Following several civil appeals, the Supreme Court has decided in its final order and judgment dated 13 September 2021 (the judgment) whether a resolution plan that has already been approved by the requisite majority of the committee of creditors (CoC) and that is pending the approval of the adjudicating authority can be modified or withdrawn by a resolution applicant under the Insolvency and Bankruptcy Code 2016 (the Code).
The Supreme Court held that, under the existing framework of the Code, there is no provision that allows for the modification or withdrawal of a resolution plan upon the request of a successful resolution applicant once it has been approved by the majority of the CoC. Further, the Supreme Court, comprising justices Dhananjaya Yeshwant Chandrachud and Mukeshkumar Rasikbhai Shah, held that a resolution plan that has been approved by the CoC becomes irrevocable and binding between the successful resolution applicant and the CoC, irrespective of the terms contained within the resolution plan.
In its judgment, the Supreme Court set out the following principles:
In view of the above principles, the Supreme Court held that the existing insolvency framework in India provides no scope for further modifications or withdrawals of CoC-approved resolution plans upon the successful resolution applicant’s request, once the plan has been submitted for the NCLT’s approval. The Supreme Court is aware of the long judicial delays that hinder the insolvency processes and, therefore, urged the NCLT and the National Company Law Appellate Tribunal (NCLAT) to be sensitive to the effect of such delays and to remember that adjournments hamper the efficacy of the judicial process.
The Supreme Court’s judgment is a welcome decision that finally gives certainty to the issue that CoC-approved resolution plans cannot be withdrawn upon the request of successful resolution applicants. Further, it helps to define the limited scope of available judicial review, which includes the residuary powers of the NCLT and the NCLAT. This decision is in line with the judicial approach of prioritising predictability and timeliness, which are touchstones of the current insolvency regime in India.
This article was originally published in LEXOLOGY on 22 October 2021 Co-written by: Misha, Partner; Anurag Dwivedi, Partner; Siddhant Kant, Principal Associate; Moulshree Shukla, Associate. Click here for original article
Contributed by: Misha, Partner; Anurag Dwivedi, Partner; Siddhant Kant, Principal Associate; Moulshree Shukla, Associate
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