No modifications or withdrawals of CoC-approved Resolution Plans at behest of successful Resolution Applicant once plan submitted to Adjudicating Authority- Supreme Court
In a recent judgment the Hon’ble Supreme Court have held that under the existing insolvency framework in India there is no scope for further modifications or withdrawals of Committee of Creditors (CoC) approved Resolution Plans, at the behest of the successful Resolution Applicant, once the plan has been submitted to the Adjudicating Authority.
ABCAUS Case Law Citation
ABCAUS 3551 (2021) (09) SC
Important case law relied referred:
Gujarat Urja Vikas Nigam Limited v. Amit Gupta & Ors.
The issue involved in these batch of appeals was with respect to withdrawal of approved resolution plan.
NCLAT had inter alia held that once the Resolution Plan was approved by the CoC, the NCLT did not have jurisdiction to permit its withdrawal. It held that the adjudicating authority could not enter upon the wisdom of the decision of the Committee of Creditors (CoC) to approve the Resolution Plan.
It was also held by the NCLAT that there was no provision in the IBC for the withdrawal of a Resolution Plan and the Resolution Plan is enforceable as a contract against the Resolution Applicant.
While the Hon’ble Supreme Court exercised their jurisdiction under Article 142 of the Constitution of India for a one-time relief with extended timeline.
Whereas in other case it held that common law remedies available under the Contract Act are not available to the parties since a submitted Resolution Plan is not a contract which can be otherwise voidable on account of frustration, force majeure or other such instances.
The Hon’ble Supreme Court observed that the extraordinary circumstance of the COVID-19 pandemic would have had a significant impact on the businesses of Corporate Debtors and upon successful Resolution Applicants whose Plans may not have been sanctioned by the Adjudicating Authority in time, for myriad reasons. But the legislative intent of the statute cannot be overridden by the Court to render outcomes that can have grave economic implications which will impact the viability of the IBC.
The Hon’ble Supreme Court stated that the residual powers of the Adjudicating Authority under the IBC cannot be exercised to create procedural remedies which have substantive outcomes on the process of insolvency. The framework, as it stands, only enables withdrawals from the CIRP process by following the procedure detailed in Section 12A of the IBC and Regulation 30A of the CIRP Regulations and in the situations recognized in those provisions.
The Hon’ble Supreme Court stated that enabling withdrawals or modifications of the Resolution Plan at the behest of the successful Resolution Applicant, once it has been submitted to the Adjudicating Authority after due compliance with the procedural requirements and timelines, would create another tier of negotiations which will be wholly unregulated by the statute.
The Hon’ble Supreme Court stated that if the legislature in its wisdom, were to recognize the concept of withdrawals or modifications to a Resolution Plan after it has been submitted to the Adjudicating Authority, it must specifically provide for a tether under the IBC and/or the Regulations.
However, the Hon’ble Supreme Court observed the age-wise pendency of the cases before NCLT under IBC and the reasons attributable to these delays such as NCLT taking considerable time in admitting CIRPs, late and unsolicited bids by Resolution Applicants after the original bidder becomes public upon passage of the deadline for submission of the Plan; and multiplicity of litigation and the appellate process to the NCLAT and the Supreme Court.
The Hon’ble Supreme Court stated that the NCLT and the NCLAT should endeavor to strictly adhere to the timelines stipulated under the IBC and clear pending resolution plans forthwith.
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