Minimum Payments under a Resolution Plan: Section 30(2)(b), Nil Liquidation Value and the New Clause (ba)

When a company’s liquidation value is exhausted by secured creditors, the notional entitlement of operational creditors and unsecured financial creditors in a liquidation is nil. Resolution applicants have argued from this that a plan may offer them nothing. Tribunals have had to decide whether Section 30(2)(b) of the Insolvency and Bankruptcy Code, 2016 (“IBC”) permits that, and the provision itself has since been rewritten.

Section 30(2)(b) IBC Before 26 May 2026

Section 30(2)(b) IBC required a resolution plan to provide for payment of the debts of operational creditors in the specified manner, which shall not be less than the higher of the liquidation entitlement under Section 53 or the amount receivable if plan proceeds were distributed in Section 53(1) order; and, in the same clause, payment to financial creditors who did not vote in favour of the plan of an amount not less than their liquidation entitlement under Section 53(1).

The NCLT Kolkata Reasoning

In proceedings concerning the resolution of Suasth Health Care Foundation, the National Company Law Tribunal, Kolkata Bench considered how Section 30(2)(b) IBC applied to these questions. The reasoning reported from that decision includes the following propositions:

• the words “not less than” set a floor rather than a ceiling; had Parliament intended to cap the entitlement at liquidation value it would have said “not more than”;
• the reference to Section 53(1) is for the limited purpose of computing the amount payable to operational creditors and dissenting financial creditors; Section 53 does not otherwise govern a resolution; and
• an argument that such creditors may be paid nil because their liquidation value is nil would defeat the statutory allocation.

The connected appeals were decided by the NCLAT in Shankar Mukherjee & Anr. v. Ravi Sethia & Ors., Company Appeal (AT) (Ins.) No. 01 of 2024 (14 May 2025). The Appellate Tribunal dismissed the challenge to the approved plan, holding that the plan did not discriminate between creditors of the same class, that a nil allocation applied to the whole class of unsecured financial creditors, and that differential treatment between classes, and between related and unrelated parties, is permissible following M.K. Rajagopalan v. Dr. Periasamy Palani Gounder, (2024) 1 SCC 42, and Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, (2020) 8 SCC 531.

What the 2026 Amendment Changed

The Insolvency and Bankruptcy Code (Amendment) Act, 2026, in force in this respect from 26 May 2026, separated the two categories:

• Operational creditors remain in clause (b), with the “higher of” comparison unchanged.
• Financial creditors who do not vote in favour are now dealt with in new clause (ba), which requires payment of not less than the lower of (i) the amount payable in a liquidation under Section 53, or (ii) the amount payable if the amount to be distributed under the plan were distributed in accordance with the order of priority in Section 53(1). Explanation I states that a distribution in accordance with clause (ba) shall be fair and equitable to such creditors.

Transitional rule. Explanation II provides that clause (ba) does not apply to a CIRP where, on or before 26 May 2026, the committee of creditors had approved a resolution plan, the Adjudicating Authority had passed a liquidation order under Section 33(1), or the committee had approved intimating the Adjudicating Authority to initiate liquidation under Section 33(2).

The result is that the older reasoning continues to govern plans that had reached those milestones, while newer processes are governed by the statutory formula in clause (ba).

Does “nil” Remain Possible?

Under clause (ba), if both computations produce nil, the statutory minimum is nil. The floor is defined by reference to two measures, and where the value available cannot reach a class after prior-ranking claims, the arithmetic can produce zero.

Two qualifications apply. First, the formula sets a minimum, not a maximum; the committee of creditors may allocate more, and in practice often does, using its commercial judgment. Second, equal treatment within a class remains a live ground of challenge, as the NCLAT emphasised in Shankar Mukherjee.

For operational creditors, the position is different: clause (b) takes the higher of the two measures, so where a Section 53(1)-style distribution of plan proceeds would yield something, that amount must be provided, and the NCLAT has held that it must be paid in cash and in priority over financial creditors: Gupta Textiles v. Darshan Patel & Ors. (1 April 2024).

Related Changes

• Section 30(4) now requires the committee of creditors to record reasons for approving a plan.
• A proviso to Section 31(2) allows the Adjudicating Authority to give notice to the committee to rectify defects before rejecting a plan.
• Section 31(2A) requires a decision on the plan within thirty days, with reasons recorded for delay.
• Section 61(6) requires appeals to be disposed of within three months.

Practical Points

• Identify which regime applies: Section 30(2)(b) or Section 30(2)(ba), depending on the milestones reached by 26 May 2026.
• Plans should set out both computations for each affected class, so that compliance is demonstrable on the face of the plan.
• Challenges are most likely to succeed where a plan differentiates within a class without a rational basis, or where the computation itself is wrong, rather than on the general adequacy of the amount.

Frequently Asked Questions

1. Can a resolution plan provide nil payment to unsecured financial creditors?
Yes, where the applicable statutory calculation produces nil, subject to the requirements of the IBC and equal treatment within the relevant class.

2. What changed in Section 30(2)(ba) of the IBC?
From 26 May 2026, dissenting financial creditors are governed separately under Section 30(2)(ba), which uses the lower of two specified amounts.

3. Does Section 53 determine payment under a resolution plan?
Section 53 provides the reference framework for calculating the statutory minimum; it does not otherwise make the liquidation waterfall applicable to the resolution process.

4. Do operational creditors have the same payment formula?
No. Section 30(2)(b) continues to apply the higher-of test to operational creditors.

Legal Information Disclaimer

This article provides general information about Indian law as it stood on 16 September 2026. It is not legal advice, and reading it does not create an advocate–client relationship. Statutes, rules and judicial interpretations change, and their application depends on the facts of each matter. Readers should consult the current official text of the laws and judgments cited and should not act on this information without advice specific to their circumstances. This article is published for legal awareness and education and is not intended to advertise or solicit professional work.

Sources / Authorities

1. Insolvency and Bankruptcy Code, 2016 — Sections 30, 31, 53, 61 (as amended) — IBBI – Legal Framework
2. Insolvency and Bankruptcy Code (Amendment) Act, 2026 (No. 6 of 2026), clauses 18 and 19 — Gazette text (IBBI); Notification S.O. 2625(E) dated 22 May 2026 — IBBI
3. Shankar Mukherjee & Anr. v. Ravi Sethia & Ors., Company Appeal (AT) (Ins.) No. 01 of 2024, NCLAT, 14 May 2025 (arising from the order dated 18 December 2023 of the NCLT, Kolkata Bench) — Indian Kanoon
4. M.K. Rajagopalan v. Dr. Periasamy Palani Gounder, (2024) 1 SCC 42, Supreme Court of India
5. Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, (2020) 8 SCC 531, Supreme Court of India
6. Gupta Textiles v. Darshan Patel & Ors., NCLAT, New Delhi, 1 April 2024 — report, LiveLaw