Tribunal Allows Withdrawal of Approved Resolution Plan, Emphasizes Timeliness in IBC

The Tribunal allowed the withdrawal of the Resolution Plan post-approval by the Committee of Creditors (CoC), citing jurisdiction under Section 60(5)(c) of the Insolvency and Bankruptcy Code (IBC) in the interest of substantial justice. Emphasizing the importance of timeliness in the IBC process, the Tribunal directed the return of performance security to the Resolution Applicant, required modification of the process document for compliance with the IBC, and set a timeline for new Resolution Plans to avoid liquidation of the Corporate Debtor due to delays.

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Issues Involved:
1. Withdrawal of Resolution Plan post CoC's approval.
2. Timeliness and speed in the Insolvency and Bankruptcy Code (IBC) process.
3. Jurisdiction and powers of the National Company Law Tribunal (NCLT) under Section 60(5)(c) of IBC.
4. Applicability of Indian Contract Act, 1872 to the process document and Resolution Plan.
5. Feasibility and viability of the Resolution Plan.
6. Impact of delays on the Corporate Insolvency Resolution Process (CIRP).
7. Role and powers of the Committee of Creditors (CoC).

Detailed Analysis:

1. Withdrawal of Resolution Plan Post CoC's Approval:
The Resolution Applicants sought to withdraw their Resolution Plan after CoC's approval due to significant delays in the approval process by the Adjudicating Authority. The Tribunal analyzed whether such withdrawal was permissible under the IBC and found no express or implied prohibition against it. The Tribunal concluded that it had jurisdiction under Section 60(5)(c) of IBC to allow the withdrawal of the Resolution Plan in the interests of substantial justice.

2. Timeliness and Speed in the IBC Process:
The Tribunal emphasized that speed and timeliness are cornerstones of the IBC. The maximum period for the CIRP, including time taken in legal proceedings, is 330 days. The Tribunal referred to the Supreme Court's observations in the case of Committee of Creditors of Essar Steel India Ltd. vs. Satish Kumar Gupta, which highlighted the importance of adhering to timelines to avoid value destruction and achieve the objectives of the IBC.

3. Jurisdiction and Powers of NCLT under Section 60(5)(c) of IBC:
The Tribunal asserted its jurisdiction under Section 60(5)(c) to entertain and dispose of any question of law or fact arising out of or in relation to the insolvency resolution or liquidation proceedings. It concluded that it had the authority to permit the withdrawal of the Resolution Plan, as there was no express prohibition in the IBC against such withdrawal.

4. Applicability of Indian Contract Act, 1872:
The Tribunal applied the provisions of the Indian Contract Act, 1872, to the process document and the Resolution Plan. It emphasized that the Resolution Applicant and CoC/RP were both promisor and promisee, and the contract consisted of reciprocal promises. The Tribunal held that the delay in approval of the Resolution Plan made the contract voidable at the option of the Resolution Applicant under Sections 54 and 55 of the Indian Contract Act, 1872.

5. Feasibility and Viability of the Resolution Plan:
The Tribunal examined whether the Resolution Plan met the requirements of Section 30(2)(e) of IBC, which mandates that the plan should not contravene any provisions of law. It found that the Resolution Plan lacked a specified term of validity, which contravened Regulation 38(2) of CIRP Regulations. Consequently, the Tribunal held that the Resolution Plan was liable to be rejected for non-compliance with IBC provisions.

6. Impact of Delays on CIRP:
The Tribunal acknowledged that delays in the approval process had significant adverse impacts on the CIRP, including the depletion of the Corporate Debtor's asset value and the uncertainty of business prospects. It noted that the pandemic situation further exacerbated these issues, making the implementation of the Resolution Plan unviable.

7. Role and Powers of CoC:
The Tribunal highlighted the evolving role and powers of the CoC, emphasizing that CoC must consider the interests of all stakeholders, not just financial creditors. It criticized the arbitrary and unreasonable approach of CoC in formulating the process document and stressed the need for transparency and accountability in the CIRP process.

Conclusion:
The Tribunal permitted the withdrawal of the Resolution Plan, directed the return of the performance security to the Resolution Applicant, and instructed the Resolution Professional to modify the process document to comply with IBC provisions. It also set a timeline for seeking new Resolution Plans and completing the CIRP, failing which the Corporate Debtor would be subject to liquidation.

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