Supreme Court: Resolution Applicant Cannot Withdraw Or Modify CoC-Approved IBC Resolution Plan

Supreme Court: Resolution Applicant Cannot Withdraw Or Modify CoC-Approved IBC Resolution Plan

The Supreme Court has reaffirmed that once a resolution plan receives approval from the Committee of Creditors ("CoC"), it becomes impermissible for the resolution applicant to withdraw or alter the resolution plan.

The Bench, consisting of Justices Sanjiv Khanna and Dipankar Datta, cited the judgment of Ebix Singapore Private Limited v. Committee of Creditors of Educomp Solutions Ltd. & Anr. In this case, the Supreme Court outlined multiple reasons why allowing the resolution applicant to withdraw or amend the resolution plan after the CoC approval and before an order under Section 31(1) of the Code is issued is impermissible.

The Court noted that in the absence of any statutory provision within the Insolvency and Bankruptcy Code, it is not permissible for the resolution applicant to amend or retract the resolution plan once it has been approved by the CoC.

The resolution applicants/appellant argued before the Supreme Court that they should be permitted to amend or withdraw the resolution plan. They contended that they were unable to present an appropriate resolution due to the financial distress of the corporate debtor, which was caused by either insufficient information or fraudulent actions by the resolution professional.

Disregarding the arguments put forth by the resolution applicant, the Court emphasized the significance of the financial expert's opinions upon which the resolution plan is formulated and presented for approval by the CoC.

“Resolution plans are not prepared and submitted by lay persons. They are submitted after the financial statements and data are examined by domain and financial experts, who scan, appraise, and evaluate the material as available for its usefulness, with caution. Inadequacies and paltriness of data are accounted and chronicled for valuations and the risk involved. It is rather strange to argue that the super specialists and financial experts were gullible and misunderstood the details, figures or data,” the Court observed.

Furthermore, the Court clarified that raising concerns about ambiguities or the absence of specific details in the resolution plan after its approval by the CoC cannot be entertained. Except in egregious cases where data and facts are misrepresented or concealed, any objections regarding the absence or ambiguity of details should be dismissed. The Court emphasized that parties should exercise caution and take responsibility for verifying details before submitting or refraining from submitting a resolution plan.

Drawing from the aforementioned facts, the Supreme Court declined to intervene in the resolution plan approved by the CoC and upheld its approval. Emphasizing the resolution professional's obligation to provide information regarding the financial distress of the corporate debtor on a "best effort" basis, the Court reaffirmed the validity of the CoC-approved resolution plan.