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TMI Blog2021 (9) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... cult to determine what weighed with the Court without a speaking order - Another two judge Bench of this Court, in its judgment in ERACH BOMAN KHAVAR VERSUS TUKARAM SHRIDHAR BHAT AND ANOTHER [ 2013 (12) TMI 1673 - SUPREME COURT] , has held that the doctrine of res judicata can only apply when there has been a conscious adjudication of the issue on merits. Res judicata cannot apply solely because the issue has previously come up before the court. The doctrine will apply where the issue has been heard and finally decided on merits through a conscious adjudication by the court. In the present case, the NLCT s order dismissing the First Withdrawal Application makes it clear that it had only considered only that part of prayer (iv) which related to re-evaluation of the Resolution Plan, possibly because Ebix had hoped to re-evaluate the Resolution Plan on the basis of the information received as a consequence of prayers (i) and (ii) and those prayers were rejected since such information was not available. Res judicata cannot apply solely because the issue has previously come up before the court. The doctrine will apply where the issue has been heard and finally decided on merits through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms of the Resolution Plan are interpreted in a manner that enables the appellants desired course of action, it is wholly unclear on whether a withdrawal of a CoC-approved Resolution Plan at a later stage of the process would result in the Adjudicating Authority directing mandatory liquidation of the Corporate Debtor. Pertinently, this direction has been otherwise provided in Section 33(1)(b) of the IBC when an Adjudicating Authority rejects a Resolution Plan under Section 31. In this context, we hold that the existing insolvency framework in India provides no scope for effecting further modifications or withdrawals of CoC-approved Resolution Plans, at the behest of the successful Resolution Applicant, once the plan has been submitted to the Adjudicating Authority. A Resolution Applicant, after obtaining the financial information of the Corporate Debtor through the informational utilities and perusing the IM, is assumed to have analyzed the risks in the business of the Corporate Debtor and submitted a considered proposal. A submitted Resolution Plan is binding and irrevocable as between the CoC and the successful Resolution Applicant in terms of the provisions of the IBC and the CIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment has been divided into sections to facilitate analysis. Further, a Glossary of defined terms which have been used throughout the judgment has also been provided. The sections in the judgment are as follows: Glossary ............................................................................................................ 5 A Civil Appeal No 3224 of 2020 - the Ebix Appeal ...................................... 11 A.1 The appeal .......................................................................................... 11 A.2 Initiation of CIRP ................................................................................. 11 A.3 Invitation, submission and approval of Resolution Plan ...................... 12 A.4 Investigations into financial transactions of Educomp ........................ 15 A.5 Applications for withdrawal of the Resolution Plan ............................. 20 A.6 Orders of NCLT and NCLAT ............................................................... 24 A.7 Present status of SFIO and CBI investigation ..................................... 28 B Civil Appeal No 3560 of 2020 - the Kundan Care Appeal ........................ 29 B.1 The appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Applicant under the IBC ................................................................................................ 134 J.1 The absence of a legislative hook or a regulatory tether to enable a withdrawal .................................................................................................. 134 J.2 Terms of the Resolution Plan are not sufficient to effect withdrawals or modifications after its submission to the Adjudicating Authority................. 145 K Factual Analysis ...................................................................................... 158 K.1 The Ebix Appeal ................................................................................ 158 K.1.1 Res Judicata ............................................................................... 159 K.1.2 Analysis of the Resolution Plan of Ebix ...................................... 167 K.1.3 Duties of the RP .......................................................................... 175 K.2 The Kundan Care Appeal .................................................................. 179 K.3 The Seroco Appeal ........................................................................... 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gujarat Urja Vikas Nigam Limited GUVNL Appeal Civil Appeal No 9241 of 2019 - filed by GUVNL before Supreme Court IBC Insolvency and Bankruptcy Code, 2016 IBBI Insolvency and Bankruptcy Board of India IFC International Finance Corporation IFC Application CA No 358 of 2018 - filed by IFC before NCLT IM Information Memorandum Investigation Audit Application CA No 793 (PB) of 2018 - filed by E-RP before NCLT IRP Interim Resolution Professional Jaypee Jaypee Kensington Boulevard Apartments Welfare Association & Ors. v. NBCC (India) Ltd. & Ors. K Sashidhar K Sashidhar v. IOC Kotak Kotak Mahindra Bank Kundan Care Kundan Care Products Limited Kundan Care Appeal Civil Appeal No 3560 of 2020 LOI Letter of Intent Maharashtra Seamless Maharashtra Seamless v. Padmanabhan Venkatesh and Ors MCA Ministry of Corporate Affairs MSME Micro, Small and Medium Enterprise NCLAT National Company Law Appellate Tribunal NCLT National Company Law Tribunal NSE National Stock Exchange PBG Performance Bank Guarantee PFCL Power Finance Corporation Limited PPA Power Purchase Agreement Recovery of Debts Act Recovery of Debts Due to Banks and Financial Institutions Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purposes of Section 5(12) of the IBC. 4 E-CoC was then constituted on 28 June 2017, following which it appointed Mr Mahender Kumar Khandelwal as the RP for Educomp on 27 July 2017. This was confirmed by the NCLT on 12 September 2017. On 18 September 2017, the E-RP took over information, documents, reports and records pertaining to Educomp from the IRP. 5 On an application, CA No 405(PB) of 2017 of the E-RP, the NCLT by its order dated 13 November 2017 extended the period of the CIRP by 90 days, beginning from 26 November 2017 till 24 February 2018. A.3 Invitation, submission and approval of Resolution Plan 6 In terms of Section 25(2)(h) of the IBC, the E-RP invited EOI on 18 October 2017 from prospective bidders, investors and lenders. 7 On 10 November 2017, the last date for submission of EOIs was extended to 17 November 2017. Commencing from 5 December 2017, the E-RP provided access to the Virtual Data Room of Educomp to prospective Resolution Applicants who had submitted a confidentiality undertaking and made an upfront payment of ₹ 5,00,000. 8 On 5 December 2017, the final RFRP was issued in accordance with Section 25(2)(h) of the IBC. The last date for submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication. On 7 March 2018, the E-RP filed the Approval Application, CA No 195 (PB) of 2018 seeking NCLT's approval to Ebix's Resolution Plan under Section 30(6). 14 On 2 July 2018, Ebix issued a letter to the E-RP to expedite the CIRP for Educomp. The relevant portions of the letter are extracted below: "…we would like to submit that the resolution plan for the Company was submitted with an expectation that the resolution process shall be completed in a time bound manner, and the Resolution Applicant shall get the management control of the Company before the start of new academic session in India i.e. April 2018, subject to being selected as the successful applicant (as per the terms and conditions provided in the resolution plan), and the approval of the plan by the NCLT. This would have provided the Resolution Applicant with sufficient time to restructure the operations of the Company. As you are aware, the operations of the Company are already under stress and it would be safe to assume that no new contracts / customers are coming up. Further, the competitors of the Company may be trying to take undue advantage of the situation, which may further erode the business v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e directions' from the NCLT in view of the alleged irregularities in the conduct of the affairs of Educomp. 18 In the meantime, on 1 August 2018, due to allegations of financial mismanagement of Educomp between 2014-2018, the MCA directed an SFIO investigation, Order No 32/2018/SFIO/CL-II into its affairs. 19 The NCLT, by its order dated 9 August 2018, dismissed the applications filed by IFC, Axis and SBI and directed that: (i) the E-RP shall convene a meeting of the E-CoC within three days to discuss the subject matter of the applications; and (ii) the E-RP and E-CoC could move an application before NCLT according to law, if advised to do so by E-CoC. 20 Pursuant to NCLT's order dated 9 August 2018, the E-CoC hosted its 13th meeting on 13 August 2018, and a resolution was passed with a 77.85 per cent vote to appoint an independent agency to conduct a Special Investigation Audit into the affairs of Educomp. The relevant terms of the resolution are as follows: "RESOLVED THAT a special investigation audit on the affairs of the Company be conducted by an independent agency, which shall be appointed by the Committee of Creditors, for period beginning from [1st January 2014] to [30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndependent agency so appointed, or in the alternative, to refer the matter to the Central Government to appoint an Inspector under the Companies Act, 2013 to conduct said investigation. RESOLVED FURTHER THAT the entire cost of the proposed investigation (special investigation audit), shall be included in CIRP Cost and accordingly be paid in terms of the provisions of the Insolvency and Bankruptcy Code, 2016 and the relevant Regulations. RESOLVED FURTHER THAT, the independent agency to conduct the special investigation audit, shall be appointed by the Core Committee, comprising of SBI, IDBI Bank, Axis Bank, IFC, Yes Bank and J&K Bank" 21 The resolution was placed before the NCLT on 20 August 2018, when it was hearing the CSEB Application and the Approval Application. The NCLT directed the E-RP to file an appropriate application. In accordance with the resolution dated 13 August 2018 and NCLT's order dated 20 August 2018, the E-RP filed the Investigation Audit Application, CA No 793 (PB) of 2018 under Section 60(5) of the IBC seeking directions from NCLT to carry out the Special Investigation Audit of Educomp. 22 It is stated before us that the Investigation Audit Application w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged fund-diversion and inflated land deals, we would like to clarify that SFIO Investigation into the affairs of Educomp Solutions Limited is currently ongoing wherein the Resolution Professional has been supplying the data/ information/ documents to them as and when required however, no such information has been brought to the notice of the Resolution Professional as yet. Moreover, the article appears to be based on a false, motivated, fabricated data." A.5 Applications for withdrawal of the Resolution Plan 26 On 5 July 2019, Ebix filed the First Withdrawal Application, CA 1252 (PB) of 2019 in CP (IB) No 101 (PB) of 2017 under Section 60(5) of the IBC, for the following reliefs: "i. Direct that the Ld. Resolution Professional supply a copy of the Special Investigation Audit to the Resolution Applicant forthwith; ii. Direct that the Ld. Resolution Professional supply a copy of the Certificates under Sections 43, 45, SO and 66 of the Insolvency and Bankruptcy Code, 2016 to the Resolution Professional forthwith; iii. Withhold approval of the Resolution Plan sanctioned by the Committee of Creditors of the Corporate Debtor, as filed before this Hon'ble Tribunal on 11.04.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion dated 05.07.2019 bearing PB/IA/1252/2019 under Section 60(5) of the Code, seeking revision/revaluation of the Resolution Plan. However, the same was dismissed by this Hon'ble Tribunal, and during the course of hearing in the said Application, this Hon'ble Court put it to the Resolution Applicant to withdraw the Resolution Plan by way of a separate Application. The present Application for withdrawal of the Resolution Plan is being made in pursuance of the same." 29 On 5 September 2019, the NCLT dismissed the Second Withdrawal Application with the following order: "C.A. No. 1310(PB)/2019 In para 'B (xii)' under the caption 'facts of the case', the following averments have been made […] The italic portion of the aforesaid para shows that the prayer for withdrawal of the Resolution Plan has been made inter alia on the suggestion of the Court which is neither reflected in the order nor is born out from any record. Such an averments imputing to the Court something which has never been said is condemnable. The cause of action cannot be based on any such things. Accordingly, we dismiss this application with liberty to the applicant to file fre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indicated in the following extract: "11. 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)/2019. 12. 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. 13. 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. 