Withdrawal of resolution plan may be permitted when later-disclosed facts undermine commercial feasibility and justify partial security forfeiture

A successful resolution applicant may withdraw a plan after committee approval but before tribunal approval where later-disclosed material facts materially alter the commercial basis of the proposal and create a genuine apprehension of loss. The note also indicates that, in such circumstances, earnest money deposit and performance bank guarantee need not be fully forfeited; a partial retention may be used to bear part of the resolution process costs, with the balance refunded. The discussion turns on commercial feasibility, subsequent material information, and equitable adjustment of security deposits in insolvency resolution.

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Issues: (i) Whether a successful resolution applicant may withdraw a resolution plan after approval by the committee of creditors but before approval by the Tribunal, and if so in what circumstances; (ii) Whether the earnest money deposit and performance bank guarantee furnished in the resolution process should be forfeited in whole or in part upon such withdrawal.

Issue (i): Whether a successful resolution applicant may withdraw a resolution plan after approval by the committee of creditors but before approval by the Tribunal, and if so in what circumstances.

Analysis: The resolution plan was found to have been prepared on the basis of the information memorandum and the applicant's commercial assessment of the project. The material later disclosed about land availability and the extent of land required for viable operation materially altered the basis on which the plan had been submitted. The Tribunal held that a resolution applicant cannot be compelled to perform a plan where substantial new facts create a genuine apprehension of loss and affect the commercial feasibility of the proposal.

Conclusion: The applicant was permitted to withdraw the resolution plan.

Issue (ii): Whether the earnest money deposit and performance bank guarantee furnished in the resolution process should be forfeited in whole or in part upon such withdrawal.

Analysis: The Tribunal held that the withdrawal caused the corporate insolvency resolution process to fail and that the applicant should bear part of the burden of the process costs. At the same time, complete forfeiture was not considered warranted in the facts. A partial forfeiture was therefore ordered with the balance directed to be refunded.

Conclusion: Partial forfeiture of the deposits was ordered and the remaining amount was directed to be refunded.

Final Conclusion: The resolution plan was not enforced against the applicant, and the relief was granted subject to partial retention of the amounts deposited in the resolution process.

Ratio Decidendi: A successful resolution applicant cannot be compelled to implement a resolution plan when subsequent material information undermines the plan's commercial feasibility, and the adjudicating authority may grant withdrawal with equitable adjustment of deposited securities.

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