Tribunal allows withdrawal of resolution plan, emphasizes corporate debtor's going concern status

The Tribunal allowed the successful Resolution Applicant to withdraw the resolution plan, citing various reasons for withdrawal. The Doctrine of Constructive Res Judicata was deemed inapplicable as the issue had not been previously adjudicated. The Tribunal acknowledged the potential impact on the Corporate Insolvency Resolution Process (CIRP) but emphasized the importance of maintaining the corporate debtor as a going concern. The CIRP period was extended, and the applicant was directed to bear costs associated with the withdrawal.

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Issues Involved:
1. Withdrawal of the resolution plan by the successful Resolution Applicant.
2. Applicability of the Doctrine of Constructive Res Judicata.
3. Impact of withdrawal on the Corporate Insolvency Resolution Process (CIRP).
4. Legal consequences and costs associated with the withdrawal.

Issue-wise Detailed Analysis:

1. Withdrawal of the resolution plan by the successful Resolution Applicant:
The successful Resolution Applicant, M/S EBIX Singapore PTE. LTD., filed an application under Section 60 (5) of the Insolvency and Bankruptcy Code, 2016, seeking withdrawal of its resolution plan approved by the Committee of Creditors (COC) and refund of the earnest money. The applicant cited several reasons for the withdrawal, including an inordinate lapse of time in concluding the CIRP, apprehensions about the commercial viability of the plan, severe mismanagement of funds, fraud, and ongoing investigations against the corporate debtor. Additionally, the plan was valid for only six months from the date of its filing, leading to its invalidity due to the lapse of time.

2. Applicability of the Doctrine of Constructive Res Judicata:
The COC objected to the withdrawal, arguing that it would create uncertainty in the CIRP and that the terms of the resolution plan were binding on the applicant. They contended that the relief claimed was barred by the Doctrine of Constructive Res Judicata, as similar prayers had been previously rejected by the Tribunal. However, the Tribunal noted that the issue of withdrawal had not been consciously adjudicated upon in the earlier applications (CA No. 1252/2019 and CA No. 1310/2019). Therefore, the Doctrine of Constructive Res Judicata did not apply as the specific issue of withdrawal had not been decided previously.

3. Impact of withdrawal on the Corporate Insolvency Resolution Process (CIRP):
The COC argued that allowing the withdrawal would waste considerable time and resources already invested in reviving the corporate debtor's business. They emphasized that the resolution plan becomes binding only after approval by the Adjudicating Authority under Section 31 of the Code. The Tribunal acknowledged that compelling an unwilling applicant to implement the plan could lead to uncertainty and that the object of the Code is to ensure the corporate debtor remains a going concern. The Tribunal decided that the application for withdrawal must be resolved before passing any order under Section 31 of the Code.

4. Legal consequences and costs associated with the withdrawal:
The Tribunal allowed the withdrawal of the resolution plan, noting that legal consequences would follow, and the Resolution Professional and COC were free to take appropriate action, including addressing the issue of refunding the earnest money. The Tribunal also extended the CIRP period by 90 days from 16.11.2019, directing the Resolution Professional and COC to expedite the resolution process. The application was partly allowed with a cost of Rs. 1 lakh to be paid by the applicant into the corpus of the Corporate Debtor.

Conclusion:
The Tribunal allowed the withdrawal of the resolution plan by the successful Resolution Applicant, emphasizing that the Doctrine of Constructive Res Judicata did not apply as the specific issue of withdrawal had not been previously adjudicated. The Tribunal recognized the potential impact on the CIRP but highlighted the importance of ensuring the corporate debtor remains a going concern. The CIRP period was extended to facilitate the resolution process, and the applicant was directed to bear certain costs associated with the withdrawal.

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