14. It is also pertinent to note here that the Resolution Applicant had subsequently taken u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplement the plan may lead to uncertainty. The object of the Code is to ensure that the Corporate Debtor keep working as a going concern and to safeguard the interest of all the stake holders. The provisions of the Code mandate the Adjudicating Authority to ensure that the successful resolution applicant starts running the business of the Corporate Debtor afresh. Besides Court ought not restrict a litigant's fundamental right to carry on business in its way under Article 19(1)(g) of the Constitution. Once the applicant is unwilling and reluctant and itself has chosen to withdraw its resolution plan, a doubt arises as to whether the resolution applicant has the capability to implement the said plan. Uncertainty in the implementation of the resolution plan cannot also be ruled out." (emphasis supplied) The NCLT also directed that Educomp's CIRP be extended by a period of 90 days, commencing from 16 November 2019. 33 As a consequence of its order allowing the Third Withdrawal Application, the NCLT also dismissed the Approval Application on 3 January 2020 as being infructuous. 34 E-CoC filed the Withdrawal Appeal assailing NCLT's order dated 2 January 2020. On 3 February 2020, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rous documents (a list was enclosed with the email). By another email dated 19 February 2020, the E-RP informed the E-CoC that CBI had resumed its search for documents at Educomp's office. 37 In the 16th meeting of the E-CoC on 30 March 2020, the E-RP provided the following updates in relation to the CBI and SFIO investigations: (i) The CBI search at the premises of Educomp on 11 February 2020, was conducted upon a complaint by SBI on behalf of a consortium of banks; (ii) Since the initiation of an enquiry by the MCA on 1 August 2018, the SFIO has requisitioned documents/information, which have been provided; (iii) The last communication from the SFIO was received on 27 February 2020; and (iv) In response to the grievance of some members of the E-CoC that the E-RP had only informed them of the investigations at a belatedly, the Chairperson of the E-CoC justified it by stating that the communication could only take place once the relevant investigation was completed. However, for future references, the Chairperson took note of the suggestion that the E-RP would add all members of the E-CoC to a WhatsApp group, where real-time updates could be shared. At the meeting, the E- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was confirmed by the NCLT on 1 February 2019. B.3 Invitation, submission and approval of Resolution Plan 45 On 20 February 2019, A-RP invited prospective resolution applicants to submit their EOIs in accordance with Regulation 36 of the CIRP Regulations and Form G was also published. Form G was amended by the A-RP, with due approval from the A-CoC, on 2 May 2019 and 17 May 2019. 46 A-RP received nine EOIs, out of which seven were found to be eligible. However, Kundan Care did not submit its EOI within the time prescribed by the A-RP, and its belated submission was rejected by the A-RP. 47 Thereafter, A-RP issued the RFRP on 6 March 2019 to the prospective Resolution Applicants who had been selected. Further, the IM was issued on 13 March 2019. Based on this, two Resolution Plans were received by the A-RP on 31 May 2019, which were then discussed with the A-CoC. 48 In the interim, Kundan Care filed an application, CA No 1119 of 2019 before the NCLT challenging the A-RP's rejection of its belated EOI. A-RP received the notice of this application on 30 August 2019. By order dated 6 September 2019, the NCLT allowed Kundan Care's application. Thereafter, it was provided access to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le NCLT dated 29 August 2019 (CA) 700/ND/2019 & CA 701/ND/2019) it is concluded that the Power Purchase Agreement (PPA) is an "instrument" for the applicability of Section 238 of the IBC, 2016 and clauses 9.2.1 e read with 9.3.1 of the PPA under reference are inconsistent within the ambit of Section 238 of/BC, 2016, provisions of/BC, 2016 and process initiated under /BC shall have an overriding effect over the PPA. Further, the Hon'ble NCLAT vide order dated 15 October 2019 has clearly stated that even in the event of Liquidation of the Corporate Debtor the appellant, Gujarat Urja Vikas Nigam Limited, cannot terminate the Power Purchase Agreement under the Code. Also, the Liquidator shall ensure that the Corporate Debtor remains a going concern. It is therefore very evident and clear that the Power Purchase Agreement cannot be terminated and has to continue even after the Resolution Plan has been approved by the Hon'ble NCLT." 56 On 29 August 2019, the NCLT allowed the applications and set aside the notice of default issued by GUVNL. It held that allowing the termination of the PPA would adversely affect the 'going concern' status of Astonfield. However, it hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) the termination was solely on account of Astonfield entering into insolvency proceedings; and (ii) being its sole contract, the PPA's termination would necessarily result in the corporate death of Astonfield, which would derail the entire CIRP. B.5 Withdrawal of the Resolution Plan 59 On 17 December 2019, Kundan Care filed an application under Section 60(5) of the IBC seeking permission of the NCLT to withdraw its Resolution Plan, which had been previously approved by the A-CoC and was pending confirmation by the NCLT under Section 31 of the IBC. In its application, it prayed for the following reliefs: "a) Allow the present application and permit the Applicant to withdraw its Resolution Plan as submitted and approved by the CoC on 14.11.2019; b) Direct that the Performance Bank Guarantee submitted by the Applicant be cancelled/revoked/returned/refunded to the Applicant;" In its application, Kundan Care stated that there was no bar under the IBC on it withdrawing its Resolution Plan before it was confirmed by the NCLT. It sought to withdraw its Resolution Plan on account of four reasons: (i) That there was uncertainty in relation to the PPA with GUVNL, since the GUVNL App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant is capable of generating 18133200 KWH/Units of Electricity per annum (11.5 MW * 365 days * 24 hours* 1000 (from MW to KW) * 18% CUF = 18133200 KWH/Units), when operating at the optimum capacity which would only be possible after change/replacement of solar panels, inverters etc. as contemplated in the Resolution Plan. This translates to generation revenue of roughly INR 1800 lacs per annum or roughly INR 150 lacs per month which is being incurred by the Project. 18. I say and submit that in addition to the aforesaid generation loss, a sum of INR 12 lacs (approx.) is being incurred towards monthly CIRP cost on account of the delay in the CIR process." 61 Thereafter, Kundan Care also filed an application for impleadment, IA No 9679 of 2020 in the GUNVL Appeal pending before this Court, along with an application for directions, IA No 9682 of 2020 praying, in exercise of this Court's jurisdiction under Article 142 of the Constitution of India, for the following reliefs: "a) Set aside/quash the Notice dated 28.03.2019 issued by Gujarat Urja Vikas Nigam Limited to Astonfield Solar (Gujarat) Private Limited and declare that the Applicant/Corporate Debtor shall be free to change/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intervening circumstances before its confirmation by the NCLT which had materially altered the financial projections. Hence, the NCLT should allow it to withdraw the Resolution Plan. In the alternative, Kundan Care proposed re-negotiation of the Resolution Plan by stating the following: "55. That Para 78 of the Reply is the Prayer Clause, which is wrong and denied. The Prayer Clause of C.A. No. 16798/2019 is reiterated and reaffirmed. Alternatively, and without prejudice to the above, it is prayed that the Applicant may be permitted to re-negotiate the financial proposal with the CoC" 65 The A-CoC also filed its reply to Kundan Care's application on 30 June 2020, where it stated that: (i) NCLT could not adjudicate upon the application since Kundan Care had filed another application before this Court in the GUVNL Appeal; and (ii) in any case, Kundan Care knew of the risks while entering the CIRP and should not be allowed to withdraw at such a belated stage. 66 The NLCT passed an order dated 3 July 2020, by which it rejected Kundan Care's application by noting that: (i) it did not have jurisdiction to permit withdrawal; and (ii) the matter was also sub judice before this Court b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, a Resolution Applicant emerges as the highest bidder (Hl) eliminating the Resolution Plans of Resolution Applicants, which are ranked H2 and H3. The approval of a Resolution Plan by the Committee of Creditors with requisite majority has the effect of eliminating H2 and H3 from the arena. Though, such approved Resolution Plan would be binding on the Corporate Debtor and all stake holders only after the Adjudicating Authority passes an order under Section 31 of the I&B Code approving the Resolution Plan submitted by Resolution Professional with the approval of Committee of Creditors in terms of provisions of Section 30(6) of the I&B Code, it does not follow that the Successful Resolution Applicant would be at liberty to withdraw the Resolution Plan duly approved by the Committee of Creditors and laid before the Adjudicating Authority for approval thereby sabotaging the entire Corporate Insolvency Resolution Process, which is designed to achieve an object. A Resolution Applicant whose Resolution Plan stands approved by Committee of Creditors cannot be permitted to alter his position to the detriment of various stake holders after pushing out all potential rivals during the bidding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the virtue of principle of estoppel of conduct, Kundan Care is estopped from withdrawing; and (vi) the withdrawal may lead to the Astonfield's liquidation, and the value of its assets were bound to have depleted in the interim. C Civil Appeal No 295 of 2021 - the Seroco Appeal C.1 The appeal 70 This is an appeal under Section 62 of the IBC from an order dated 10 December 2020 of the NCLAT. By its judgment, the NCLAT dismissed an appeal, Company Appeal (AT) (Insolvency) No 1054 of 2020 instituted by Seroco, under Section 61 of the IBC against an order dated 23 October 2020 of the NCLT. 71 The NCLT dismissed an application, IA No 96 of 2020 in CP (IB) No 29 of 2018 by Seroco under Section 60(5) seeking permission to modify its Resolution Plan submitted for the Corporate Debtor - Arya Filaments. NCLT relied on the impugned judgment in the Kundan Care Appeal. Further, it noted that while the application prayed for a modification of the Resolution Plan, its title was "Application for withdrawal under section 60(5) of the Insolvency and Bankruptcy Code, 2016". 72 In appeal, the NCLAT partly upheld the NCLT's decision and held that Seroco could not be allowed to modify or withdra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also been drastically reduced. It submitted a revised Resolution Plan to be considered by the Arya-CoC. In the revised Resolution Plan, Seroco offered to pay, inter alia, an amount of ₹ 5,29,22,000. It also requested the Arya-RP and Arya-CoC to file the revised Resolution Plan before the NCLT, and keep the proceedings on the confirmation of the previous Resolution Plan in abeyance. 79 Thereafter, on 10 July 2020, Seroco filed an application before the NCLT praying for the following reliefs: "a) permit the Applicant to revise the Resolution Plan dated 13.3.2020 in terms of letter dated 09/06/2020 at Annexure C hereto; b) direct the Respondent No. 2 to consider the modified resolution plan as per Letter at Annexure C and vote afresh on the same; c) direct the Respondent No.1 to provide an updated Information Memorandum providing financial condition of the Corporate Debtor as on 1/07/2020; d) during the hearing of this Application, stay the implementation, operation and execution of the Resolution Plan dated 13.3.2020 of the Applicant;" It noted that its Resolution Plan was filed eighteen months ago and was based on an IM published two years previously, following whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... withdrawal of the Resolution Plan." Hence, it rejected Seroco's application and imposed costs of ₹ 50,000. 