2020 (10) TMI 68 - AT - Insolvency and Bankruptcy

Withdrawal of a Resolution Plan post approval - It is submitted on behalf of Appellant that there is no basis or justification for the finding that the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016 has no power or jurisdiction to allow withdrawal of a Resolution Plan post approval from the Committee of Creditors - HELD THAT - It appears that in terms of the impugned order the Adjudicating Authority has rejected the prayer emanating from the Resolution Applicant seeking withdrawal of the Resolution Plan, which had been approved by the Committee of Creditors and in respect whereof application under Section 31 of the I B Code filed by the Resolution Applicant was pending consideration before the Adjudicating Authority. The Adjudicating Authority was of the view that it had no jurisdiction to permit withdrawal of a Resolution Plan, which had been duly approved by the Committee of Creditors. It has also been influenced by the fact that an issue of similar nature was sub-judice before the Hon ble Apex Court. The sanctity of resolution process has to be maintained and the Resolution Applicant whose Resolution Plan has been approved by Committee of Creditors cannot be permitted to withdraw its Resolution Plan. Provision for submission of a Performance Bank Guarantee by a Resolution Applicant while submitting its Resolution Plan, as required under the amended provisions of IBBI (Insolvency Resolution Process of Corporate Persons) Regulations, 2016 is a step in this direction but may not be deterrent enough to prevent a Successful Resolution Applicant from taking a U-turn - The approved Resolution Plan admittedly does not have a provision which could be treated as a contract of personal service rendering the same unenforceable or of a nature in respect of which specific performance cannot be an appropriate remedy. This feature of the plan also distinguishes it from the one which was the subject matter in the aforestated Appeal decided by this Appellate Tribunal. The Appellant has failed to demonstrate that the impugned order suffers from any legal infirmity - Appeal being devoid of merit is dismissed.

Issues Involved:
1. Jurisdiction of the Adjudicating Authority to allow withdrawal of a Resolution Plan post-approval.
2. Commercial unviability of the approved Resolution Plan due to delay.
3. Binding nature of the Resolution Plan on the Resolution Applicant and the stakeholders.
4. Applicability of the principle of estoppel by conduct to the Resolution Applicant.
5. Impact of the withdrawal of the Resolution Plan on the Corporate Debtor and stakeholders.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Adjudicating Authority to Allow Withdrawal of a Resolution Plan Post-approval:
The Appellant argued that the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016 (I&B Code) has the power to allow withdrawal of a Resolution Plan post-approval from the Committee of Creditors (CoC). The Appellant cited the Deccan Value Investors LP case, where a similar view was upheld by the Appellate Tribunal. However, the Respondent countered that the Adjudicating Authority has no jurisdiction to permit such withdrawal once the Resolution Plan is approved by the CoC, as established in the "Committee of Creditors of Educomp Solutions Ltd. vs. Ebix Singapore Pte. Ltd. & Anr." case. The Tribunal concluded that the Adjudicating Authority cannot interfere with the majority decision of the CoC and lacks jurisdiction to allow the withdrawal of an approved Resolution Plan.

2. Commercial Unviability of the Approved Resolution Plan Due to Delay:
The Appellant claimed that the approved Resolution Plan had become commercially unviable due to delays in the Corporate Insolvency Resolution Process (CIRP). The Tribunal noted that the CIRP process involves multiple stages, including the submission and approval of Resolution Plans by the CoC. The Tribunal emphasized that the I&B Code aims for insolvency resolution in a time-bound manner to maximize the value of assets and balance stakeholders' interests. The Tribunal found that commercial unviability due to delays does not justify withdrawal of the Resolution Plan.

3. Binding Nature of the Resolution Plan on the Resolution Applicant and the Stakeholders:
The Respondents argued that once the Resolution Plan is approved by the CoC, it becomes a binding contract between the parties, and the Resolution Applicant cannot withdraw it. The Tribunal supported this view, stating that the approved Resolution Plan is binding on the Corporate Debtor and all stakeholders once the Adjudicating Authority approves it. The Tribunal highlighted that allowing withdrawal would sabotage the entire CIRP process and potentially push the Corporate Debtor into liquidation.

4. Applicability of the Principle of Estoppel by Conduct to the Resolution Applicant:
The Tribunal held that the Resolution Applicant is estopped from withdrawing the approved Resolution Plan based on the principle of estoppel by conduct. The Tribunal reasoned that the Resolution Applicant, having accepted the conditions of the Resolution Plan and eliminated other potential bidders, cannot alter its position to the detriment of stakeholders. The Tribunal emphasized that there is no provision in the I&B Code allowing a Successful Resolution Applicant to withdraw the approved Resolution Plan.

5. Impact of the Withdrawal of the Resolution Plan on the Corporate Debtor and Stakeholders:
The Tribunal noted that allowing the withdrawal of the approved Resolution Plan would have disastrous consequences for the Corporate Debtor and stakeholders. The Tribunal pointed out that the value of the Corporate Debtor's assets would likely deplete due to the time consumed in the CIRP process, leaving stakeholders in a state of devastation. The Tribunal stressed the importance of maintaining the sanctity of the resolution process and preventing the Successful Resolution Applicant from taking a U-turn.

Conclusion:
The Tribunal found no merit in the Appeal and dismissed it, stating that the Appellant failed to demonstrate any legal infirmity in the impugned order. The Tribunal upheld the binding nature of the approved Resolution Plan and emphasized the importance of maintaining the integrity of the CIRP process. The Appeal was dismissed with no order as to costs.

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