Tribunal allows withdrawal of Resolution Plan & partial forfeiture of guarantees

The Tribunal allowed the withdrawal of the Resolution Plan due to significant discrepancies in the information provided in the IM and ordered the partial forfeiture of the EMD and Performance Bank Guarantee to cover the expenses incurred during the CIRP. The I.A No.439/2020 was dismissed as infructuous, and I.A No. 500/2020 was allowed.

---

---

Issues Involved:
1. Withdrawal of the Resolution Plan after CoC approval and pending Tribunal approval.
2. Return or forfeiture of the Earnest Money Deposit (EMD) and Performance Bank Guarantee.

Issue-wise Detailed Analysis:

1. Withdrawal of the Resolution Plan after CoC approval and pending Tribunal approval:
The Tribunal examined whether the Resolution Applicant can withdraw the resolution plan after it has been approved by the Committee of Creditors (CoC) but is pending approval by the Tribunal. The Resolution Applicant argued that the Information Memorandum (IM) provided by the Resolution Professional contained erroneous, misleading, and incomplete statements regarding the total project lands and the average annual generation capacity of the project. The Applicant discovered that the actual land required for the project was 100 acres, not the 58 acres mentioned in the IM, and that an additional 42-acre parcel of land, essential for the project, was not disclosed. This new information rendered the plan commercially unviable. The Tribunal noted that the Resolution Applicant had reserved the right to withdraw the plan in case of any change in the information provided in the IM or if new information became available. The Tribunal held that the Resolution Applicant cannot be compelled to participate in a resolution plan that jeopardizes its own interests, especially when there is a significant discrepancy in the information provided. The Tribunal cited the decision of the Hon'ble NCLAT in Committee of Creditors of Metalyst Forgings Ltd. v. Deccan Value Investors LP. & Ors, which upheld that the Applicant cannot be forced to perform its obligations under a misleading plan. Therefore, the Tribunal allowed the withdrawal of the Resolution Plan.

2. Return or forfeiture of the Earnest Money Deposit (EMD) and Performance Bank Guarantee:
The Tribunal considered whether the EMD and the Performance Bank Guarantee deposited by the Resolution Applicant should be returned or forfeited due to the withdrawal of the plan. The Resolution Professional argued that the withdrawal caused a loss to the CoC/CD and that there is no provision for withdrawal after CoC approval. The Tribunal noted that the Resolution Applicant should bear part of the burden of expenses incurred during the Corporate Insolvency Resolution Process (CIRP) and that some amount may be lost due to the low liquidation value of the project. Balancing the interests of justice, the Tribunal ordered the forfeiture of Rs. 75,00,000/- and the refund of the balance amount of Rs. 2,76,32,780/- to the Resolution Applicant.

Conclusion:
The Tribunal allowed the withdrawal of the Resolution Plan due to significant discrepancies in the information provided in the IM and ordered the partial forfeiture of the EMD and Performance Bank Guarantee to cover the expenses incurred during the CIRP. The I.A No.439/2020 was dismissed as infructuous, and I.A No. 500/2020 was allowed.

---