81 Seroco filed an appeal against the NCLT's judgment, which came to be dismissed by the NCLAT by its impugned order dated 10 December 2020, where it noted: "2. After hearing learned counsel for the Appellant and 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. We are of the considered opinion that there is no merit in this appeal and the same is liable to be dismissed." Considering Arya Filament's position as an MSM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definitive agreements; (ii) The Resolution Plan constitutes an offer qualified by time and cannot be enforced against the parties after such a long period of time has elapsed. In this regard, the following terms of the documents underlying the CIRP were highlighted: (a) Clause 1.1.5 of the RFRP, which invites Resolution Plans from prospective Resolution Applicants. Further, Clause 1 of the covering letter for submission of the Resolution Plan provides that Ebix is setting out the offer in relation to the insolvency resolution of Educomp; (b) The Resolution Plan was valid only for six months, since Clause 1.8.3 of the RFRP invites resolution plans/offers with a validity of six months; (c) In accordance with the RFRP, Clause 7 of the Resolution Plan provides that it is valid for a period of six months from the date of submission. The appellant is a liberty to withdraw the resolution plan if there is delay of several months beyond the period of six months. It was emphasized that the Resolution Plan is a qualified offer which is not open to acceptance for an indefinite period. Reliance was placed on the decision of this Court in Riya Travel & Tours (India) (P) Ltd. v. C.U. Che ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in such exceptional cases that time can be extended, the general rule being that 330 days is the outer limit within which resolution of the stressed assets of the corporate debtor must take place beyond which the corporate debtor is to be driven into liquidation"; (iii) The events that have taken place subsequent to the submission of Resolution Plan justify its withdrawal. In this regard, it was urged on behalf of Ebix that: (a) The Resolution Plan was based on certain considerations that were fundamental to the Ebix's bid for the business of Educomp, and were crucial for keeping the business of Educomp as a going concern. These were the government contracts and IP driven solutions in the education and health industries. However, due to the inordinate delay in the completion of the CIRP, many of the government contracts may have ended. Further, various technology driven solutions and intellectual property owned and operated by Educomp, which Ebix had sought to acquire, were no longer valid; (b) The E-CoC passed a resolution with 77.85 per cent votes to conduct a special audit into the affairs of Educomp, which shows that evidence is available to conclude that the affairs of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d (d) The E-CoC/E-RP withheld information relating to mismanagement of affairs of Educomp between 2014-2018, and also in relation to the investigation into the affairs of Educomp by governmental authorities; (v) The Adjudicating Authority has the power to permit the withdrawal of the Resolution Plan. Under Section 31 of the IBC, it has the power to independently satisfy itself that the "Resolution Plan as approved by the CoC… meets the requirements as referred to in sub-section (2) of Section 30". Section 30(2)(d) of the IBC provides that the Adjudicating Authority can assess whether adequate provisions have been made for the "implementation and supervision of the resolution plan". This Court in K Sashidhar v. IOC, (2019) 12 SCC 150 has emphasized that the Adjudicating Authority has the discretion to reject the Resolution Plan if it does not conform to the stated requirements of Section 30(2)(d). The proviso to Section 31(1) of the IBC expressly prohibits the Adjudicating Authority from approving a plan that is incapable of being effectively implemented. The NCLAT, in the impugned judgement, has not considered whether the exercise of the jurisdiction by the Adjudicating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to vote, and approved by 75.36 per cent of the E-CoC. This constituted a binding contract between Ebix and the E-CoC; (ii) The IBC is a complete code as held by this Court in M/s Embassy Property Developments Pvt. Ltd. v. State of Karnataka & Ors., (2020) 13 SCC 308 and M/s Innoventive Industries Ltd. v. ICICI Bank & Anr., (2018) 1 SCC 407. It does not envisage withdrawals of Resolution Plans after mutual negotiations between the Resolution Applicant and the CoC, which culminates into a binding agreement. The Adjudicating Authority cannot contravene the text to invoke the spirit/object of the IBC without a conscious statutory prescription, as held by this Court in Gujarat Urja Vikas Nigam Limited v. Amit Gupta, 2021 SCCOnLine SC 194, para 181; (iii) The basic tenets of any insolvency law are to ensure the sanctity of the prescribed processes and timelines. Maximization of the value of assets and resolution of the Corporate Debtor are the core objectives of the IBC, as held by this Court in Swiss Ribbons (P) Ltd v. Union of India, (2019) 4 SCC 17, paras 27-28. Enabling withdrawals, especially at the tail end of the process, would push financially distressed Corporate Debtors in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under Section 30(2)(a) to (e) of the IBC; (xi) The provisions of the RFRP were designed to ensure predictability and finality. The provisions which elucidated this aim were: (a) Clause 1.13.5, which did not envisage any change or supplemental information to the Resolution Plan, after the submission date; (b) Clause 1.8.4, which stated that a submitted Resolution Plan shall be irrevocable; and (c) Clause 1.10(l), which stipulated that the Resolution Applicant will not be permitted to withdraw the Resolution Plan; (xii) The RFRP did not envisage six months to be the validity of the Resolution Plan. Clause 1.8.3, which stipulated a minimum six-month validity of the Resolution Plan, is relatable to the acceptance of the plan by the E-CoC and not the Adjudicating Authority. This is evident from the clauses of the RFRP which stipulate that the submitted plan is irrevocable; (xiii) The resolution process belies the claim that withdrawals were permissible after the six-month period. The process was delineated in the following terms: (a) Clause 1.3.1 and 1.3.2 empowers the E-RP to issue an invitation to prospective resolution applicants, subject to, inter alia, non-disclosu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Resolution Plan by the CoC, which determines its feasibility and viability; (b) Clause 1.1.6 paraphrases Section 31(1) of the IBC, which merely makes the Resolution Plan binding on all other stakeholders. The Adjudicating Authority's approval under Section 31(1) amounts to a 'super-added imprimatur' to the concluded terms between the CoC and the Successful Resolution Applicant; and (c) A conjoint reading of Clause 1.1.6, along with Clause 1.8.4, which declares a submitted Resolution Plan to be irrevocable, and Clause 1.10(l), which prohibits withdrawal of a submitted Resolution Plan, belies the claim that the Resolution Plan is binding on the Successful Resolution Applicant only after approval of the Adjudicating Authority; (xv) The delay in the resolution process is not attributable to the E-CoC. It cannot be cited to allow Ebix to withdraw from a legally binding plan; (a) The E-CoC approved the submitted Resolution Plan within 270 days, and it was promptly filed before the Adjudicating Authority in March 2018. The orders on the plan approval were reserved in January 2019 and pronounced only in January 2020. The delay cannot be attributable to the E-CoC or used to withdr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for avoidance of certain transactions, to protect the interests of the Resolution Applicant; and (xvii) The Third Withdrawal Application is barred by res judicata since the grounds raised by Ebix were rejected by the NCLT in the First Withdrawal Application on 10 July 2019. The liberty granted by the NCLT to file a fresh application on 5 September 2019 was with respect to filing a proper pleading without defects, and not on merits. This conditional liberty cannot be construed as a waiver of the objection of res judicata. In any event, the issue of limited validity of the approved Resolution Plan and delay of seventeen months, is barred by the principles of constructive res judicata. 84 In the alternative, if Ebix were to succeed before this Court, the learned Senior Counsel on behalf of the E-CoC has prayed that this Court exercise its powers under Article 142 of the Constitution of India, and extend the limitation period for conducting the insolvency process by three to four months for a fresh process to be initiated, subject to the consent of the E-CoC. D.3 Submissions for the second respondent 85 Supporting the submissions of the E-CoC, Mr Nakul Dewan, learned Senior Couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while enacting the IBC intended to permit the withdrawal of the Resolution Plan after its approval by the CoC or NCLT, it would have provided for such an eventuality. Section 12A was inserted by amendment for situations involving a withdrawal from the CIRP. On the contrary, Section 74 provides for penalties in case the Resolution Applicant does not comply with the Resolution Plan; (v) Ebix's argument, that the RFRP which provides that the Resolution Plan must be approved within six months would also include its approval by the Adjudicating Authority, is contrary to the IBC since the parties, through an agreement, cannot impose a restriction/condition on a judicial authority; (vi) In any case, Ebix has actively pursued the Resolution Plan even after the period of six months by communicating with the E-CoC/E-RP, arguing in its favor in the Approval Application and by extending the EMD. The First Withdrawal Application was filed only on 5 July 2019, after the expiry of nearly one year from the expiry of the period of six months on 19 August 2018; (vii) The investigations by the SFIO and CBI were initiated after the filing of the Approval Application before the NCLT. Since the E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) The NCLAT incorrectly proceeded on the assumption that its powers in disposing off Kundan Care's application seeking withdrawal were circumscribed by Section 61(3) of the IBC, which concerns appeals against approval of a Resolution Plan. Kundan Care sought to invoke jurisdiction under Section 61(1) of the IBC which provides a right of appeal against any order of the NCLT; (d) The facts and circumstances, on the basis of which the 'feasibility and viability' of the Resolution Plan were approved by the A-CoC in its commercial wisdom, have changed. Since the edifice of the A-CoC's satisfaction had altered, the NCLT has power to look into the facts which warrant withdrawal or modification of the Resolution Plan; (e) The legislative background of Section 31 of the IBC does not contemplate circumstances that could arise after submission of the Resolution Plan to the Adjudicating Authority. The UNCITRAL Guide and the BLRC Report place the viability of the Corporate Debtor at the heart of the insolvency process. The CIRP mandates interests of stakeholders to be better preserved by reorganization than liquidation. The BLRC Report was relied upon by this Court in K Sashidhar (supra) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, the computed Net Present Value for future cash flow of Astonfield demonstrates loss and a potential repeated CIRP; and (j) The proposition that a Resolution Plan approved by the CoC cannot be withdrawn or modified under any circumstance, no matter the extent of impossibility or unviability that may have arisen subsequently, is seriously flawed and is likely to lead to draconian and absurd consequences. In the event that the basis of the Resolution Plan is completely eroded, a Resolution Applicant's failure to implement the Plan would invite penal prosecution under Section 74 of the IBC and a repeated CIRP. This will discourage prospective Resolution Applicants from coming forward with their Plans in the future, thus defeating the very purpose and object behind the IBC; (ii) There is no concluded and binding contract between the Resolution Applicant and the CoC, prior to approval by the Adjudicating Authority: (a) There is no concluded contract between the Resolution Applicant and the CoC until the NCLT approves of the same. Section 7 of the Contract Act requires the acceptance of offer to be absolute, unconditional and unqualified. Clauses 1.1.9, 1.2, 1.9.4 and 2.2.6 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessitated because of uncertainty over the continuation of the sole contract of Astonfield, deterioration of the assets of Astonfield owing to the floods in Gujarat, repudiation of Astonfield's insurance claim due to the alleged failure of the A-RP to provide supporting documents and misrepresentation in respect of trade receivables towards non-availing the benefit of accelerated depreciation; and (g) Kundan Care had also demonstrated good faith since it sought to withdraw the Resolution Plan on 17 December 2019, soon after GUVNL Appeal was listed before this Court. This interim application for withdrawal was filed within a month of the A-RP submitting the plan to the Adjudicating Authority. The NCLAT erred in noting that this was a ploy on behalf of Kundan Care to frustrate the CIRP after pushing out all rivals during the bidding process; (iii) Alternatively, the CoC-approved Resolution Plan is a contingent contract under Section 32 of the Indian Contract Act: (a) The contract has become void since the contingency of certainty of PPA with GUVNL within a specified time through approval of the NCLT has become impossible; (b) GUVNL's Appeal against the continuation of the PPA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other Plan which has been able to satisfy the criteria under section 29A before the NCLT. In other words, a Plan approved by the CoC does not result in a concluded contract because it is replaceable by another party. 