Section 230 of the Companies Act, 2013 ("the Act") is not confined to mergers and demergers. It is a general compromise and arrangement provision, and it is available for a corporate debt restructuring in which the company proposes a compromise with its creditors—a haircut, a rescheduling, a conversion of debt into equity, or a combination. The scheme is class-based and consensual, and it binds only the classes of creditors that approve it and the dissentients within those classes.
The Class-Based and Consensual Character
The NCLT Hyderabad, in a 2026 ruling concerning Sarda Agro Oils Ltd., emphasised that a compromise scheme under Section 230 is inherently consensual and class-based. It binds only those identified classes of creditors or members that are expressly dealt with under the scheme. A scheme cannot be used to extinguish liabilities owed to a class that was not convened or that did not approve the scheme.
This characterisation has practical consequences. The company must identify each class of creditors—secured creditors, unsecured financial creditors, operational creditors, and so on—and convene a separate meeting for each class. The scheme must be approved by a majority of persons representing three-fourths in value of the creditors present and voting in each class.
The Availability During CIRP and Liquidation
The NCLT Kochi has held that a scheme of compromise or arrangement under Section 230 cannot be considered during the corporate insolvency resolution process ("CIRP") in the absence of a liquidation order. The rationale is that the CIRP is governed by the Insolvency and Bankruptcy Code, 2016 ("IBC"), and the scheme route is not available as a parallel process while the CIRP is ongoing. Once a liquidation order is passed, the scheme route may be available in limited circumstances, but the company is then in liquidation and the scheme must be consistent with the liquidation framework.
The practical implication is that a company that is in financial distress must choose between the IBC route and the Section 230 route at the threshold. It cannot use the Section 230 route to pre-empt a CIRP that has already commenced.
The Creditor Safeguards
Section 230(2)(c) recognises a scheme of corporate debt restructuring consented to by not less than seventy-five per cent of the secured creditors in value. The scheme must disclose the details of the compromise, the effect on each class of creditors, and the basis of the valuation. The creditors who dissent within an approving class are bound by the scheme, but they are entitled to the same treatment as the other creditors in the class.
A debt restructuring scheme is not a substitute for a resolution plan under the IBC. It is a consensual arrangement that requires the active support of the creditors, and it is available only where the company is not already in CIRP.
Call to Action
Anuj Desai & Associates advises companies and creditor groups on debt restructuring through a Section 230 scheme—from the classification of creditors and the convening of class meetings to the voting threshold and the NCLT sanction. If your company is considering a compromise with creditors, we can help you assess whether the scheme route is available and how to structure it.
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