IBC | Resolution Plan Approved By CoC Can't Be Withdrawn or Modified By Resolution Applicant: Supreme Court

The Supreme Court reiterated that once a resolution plan is approved by the Committee of Creditors (“CoC”) then it becomes impermissible for the resolution applicant to withdraw or modify the resolution plan.

The Bench Comprising Justices Sanjiv Khanna and Dipankar Datta referred to the Judgment of Ebix Singapore Private Limited v. Committee of Creditors of Educomp Solutions Limited and Another, where the Supreme Court elaborated and set out several reasons why the resolution applicant cannot be permitted to withdraw or modify the resolution plan after approval by the Committee of Creditors, and before an order under Section 31(1) of the Code is passed.

The court observed that due to the absence of any statutory provision in the Insolvency and Bankruptcy Code, it is impermissible for the resolution applicant to modify or withdraw the resolution plan after the plan was approved by the CoC.

“The effect of approval by the adjudicating authority under Section 31(1) of the Code makes the resolution plan binding on all stakeholders, even those who are not members of the Committee of Creditors. The scrutiny by the adjudicating authority for grant of approval in terms of Section 31(1), read with other provisions of the Code, is limited and restricted. It does not allow or permit the resolution applicant to unilaterally amend/modify or withdraw the resolution plan post approval by the Committee of Creditors.”, the court said.

Before the Supreme Court, it was submitted by the resolution applicants/appellant that they should be allowed to modify/withdraw the resolution plan as they were prevented from presenting the appropriate resolution looking towards the financial distress of the corporate debtor because of lack of information or rather fraud on the part of the resolution professional.

Rejecting the resolution applicant's submissions, the court underlined the importance of the financial expert's opinions based on which the resolution plan is prepared and submitted for the approval of the CoC.

“Resolution plans are not prepared and submitted by lay persons. They are submitted after the financial statements and data are examined by domain and financial experts, who scan, appraise evaluate the material as available for its usefulness, with caution and scepticism. Inadequacies and paltriness of data are accounted and chronicled for valuations and the risk involved. It is rather strange to argue that the super specialists and financial experts were gullible and misunderstood the details, figures or data.”, the court observed.

Further, the court clarified that pointing out the ambiguities and lack of specific details in the resolution plan cannot be acceptable after the approval of the resolution plan by the CoC.

“Pointing out the ambiguities or lack of specific details or data, post acceptance of the resolution plan by the Committee of Creditors, should be rejected, except in an egregious case were data and facts are fudged or concealed. Absence or ambiguity of details and particulars should put the parties to caution, and it is for them to ascertain details, and exercise discretion to submit or not submit resolution plan.”, the court clarified.

Based on the above premise, the Supreme Court refused to interfere with the CoC-approved resolution plan and upheld the resolution plan as approved by the CoC highlighting the obligation of the resolution professional to provide information about the financial distress of the corporate debtor to be understood on “best effort” basis.

Case Title: DECCAN VALUE INVESTORS L.P. & ANR. VERSUS DINKAR VENKATASUBRAMANIAN & ANR.

Citation : 2024 LiveLaw (SC) 265

Click Here To Read/Download The Order