Section 54N explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 54N says how a pre-packaged insolvency resolution process ends without an approved plan. The Adjudicating Authority terminates it within thirty days of an application by the resolution professional, or on the decision of the committee of creditors. The section also deals with the avoidance and trading proceedings that are pending, with the costs of the process, and with liquidation after a vesting order. This article reads section 54N as per the IBBI consolidated text of the Code amended up to 12 August 2021 and then the change the Insolvency and Bankruptcy Code (Amendment) Act, 2026 makes to sub-section (4).
The Adjudicating Authority must terminate the process within thirty days of an application by the resolution professional made because no plan was approved in time or because the selected plan was not approved. It must also terminate it when the committee of creditors decides to terminate by not less than sixty-six per cent. of the voting shares. The order provides for the continuation of avoidance and trading proceedings. The corporate debtor bears the costs, except that after a section 54J vesting order liquidation is ordered.
Section 54N(1): the application and the order
"Where the resolution professional files an application with the Adjudicating Authority, —
- (a) under the proviso to sub-section (12) of section 54K; or
- (b) under sub-section (3) of section 54D,
the Adjudicating Authority shall, within thirty days of the date of such application, by an order, — (i) terminate the pre-packaged insolvency resolution process; and (ii) provide for the manner of continuation of proceedings initiated for avoidance of transactions under Chapter III or proceedings initiated under section 66 and section 67A, if any."
Two routes lead to the application. Clause (a) is the case where the plan selected under section 54K(11) is not approved by the committee; see our article on section 54K. Clause (b) is the case where no plan is approved within the ninety days, which is section 54D(3), explained in the article on sections 54D and 54E. The word is "shall", and the period is thirty days "of the date of such application". A debtor, creditor or professional who has to respond to such an application can take legal dispute resolution advice on the order that follows. The order has two parts: termination, and the manner in which avoidance proceedings and the proceedings under sections 66 and 67A continue. The chapter references are quoted as printed. Our post on section 66 deals with fraudulent transactions, and the article on sections 67 and 67A with the orders in those proceedings.
Section 54N(2): termination by decision of the committee
"Where the resolution professional, at any time after the pre-packaged insolvency commencement date, but before the approval of resolution plan under sub-section (4) or sub-section (12), as the case may be of section 54K, intimates the Adjudicating Authority of the decision of the committee of creditors, approved by a vote of not less than sixty-six per cent. of the voting shares, to terminate the pre-packaged insolvency resolution process, the Adjudicating Authority shall pass an order under sub-section (1)."
| Element | Words of the sub-section |
|---|---|
| Who intimates | the resolution professional |
| When | after the pre-packaged insolvency commencement date but before approval of the plan under section 54K(4) or (12) |
| Decision | of the committee of creditors, "approved by a vote of not less than sixty-six per cent. of the voting shares" |
| Result | the Adjudicating Authority "shall pass an order under sub-section (1)" |
This is an exit that the committee can use at any time before the plan is approved. The Adjudicating Authority has no discretion once the intimation is made: it passes the order under sub-section (1). The thirty-day period in that sub-section is stated as running from "the date of such application", and the text of sub-section (2) speaks of an "intimation", not an application; whether the thirty days run from the intimation is not stated in the section.
Section 54N(3): who bears the costs
"Where the Adjudicating Authority passes an order under sub-section (1), the corporate debtor shall bear the pre-packaged insolvency resolution process costs, if any." Compare this with section 54B(3), under which the fees of the insolvency professional for the pre-application duties form part of the process costs only if the application is admitted; see section 54B.
Section 54N(4): liquidation after a vesting order
"Notwithstanding anything to the contrary contained in this section, where the Adjudicating Authority has passed an order under sub-section (2) of section 54J and the pre-packaged insolvency resolution process is required to be terminated under sub-section (1), the Adjudicating Authority shall pass an order —
- (a) of liquidation in respect of the corporate debtor as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1) of section 33; and
- (b) declare that the pre-packaged insolvency resolution process costs, if any, shall be included as part of the liquidation costs for the purposes of liquidation of the corporate debtor."
