| Headnote |
Insolvency and Bankruptcy Code, 2016 – ss.5(26), 7, 9, 10, 12, 23, 25, 30, 31, 60(5), 61 & 74(3) – National Company Law Tribunal Rules, 2016 – r.11 – Insolvency and Bankruptcy Board of India (Insolvency Resolution Process For Corporate Persons) regulations, 2016 – regn. 36A, 36B and 39 – Whether withdrawals or modifications by successful Resolution Applicants are permissible under IBC – Held: 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 – 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 – Since the 330 days outer limit of the CIRP u/s. 12(3) of the IBC, including judicial proceedings, can be extended only in exceptional 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 – A failed negotiation for modification after submission, or a withdrawal after approval by the CoC and submission to the Adjudicating Authority, irrespective of the content of the terms envisaged by the Resolution Plan, when unregulated by statutory timelines could occur after a lapse of time, as is the case in the present appeals – Permitting such a course of action would either result in a down-graded resolution amount of the Corporate Debtor and/or a delayed liquidation with depreciated assets which frustrates the core aim of the IBC – 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 – These are matters for legislative policy – In the present framework, even if an impermissible understanding of equity is imported through the route of residual powers or the terms of the Resolution Plan are interpreted in a manner that enables the appellants’ desired course of action, it is wholly unclear on whether a withdrawal of a CoC-approved Resolution Plan at a later stage of the process would result in the Adjudicating Authority directing mandatory liquidation of the Corporate Debtor – Pertinently, this direction has been otherwise provided in Section 33(1)(b) of the IBC when an Adjudicating Authority rejects a Resolution Plan under Section 31 – In this context, 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 perusing 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. Insolvency and Bankruptcy Code, 2016 – Res judicata – Applicability of – Held: The prayer for withdrawal of the Resolution Plan in the First Withdrawal Application was not substantial and one that the Court was bound to grant, since it was contingent upon a re-evaluation, which in itself was contingent upon receiving the information sought in prayers (i) and (ii) – Since the latter two contingencies never arose, the NCLT did not apply its mind to the prayer for withdrawal independently – When it filed the Second Withdrawal Application, it was dismissed on a technical ground and not on its merits – When a revised Third Withdrawal Application was filed, the NCLT then adjudicated it on its merits and allowed it – Hence, since the NCLT did not adjudicate Resolution applicant ‘E’ prayer for withdrawal of their Resolution Plan on its merits while dismissing the First Withdrawal Application, the opportunity to seek the relief was not available to resolution applicant ‘E’ in a real sense – Therefore, the finding of the NCLAT on this issue is reversed and hold that resolution applicant ‘E’ Third Withdrawal Application was not barred by res judicata. |