87 In the course of the final stage of the hearings, Kundan Care submitted that it had mutually negotiated a settlement with A-RP/A-CoC and requested the exercise of this Court's powers under Article 142 of the Constitution of India for a one-time relief of modification, which would enable them to arrive at a mutually acceptable modification to the Resolution Plan. E.2 Submissions for the first respondent 88 Mr Nakul Dewan, learned Senior Counsel appeared on behalf of the A-RP in the Kundan Care Appeal. He has also appeared on behalf of the E-RP in the Ebix Appeal, both being collectively disposed of by this judgement. He has made the following submissions, in addition to the arguments recorded above in the Ebix Appeal: (i) There is no direct provision with respect to withdrawal of a Resolution Plan under the IBC by a Resolution Applicant, once approved by the CoC. Consequently, the Adjudicating or Appellate Authority has no jurisdiction to direct withdrawals or m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uly 2021, the unpaid CIRP cost is ₹ 1.66 crores which would probably be payable from the pending insurance claim. A table detailing the financial health of Astonfield for the last three years was also annexed, to bolster the claim that financial health has improved and profits can still be generated; and (viii) The delay in approval of the Resolution Plan by the Adjudicating Authority is an imponderable which cannot be used to resile from a binding contract. The delay is also not attributable to the A-RP or the A-CoC. E.3 Submissions for the second respondent 89 Mr V Giri, learned Senior Counsel appearing for EXIM Bank on behalf of the A-CoC, has made the following submissions: (i) A Resolution Plan approved by the CoC is submitted by the RP to the NCLT under Section 30(6) of the IBC. Once the NCLT is satisfied that the Resolution Plan complies with the requirements of Section 30(2), it grants its approval to the Plan, which becomes binding on all the stakeholders involved in the Resolution Plan. Thus, in the above scheme of things, IBC does not contemplate withdrawal of Resolution Plan once it has been approved by the CoC; (ii) The penal provision under Section 74(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt stating that it has been selected as the successful Resolution Applicant subject to the approval of the NCLT. The successful Resolution Applicant accepts the LOI and submits a PBG. The successful Resolution Applicant is required to state that the LOI is "accepted unconditionally". It is only after the LOI is unconditionally accepted by the successful Resolution Applicant and the PBG is furnished, that the RP makes an application to the NCLT for approval of the Resolution Plan; and (e) Contracting parties cannot renege on their promise to perform the contract without facing any consequences. F Submissions of counsel in the Seroco Appeal F.1 Submissions for the appellant 90 Mr Tirth Nayak has made the following submissions on behalf of Seroco: (i) The Resolution Plan was submitted on the basis of information that was provided under the IM issued by the Arya-RP in August 2018. Over 18 months have passed since the Resolution Plan was submitted. The inordinate delay in the approval of the Resolution Plan by the NCLT, along with the outbreak of COVID-19 pandemic, has substantially affected the valuation of Arya Filaments, apart from impacting its business operations and financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e pandemic. This is evinced from the fact that the application for modification was made within 2 months of the outbreak of the pandemic; (ii) The Resolution Plan of Seroco was approved by the Arya-CoC on 10 May 2019 and submitted to the Adjudicating Authority for approval on 14 May 2019. When Seroco filed their application before the NCLT for modification of the Resolution Plan, Kotak and UBIL, by their emails dated 13 July 2020 and 17 July 2020 respectively, had informed the Arya-RP that they record their disapproval for any such attempts at modification of the Resolution Plan which sought to reduce the resolution amount payable to secured creditors by ₹ 1.5 crore; (iii) There has been no material change in the assets or valuation of Arya Filaments. Seventy-five per cent of the funds were to be generated by Seroco by the sale of the Arya Filament's assets; and (iv) The following authorities were cited to elucidate on the power of the Adjudicating Authority, which is tightly circumscribed by the IBC, and designed to uphold the commercial wisdom of the CoC: K Sashidhar, Paras 52-58, 62, 68, 65 (supra), Essar Steel, Paras 65, 67, 69 and 88 (supra), Committee of Creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omic goals. It notes, Pgs 14-16 of the UNCITRAL Legislative Guide to an Insolvency Law, available at accessed on 20 August 2021: "15. Since an insolvency regime cannot fully protect the interests of all parties, some of the key policy choices to be made when designing an insolvency law relate to defining the broad goals of the law (rescuing businesses in financial difficulty, protecting employment, protecting the interests of creditors, encouraging the development of an entrepreneurial class) and achieving the desired balance between the specific objectives identified above. Insolvency laws achieve that balance by reapportioning the risks of insolvency in a way that suits a State's economic, social and political goals. As such, an insolvency law can have widespread effects in the broader economy….. […] 17. There is no universal solution to the design of an insolvency law because States vary significantly in their needs, as do their laws on other issues of key importance to insolvency, such as security interests, property and contract rights, remedies and enforcement procedures. Although there may be no universal solution, most insolvency laws address the range o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he more likely it is that liquidation will be the only answer. Second, the liquidation value tends to go down with time as many assets suffer from a high economic rate of depreciation. From the viewpoint of creditors, a good realisation can generally be obtained if the firm is sold as a going concern. Hence, when delays induce liquidation, there is value destruction. Further, even in liquidation, the realisation is lower when there are delays. Hence, delays cause value destruction. Thus, achieving a high recovery rate is primarily about identifying and combating the sources of delay." In identifying the sources of delay, adjudicating mechanisms were identified as one of the two important sources of delay which need to be equipped with the right resources. In order to respond to the rapid changes in the economy, the BLRC report recommended the formation of an IBBI which would function as a regulator and formulate regulations that dynamically detail the procedural norms of the working of the IBC with the necessary immediacy. It is also important for this Court, as a constitutional authority which determines questions of law concerning the IBC framework, to note that a rapid liquid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll participants in the insolvency process. This process invariably has an impact on the conduct of the Resolution Applicant who participates in the process and consents to be bound by the RFRP and the broader insolvency framework. An analysis of the framework of the statute and regulations provides an insight into the dynamic and comprehensive nature of the statute. Upholding the procedural design and sanctity of the process is critical to its functioning. The interpretative task of the Adjudicating Authority, Appellate Authority, and even this Court, must be cognizant of, and allied with that objective. The UNCITRAL Guide has echoed this position by noting the interplay between the procedural design of the insolvency law and the corresponding institutional infrastructure by observing, page 20, UNCITRAL Guide, supra note 56: "27. While the institutional framework is not discussed in any detail in the Legislative Guide, some of the issues are touched upon below. Notwithstanding the variety of substantive issues that must be resolved, insolvency laws are highly procedural in nature. The design of the procedural rules plays a critical role in determining how roles are to be allocate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been defined in Section 5(25) of the IBC as follows: "(25) "resolution applicant" means a person, who individually or jointly with any other person, submits a resolution plan to the resolution professional pursuant to the invitation made under clause (h) of sub-section (2) of Section 25 or pursuant to Section 54-K, as the case may be" 101 The IBC provides a roadmap for the entire CIRP in Chapter II of Part II. This process is tightly regulated to include, inter alia, timelines of the CIRP specified by Section 12, duties of the RP to provide adequate information to propose a Resolution Plan in Section 29 and restrictions on who can be a Resolution Applicant in Section 29A. Thereafter, Section 30 provides for the submission of a Resolution Plan, and it reads as follows: "30. Submission of resolution plan.-(1) A resolution applicant may submit a resolution plan along with an affidavit stating that he is eligible under Section 29-A to the resolution professional prepared on the basis of the information memorandum. (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan- (a) provides for the payment of insolve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of actions under the resolution plan, such approval shall be deemed to have been given and it shall not be a contravention of that Act or law. (3) The resolution professional shall present to the committee of creditors for its approval such resolution plans which confirm the conditions referred to in sub-section (2). (4) The committee of creditors may approve a resolution plan by a vote of not less than sixty-six per cent of voting share of the financial creditors, after considering its feasibility and viability the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of Section 53, including the priority and value of the security interest of a secured creditor, and such other requirements as may be specified by the Board: Provided that the committee of creditors shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017, where the resolution applicant is ineligible under Section 29-A and may require the resolution professional to invite a fresh resolution plan where no other resolution plan is available with it: Provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIRP Regulations created under the IBC. Regulation 37 provides an illustration of the solutions which can be proposed in a Resolution Plan. Regulation 38 provides for the mandatory contents of a Resolution Plan, which are similar to the pre-conditions mentioned in Section 30(2) of the IBC. Regulation 39 provides for the process of approval of a Resolution Plan by the CoC, and under sub-Regulation (3), the CoC has to evaluate every Resolution Plan based on an "evaluation matrix" it has come up with under Regulation 5(ha). 103 Having briefly taken an overview of the process, we now understand that there are broadly three stages: (i) the first stage is prior to and ends with the approval of the Resolution Plan by the CoC; (ii) the second stage is the interim period between the Resolution Plan's approval by the CoC and before its confirmation by the Adjudicating Authority; and (iii) the third stage is after the approval of the Resolution Plan by the Adjudicating Authority. In the first stage, the relationship between the parties is explicitly governed by the provisions of the IBC - such as the right of a prospective Resolution Applicant to seek the IM and RFRP upon submission of its E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective Resolution Applicants. The RP, with the approval of the CoC, Section 25(2)(h), IBC, invites prospective Resolution Applicants through an RFRP. Once an unconditional EOI has been received from prospective Resolution Applicants who are otherwise eligible under Section 29A, the RP prepares an IM as per the provisions of Section 29 which furnishes all relevant information of the Corporate Debtor to enable prospective Resolution Applicants to make an informed decision, before proposing a Resolution Plan. As a consequence of the IBC and its regulations, prospective Resolution Applicants, who are not disqualified under Section 29A, propose drafts of their Resolution Plans. The RP examines the Resolution Plan against the contours of Section 30(2) and submits only the eligible plans to the CoC, Regulation 39(2), CIRP Regulations. Prior to the IBBI (CIRP) (Fourth Amendment) Regulations 2020, which now requires the CoC to vote on all Plans simultaneously after recording its deliberations on the feasibility and viability of each Plan, Regulation 39(3) earlier enabled the CoC to approve a Resolution Plan with "such modifications as it deems fit". This meant that the prospective Resolutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome applicable to CoC-approved Resolution Plans. For instance, in the United States, plans confirmed by courts have been characterized as contracts, whose breach can even give rise to contractual remedies. In In re Hoffinger Indus, Inc, 327 B.R. 389 (Bankr. E.D. Ark. 2005), United States Bankruptcy Court, E.D. Arkansas, a bankruptcy court in Arkansas has held that "a confirmed plan should be enforceable and amenable to damages between contractually bound parties." Indeed, it has been argued before us that Resolution Plans should be enforced through the contractual remedy of specific performance. Further, a determination that Resolution Plans are contracts in the period between approval by the CoC and the approval of the Adjudicating Authority would require us to analyse whether all elements of contract formation have been satisfied, including the question of whether the acceptance of the Resolution Plan by the CoC fulfils the criteria laid down under Section 7 of the Contract Act or whether the conditionality of seeking approval from the Adjudicating Authority makes the Resolution Plan a contingent contract. Our intent of laying down the consequences of our determination of Resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Plan does not give rise to a claim of damages, rather it leads to prosecution and imposition of punishment under Section 74 of the IBC. On the contrary, a CoC's withdrawal of the CIRP under Section 12A is coupled with a requirement of payment of CIRP costs, but no damages are statutorily payable to the Resolution Applicant, irrespective of the stage of the withdrawal. 