1. What Comparative Analysis Means

US Bankruptcy Code 11 U.S.C. §1125 & §1129(a)(7):
Disclosure Statement must contain "adequate information" for hypothetical reasonable investor to make informed judgment.

Mandatory contents per Fried Frank / ABA:

• Background of debtor
• Summary of Chapter 11 plan
• Liquidation analysis comparing recoveries under Chapter 11 vs Chapter 7 - class-by-class
• Financial projections, assumptions, tax consequences
• Risk factors, litigation

Without liquidation analysis, court cannot find plan meets Best Interests of Creditors Test: every impaired creditor must receive at least as much under plan as in Chapter 7 liquidation.

India IBC CIRP Regulations:
Regulation 38 - Mandatory Contents of Resolution Plan read with Section 30(2)(b) and Regulation 39 - Evaluation:

• Plan must provide:
  • 38(1)(a): Amount due to operational creditors in priority over financial creditors
  • 38(1A): Statement how it deals with interests of all stakeholders including creditors
  • 38(2): Term, implementation schedule, management, sources of funds
  • 38(3): Demonstrates feasibility and viability
  • Reg 39(2): RP to present to CoC all compliant plans along with comparative evaluation based on evaluation matrix + liquidation value + fair value

So comparative analysis =

• Liquidation value vs Resolution value - class-wise
• Fair value vs Resolution value
• Dissenting financial creditor vs Assenting
• Operational vs Financial creditor recovery %
• Causes of default addressed - how plan cures

2. Why Failure Is Fatal

US consequences:

• Disclosure statement rejected - no solicitation allowed under 1125(b)
• If repeated failure, conversion to Chapter 7 or dismissal under §1112
• Plan cannot be confirmed under 1129(a)(7) if liquidation analysis missing or flawed

India consequences:

• NCLT cannot approve under Sec 31(1) if fails Sec 30(2)
• Supreme Court in Bhushan Power and Steel Ltd (BPSL) v. JSW Steel, Judgment 2 May 2025 ordered liquidation despite 5 years of implementation for failure to comply with Sec 30(2) + Reg 38

3. Leading Case Laws

A. US - Disclosure Statement Failures

1. In re Ditech Holding Corp., 606 B.R. 544 (Bankr. S.D.N.Y. 2019)

• Debtors filed liquidation analysis that "entirely fails to account for Debtors' unencumbered assets"
• Court held: Plan fails Best Interests Test under §1129(a)(7) - Class 5 claims would not receive at least as much as Chapter 7 liquidation.
• Plan confirmation denied.

2. In re Tribune Co., No. 08-13141 (Bankr. D. Del. Oct 31, 2011)

• Disclosure statement objection by US Department of Labor - argued insufficient disclosure of LBO investigation and comparative recovery.
• Court: Objection valid - disclosure must give adequate info on what creditors would receive in liquidation including avoidance actions.

3. General Rule from Fried Frank memo on 1125:

While standard is intentionally flexible, in all instances disclosure statement should include liquidation analysis that analyzes recoveries of each class under hypothetical Chapter 7. Parties-in-interest and bankruptcy court will use it to decide whether reorganization or liquidation serves best interests.

Common objections sustained:

• Missing financial data
• Unrealistic projections
• Inadequate liquidation analysis
• Failure to disclose insider compensation / conflicts

If debtor repeatedly fails, court converts to Chapter 7.

B. India - IBC Comparative Analysis Failures

4. K. Sashidhar v. Indian Overseas Bank (2019) 12 SCC 150 - SC

• Foundation: Resolution plan must provide for payment to operational creditors in accordance with Section 53 waterfall. Cannot provide less than liquidation value to OC under Sec 30(2)(b).
• CoC commercial wisdom supreme BUT only if plan complies with Sec 30(2). Failure to provide comparative analysis showing OC gets at least liquidation value = non-compliant, NCLT must reject.

5. Committee of Creditors of Essar Steel India Ltd v. Satish Kumar Gupta (2020) 8 SCC 531

• Court: CoC evaluation matrix must compare plans on viability, feasibility, liquidation value comparison. NCLAT cannot substitute commercial wisdom but must ensure Sec 30(2)(b) compliance demonstrated with comparative figures.

