The Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code has to complete within 330 days as stated under the law, the Apex Court ruled recently. Supreme Court held that since the 330 days outer limit of the Corporate Insolvency Resolution under Section 12 (3) of the IBC, including judicial proceedings, can be extended in extraordinary circumstances.
“This open-ended process for further negotiations or a withdrawal would have a deleterious impact on the Corporate Debtor, its creditors, and the economy at large as the liquidation value depletes with the passage of time”.
In the case, NCLAT had held that the application to withdraw from the Resolution Plan could not have been allowed since (i) it was barred by res judicata, and (ii) the NCLAT does not have jurisdiction to permit such withdrawal.
This reasoning was under challenge in the present case. The top court held that the Adjudicating Authority lacks the authority to permit the withdrawal or modification of the Resolution Plan by a successful Resolution Application or to give effect to any such clauses in the Resolution Plan.
“Adjudicating Authority under Section 31 (2) of the IBC can only examine the validity of the plan on the anvil of the grounds stipulated in Section 30(2) and either approve or reject the plan. The Adjudicating Authority cannot compel a CoC to negotiate further with a successful Resolution Applicant”, the top court ruled.
The Court further noted that if the Parliament intended to permit such withdrawals modifications sought by successful Resolution Applications being beneficial to the economic policy, “which it has sought to pursue while enacting the IBC, it would have prescribed timelines for setting the clock-back or directing immediate liquidation if the withdrawals occur after a certain period”.
Further, permitting the Adjudicating Authority to exercise its residuary powers under Section 60(5) to allow for further modifications or withdrawals at the behest of the successful Resolution Applicant would be in the teeth of the decision of the Supreme Court in Essar Steel.
“We hold that the existing insolvency framework in India provides no scope for effecting further modifications or withdrawals of CoC- approved Resolution Plans, at the behest of the successful Resolution Applicant, once the plan has been submitted to the Adjudicating Authority. A Resolution Applicant, after obtaining the financial information of the Corporate Debtor through the informational utilities and persuing the IM, is assumed to have analyzed the risks in the business of the Corporate Debtor and submitted a considered proposal. A submitted Resolution Plan is binding and irrevocable as between the CoC and the successful Resolution Applicant in terms of the provisions of the IBC and the CIRP Regulations”, the judgment said.
Case Details
Before: Supreme Court
Case Title: Ebix Singapore Private Limited vs. COG Educomp Solutions
Coram: Hon’ble Mr. DY Chandrachud
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