110 The CoC even with the requisite majority, while approving the Resolution Plan must consider the feasibility and viability of the Plan and the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of section 53 of the IBC. The CoC cannot approve a Resolution Plan proposed by an applicant barred under Section 29A of the IBC. Regulation 37 and 38 of the CIRP Regulations govern the contents of a Resolution Plan. Furthermore, a Resolution Plan, if in compliance with the mandate of the IBC, cannot be rejected by the Adjudicating Authority and becomes binding on its approval upon all stakeholders - including the Central and State Government, local authorities to whom statutory dues are owed, operational creditors who were not a part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t even dissenting creditors or members, as the case may be. The effect of the sanctioned scheme is "to supply by recourse to the procedure thereby prescribed the absence of that individual agreement by every member of the class to be bound by the scheme which would otherwise be necessary to give it validity" [see J.K. (Bombay) Pvt. Ltd. v. New Kaiser-i-Hind Spg. & Wvg. Co. Ltd. [AIR 1970 SC 1041 : (1969) 2 SCR 866, 891 : (1970) 40 Com Cas 689] ].." (emphasis supplied) 112 While the above observations were made in the context of a scheme that has been sanctioned by the Court, the Resolution Plan even prior to the approval of the Adjudicating Authority is binding inter se the CoC and the successful Resolution Applicant. The Resolution Plan cannot be construed purely as a 'contract' governed by the Contract Act, in the period intervening its acceptance by the CoC and the approval of the Adjudicating Authority. Even at that stage, its binding effects are produced by the IBC framework. The BLRC Report mentions that "[w]hen 75% of the creditors agree on a revival plan, this plan would be binding on all the remaining creditors", Page 13, BLRC Report, supra note 55. The BLRC Report also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n between the CoC and Resolution Applicant. There is also an intention to create legal relations with binding effect. However, it is the structure of the IBC which confers legal force on the CoC-approved Resolution Plan. The validity of the Resolution Plan is not premised upon the agreement or consent of those bound (although as a procedural step the IBC requires sixty-six percent votes of creditors), but upon its compliance with the procedure stipulated under the IBC. 115 It was argued for the E-RP that a Resolution Plan is a contract executed in furtherance of a statutory regime under the IBC. A question arises whether a Resolution Plan can be classified as a 'statutory contract'. This Court has defined a statutory contract in India Thermal Power Ltd. v. State of MP, (2000) 3 SCC 379 in the following terms: "11. Section 43 empowers the Electricity Board to enter into an arrangement for purchase of electricity on such terms as may be agreed. Section 43-A(1) provides that a generating company may enter into a contract for the sale of electricity generated by it with the Electricity Board. As regards the determination of tariff for the sale of electricity by a generating company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficient guidance on the conduct of all participants in the process and the binding effect of the CoC-approved Resolution Plan is evidenced by the execution of a PBG furnished by the successful Resolution Applicant, in compliance with the CIRP Regulations. This PBG is returnable once the Adjudicating Authority approves the Resolution Plan under Section 31 and makes it binding on all stakeholders. Therefore, the IBC and its regulations institute sufficient safeguards to ensure the binding effect of a CoC-approved Resolution Plan. In our discussion in Sections I and J below, we further elaborate on the nature of a CoC-approved Resolution Plan and the code of conduct that is permissible by the statutory framework. 117 While insolvency regimes are specific to each jurisdiction, it may be useful to analyze how Resolution Plans or similar instruments are characterized in foreign jurisdictions. 118 Certain precedents from other jurisdictions have been cited by Mr Nakul Devan for the E-RP, to argue that contracts entered into, in furtherance of a statutory regime have to be interpreted in accordance with the objective and intent of the concerned statute. It has been submitted that the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory contract, Tucker v Gold Fields Mining LCC, [2010] B.C.C. 544 (Court of Appeal), or has a contractual effect and is subject to ordinary principles of interpretation applying to contracts, Heis v Financial Services Compensation Scheme Ltd, [2018] EWCA Civ 1327 (Court of Appeal). However, the position on this issue is not completely settled. In a recent decision of the High Court of Justice, Re Rhino Enterprises Properties Ltd. Schofield v Smith [2020] EWHC 2370 (Ch)., it was held that the CVA is not a contract. Crucially the court made the following observations: "83. Further, and as noted by Mr Pymont QC in SHB Realisations Ltd, a voluntary arrangement is not formed or analysed as a contract. Certain legal principles applicable to contracts, for example their interpretation, are applied to voluntary arrangements; that is no less true of other instruments which are not contracts. Other principles of contract law, for example those relating to penalties, are not applicable to voluntary arrangements. Mr Pymont QC concluded that a voluntary arrangement is not a contract. Characterising a CVA as a hypothetical agreement or by reference to a statutory hypothesis neatly and accurate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities [namely, Hill v Anderson Meat Industries Ltd [1971] 1 NSWLR 868, Caratti and Bond Corp Holdings Ltd v Western Australia (1992) 7 ACSR 472] establish that an approved scheme does indeed derive its force from the court order, [and] not from the antecedent resolutions of members and creditors." 122 Under the United States Bankruptcy Code, a restructuring plan becomes binding once it is confirmed by the court in terms of Section 1141. There are decisions of the bankruptcy courts in the United States which indicate that such restructuring plans are characterized as contracts, In re Hoffinger Indus, Inc, 327 B.R. 389 (Bankr. E.D. Ark. 2005), United States Bankruptcy Court, E.D. Arkansas. It has been held that a confirmed plan is binding on the debtor and the plan proponent and has the same effect as contract, In Re Shenandoah Realty Partners, L.P. v. Ascend Health Care, Inc, 287 BR 867 (US Bankruptcy Court, WD). However, commentators have noted that the United States Bankruptcy Code's, "embrace of a contractual paradigm is somewhat inconsistent…Both bankruptcy courts and the Code itself are far more sympathetic to ex post than to ex ante contracting", David Skeel and Geo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fic provision in the IBC or the regulations referring to a CoC-approved Resolution Plan as a contract and the lack of clarity in the BLRC report regarding the nature of such a Resolution Plan, constrains us from arriving at the conclusion that CoC-approved Resolution Plans will be governed by the Contract Act and common law principles governing contracts, save and except for the specific prohibitions and deeming fictions under the IBC. Regulation 39(3) of CIRP regulations, as it stood before the IBBI (CIRP) (Fourth Amendment) Regulations 2020 and applicable to the three appellants before us, enabled a framework where a draft Resolution Plan would involve several rounds of negotiations and revisions between the Resolution Applicant and the CoC, before it is approved by the latter and submitted to the Adjudicating Authority, "(3) The committee shall evaluate the resolution plans received under sub-regulation (1) strictly as per the evaluation matrix to identify the best resolution plan and may approve it with such modifications as it deems fit: Provided that the committee shall record its deliberations on the feasibility and viability of the resolution plans". However, this stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of frustration or force majeure are not applicable to CoC-approved Resolution Plans owing to the nature of the IBC. Similarly, the whole host of remedies such as liquidated and unliquidated damages, restitution, novation and frustration, unless specifically provided by the IBC, are not available to a successful Resolution Applicant whose Plan has been approved by the CoC and is awaiting the approval of the Adjudicating Authority. The Insolvency Law Committee Report of February 2020 has recommended the CIRP process to mandate Resolution Plans to provide for the apportionment of the profit or loss accrued by the Corporate Debtor during the CIRP, Pages 55-56, Report of the Insolvency Law Committee (February 2020), Ministry of Corporate Affairs, available at accessed on 20 August 2021. These reports are periodically commissioned by the parliament to review the functioning of the Code and suggest amendments. However, if the intention was to view a CoC-approved Resolution Plan as a contract, the principles of unjust enrichment would have been sufficient to address the issue and an amendment may not be considered necessary. A Resolution Applicant, as a third party partaking in the insol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CoC enters into a settlement with the Corporate Debtor and withdraws from the CIRP under Section 12A, Regulation 30A provides for only payment of insolvency costs and not compensation or damages to Resolution Applicant for investing time and money in the process. The parties may resort to invoking principles of frustration or force majeure to evade implementation of the Resolution Plan leading to unnecessary litigation. This Court in Amtek Auto (supra), had curbed a similar attempt by a successful Resolution Applicant who had relied on a force majeure clause in its Resolution Plan to seek a direction compelling the CoC to negotiate a modification to its Resolution Plan. The Court held that there was no scope for negotiations between the parties once the Resolution Plan has been approved by the CoC. Thus, contractual principles and common law remedies, which do not find a tether in the wording or the intent of the IBC, cannot be imported in the intervening period between the acceptance of the CoC and the approval by the Adjudicating Authority. Principles of contractual construction and interpretation may serve as interpretive aids, in the event of ambiguity over the terms of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o avoid the same pitfalls in the IBC. The Court, speaking through Justice R F Nariman, noted: "119. The speech of the Hon'ble Minister on the floor of the House of the Rajya Sabha also reflected the fact that with the passage of time the original intent of quick resolution of stressed assets is getting diluted. It is therefore essential to have time-bound decisions to reinstate this legislative intent. It was also pointed out on the floor of the House that the experience in the working of the Code has not been encouraging. The Minister in her speech to the Rajya Sabha gives the following facts and figures: "Now, regarding the Corporate Insolvency Resolution Process (CIRP), under the Code, I want to give you data again as of 30-6-2019. First, I will talk about the status of CIRPs. Number of admitted cases is 2162; number of cases closed on appeal, which I read out about, is 174; number of cases closed by withdrawal under Section 12-A, is 101, I have given you a slightly later data; number of cases closed by resolution is 120; closed by liquidation, 475; and ongoing CIRPs are 1292. So, now, I would like to mention the number of days of waiting. I would like to mention here th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is declaration is that ordinarily the time taken in relation to the corporate resolution process of the corporate debtor must be completed within the outer limit of 330 days from the insolvency commencement date, including extensions and the time taken in legal proceedings. However, on the facts of a given case, if it can be shown to the Adjudicating Authority and/or Appellate Tribunal under the Code that only a short period is left for completion of the insolvency resolution process beyond 330 days, and that it would be in the interest of all stakeholders that the corporate debtor be put back on its feet instead of being sent into liquidation and that the time taken in legal proceedings is largely due to factors owing to which the fault cannot be ascribed to the litigants before the Adjudicating Authority and/or Appellate Tribunal, the delay or a large part thereof being attributable to the tardy process of the Adjudicating Authority and/or the Appellate Tribunal itself, it may be open in such cases for the Adjudicating Authority and/or Appellate Tribunal to extend time beyond 330 days. Likewise, even under the newly added proviso to Section 12, if by reason of all the aforesaid f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a call for submissions of claims as may be specified under Section 15 of the IBC; and (iii) appointing an IRP in accordance with Section 16 of the IBC. 130 Section 13(2) provides that the public announcement is to be made immediately after the appointment of an IRP. The word 'immediately' here means not later than three days from the date of appointment as provided in the explanation to Regulation 6(1) of the CIRP Regulations. Section 15 of the IBC lists down the information that should be included in the public announcement of CIRP. It should specify the last date up to which the claims, i.e., a right of payment or right to remedy as defined under Section 3(6) of the IBC, can be made by creditors, workmen and employees. Regulation 6(2)(c) provides that the last date of submission of claims shall be fourteen days from the date of appointment of the IRP. The