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

Tribunal Upholds Resolution Plan, Rejects Appeal on Jurisdiction & Commercial Viability

The Tribunal dismissed the Appeal, upholding the binding nature of the approved Resolution Plan and emphasizing the importance of maintaining the ... Withdrawal of approved Resolution Plan - jurisdiction of the Adjudicating Authority to permit withdrawal - primacy of the Committee of Creditors - binding nature of an approved Resolution Plan - feasibility and viability scrutiny of a Resolution Plan - performance bank guarantee as deterrent to withdrawal - estoppel by conduct of a Successful Resolution Applicant - time bound CIRP and maximisation of asset valueWithdrawal of approved Resolution Plan - jurisdiction of the Adjudicating Authority to permit withdrawal - primacy of the Committee of Creditors - binding nature of an approved Resolution Plan - Adjudicating Authority has no jurisdiction to permit withdrawal of a Resolution Plan after it has been approved by the Committee of Creditors. - HELD THAT: - The Tribunal upheld the view that once a Resolution Plan is approved by the Committee of Creditors by the requisite majority and placed before the Adjudicating Authority for approval, the Adjudicating Authority cannot entertain an application by the Successful Resolution Applicant to withdraw that approved plan. The insolvency regime accords primacy to the commercial decision of the Committee of Creditors; judicial intervention by the Adjudicating Authority is limited to the statutory grounds of scrutiny of the approved plan. Allowing a Successful Resolution Applicant to retract its approved plan would undermine the bidding process, eliminate rival bidders' expectations and could push the corporate debtor into liquidation, defeating the object of a time bound CIRP and maximisation of asset value. The Tribunal rejected reliance on earlier appellate observations from a different factual matrix where a plan violated statutory requirements, holding that those observations do not stand as a precedent permitting withdrawal generally. [Paras 5, 6, 7, 8, 9]Application for withdrawal of a Resolution Plan approved by the Committee of Creditors cannot be permitted; the appeal challenging the Adjudicating Authority's refusal to allow withdrawal is dismissed.Commercial unviability as ground for withdrawal - performance bank guarantee as deterrent to withdrawal - estoppel by conduct of a Successful Resolution Applicant - time bound CIRP and maximisation of asset value - Commercial unviability arising from delay in CIRP is not a permissible ground to allow a Successful Resolution Applicant to withdraw an approved plan. - HELD THAT: - The Tribunal considered the contention that delay and consequent commercial unviability justified withdrawal. It held that permitting a Successful Resolution Applicant to take a 'U turn' after acceptance of conditions and after displacing other bidders would defeat the CIRP's objectives; the obligation not to withdraw is reinforced by mechanisms like performance bank guarantees and by estoppel arising from the applicant's conduct. The Tribunal relied on its earlier precedent rejecting withdrawal where the plan had been approved by the CoC despite delay making implementation difficult, and distinguished cases where the approved plan was found statutorily infirm. [Paras 5, 7, 8]The plea of commercial unviability due to delay does not justify permitting withdrawal of an approved Resolution Plan; the appeal is without merit on this ground as well.Final Conclusion: Appeal dismissed. The Tribunal affirmed that an approved Resolution Plan is binding on the Successful Resolution Applicant and that neither commercial inconvenience arising from delay nor an application to withdraw after CoC approval entitles the applicant to unsettle the resolution process; therefore the Adjudicating Authority's refusal to permit withdrawal was upheld. Issues Involved:1. Jurisdiction of the Adjudicating Authority to allow withdrawal of a Resolution Plan post-approval.2. Commercial unviability of the approved Resolution Plan due to delay.3. Binding nature of the Resolution Plan on the Resolution Applicant and the stakeholders.4. Applicability of the principle of estoppel by conduct to the Resolution Applicant.5. Impact of the withdrawal of the Resolution Plan on the Corporate Debtor and stakeholders.Issue-wise Detailed Analysis:1. Jurisdiction of the Adjudicating Authority to Allow Withdrawal of a Resolution Plan Post-approval:The Appellant argued that the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016 (I&B Code) has the power to allow withdrawal of a Resolution Plan post-approval from the Committee of Creditors (CoC). The Appellant cited the Deccan Value Investors LP case, where a similar view was upheld by the Appellate Tribunal. However, the Respondent countered that the Adjudicating Authority has no jurisdiction to permit such withdrawal once the Resolution Plan is approved by the CoC, as established in the 'Committee of Creditors of Educomp Solutions Ltd. vs. Ebix Singapore Pte. Ltd. & Anr.' case. The Tribunal concluded that the Adjudicating Authority cannot interfere with the majority decision of the CoC and lacks jurisdiction to allow the withdrawal of an approved Resolution Plan.2. Commercial Unviability of the Approved Resolution Plan Due to Delay:The Appellant claimed that the approved Resolution Plan had become commercially unviable due to delays in the Corporate Insolvency Resolution Process (CIRP). The Tribunal noted that the CIRP process involves multiple stages, including the submission and approval of Resolution Plans by the CoC. The Tribunal emphasized that the I&B Code aims for insolvency resolution in a time-bound manner to maximize the value of assets and balance stakeholders' interests. The Tribunal found that commercial unviability due to delays does not justify withdrawal of the Resolution Plan.3. Binding Nature of the Resolution Plan on the Resolution Applicant and the Stakeholders:The Respondents argued that once the Resolution Plan is approved by the CoC, it becomes a binding contract between the parties, and the Resolution Applicant cannot withdraw it. The Tribunal supported this view, stating that the approved Resolution Plan is binding on the Corporate Debtor and all stakeholders once the Adjudicating Authority approves it. The Tribunal highlighted that allowing withdrawal would sabotage the entire CIRP process and potentially push the Corporate Debtor into liquidation.4. Applicability of the Principle of Estoppel by Conduct to the Resolution Applicant:The Tribunal held that the Resolution Applicant is estopped from withdrawing the approved Resolution Plan based on the principle of estoppel by conduct. The Tribunal reasoned that the Resolution Applicant, having accepted the conditions of the Resolution Plan and eliminated other potential bidders, cannot alter its position to the detriment of stakeholders. The Tribunal emphasized that there is no provision in the I&B Code allowing a Successful Resolution Applicant to withdraw the approved Resolution Plan.5. Impact of the Withdrawal of the Resolution Plan on the Corporate Debtor and Stakeholders:The Tribunal noted that allowing the withdrawal of the approved Resolution Plan would have disastrous consequences for the Corporate Debtor and stakeholders. The Tribunal pointed out that the value of the Corporate Debtor's assets would likely deplete due to the time consumed in the CIRP process, leaving stakeholders in a state of devastation. The Tribunal stressed the importance of maintaining the sanctity of the resolution process and preventing the Successful Resolution Applicant from taking a U-turn.Conclusion:The Tribunal found no merit in the Appeal and dismissed it, stating that the Appellant failed to demonstrate any legal infirmity in the impugned order. The Tribunal upheld the binding nature of the approved Resolution Plan and emphasized the importance of maintaining the integrity of the CIRP process. The Appeal was dismissed with no order as to costs.