2020 (1) TMI 1207 - Tri - Insolvency and Bankruptcy

Withdrawal of resolution plan already approved by the committee of creditors of the Corporate Debtor - refund of Earnest Money - Doctrine of Constructive Res Judicata - HELD THAT - No doubt there was a prayer for withdrawal of resolution plan amongst others in CA No. 1252 (PB)/2019, the prayer for revaluation was specifically declined dismissal order dated 10.07.2019. While dismissing CA No. 1252(PB)/2019 the prayer for withdrawal of resolution plan was neither considered nor was ever dealt with. The issue of withdrawal of the resolution plan by the Applicant has never been considered consciously on merit and/or adjudicated upon in CA No. 1252(PB). Doctrine of Constructive Res Judicata does not apply to the issues/ points, or any lis between parties that has not been decided previously, and despite being pleaded, has not been considered by a court/ tribunal and expressly dealt with in the order so passed - Even a bare perusal of the Order dated 10.07.2019 would indicate that the issue of withdrawal of the Resolution Plan by the Resolution Applicant was not dealt with on merit and that no decision has either been passed or attained finality as regards allowing the party to withdraw the Resolution Plan. The question of applying res judicata therefore cannot arise in the present application seeking withdrawal of the resolution plan. It is relevant to note here that the Corporate Insolvency Resolution Process against the Corporate Debtor was initiated vide order dated 30.05.2017 passed in IB-101 (PB)/2017a Under third proviso to sub-section (3) of Section 12 of the Code the corporate insolvency resolution process period has expired on 16.11.2019 - Ordinarily the Corporate Insolvency Resolution Process period must be completed within the outer time limit provided under the Code. However, in exceptional cases in order to achieve a resolution and to avoid to drive the corporate debtor into liquidation, Adjudicating Authority (NCLT) can extend the outer time limit provided under the Code. In the facts the Corporate Insolvency Resolution Process period in the present case is further extended by 90 days from 16.11.2019. The Resolution Professional and the members of Committee of Creditors are directed to expedite the possibility of achieving resolution of the stressed assets of the corporate debtor within the extended period. Application allowed in part with cost of ₹ 1 lakh to be paid by the applicant into the corpus of the Corporate Debtor.

Summary

Issues Involved:
1. Withdrawal of the resolution plan by the successful Resolution Applicant.
2. Applicability of the Doctrine of Constructive Res Judicata.
3. Impact of withdrawal on the Corporate Insolvency Resolution Process (CIRP).
4. Legal consequences and costs associated with the withdrawal.

Issue-wise Detailed Analysis:

1. Withdrawal of the resolution plan by the successful Resolution Applicant:
The successful Resolution Applicant, M/S EBIX Singapore PTE. LTD., filed an application under Section 60 (5) of the Insolvency and Bankruptcy Code, 2016, seeking withdrawal of its resolution plan approved by the Committee of Creditors (COC) and refund of the earnest money. The applicant cited several reasons for the withdrawal, including an inordinate lapse of time in concluding the CIRP, apprehensions about the commercial viability of the plan, severe mismanagement of funds, fraud, and ongoing investigations against the corporate debtor. Additionally, the plan was valid for only six months from the date of its filing, leading to its invalidity due to the lapse of time.

2. Applicability of the Doctrine of Constructive Res Judicata:
The COC objected to the withdrawal, arguing that it would create uncertainty in the CIRP and that the terms of the resolution plan were binding on the applicant. They contended that the relief claimed was barred by the Doctrine of Constructive Res Judicata, as similar prayers had been previously rejected by the Tribunal. However, the Tribunal noted that the issue of withdrawal had not been consciously adjudicated upon in the earlier applications (CA No. 1252/2019 and CA No. 1310/2019). Therefore, the Doctrine of Constructive Res Judicata did not apply as the specific issue of withdrawal had not been decided previously.

3. Impact of withdrawal on the Corporate Insolvency Resolution Process (CIRP):
The COC argued that allowing the withdrawal would waste considerable time and resources already invested in reviving the corporate debtor's business. They emphasized that the resolution plan becomes binding only after approval by the Adjudicating Authority under Section 31 of the Code. The Tribunal acknowledged that compelling an unwilling applicant to implement the plan could lead to uncertainty and that the object of the Code is to ensure the corporate debtor remains a going concern. The Tribunal decided that the application for withdrawal must be resolved before passing any order under Section 31 of the Code.

4. Legal consequences and costs associated with the withdrawal:
The Tribunal allowed the withdrawal of the resolution plan, noting that legal consequences would follow, and the Resolution Professional and COC were free to take appropriate action, including addressing the issue of refunding the earnest money. The Tribunal also extended the CIRP period by 90 days from 16.11.2019, directing the Resolution Professional and COC to expedite the resolution process. The application was partly allowed with a cost of ?1 lakh to be paid by the applicant into the corpus of the Corporate Debtor.

Conclusion:
The Tribunal allowed the withdrawal of the resolution plan by the successful Resolution Applicant, emphasizing that the Doctrine of Constructive Res Judicata did not apply as the specific issue of withdrawal had not been previously adjudicated. The Tribunal recognized the potential impact on the CIRP but highlighted the importance of ensuring the corporate debtor remains a going concern. The CIRP period was extended to facilitate the resolution process, and the applicant was directed to bear certain costs associated with the withdrawal.