This is the same pattern as section 54L(4), but here the trigger is termination under sub-section (1) after a vesting order under section 54J. The costs rule in sub-section (3) gives way: in that case the costs are treated as liquidation costs. For liquidation orders under section 33 see the live post on the section 33 liquidation order.
Example
Quartz Metals Pvt Ltd is in a pre-packaged process. Ninety days pass without a plan approved by the committee of creditors. The resolution professional, Ms Iyer, files the application under section 54D(3) on the next day. The Adjudicating Authority terminates the process within thirty days of the application and provides how the pending avoidance application will continue. The company bears the pre-packaged process costs. Had management been vested in Ms Iyer under section 54J, section 54N(4) would have required a liquidation order and the costs would have gone into the liquidation costs. The names are invented.
What the Amendment Act, 2026 changes
Section 38 of the Insolvency and Bankruptcy Code (Amendment) Act, 2026 amends section 54N(4)(a) only. The Amendment Act, 2026 comes into force on the date or dates the Central Government notifies; the notification is not in the texts consulted, so check whether this change has been notified.
| As printed in the consolidated text | After the 2026 Act |
|---|---|
| (4)(a) liquidation order "as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1) of section 33" | The words "(ii) and (iii)" are replaced by "(ii), (iii), (iv) and (v)", which reads sub-clauses (i), (ii), (iii), (iv) and (v) |
Section 20 of the Amendment Act, 2026 inserts sub-clauses (iv) and (v) in section 33(1)(b): (iv) "subject to the provisions of section 52, declare a moratorium for the purposes referred to in clauses (a) and (c) of sub-section (1) read with sub-section (3) of section 14", with a proviso on notified transactions, and (v) "pass an order appointing a liquidator for the liquidation process in accordance with section 34". The Amendment Act, 2026 describes these as sub-clauses of clause (b), whereas the consolidated text prints (i), (ii) and (iii) after clauses (a) and (b) of section 33(1) as the orders to be passed; the cross-reference in section 54N(4)(a) is quoted as printed in each text and is not reconciled here. The same change is made to section 54L(4)(b) (see our article on sections 54L and 54M).
The Insolvency and Bankruptcy Board of India (Pre-packaged Insolvency Resolution Process) Regulations, 2021 are made under provisions of Chapter III-A of Part II; the copy consulted is amended up to 2 June 2026, and its date does not show that any provision of the Amendment Act, 2026 is in force. The detail is for those regulations and is not taken up here.
Amendments and notifications made after 12 August 2021, other than the Amendment Act, 2026, are not in the texts consulted and should be checked.
Need help when a pre-packaged process fails?
When a pre-packaged process is heading for termination, the live questions are the pending avoidance proceedings, who bears the costs, and whether liquidation follows. Our team can advise the debtor, the creditors and the professional through legal dispute resolution on the position and the next step.
Key takeaways
- Section 54N(1): on the resolution professional's application under section 54K(12) proviso or section 54D(3), the Adjudicating Authority terminates the process within thirty days of the application.
- The order also provides for the manner of continuation of avoidance proceedings and of proceedings under sections 66 and 67A.
- Section 54N(2): the committee may decide to terminate by not less than sixty-six per cent. of the voting shares, before the plan is approved.
- Section 54N(3): the corporate debtor bears the process costs.
- Section 54N(4): after a section 54J vesting order, liquidation is ordered and the costs are liquidation costs; the 2026 Act extends the section 33 sub-clauses to (iv) and (v).
Read next
- Sections 54L and 54M: approval of the plan and appeal
- Sections 54-O and 54P: moving from the pre-pack to CIRP
- Sections 54D and 54E: time limit and moratorium
- Hybrid frameworks: pre-packaged and creditor-initiated processes
Disclaimer: Based on the IBBI consolidated text of the Insolvency and Bankruptcy Code, 2016 amended up to 12 August 2021 and on the Insolvency and Bankruptcy Code (Amendment) Act, 2026 (No. 6 of 2026), which comes into force on the date or dates notified by the Central Government, as consulted on 2 October 2026. It explains the words of the statute only; commencement notifications, other amendments made after 12 August 2021, notified thresholds, the rules and IBBI regulations, and the way tribunals and courts apply these sections should be checked. This article is general information, not legal advice; check the official text before acting.