2020 (12) TMI 1271 - AT - Insolvency and Bankruptcy

Revision of the approved Resolution Plan - Adjudicating Authority observed that the contention of the Appellant that it had no knowledge of the financial condition of the Corporate Debtor cannot be entertained - HELD THAT - Having regard to the Judgments rendered by this Appellate Tribunal holding that the Successful Resolution Applicant cannot be permitted to withdraw the approved Resolution Plan coupled with the fact that the Appellant in the instant case being the sole Resolution Applicant in the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor which has been classified as an MSME and admittedly having knowledge of the financial health of the Corporate Debtor as a promoter or a connected person cannot be permitted to seek revision of the approved Resolution Plan on that ground which would not be a material irregularity within the ambit of Section 61(3) of the Insolvency and Bankruptcy Code 2016. Taking into consideration the fact that the Corporate Debtor is an MSME and there is economic slowdown globally in the wake of outbreak of COVID-19 Pandemic it is deemed appropriate to waive off the costs imposed by the Adjudicating Authority - Appeal dismissed.

Summary

Issues: Dismissal of revision of approved Resolution Plan by Adjudicating Authority; Appellant's knowledge of Corporate Debtor's financial condition; Permissibility of seeking revision of approved Resolution Plan; Applicability of Section 61(3) of the Insolvency and Bankruptcy Code, 2016; Economic impact of COVID-19 on MSMEs.

The judgment by the National Company Law Appellate Tribunal, New Delhi, involved an appeal against the dismissal of a revision of an approved Resolution Plan by the Adjudicating Authority. The Appellant's prayer for revision was turned down based on the Adjudicating Authority's observation that the Appellant, being aware of the financial condition of the Corporate Debtor, cannot claim ignorance. The Appellate Tribunal considered the fact that the Corporate Debtor was an MSME and the Appellant, as the sole Resolution Applicant, had knowledge of the financial health of the Corporate Debtor. The Tribunal referred to previous judgments, highlighting that a Successful Resolution Applicant cannot withdraw an approved Resolution Plan. It was determined that seeking revision on the grounds of financial condition, known to the Appellant, did not constitute a material irregularity under Section 61(3) of the Insolvency and Bankruptcy Code, 2016.

The Appellate Tribunal concluded that there was no merit in the appeal and dismissed it. However, considering the MSME status of the Corporate Debtor and the global economic slowdown due to the COVID-19 pandemic, the Tribunal decided to waive off the costs imposed by the Adjudicating Authority. The order to set aside the imposition of costs was communicated to the Adjudicating Authority. The judgment highlighted the importance of upholding approved Resolution Plans, especially when the Applicant is aware of the financial condition of the Corporate Debtor. The economic impact of the pandemic on MSMEs was also considered in the decision to waive off costs, showing a balance between legal principles and economic realities.