CoC after approving Resolution Plan can’t seek withdrawal of the same on improved financial position of the Corporate Debtor – SC
In a recent judgment, the Hon’ble Supreme Court has held that an improved profitability alone cannot be a reason to refuse approval if the Resolution Plan meets the requirements under sub-section (2) of Section 30
ABCAUS Case Law Citation:
5252 (2026) (10) abacus.in SC
Important Case Laws relied upon by Parties:
Kalyani Transco v. Bhushan Power & Steel Ltd
Ebix Singapore (P) Ltd
In the instant case a very interesting question arose before the Hon’ble Supreme Court as to whether a Committee of Creditors (CoC), after approving the Resolution Plan can seek withdrawal of the same on the plea that the financial position of the Corporate Debtor (CD) has improved considerably.
The NCLT had allowed the withdrawal filed by the Resolution Professional (RP), on it being approved by the CoC unanimously. The plea taken was that financial position of CD had improved in the ensuing years, when the RP was in management.
However, the National Company Law Appellate Tribunal (NCLAT) found the withdrawal application to be in violation of the provisions of the IBC. The NCLAT held that the CoC has no jurisdiction to decide on withdrawal of the Resolution Plan. However, directed that every contention raised by the Consortium/SRA and the CD’s holding company to be considered by the Adjudicating Authority (NCLT).
Against the order of the NCLAT, appeal was filed before Hon’ble Supreme Court by the members of the CoC including the financial creditor, who initiated the CIRP against the Corporate Debtor.
It was submitted that since the financial position of the CD had improved nearly six times it conferred a windfall gain on the Consortium (SRA). Since the fresh infusion of funds by the SRA would be considerably reduced, this would violate the governing principles of CIRP, under the IBC, which is the maximization of value of the assets of the CD inter alia inuring to the benefit of the creditors. Here, the creditors would be benefited if the Resolution Plan is withdrawn, since they would also be entitled to much more than that offered in the haircut by the Resolution Plan.
It was further submitted that the CoC’s existence does not end with the approval of the plan and survives throughout the implementation, till the disbursals as per the plans are fructified.
The Hon’ble Supreme Court observed that in the case law relied upon by the NCLAT, the Apex Court had considered three stages of the CIRP procedures; the first, prior to and ending with the approval of the Resolution Plan by the CoC; the second, the interim period between the approval of the CoC and the confirmation by the Adjudicating Authority; and the third, after the Adjudicating Authority approves the Resolution Plan. It was held that the resolution plan in IBC, the element of privity becomes inapplicable once the adjudicating authority confirms the resolution plan under Section 31(1) and declares it to be binding on all stakeholders, who are not a part of the negotiation stage or parties to the resolution plan. It was categorically held that ability of the Resolution Plan to bind those who have not consented to it, by way of a statutory procedure, indicates that it is not a typical contract. Even the dissenting creditors are bound by the Resolution Plan, by virtue of the statutory provisions. It was categorically held that the binding effect of the resolution plan has the consequence of preventing the CoC or the resolution applicant to renege from its terms after the plan has been approved by the CoC through a voting mechanism.
Following the said judgment, the Hon’ble Supreme Court observed that the Adjudicating Authority, the NCLT, cannot second guess the commercial wisdom of the parties or direct unilateral modification to the Resolution Plan. When there is no clear legal provision, by a process of interpretation, no power can be conferred on the Adjudicating Authority to direct an unwilling CoC to renegotiate a submitted Resolution Plan or agree to its withdrawal at the behest of the Resolution Applicant.
The Hon’ble Supreme Court noted that Section 12-A introduced with retrospective effect, on the face of it, read alone, gives a carte blanche to the applicant, with approval of 90% voting share of the CoC to seek withdrawal of an application. Regulation 30-A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 incorporated simultaneous to Section 12A, seemingly restricts the power to withdraw, permitting it only; before the constitution of the CoC, through the IRP or, after the constitution of the CoC, thorough the IRP or the RP, as the case may be.
With regard to reliance placed on the case law by the appellants, the Hon’ble Supreme Court noted that it was held that on approval of the Resolution Plan, the CoC does not become functus officio, and it is empowered to decide all matters, except matters which affect the Resolution Plan submitted before the AA. It was also held that the CoC has a vital interest in the Resolution Plan which interest would continue till the Resolution Plan stands actually implemented.
The Hon’ble Supreme Court observed that the consideration by the NCLT has to be with a satisfaction entered of the Resolution Plan meeting the requirements of Section 30(2), as is mandated by Section 31(1) which shall be after verifying the financial position of the CD, as of now, together with the cash balance juxtaposed with the terms of the resolution plan. The improved profitability alone cannot be a reason to refuse approval if the Resolution Plan meets the requirements under sub-section (2) of Section 30.
The Hon’ble Supreme Court directed NCLT to take up applications together and render a decision as expeditiously as possible. The appeals were disposed off accordingly.
Download Full Judgment Click Here >>
- Improved profitability alone cannot be a reason to refuse approval to Resolution Plan – SC
- ITAT confirms addition u/s 68 by lifting the veil of secrecy to see beyond paper trail
- Disallowance of a deduction does not automatically lead to misreporting of income
- After holding cash receipts/payments as unexplained, ad-hoc addition can not be made – HC
- Dividing total turnover by 365 days to arrive at daily cash sale is based on conjectures and surmises