6. Maharashtra Seamless Ltd v. Padmanabhan Venkatesh (2020)

• Important clarification: No provision in Code mandates bid must match liquidation value. Plan can be lower than liquidation value if it meets 30(2)(b) - i.e., if OC gets liquidation value (which may be nil).
• BUT RP must still provide comparative analysis to CoC showing liquidation value is X, fair value Y, plan value Z - so CoC can decide. Failure to provide that comparison = procedural violation.

7. Bhushan Power and Steel Ltd (BPSL) - Supreme Court 2 May 2025 - JSW Plan Rejected
Most significant 2025 case on failure to provide comparative analysis + priority compliance.

• Facts: CIRP of BPSL - 47,000 cr FC claims, 621 cr OC claims. JSW highest scorer in evaluation matrix, plan approved by CoC and NCLT Sep 5 2019, implemented Mar 2021 (FC) and Mar 2022 (OC) - 4 years operation.
• Supreme Court rejected plan and ordered liquidation.

Key holdings on comparative analysis:

• Non-Compliance with Sec 30(2) and Reg 38: Plan violated by failing to treat operational creditors in accordance with statutory mandates. Failed to prioritize operational creditors over financial creditors contrary to Reg 38(1) as it then stood.
• NCLT had conditioned approval on payment to OC in priority per amended Sec 30(2) + Reg 38. JSW paid OC 1 year AFTER FC - violated comparative priority.
• CoC did not verify feasibility, viability, legal compliance. Allowed revised plan after evaluation, negotiated via core committee not full CoC, never formally declared H1. Commercial wisdom invalid if not exercised in compliance with mandatory requirements.
• CIRP timeline failure under Sec 12: Plan filed 1.5 years after admission without extension under 12(2) - mandatory violation.

Result: Payments of Rs 19,350 cr to FC, Rs 350 cr to OC, Rs 8,550 cr equity infusion ordered to be refunded to JSW within 2 months - reversal of 8-year process. Signals strict compliance era.

8. NCLT Bengaluru - Stellence Pharmascience Resolution Plan (2024)

• Tribunal referred plan back to CoC.
• Reason: Plan provided nil payout to certain creditors, violated Sec 30(2)(b) + Reg 38(1A) - SRA had not considered interest of all stakeholders. No comparative analysis showing how nil is at least liquidation value. Tribunal said commercial feasibility not demonstrated per Reg 38(3).

9. NCLAT - Dissenting Financial Creditors Discrimination - Regulation 38 amendment Oct 5, 2018

• Reg 38 originally provided payment of liquidation value to dissenting FCs. Amendment deleted it, but NCLAT in 2019 held: resolution plans must not discriminate between similarly situated creditors, must conform to amended Reg 38. Must show comparative treatment of dissenting vs assenting in evaluation matrix.

10. Nimai Gautam Shah v. Raj Radhe Finance Ltd - NCLAT

• Plan did not provide funds to carry out business, did not address root cause of financial distress.
• NCLAT: Commercial feasibility and viability not demonstrated as required under Reg 38(3) - comparative analysis of going concern vs liquidation revival plan missing.

4. What Adequate Comparative Analysis Must Contain

To survive challenge, provide:

For US Disclosure Statement:

1. Hypothetical Chapter 7 liquidation balance sheet - orderly vs forced sale values
2. Add-back of avoidance actions, Chapter 5 claims
3. Less Chapter 7 trustee fees, administrative costs
4. Distribution waterfall per 726
5. Class-by-class % recovery: Plan vs Chapter 7

For IBC Information Memorandum + Evaluation Matrix (Reg 36-39):

1. Two valuations by registered valuers - Fair Value + Liquidation Value (Reg 35)
2. Comparative table:
   • FC - Assenting: Liquidation Value = Rs X, Plan = Rs Y, Haircut = Z%
   • FC - Dissenting: Same
   • OC: Liquidation = often nil, Plan = Rs Y
   • Other creditors
3. Priority compliance statement - OC paid in priority, within 30 days of approval per amended Sec 30(2)
4. Feasibility: Source of funds, capex, working capital, P&L projection 5 years
5. Causes of default - how addressed
6. Evaluation matrix scoring - why this plan H1

If RP fails to present this to CoC, CoC approval is vitiated.

5. Remedy for Creditor If Not Provided

• US: File objection to disclosure statement under FRBP 2002(b) - 28 days notice. Ask court to deny approval, order amended liquidation analysis.
• India:
  • File objection to RP under Reg 36A - seek information
  • Challenge before NCLT under Sec 31 - plan non-compliant with Sec 30(2)