create a monitoring committee to watch over the plan’s progress, making the process more transparent and efficient. People could share feedback on this idea until February 7, 2023.
As of April 28, 2025, there may have been more updates since 2023, but this guide reflects the rules up to the 2019 amendments and proposed changes still under review.
How Section 30 Connects to Other IBC Rules
Section 30 works with other parts of the IBC, such as:
Section 29A: Sets eligibility rules for who can submit plans, used in Section 30(1).
Section 53: Explains how money is distributed in liquidation, which Section 30(2) uses to ensure fair payments to operational creditors.
Sections 61 and 62: Cover appeals, mentioned in Explanation 2 of Section 30(2).
IBBI Regulations: Add details about payments and other rules to support Section 30.
Why Section 30 Matters
For creditors, Section 30 provides a clear process to recover their money, with defined voting rights and payment priorities. For companies in trouble, it offers a chance to recover through a practical plan, approved by creditors and the NCLT. The 66% voting rule (changed in 2018) makes decisions faster while ensuring most creditors agree, though some debate whether it’s enough for complex cases.
Summary
Section 30 of the IBC, 2016, is an important part of India’s insolvency system, guiding how resolution plans are made and approved to save struggling companies. Updates to the law and court rulings show that the system is responsive to the needs of creditors, companies, and others involved. While future changes may be coming, the current rules (as of 2019) provide a strong framework for fair and effective corporate recovery.
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Section 30 of IBC: FAQs
Q1. How does someone submit a resolution plan under Section 30?
Under Section 30(1), the resolution applicant gives the plan to the resolution professional with a signed statement confirming they meet Section 29A eligibility. The plan must follow the information memorandum and meet Section 30(2) requirements, like paying insolvency costs and treating creditors fairly.
Q2. What does a resolution plan need to include to get CoC approval?
Section 30(2) says the plan must pay insolvency costs first, give operational creditors at least what they’d get in liquidation (per Section 53), explain how the company will be managed after approval and follow all laws and IBBI rules. The CoC approves it with at least 66% of votes under Section 30(4).
Q3. What happens if the CoC rejects a plan?
If the CoC says no, Section 30(4) allows the resolution professional to ask for new plans. If no plan is approved, the company might go into liquidation, as per Section 30(4) and other IBC rules.
Q4. Who can attend CoC meetings during the approval process?
Under Section 30(5), the resolution applicant can attend meetings to discuss the plan but can’t vote unless they’re also a financial creditor. This keeps the process open while letting creditors make the final call.
Q5. How has Section 30 changed, and why does the 66% voting rule matter?
In 2018, the CoC voting requirement dropped from 75% to 66% (effective November 23, 2017) to speed up approvals. The 2019 amendment applied these rules to ongoing cases. The 66% rule makes decisions faster while ensuring most creditors agree on a workable plan.
