Approval of a resolution plan by the National Company Law Tribunal (NCLT) constitutes the final stage of judicial oversight in India’s corporate insolvency resolution process. Under Section 31 of the Insolvency and Bankruptcy Code, 2016, the NCLT is mandated to assess whether a resolution plan approved by the Committee of Creditors (CoC) complies with statutory requirements and adequately safeguards the interests of all stakeholders. In recent years, particularly following regulatory clarifications and evolving judicial pronouncements in 2025, the scope of NCLT scrutiny has expanded beyond mere procedural compliance to encompass a substantive examination of feasibility, equitable value distribution, and the protection of dissenting creditors.

This evolving jurisprudence has transformed Section 31 into more than a formality. It now functions as a substantive safeguard ensuring that resolution plans are viable in practice, legally enforceable, and aligned with the fundamental objective of value maximisation.

The Scope of NCLT’s Powers under Section 31

Section 31 empowers the NCLT to approve a resolution plan only if it conforms to the provisions of the IBC and related regulations. While the CoC retains commercial supremacy in selecting a plan, the tribunal performs an independent review to ensure that minimum statutory standards are met.

Traditionally, courts refrained from interfering with commercial decisions. However, post-2025 developments reflect a calibrated expansion of scrutiny. The tribunal now actively verifies whether the plan is capable of being implemented, respects statutory priority, and does not unfairly prejudice any stakeholder class. This approach balances creditor autonomy with judicial oversight.

The NCLT is not expected to redesign a plan, but it can refuse approval if the plan is ill-conceived, discriminatory, or unworkable. The consequence of rejection is severe, often pushing the corporate debtor towards liquidation. Therefore, the Section 31 review has become a critical phase in the resolution lifecycle.

Feasibility and Viability: From Paper Plans to Practical Solutions

One of the most significant post-2025 shifts lies in the tribunal’s emphasis on feasibility and implementation capability. Earlier, feasibility was largely assessed by the CoC through financial projections and business plans. Now, the NCLT independently examines whether the proposed restructuring can realistically revive the corporate debtor.

Feasibility involves more than optimistic cash-flow estimates. Tribunals increasingly evaluate funding commitments, availability of working capital, regulatory approvals, operational continuity, and managerial competence of the resolution applicant. Plans dependent on speculative asset sales or uncertain market conditions face closer scrutiny.

Implementation timelines are another focal point. The NCLT checks whether milestones are clearly defined and whether safeguards exist in case of delay or default. Resolution applicants are often required to provide performance guarantees or escrow mechanisms to demonstrate seriousness and capacity.

This trend reflects judicial concern that approval without enforceability merely postpones failure and erodes stakeholder confidence.

Compliance with Mandatory Statutory Conditions

Section 30(2) of the IBC prescribes non-negotiable conditions that every resolution plan must satisfy before reaching Section 31 approval. These include payment of insolvency resolution costs in priority, treatment of operational creditors, management of the corporate debtor post-resolution, and compliance with applicable laws.

Post-2025 practice shows increased vigilance regarding regulatory compliance. Plans involving sector-specific approvals, foreign investment permissions, or environmental clearances are examined carefully. The tribunal now insists on clarity regarding pending litigations, tax liabilities, and contingent obligations to avoid future disputes.

Failure to address statutory dues or employee claims transparently has become a common ground for objections. The NCLT ensures that the resolution framework does not become a mechanism for bypassing public law liabilities.

Stakeholder Waterfalls and the Principle of Equitable Distribution

The distribution of resolution proceeds among stakeholders remains one of the most contentious aspects of insolvency proceedings. Although resolution does not strictly follow the liquidation waterfall, the principle of equitable treatment governs allocations.

The NCLT now actively reviews whether similarly placed creditors are treated consistently and whether deviations are justified by objective criteria. Priority payments to secured creditors, haircuts imposed on unsecured lenders, and token distributions to operational creditors must align with fairness and transparency.

Post-2025 jurisprudence has clarified that while commercial wisdom prevails, discriminatory distributions without a rational basis can invite judicial correction. The tribunal ensures that the minimum entitlement principle is respected, meaning no stakeholder should receive less than what they would have obtained in liquidation.

This approach protects the integrity of the insolvency framework and discourages opportunistic bidding strategies.

Protection of Dissenting Creditors

One of the most progressive developments after 2025 is the strengthened protection for dissenting financial creditors. While the CoC may approve a plan by majority vote, dissenting members retain statutory safeguards.

The NCLT verifies that dissenting creditors receive at least the liquidation value of their claims and are not subjected to arbitrary subordination. Differential interest rates, delayed payments, or conditional recoveries imposed only on dissenters attract judicial attention.

Recent trends also show sensitivity towards minority financial institutions and bondholders who may lack bargaining power. The tribunal ensures that voting dynamics do not result in coercive outcomes that undermine creditor equality.

This enhanced protection reinforces confidence in collective decision-making and prevents abuse of majority control.

Treatment of Operational Creditors and Employees

Operational creditors and employees often represent the most vulnerable stakeholder group in insolvency proceedings. Section 31 review has evolved to ensure that their interests are not marginalised.

The NCLT now examines whether operational creditors receive fair consideration in proportion to their role in sustaining business operations. Token settlements without justification are increasingly questioned. Employee dues, gratuity obligations, and provident fund liabilities receive special protection due to their statutory nature.

Post-2025 interpretations have reaffirmed that resolution should promote continuity, not merely financial restructuring. Retention of workforce, settlement of wage arrears, and clarity on future employment terms form part of the tribunal’s holistic assessment.

Binding Effect and Post-Approval Consequences

Once approved under Section 31, a resolution plan becomes binding on the corporate debtor, creditors, employees, guarantors, and government authorities. This binding effect provides legal certainty and facilitates fresh investment.

However, the NCLT now carefully ensures that the plan does not extinguish third-party rights unlawfully or compromise ongoing investigations. Extinguishment clauses relating to guarantees, criminal liabilities, or statutory penalties are examined cautiously.

Implementation monitoring has also gained prominence. Non-compliance with approved timelines can invite supervisory directions, penalties, or even conversion into liquidation. This reinforces accountability among successful resolution applicants.

Judicial Philosophy after 2025: Balancing Speed with Substantive Justice

The post-2025 insolvency landscape reflects a mature judicial philosophy that balances procedural efficiency with substantive justice. While timelines remain critical, tribunals are no longer willing to approve defective plans merely to meet statutory deadlines.

The emphasis is now on sustainable revival, transparent distributions, and institutional integrity. Section 31 approval has become a quality control mechanism rather than a rubber stamp.

This evolution aligns with the broader objective of the IBC—to preserve enterprise value, protect stakeholder confidence, and promote responsible restructuring.

Conclusion

Section 31 stands at the intersection of commercial autonomy and judicial supervision. In the post-2025 framework, NCLT approval is no longer a ceremonial endorsement but a rigorous examination of feasibility, legality, and fairness.

By strengthening scrutiny over implementation capacity, stakeholder waterfalls, and dissenting creditor rights, the tribunal ensures that resolution plans deliver real revival rather than temporary relief. This balanced approach enhances predictability, safeguards minority interests, and reinforces India’s insolvency regime as a credible platform for corporate restructuring.

As insolvency jurisprudence continues to evolve, Section 31 will remain the cornerstone that transforms negotiated plans into binding and enforceable solutions.

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