The Supreme Court of India, on 13.09.2021, delivered a landmark judgment which has settled the issue of whether withdrawal or modification of the Resolution Plan by the Resolution Applicant, after acceptance by the Committee of Creditors ("CoC") but before approval of the Adjudicating Authority/NCLT, is permissible or not.
The bench of Justices D.Y. Chandrachud and M.R. Shah while deciding three Appeals filed by Ebix Singapore PTE Limited, Kundan Care Products Limited and Seroco Lighting Industries Private Limited, in which the common issue regarding withdrawal or modification of an approved Resolution Plan was involved, has held that enabling withdrawal or modification of the Resolution Plan would lead to another round of negotiations completely unregulated by Insolvency and Bankruptcy Code, 2016 ("IBC") and therefore would be detrimental to the Corporate Debtor, its creditors and the economy at large. The Court has further held that the existing insolvency framework provides no scope or provision for withdrawal or modification of the Resolution Plan which has been approved by the CoC, and hence the Court cannot permit the same through the backdoor by a judicial fiat. The Court has left it to the Legislature to incorporate appropriate provisions for withdrawal or modifications of Plans in its legislative wisdom.
However, in the Appeal filed by Kundan Care Products Limited, the Court after considering the peculiar facts and circumstances, exercised its powers under Article 142 of the Constitution of India and granted one-time relief to the Appellant/Resolution Applicant permitting it to modify the Resolution Plan, as in this case both the CoC and the Resolution Applicant had requested for modification of the Resolution Plan in view of the inordinate delay in conclusion of the CIRP and pendency of the Plan for approval before the NCLT.
The Court also took cognizance of the long delays in approving the Resolution Plans by the Adjudicating Authority by relying on the 32nd Report of the Ministry of Corporate Affairs' Standing Committee on Finance (2020-2021) on 'Implementation of Insolvency and Bankruptcy Code - Pitfalls and Solutions' which has highlighted huge pendency of applications before the Adjudicatory Authority. The Court urged the NCLT and the NCLAT to strictly adhere to the timelines stipulated under the IBC on best effort basis, as inordinate delays cause commercial uncertainty, degradation in the value of the Corporate Debtor and makes the insolvency process inefficient and expensive.
This judgment provides much needed clarity to all prospective resolution applicants who intend to revive the companies which are under Insolvency which is the essence of the IBC.
In the Appeal filed by Kundan Care Products Limited (CA No. 3560/2020), the Appellant was represented by Mr. Ramji Srinivasan, Senior Advocate along with Mr. Prithu Garg, Mr. Shailendra Singh, Ms. Harimohana N., Mr. Ankush Bhardwaj and Mr. Shivkrit Rai, Advocates, while the Committee of Creditors was represented by Mr. V. Giri, Senior Advocate along with Mr. Ashish Rana and Mr. Anurag Singh, Advocates and the Resolution Professional was represented by Mr. Nakul Dewan, Senior Advocate along with Ms. Pooja Mahajan, Mr. Avinash B. Amarnath, Ms. Mahima Singh, S. Mahajan and Neelu Mohan, Advocates.
In the Appeal filed by Ebix Singapore PTE Limited (CA No. 3224/2020), the Appellant was represented by Mr, K.V. Vishwanathan and Ritin Rai, Senior Advocates along with Mr. Rajat Sehgal, Mr. Gautam Swarup, Ms. Vandana Anand, Mr. Mandavya Kapoor, Mr. Karthikeya Kapoor and Ms. Gunjan Jindal, Advocates, while the Committee of Creditors was represented by Mr. Shyam Divan, Senior Advocate along with Ms. Misha, Mr, Siddhant Kant, Ms. Moulshree Shukla and Mr. S.S. Shroff, Advocates and the Resolution Professional was represented by Mr. Nakul Dewan, Senior Advocate along with Mr. Atul Sharma, Mr. Abhishek Sharma, Ms. Ashly Cherian, Ms. Anisha Mahajan, Ms. Harshita Agarwal and Mr. Gautam Talukdar, Advocates.
In the Appeal filed by Seroco Lighting Industries Private Limited (CA No. 295/2021), the Appellant was represented by Mr. Tirth Nayak and Mr. Vinam Gupta, Advocates, while the Committee of Creditors was represented by Mr. Jayant Mehta, Senior Advocate along with Ms. Sonia Dube, Mr. Shatadru Chakraborty, Kanchan Yadav, Ms. Surbhi Anand and Surya Kapoor, Advocates.
The Author is Prithu Garg, Advocate-on-Record, Supreme Court of India and Managing Partner GnS Legal LLP. Views are personal.
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