Withdrawal of resolution plan before approval may be allowed; constructive res judicata cannot bar an issue not decided on merits.
Constructive res judicata did not bar the withdrawal request because the earlier order had not consciously decided that issue on merits. A resolution applicant may be permitted to withdraw a resolution plan before approval under section 31 of the Insolvency and Bankruptcy Code, 2016, and an unwilling applicant should not be compelled to implement it where doing so would undermine the resolution process. The insolvency resolution period was accordingly extended to complete the process within the permissible framework, with costs also directed.
Issues: (i) whether the prayer for withdrawal of the resolution plan was barred by constructive res judicata; (ii) whether the resolution applicant could be permitted to withdraw the resolution plan and whether the insolvency resolution period could be extended for the remaining process.
Issue (i): whether the prayer for withdrawal of the resolution plan was barred by constructive res judicata.
Analysis: The earlier dismissal of a separate application did not adjudicate the withdrawal prayer on merits. The withdrawal issue had not been consciously decided or expressly dealt with in the previous order, and constructive res judicata does not apply to a matter that was pleaded but not actually decided.
Conclusion: The bar of constructive res judicata did not apply, and the withdrawal prayer was maintainable.
Issue (ii): whether the resolution applicant could be permitted to withdraw the resolution plan and whether the insolvency resolution period could be extended for the remaining process.
Analysis: The plan had not yet received approval under section 31 of the Insolvency and Bankruptcy Code, 2016, and the authority held that an unwilling resolution applicant should not be compelled to implement a plan. It further held that effective implementation and the object of resolution would be undermined by forcing a reluctant applicant to proceed. The authority also extended the corporate insolvency resolution process period in the interest of completing resolution within the permissible framework.
Conclusion: The withdrawal of the resolution plan was allowed, and the insolvency resolution period was extended by 90 days.
Final Conclusion: The application succeeded in substance, with the withdrawal of the plan permitted and ancillary directions issued to continue the resolution process within the extended period, along with costs.
Ratio Decidendi: A resolution applicant may be permitted to withdraw a plan before approval under section 31 where the withdrawal issue has not been finally adjudicated earlier, and constructive res judicata cannot bar a matter not decided on merits.
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AI Drafter ✕
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