National Company Law Appellate Tribunal (NCLAT): Full Bench of Justice Bansi Lal Bhat (ACJ) and Justice Anant Bijay Singh (Judicial Member) and Dr Ashok Kumar Mishra (Technical Member), while addressing the present application observed that,

A Resolution Applicant whose Resolution Plan stands approved by Committee of Creditors cannot be permitted to alter his position to the detriment of various stake holders after pushing out all potential rivals during the bidding process.

Appellant emerged as the Successful Resolution Applicant in the Insolvency Resolution Process of Astonefield Solar (Gujarat) Pvt Ltd. (Corporate Debtor) assailed the impugned order rejecting the withdrawal application of its resolution plan and cancellation/ revocation/ return/ refund of the Performance Bank Guarantee, on the ground that there is no legal basis or justification for holding that an application for withdrawal of a Resolution Plan post-approval is not maintainable.

Withdrawal of Resolution Professional

Resolution Professional submitted that the appeal is not maintainable in view of the same being squarely covered by the decision of the Appellate Tribunal in

Committee of Creditors of Educomp Solutions Ltd. v. Ebix Singapore Pte. Ltd., Company Appeal (AT) (Insolvency) No. 653 of 2020, wherein it was held that after approval of the resolution plan by the committee of creditors, the adjudicating authority has no jurisdiction to entertain the application withdrawal filed by the resolution applicant and that adjudicating authority cannot enter into the arena of majority decision of the CoC.

Analysis & Decision

Adjudicating Authority was of the view that it had no jurisdiction to permit the withdrawal of a Resolution Plan, which had been duly approved by the Committee of Creditors. Issue of similar nature was sub-judice before the Supreme Court.

Resolution Plan

Before approval of a Resolution Plan by the Committee of Creditors, the Corporate Insolvency Resolution Process passes through various stages.

I&B Code provides for insolvency resolution in a time-bound manner, the object sought to be achieved, inter alia, being maximization of value of assets of corporate persons and balancing the interests of all stakeholders.

Commercial Wisdom

Further, the bench also stated that primacy is given to the Committee of creditors empowered to take a business decision in regard to the feasibility and viability of a Resolution Plan based on their commercial wisdom.

CIRP Process | Bidding Process

This process is in the nature of a bidding process where, based on consideration of the provisions of a Resolution Plan with regard to the financial matrix, the capacity of the Resolution Applicant to generate funds, infusion of funds, upfront payment, the distribution mechanism and the period over which the claims of various stakeholders are to be satisfied besides the feasibility and viability of the Resolution Plan, a Resolution Applicant emerges as the highest bidder (H1) eliminating the Resolution Plans of Resolution Applicants, which are ranked H2 and H3.

Further, approval of a Resolution Plan by CoC would be binding on the corporate debtor and all the stakeholders only after the Adjudicating Authority passes an order under Section 31 of the I&B Code approving the said plan, it does not follow that the Successful Resolution Applicant would be at liberty to withdraw the Resolution Plan sabotaging the entire Corporate Insolvency Resolution Process.

The said move of Resolution Applicant may push the Corporate Debtor into disastrous consequences wherein the Corporate debtor may be liquidated.

There is no express provision in the I&B Code allowing a Successful Resolution Applicant to stage a U-turn and frustrate the entire exercise of Corporate Insolvency Resolution Process.

“Provision for submission of a Performance Bank Guarantee by a resolution applicant while submitting its resolution plan, as required under the amended provisions of IBBI [Insolvency Resolution Process of Corporate Persons] Regulations, 2016 is a step in this direction, but may not be deterrent enough to prevent a Successful Resolution Applicant from taking a U-turn.”

Tribunal opined that the sanctity of the resolution process needs to be maintained and the Resolution Applicant whose Resolution Plan is approved by the CoC cannot be permitted to withdraw the same.

In view of the above, the appeal was dismissed. [Kundan Care Products Ltd. v. Amit Gupta, 2020 SCC OnLine NCLAT 670, decided on 30-09-2020]

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