Once Committee of Creditors in its commercial wisdom, decides to reject the Resolution Plan and liquidate the Corporate Debtor on account of the SRA default, there can be no interference.
In a recent judgment, Supreme Court has held that once the Committee of Creditors (CoC) in its commercial wisdom, come to the decision to reject the Successful Resolution Applicant (SRA) Plan and liquidate the Corporate Debtor on account of the SRA’s own default, there can be no case for interference.
ABCAUS Case Law Citation:
5159 (2026) (05) abacus.in SC
In the instant case, the appellant Bank had appealed under Section 62 of the Insolvency and Bankruptcy Code, 2016 (the Code) challenging the judgment passed by the National Company Law Appellate Tribunal (the NCLAT).
Pursuant to admission of the CIRP of the Corporate Debtor, a Resolution Professional (RP) was appointed. With the permission of the National Company Law Tribunal (the NCLT), the appellant who was Promotor/Director of the Corporate Debtor had submitted a Resolution Plan. The Resolution Plan was approved by the CoC with the voting majority of 99.90%.
However, the appellant for the second time failed to submit the accepted copy of the Letter of Intent (LoI) within the time stipulated. In the second LoI too, it was stated that the LoI would be subject to the outcome of the pending applications filed by the prospective resolution applicants. As a result, third LoI was issued on the very same terms and a specific clause was incorporated that the unconditional performance guarantee was to be submitted within stipulated period. Due to non compliance by the appellant, earnest money deposit was forfeited on account of non acceptance of the LoI.
Thus, on the CIRP period coming to an end and since there was no valid Resolution Plan under Section 33 of the Code, the CoC voted on the liquidation of the Corporate-Debtor. The same was approved with a voting percentage of 99.61%. After the CoC voted for liquidation, the RP filed an Interlocutory Application seeking approval for liquidation based upon the decision of the CoC
The IA was allowed by the NCLT. The NCLAT by the impugned order dismissed all the appeals of the appellant lading to present appeal before Apex Court.
The Supreme Court observed that all that the stipulations mentioned was that the LoI would be subject to the final decision of a judicial body in a proceeding to which the CoC and RP were privy. Even if such a stipulation was not mentioned, ultimately it will be the order of the Adjudicating Authority, unless duly called in question and set aside before the higher body, which will prevail. Hence, the stipulation about the LoI being subject to the outcome of the pending applications of PRA would not make the LoI conditional for the appellant to renege from the plan.
The Supreme Court further noted that a perusal of the minutes of meetings of the CoC made it evident that the appellant was very well made aware of the pending litigation and the other conditions which the LoIs have allegedly imposed on the appellant.
The Hon’ble Supreme Court opined that once the CoC, after applying its commercial wisdom, has approved the resolution plan, the Successful Resolution Applicant (SRA) is prohibited from negotiating further and is expected to act in a time bound manner to implement the plan. In the present case, it was seen that the appellant was deliberately trying to delay the implementation of the plan citing the purported conditionality of the LoI. This defeats the purpose of the Code as the otherwise timebound and swift process is now being delayed at the behest of the appellant.
The Hon’ble Supreme Court observed that a plain reading of clause 2 of Section 33 and specifically the explanation to the said clause 2, which came into force from 16.08.2019, makes it clear that where an SRA after lulling the CoC to believe that it will comply with the plan, reneges from the plan and where the CoC resolves to liquidate the company so as to realize the money and disburse the claims of the different claimants, no fault can be found with the process.
The Hon’ble Supreme Court held that once the CoC has, in its commercial wisdom, come to the decision to reject the appellant’s plan and liquidate the CD on account of the appellant’s own default, there can be no case for interference.
Accordingly, the Hon’ble Supreme Court held that the fora below had rightly refused to interfere in the well-informed commercial decision of the CoC to reject the plan of the appellant and liquidate the CD, which was approved with a voting percentage of 99.61%. 43.
As a result, the appeal was dismissed.
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