The NCLAT, Principal Bench, New Delhi, has opined that there is no scope for modifications or withdrawals of the CoC-approved resolution plans either by the Successful Resolution Applicant or by the Creditors.
The bench further stated that “The interference by NCLT is only permitted if the plan goes against the IBC. Moreover, once the plan is submitted to the NCLT, the same becomes binding and irrevocable between Coc and the Successful Resolution Applicant”.
The Appellate Tribunal also propounded that the ‘maximization of value of assets’ has to be done within the specified timelines and if merely because there was a higher offer a plan is considered, the entire objective of IBC i.e., a timebound process would fail.
Brief Facts
The present Appeal has been preferred against the order of the NCLT vide which the Application filed by the Committee of Creditors (hereinafter referred to as “CoC”) seeking a direction to the Resolution Professional (hereinafter referred to as “RP”) to call for a meeting, consider the resolution plans and sought for additional days to consider and approve the most suitable plan.
Contentions of the Appellant
It was contended that the Appellant (Successful Resolution Applicant) was not a party in the IA which was filed by HCL and allowed, directing the Application with a proposed plan of HCL to be placed before the CoC. It was submitted that the NCLT cannot entertain an application of a person who has not participated in CIRP.
It was argued that Resolution Plan approved by CoC is like a contract that becomes binding between the CoC and the Successful Resolution Applicant. The plan cannot be withdrawn by CoC as more than three years have passed.
Contentions of Respondent No. 1
It was contended that the CoC can withdraw and recall its consent given for a resolution plan before the approval by the NCLT. It was argued that in its commercial wisdom if HCL offered a higher amount, the plan by HCL can be considered.
Contentions of Respondent No. 2
It was contended that the plan submitted by the Appellant was non-compliant with the provisions of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”) and therefore, it was not put up by the RP to the CoC for approval.
Observations of the Tribunal
The primary issue to be ascertained is whether the CoC after approving a resolution plan can seek directions to consider a new resolution plan of a third party who was not a part of CIRP proceedings and further seek to withdraw their approval after more than 2 years have passed since the approval of the 1st plan.
The Tribunal relied on the case of Ebix Singapore Pvt. Ltd. v. Committee of Creditors of Educomp Solutions Ltd. & Anr. (2021 SCC OnLine SC 707) and observed that the NCLT cannot do what IBC did not provide it with the power to do.
It was noted that if CoC is allowed to withdraw an approved Resolution Plan, then the same would have a bearing on the timelines and would be equal to restarting the CIRP process. Any modification or withdrawal of a plan which is approved by the CoC and submitted to the NCLT would only lead to further delay and that goes against the very object of the IBC.
The Tribunal opined that there is no scope for modifications or withdrawals of the CoC-approved resolution plans either by the Successful Resolution Applicant or by the Creditors. The interference by NCLT is only permitted if the plan goes against the IBC. Moreover, once the plan is submitted to the NCLT, the same becomes binding and irrevocable between Coc and the Successful Resolution Applicant.
The Appellate Tribunal also propounded that the ‘maximization of value of assets’ has to be done within the specified timelines and if merely because there was a higher offer a plan is considered, the entire objective of IBC i.e., a timebound process would fail.
Decision of the Tribunal
Based on the abovementioned reasons, the Appeal was allowed and accordingly the order of NCLT was set aside.
Case Title: Kalinga Allied Industries India Pvt. Ltd v. Committee of Creditors & Anr.
Coram: Ms. Shreesha Merla (Technical Member), Justice Anant Bijay Singh
Case No.: COMPANY APPEAL (AT) (INSOLVENCY) No. 689 of 2021
Advocates for Appellant: Advs. Mr. Abhijeet Sinha, Mr. Rakesh Wadhwa
Advocate for Respondent No.1: Adv. Mr. Mohit Nandani
Advocate for Respondent No.2: Adv. Mr. Mukesh Kumar
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