public announcement also specifies the date on which the CIRP shall close, which is the one hundred and eightieth day from the date of the admission of the application under Sections 7, 9 or 10, as may be applicable. Regulation 6 of the CIRP Regulations stipulates additional requirements relating to how the public announcement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the resolution professional pursuant to the invitation made under clause (h) of sub-section (2) of section 25; or pursuant to section 54K, as the case may be." 134 The first step in the process of soliciting a Resolution Plan is the preparation of an IM containing relevant information as specified by the IBBI for formulating a Resolution Plan in accordance with Section 29(1) of the IBC. The contents of the IM are specified under Regulation 36(2) of the CIRP Regulations. Regulation 36(1) of the CIRP Regulations specifies the timelines within which the RP must submit the IM to members of the CoC, which is within two weeks of his appointment but not later than the fifty-fourth day from the insolvency commencement date, whichever is earlier. Thereafter, the RP issues an invitation of EOI not later than the seventy-fifth day from the insolvency commencement date to seek expressions of interest from eligible prospective Resolution Applicants in terms of Regulation 36A of the CIRP Regulations. A prospective Resolution Applicant is required to submit an unconditional EOI within the time stipulated under the invitation, which shall not be less than fifteen days from the date of the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailure of implementation of the plan. Under the regulation, a performance security is defined as "security of such nature, value, duration and source, as may be specified in the request for resolution plans with the approval of the committee, having regard to the nature of resolution plan and business of the corporate debtor". Regulations 37 and 38 list down the mandatory contents of the Resolution Plan. 137 The RP is required to review the Resolution Plan submitted in terms of Section 30(2) of the IBC, which provides that: "Section 30 - Submission of resolution plan […] (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan-- (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor; (b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than-- (i) the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53; or (ii) the amount that would have been paid to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty-six per cent after considering the feasibility and viability of the plan and any such requirements specified by the IBBI. 138 The CoC has been given wide powers under the IBC. It can direct the Corporate Debtor into liquidation any time before the approval by the Adjudicating Authority, under Section 33(2) of the IBC. Further, under Section 12A of the IBC the Adjudicating Authority may allow withdrawal of the application submitted under Sections 7, 9 or 10 of the IBC for initiation of the CIRP (i.e., initiation of the CIRP by the financial creditor, operational creditor and the corporate applicant, respectively) if the withdrawal is approved by ninety per cent of the voting share of the CoC. Dealing with the question whether a successful Resolution Applicant can retreat through the route provided under Section 12A of the IBC, a three-judge Bench of this Court in Maharashtra Seamless v. Padmanabhan Venkatesh, (2020) 11 SCC 467 observed that, "[t]he exit route prescribed in Section 12A is not applicable to a Resolution Applicant. The procedure envisaged in the said provision only applies to applicants invoking Sections 7, 9 and 10 of the code". However, this Court left the questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cers or creditors or any person on whom the approved resolution plan is binding under section 31, knowingly and wilfully contravenes any of the terms of such resolution plan or abets such contravention, such corporate debtor, officer, creditor or person shall be punishable with imprisonment of not less than one year, but may extend to five years, or with fine which shall not be less than one lakh rupees, but may extend to one crore rupees, or with both." 140 If the Resolution Plan is rejected by the Adjudicating Authority, the Corporate Debtor goes into liquidation in accordance with Section 33(1) of the IBC. The order of the Adjudicating Authority rejecting a Resolution Plan and directing liquidation under Section 33 of the IBC can be appealed only on the grounds of material irregularity or fraud, as stipulated under Section 61(4) of the IBC. The order of the Adjudicating Authority approving a Resolution Plan can be appealed before the NCLAT under Section 61(3) of the IBC only on the grounds specified in that section. The grounds of appeal are as follows: "Section 61 - Appeals and Appellate Authority [….] (3) An appeal against an order approving a resolution plan und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egulations 6(2)(c) and 12 (1) Submission of claims For 14 Days from Appointment of IRP T+14 Regulation 12(2) Submission of claims Up to 90th day of commencement T+90 Regulation 13(1) Verification of claims received under Regulation 12(1) Within 7 days from the receipt of the claim T+21 Verification of claims received under Regulation 12(2) T+97 Section 21(6A) (b)/Regulation 16-A Application for appointment of AR Within 2 days from verification of claims received under Regulation 12(1) T+23 Regulation 17(1) Report certifying constitution of CoC T+23 Section 22/Regulation 19(2) 1st meeting of the CoC Within 7 days of filing of the report certifying constitution of the CoC, but with five days' notice. T+30] Section 22(2) Resolution to appoint RP by the CoC In the first meeting of the CoC T+30 Section 16(5) Appointment of RP On approval by the AA …… Regulation 17(3) IRP performs the functions of RP till the RP is appointed. If RP is not appointed by 40th day of commencement T+40 Regulation 27 Appointment of valuer Within 7 days of appointment of RP, but not later than 47th day of commencement T+47] Section 12(A)/Regulation 30-A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I Bank, (2018) 1 SCC 407, para 13 a three judge Bench of this Court observed that "one of the important objectives of the Code is to bring the insolvency law in India under a single unified umbrella with the object of speeding up of the insolvency process". Recently, in Gujarat Urja, (2021) SCC OnLine 194, para 71 (supra) a three judge Bench of this Court observed that a "delay in completion of the insolvency proceedings would diminish the value of the debtor's assets and hamper the prospects of a successful reorganization or liquidation. For the success of an insolvency regime, it is necessary that insolvency proceedings are dealt with in a timely, effective and efficient manner". The stipulation of timelines and a detailed procedure under the IBC ensures a timely completion of CIRP and introduces transparency, certainty and predictability in the insolvency resolution process. The UNCITRAL Guide also states that the insolvency law of a jurisdiction should be transparent and predictable. It notes the value of such predictability in the following terms, Page 13, UNCITRAL Guide, supra 56: "11. An insolvency law should be transparent and predictable. This will enable potential lende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... event that a time bound CIRP fails, in a bid to avert further deterioration of value. 145 Since the aim of the statute is to preserve the interests of the corporate debtor and the CoC, it was recognized that settlements between the corporate debtor and the CoC may be in the best interests of all stakeholders since insolvency is averted. Two decisions of two judge Benches of this Court, in Lokhandwala Kataria Construction (P) Ltd v. Nisus Finance and Investment Managers LLP, (2018) 15 SCC 589 and Uttara Foods and Feeds (P) Ltd v. Mona Pharmachem, (2018) 15 SCC 587, (prior to the insertion of Section 12A which enabled withdrawal of the CIRP on account of settlement between the parties), had refused to effectuate this remedy by exercising inherent powers of the Adjudicating Authority under Rule 11 of the NCLT Rules 2016 or the power of parties to make applications to the Adjudicating Authority under Rule 8 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016. In Uttara Foods (supra) this Court had granted a one-time relief under Article 142 of the Constitution since all the parties were present before it and had presented it with signed consent terms. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ribbons (supra) interpreted the true import of Section 12A and clarified that if the CoC is not yet constituted, a party can approach the Adjudicating Authority, which may in exercise of its inherent powers under Rule 11 of the NCLT Rules 2016, allow or reject an application for withdrawal or settlement. On 25 July 2019, the IBBI (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2019 amended Regulation 30A in terms of this decision in interpreting Section 12A and now specifically provides the procedure under the IBC that relates to affecting a withdrawal under Section 12A before the constitution of the CoC. The applicant submits an application for withdrawal through the IRP, directly before the Adjudicating Authority, since the CoC is not yet constituted to consider such an application. To ensure that the process for withdrawal is timely and efficient, the present Regulation 30A provides that the IRP shall submit an application for withdrawal of the CIRP prior to the constitution of the CoC to the Adjudicating Authority on behalf of the applicant within three days of the receipt. Alternatively, if the application for withdrawal is made after the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant, after obtaining the financial information of the Corporate Debtor through the informational utilities and perusing the IM, is assumed to have analyzed the risks in the business of the Corporate Debtor and submitted a considered proposal. It cannot demand vesting of certain powers and rights which have been conspicuously omitted by the legislature under the statute, in furtherance of the policy objectives of the IBC. A court may not be able to lay down such detailed guidance on how a mechanism for withdrawal, if any, may be provided to a successful Resolution Applicant without disturbing the statutory timelines and adequately evaluating the interests of creditors and other stakeholders, which is ultimately a matter of legislative policy. In Essar Steel (supra), a three judge Bench of this Court, affirmed a two judge Bench decision in K Sashidhar, Para 62, supra note 35 (supra), prohibiting the Adjudicating Authority from second-guessing the commercial wisdom of the parties or directing unilateral modification to the Resolution Plans, Paras 64-73, supra note 35. These are binding precedents. Absent a clear legislative provision, this court will not, by a process of interpretati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intervening in a law governing substantive outcomes through procedure, such as the IBC. In this case, if Resolution Applicants are permitted to seek modifications after subsequent negotiations or a withdrawal after a submission of a Resolution Plan to the Adjudicating Authority as a matter of law, it would dictate the commercial wisdom and bargaining strategies of all prospective Resolution Applicants who are seeking to participate in the process and the successful Resolution Applicants who may wish to negotiate a better deal, owing to myriad factors that are peculiar to their own case. The broader legitimacy of this course of action can be decided by the legislature alone, since any other course of action would result in a flurry of litigation which would cause the delay that the IBC seeks to disavow. 147 The IBC is silent on whether a successful Resolution Applicant can withdraw its Resolution Plan. However, the statutory framework laid down under the IBC and the CIRP Regulations provide a step-by-step procedure which is to be followed from the initiation of CIRP to the approval by the Adjudicating Authority. Regulation 40A describes a model-timeline for the CIRP that accounts f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Parliament intended to achieve. But before any words are read to repair an omission in the Act, it should be possible to state with certainty that these or similar words would have been inserted by the draftsman and approved by Parliament had their attention been drawn to the omission before the Bill passed into law." In the wake of the COVID-19 pandemic, several Resolution Plans remained pending before Adjudicating Authorities due to the lockdown and significant barriers to securing a hearing. An Ordinance was swiftly promulgated on 5 June 2020 which imposed a temporary suspension of initiation of CIRP under Sections 7, 9 and 10 of the IBC for defaults arising for six months from 25 March 2020 (extendable by one year). This was followed by an amendment through the IBC (Second Amendment) Act 2020 on 23 September 2020 which provided for a carve-out for the purpose of defaults arising during the suspended period. The delays on account of the lockdown were also mitigated by the IBBI (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations 2020, which inserted Regulation 40C on 20 April 2020, with effect from 29 March 2020, and excluded such delays for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rformance, whether in whole or in part, and the specific problem can be remedied", IV. A. 66, page 230 of the UNCITRAL Guide, supra note 56. If permitted by the statute, the recommendations strongly urge the establishment of a mechanism for amendment after approval by creditors which details requirements of, inter alia, approval by creditors of the modification and consequences of failure to secure approval to the amendments, Recommendation 156: "The insolvency law should establish the mechanism for approval of amendments to a plan that has been approved by creditors. That mechanism should require notice to be given to the creditors and other parties affected by the proposed modification; specify the party required to give notice; require the approval of creditors and other parties affected by the modification; and require the rules for confirmation (where confirmation is required) to be satisfied. The insolvency law should also specify the consequences of failure to secure approval of proposed amendments.", UNCITRAL Guide, supra note 56. The BLRC Report has relied on the UNCITRAL Guide while designing the IBC, 3.3.1, supra note 55 and it is a critical tool for ascertaining legisla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after it is approved by the Adjudicating Authority. The language of Section 31(1) cannot be construed to mean that a Resolution Plan is indeterminate or open to withdrawal or modification until it is approved by the Adjudicating Authority or that it is not binding between the CoC and the successful Resolution Applicant. Regulation 39(4) of CIRP Regulations mandates that the RP should endeavour to submit the Plan at least fifteen days before the statutory period of the CIRP under Section 12 is due to expire along with a receipt of a PBG and a compliance certificate as Form H. It is pertinent to note that sub-Section (3) to Section 12 mandates that the CIRP process, including legal proceedings, must be concluded within 330 days. This three-hundred-and-thirty-day period can be extended only in exceptional circumstances, if the process is at near conclusion and serves the object of the IBC, as held by a three judge Bench of this Court in Essar Steel (supra). Therefore, after accounting for all statutorily envisaged delays which the RP has to explain in its Form H and otherwise through Regulation 40B, the procedure envisages a fifteen-day window between submission of Resolution Plan an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the IRP. However, the orders will vary depending upon the condition. If the RP submits a binding agreement to the Adjudicator before the default maximum date, then the Adjudicator orders the IRP case to be closed. If the Adjudicator does not receive a binding agreement by this date, the Adjudicator issues an order to close the IRP case along with an order to liquidate the entity." (emphasis supplied) 152 The binding nature, as between the CoC and the successful Resolution Applicant, of the Resolution Plan submitted for approval by the Adjudicating Authority is further evidenced from the fact that the CoC issues a LOI to a successful Resolution Applicant stating that it has been selected as the successful Resolution Applicant and its Plan would be submitted to the Adjudicating Authority for its approval. The successful Resolution Applicant is typically required to accept the LOI unconditionally and submit a PBG. Sequentially, the issuance of an LOI is followed by its unconditional acceptance by the successful Resolution Applicant. In Amtek Auto (supra), this court thwarted a similar attempt by a successful Resolution Applicant who had relied on certain open-ended clauses in its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 30(2) are satisfied, the Adjudicating Authority shall confirm the Plan approved by the CoC under Section 31(1) of the IBC. 154 If the appellants' claim were to succeed, a clause enabling a Resolution Applicant to withdraw/seek modification for reasons such as a 'Material Adverse Event' could also be set up by a Resolution Applicant when it is being prosecuted under Section 74 (3). It was contended before us that Form H, which is a compliance certificate that is to be submitted by the RP to the Adjudicating Authority along with the Resolution Plan, mentions that the RP can enter details as to whether the Resolution Plan is subject to any conditionalities under Clause 12. Thus, the argument goes that this permits the Resolution Applicant to stipulate in the Resolution Plan certain contingencies under which it can withdraw the Plan, for instance if there is an occurrence of an 'Material Adverse Event'. A form is subservient to the statute. The conditionalities contemplated in Form H could be those which do not strike at the root of the IBC. They can include commercial conditions and business arrangements with the CoC. However, conditions for withdrawal or re-negotiation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill be provided for obtaining the relevant approvals, and section 31 shall be amended to reflect this. 16.2 Further, the Committee noted that there is no provision in the Code on the requirement to obtain an indication on the stance of the concerned regulators or authorities, if required, on the resolution plan prior to the resolution plan being approved by the NCLT. It was brought to the attention of the Committee that this was resulting in several conditional resolution plans being approved by the NCLT, and that the approval by the NCLT was being regarded as a 'single window approval.' This not being the intent of the Code, the Committee deliberated on introduction of a mechanism for obtaining preliminary observations from the concerned regulators and authorities in relation to a resolution plan approved by the CoC and submitted to the NCLT for its approval, but prior to the NCLT's approval." (emphasis supplied) The Insolvency and Bankruptcy Law Committee in its report dated February 2020, supra note 90 stated that the current practice of obtaining governmental approvals after the approval of the Resolution Plan has created an uncertainty about the implementation of the Resol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the time limit under Section 12 of the Code. Although some members of the Committee were of the view that this time-line should ideally run concurrently with the CIRP period, the Committee felt that this exclusion would be justified since it would streamline the process of gaining government approvals considerably, which would lead to more value maximising resolutions, offsetting value lost, if any, in this forty-five day period in which the corporate debtor will be run as a going concern." (emphasis supplied) The aim to tighten timelines for receiving regulatory approvals through the provision of in-principal approvals, prior to the approval of the Adjudicating Authority, indicates that the statutory framework under the IBC has consistently attempted to avoid situations which may introduce unpredictability in the insolvency resolution process and has sought to make the process as linear as it can be. Further, the recommendations made in the Insolvency Law Committee Report of February 2020, supra note 90 discussed above indicate that the aim is to ensure that the Resolution Plan placed before the Adjudicating Authority should reach a certain finality, even in the context of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd either approve or reject the plan. The Adjudicating Authority cannot compel a CoC to negotiate further with a successful Resolution Applicant. A rejection by the Adjudicating Authority is followed by a direction of mandatory liquidation under Section 33. Section 30(2) does not envisage setting aside of the Resolution Plan because the Resolution Applicant is unwilling to execute it, based on terms of its own Resolution Plan. 158 Further, no such power can be vested with the Adjudicating Authority under its residuary jurisdiction in terms of Section 60 (5)(c). In a decision of a three judge Bench of this Court in Gujarat Urja (supra), it was held that, "the NCLT's residuary jurisdiction [under Section 60(5)(c)] though wide, is nonetheless defined by the text of the IBC. Specifically, the NCLT cannot do what the IBC consciously did not provide it the power to do". Further, the court observed that "this Court must adopt an interpretation of the NCLT's residuary jurisdiction which comports with the broader goals of the IBC", Para 163-164, supra note 38. The effect of allowing the Adjudicating Authority to permit withdrawals of resolution plans that are submitted to it, would be to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttle down Section 31(1) of the IBC, by the investment of some discretionary or equity jurisdiction in the Adjudicating Authority outside Section 30(2) of the Code, when it comes to a resolution plan being adjudicated upon by the Adjudicating Authority", Para 68-69, supra note 34. K Factual Analysis 161 We have held in Section H of this judgement that Resolution Plans are not in a nature of a traditional contract per se, and the process leading up to their formulation and acceptance by the CoC is comprehensively regulated by the insolvency framework. In Section J, we have further held that the IBC framework, does not enable withdrawals or modifications of Resolution Plans, once they have been submitted by the RP to the Adjudicating Authority after their approval by the CoC. In any event, and without affecting the legal position formulated above, we will also deal with the submissions of the parties that the contractual terms of their respective Resolution Plans enabled withdrawal or re-negotiation of terms. We will be undertaking an analysis on whether the individual Resolution Applicants before us had specifically negotiated with the respective CoCs for a right of modification or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties to canvass the matter again. This principle of res judicata is embodied in relation to suits in Section 11 of the Code of Civil Procedure; but even where Section 11 does not apply, the principle of res judicata has been applied by courts for the purpose of achieving finality in litigation. The result of this is that the original court as well as any higher court must in any future litigation proceed on the basis that the previous decision was correct." From the above extract, it is clear that while res judicata may have been codified in Section 11, that does not bar its application to other judicial proceedings, such as the one in the present case. 165 Before proceeding further, it is important to compare the reliefs sought by Ebix in the First, Second and Third Withdrawal Applications. They have been tabulated below, for an easy comparison: First Withdrawal Application Second Withdrawal Application Third Withdrawal Application i. Direct that the Ld. Resolution Professional supply a copy of the Special Investigation Audit to the Resolution Applicant forthwith; ii. Direct that the Ld. Resolution Professional supply a copy of the Certificates under Sections 43, 45, SO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peated in the Second and Third Withdrawal Applications. However, what is at issue is prayer (iv) of the First Withdrawal Application and prayer (i) of the Second and Third Withdrawal Applications. Through the former, Ebix sought permission to re-evaluate its Resolution Plan and to suitably "revise/modify and/or withdraw" it, while through the latter, Ebix sought permission to withdraw its Resolution Plan. Now we must analyse whether this would attract the principle of res judicata. 166 In a judgment of this Court in Sheodan Singh v. Daryao Kunwar, (1966) 3 SCR 300, a four judge Bench of this Court elaborated on the various conditions which must be satisfied before the doctrine of res judicata can apply in a given case. Justice KN Wanchoo, speaking for the Court, held: "9. A plain reading of Section 11 shows that to constitute a matter res judicata, the following conditions must be satisfied, namely- (i) The matter directly and substantially in issue in the subsequent suit or issue must be the same matter which was directly and substantially in issue in the former suit; (ii) The former suit must have been a suit between the same parties or between parties under whom they or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is other than the one that there is something fishy in the petitioner's version…." which observations have been relied upon by the High Court in holding that the suit was barred by res judicata do not at all make out a case of applicability of the principle of res judicata. The conclusion of the High Court on this score is indeed baffling to us, because, for res judicata to operate the involved issue must have been "heard and finally decided". There was no decision at all on the merit of the grievance of the petitioner in the aforesaid writ petition and, therefore, to take a view that the decision in earlier proceeding operated as res judicata was absolutely erroneous, not to speak of its being uncharitable." (emphasis supplied) 169 In Daryao v. State of U.P., (1962) 1 SCR 574, a Constitution Bench of this Court held that orders dismissing writ petitions in limine will not constitute res judicata. It was noted that while a summary dismissal may be considered as a dismissal on merits, it would be difficult to determine what weighed with the Court without a speaking order. Justice PB Gajendragadkar, speaking for the Court, held: "26...If the petition is dismissed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s The Code of Civil Procedure states that Explanation V can only apply upon the fulfilment of two conditions: (i) the relief claimed must have been substantial, and not merely auxiliary; and (ii) the relief claimed must have been one which the Court is bound to grant, and not one which it is discretionary for the Court to grant, Sir Dinshaw Fardunji Mulla, The Code of Civil Procedure (18th edn, LexisNexis). 173 In Jaswant Singh v. Custodian of Evacuee Property, (1985) 3 SCC 648, a two judge Bench of this Court held that res judicata will only apply if the cause of action the same and that the party also had an earlier opportunity to apply for the relief it is now seeking. Justice ES Venkataramiah held: "14…It is well-settled that in order to decide the question whether a subsequent proceeding is barred by res judicata it is necessary to examine the question with reference to the (i) forum or the competence of the Court, (ii) parties and their representatives, (iii) matters in issue, (iv) matters which ought to have been made ground for defence or attack in the former suit, and (v) the final decision…A cause of action for a proceeding has no relation whatever to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... took the benefit of an extension of time which was granted to it to submit its Resolution Plan. In the absence of an extension of time, it would not have been permitted to enter the fray. After multiple rounds of negotiations, on 9 February 2018, Ebix was declared the successful Resolution Applicant and a LOI was issued by the E-CoC. On 17 February 2018, Ebix's Resolution Plan was approved by a 74.16 per cent voting share of the E-CoC, which was subsequently upgraded to 75.35 per cent by CSEB's vote being added belatedly on 23 February 2018. While it is true that the votes of CSEB were received in favour of the Resolution Plan on a later date, all the parties including Ebix proceeded on the notion that the Resolution Plan has been approved by the requisite majority of seventy-five per cent of the voting share of the E-CoC as was required then (now the requisite percentage has been reduced to sixty-six per cent pursuant to an amendment). Thus, the CSEB Application filed before the NCLT seeking a clearance of its delayed vote was a mere formality and there was no controversy raised in relation to that application at that stage. In fact, the Approval Application for the approval of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission: "7. Term of the Resolution Plan This Resolution Plan proposed by the Resolution Applicant is valid for a term of six months from the date of submission of this plan" Ebix urges that these matching terms of the offer (the RFRP) and the acceptance (the Resolution Plan) are binding on the E-CoC and the Resolution Plan is voidable and revocable at the instance of Ebix, upon the failure to seek timely approval under Section 31. 179 This submission of Ebix cannot be accepted since the terms of the RFRP or the Resolution Plan relate to the validity of the Resolution Plan for the period of negotiation with the E-CoC and not for a period after the Resolution Plan is submitted for the approval of the Adjudicating Authority. The time which may be taken before the Adjudicating Authority is an imponderable which none of the parties can predict. In fact, this is emphasized by Clause 1.3.7 of the RFPF which contains a schedule of the Resolution Plan submission process. As regards the approval of the Adjudicating Authority, it provides clearly that there is no time-line: "1.3.7 Schedule of Resolution Plan Submission Process […] 11. Approval of NCLT regarding the Resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me no responsibility or liability in this respect." (emphasis supplied) Ebix's submission that Clause 1.10(l) is applicable only upon approval of the Adjudicating Authority is not plausible since the Resolution Plan becomes binding on all stakeholders as a consequence of the approval under Section 31. The E-RP's argument holds much weight when it is argued that Clause 1.10(l) cannot be construed to infer that the Adjudicating Authority would declare Ebix as the 'Successful Resolution Applicant' once again, which would then impose the obligation of barring withdrawals for the first time. Mr Nakul Dewan, learned Senior Counsel for the E-RP, has also submitted before us that the validity of the Resolution Plan being six months was not mentioned as a specific conditionality in Form H that was submitted by the E-RP along with the Resolution Plan to the Adjudicating Authority, which evinces that the six-month validity was only vis-à-vis the acceptance by the E-CoC. 181 Ebix has also tried to argue that its position has changed manifestly because of new allegations which have come up in relation to the financial conduct of Educomp. However, in this regard, it is pertinent to not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court: […] (2) No action shall be taken against the property of the corporate debtor in relation to an offence committed prior to the commencement of the corporate insolvency resolution process of the corporate debtor, where such property is covered under a resolution plan approved by the Adjudicating Authority under section 31, which results in the change in control of the corporate debtor to a person, or sale of liquidation assets under the provisions of Chapter III of Part II of this Code to a person, who was not - (i) a promoter or in the management or control of the corporate debtor or a related party of such a person; or (ii) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession, reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court. […] (3) Subject to the provisions contained in sub-sections (1) and (2), and notwithstanding the immunity give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its duties under Section 29 of the IBC when it failed to inform Ebix about the ongoing investigations against Educomp. While this argument was made in order to justify Ebix's withdrawal of its Resolution Plan, which we have already rejected, we shall assess it nonetheless. On behalf of the E-RP, Mr Nakul Dewan has appeared and argued that the obligation on an RP to provide information under Section 29 has to be understood on a "best effort basis". 186 Section 29 of the IBC places a duty upon the RP to provide an IM to the Resolution Applicant, containing such information which may be relevant to the Resolution Applicant to draft its Resolution Plan. It states: "29. Preparation of information memorandum.-(1) The resolution professional shall prepare an information memorandum in such form and manner containing such relevant information as may be specified by the Board for formulating a resolution plan. (2) The resolution professional shall provide to the resolution applicant access to all relevant information in physical and electronic form, provided such resolution applicant undertakes- (a) to comply with provisions of law for the time being in force relating to confidentiali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) that she is the RP in charge of this case, (b) about a transparent mechanism through which interested third parties can access the information memorandum, (c) about the time frame within which possible solutions must be presented and (d) with a channel through which solutions can be submitted for evaluation. The Code does not specify details of the manner or the mechanism in which this should be done, but rather emphasises that it must be done in a time-bound manner and that it is accessible to all possible interested parties." (emphasis supplied) 188 Similarly, the UNCITRAL Guide notes: "5. Duties and functions of the insolvency representative […] (e) Obtaining information concerning the debtor, its assets, liabilities and past transactions (especially those taking place during the suspect period), including examining the debtor and any third person having had dealings with the debtor…" 189 Under the IBC, there is a duty upon the RP to collect as much information about the Corporate Debtor as is accurately possible to do. When such information is communicated through an IM to the Resolution Applicant, the RP must be careful to clarify when its information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermination of the PPA would adversely affect the "going concern" status of Astonfield. On 15 October 2019, the NCLAT dismissed an appeal filed by GUVNL. On 29 October 2019, Kundan Care submitted a Resolution Plan for being considered by the A-CoC, which was followed by a final version on 12 November 2019. On 14 November 2019, the Resolution Plan submitted by Kundan Care was approved by the A-CoC with a vote of 99.28 per cent. On 15 November 2019, a Letter of Award was issued by the A-RP to Kundan Care, and the Resolution Plan was submitted to the NCLT for approval to under Section 31 of the IBC. 193 On 27 November 2019, GUVNL moved this Court in appeal against the order of the NCLAT dated 15 October 2019 (this Court eventually dismissed the appeal). During the pendency of the appeal, the appellant moved an application before the NCLT for withdrawal of its Resolution Plan and for return of its PBG. In view of the pendency of the appeal before this Court, NCLT deferred consideration of the Resolution Plan till the disposal of the appeal. On the request of Kundan Care, their application was listed for hearing and dismissed on 3 July 2020 for want of jurisdiction to enable withdrawals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not acceptable to the CoC. The Conditions Precedent, if any, in a Resolution Plan would mean the 'walk-away conditions' and shall be required to be specifically mentioned as such in the said Plan, with a conspicuous heading and placement of a paragraph in the Plan, and all such conditions shall be placed in a consolidated manner in the said paragraph." This indicates that the condition of a material adverse event could be exercised only until the A-CoC was considering the Resolution Plan, and not after it had been submitted to the Adjudicating Authority. 195 During the course of the hearing of the present appeal, the compilation of additional documents has been filed by Kundan Care. On 5 July 2021, Kundan Care had addressed a communication to EXIM Bank and PFCL "seeking a revision/renegotiation of the resolution amount/financial proposal" of Kundan Care for the resolution of Astonfield. Responding to the above communication, EXIM Bank has addressed a letter dated 12 July 2021 stating that a meeting was held by "the lenders" (EXIM Bank and PFCL) on 9 July 2021, on a without prejudice basis to deal with the issues raised by Kundan Care in their letter dated 5 July 2021. Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Plans at the behest of the Resolution Applicant. K.3 The Seroco Appeal 198 The CIRP of Arya Filaments, an MSME, was instituted on 17 August 2018. Seroco submitted a draft Resolution Plan on 13 March 2019 for an amount of ₹ 6.79 crores (approx.). Subsequent to meetings with the Arya-CoC and revisions to the Resolution Plan, Seroco's plan was approved by the Arya-CoC on 10 May 2019. On 15 May 2019, the Arya-RP filed the Resolution Plan for approval before the NCLT. Form H was filed by Arya-RP on 5 June 2020. 199 Seroco addressed a letter to Arya-RP and Arya-CoC on 9 June 2020 seeking a modification of the Resolution Plan and the resolution amount to ₹ 5.29 crores (approx.) on account of the economic slowdown caused by the COVID-19 pandemic, and subsequently filed applications before the NCLT and an appeal before the NCLAT seeking a modification of the Resolution Plan on account of the original being filed over eighteen months ago. 200 Seroco has relied on the terms of its Resolution Plan which envisage payment to the Arya-CoC by sale of land and building, and old/unusable/spare plant and machineries to urge that there has been a frustration of the contract because of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpliance with the procedural requirements and timelines, would create another tier of negotiations which will be wholly unregulated by the statute. Since the 330 days outer limit of the CIRP under Section 12(3) of the IBC, including judicial proceedings, can be extended only in exceptional circumstances, this open-ended process for further negotiations or a withdrawal, would have a deleterious impact on the Corporate Debtor, its creditors, and the economy at large as the liquidation value depletes with the passage of time. A failed negotiation for modification after submission, or a withdrawal after approval by the CoC and submission to the Adjudicating Authority, irrespective of the content of the terms envisaged by the Resolution Plan, when unregulated by statutory timelines could occur after a lapse of time, as is the case in the present three appeals before us. Permitting such a course of action would either result in a down-graded resolution amount of the Corporate Debtor and/or a delayed liquidation with depreciated assets which frustrates the core aim of the IBC. 203 If the legislature in its wisdom, were to recognize the concept of withdrawals or modifications to a Resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so be sobering for us to recognize that whilst this Court has declared the position in law to not enable a withdrawal or modification to a successful Resolution Applicant after its submission to the Adjudicating Authority, long delays in approving the Resolution Plan by the Adjudicating Authority affect the subsequent implementation of the plan. These delays, if systemic and frequent, will have an undeniable impact on the commercial assessment that the parties undertake during the course of the negotiation. The thirty-second report of the Ministry of Corporate Affairs' Standing Committee on Finance (2020-2021) on the 'Implementation of Insolvency and Bankruptcy Code- Pitfalls and Solutions', 127 Standing Committee on Finance, Seventeenth Lok Sabha, Ministry of Corporate Affairs, 'Implementation of Insolvency and Bankruptcy Code- Pitfalls and Solutions: Thirty-second Report' (August 2021) accessed on 20 August 2021 represented a despondent state of affairs with regard to pendency of applications before the Adjudicating Authority. It noted, Ibid., page 6: In its observations, the Report noted that a delay in the resolution process with more than seventy-one per cent cases pending fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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