2022 (12) TMI 893 - AT - Insolvency and Bankruptcy

Tribunal rules on CoC's approval withdrawal and new Resolution Plan considerations

Kalinga Allied Industries India Private Limited Versus Committee of Creditors (Bindals Sponnge Industries Limited), Mr. Dinesh Sood (Resolution Professional)

The Tribunal held that the Committee of Creditors (CoC) cannot withdraw approval of a Resolution Plan after more than two years, and the Adjudicating ... Approval of resolution plan - Seeking a direction to the Resolution Professional (RP) to call for a Meeting at the CoC - requirement to follow the timelines - seeking consideration of Resolution Plan of M/s. Hindustan Coils Limited, (HCL) M/s. Kalinga Enterprises Private Limited (KEPL) and M/s. New Lakshmi Steel & Power Private Limited or any other entity and sought for additional 30 days to consider and approve the most suitable Plan - whether the CoC after having approved the Resolution Plan on 11.11.2019 can seek direction to consider the new Resolution Plan of a third party who was not a part of the CIRP Proceedings, and seek to withdraw their approval after more than two years of the approval of the first Resolution Plan? HELD THAT:- Though the main issue raised in EBIX SINGAPORE PRIVATE LIMITED VERSUS COMMITTEE OF CREDITORS OF EDUCOMP SOLUTIONS LIMITED & ANR., KUNDAN CARE PRODUCTS LIMITED VERSUS MR AMIT GUPTA AND ORS. AND SEROCO LIGHTING INDUSTRIES PRIVATE LIMITED VERSUS RAVI KAPOOR RP FOR ARYA FILAMENTS PRIVATE LIMTIED & ORS. [2021 (9) TMI 672 - SUPREME COURT] is with respect to withdrawal/modification of a Resolution Plan by an SRA, the Hon’ble Supreme Court has clearly laid down that ‘the NCLT is Residuary Jurisdiction [under Section 60(5)(c)] though vide, is nonetheless defined by the text of the Code. Specifically, the NCLT cannot do what the IBC consciously did not provide it the power to do’. Further, the Court observed that ‘this Court must adopt an interpretation of the NCLT is Residuary Jurisdiction which concurs with the broader goals of the Code’. Ebix Singapore Pvt. Ltd. has observed that strict timelines have to be adhered to and that the Adjudicating Authority lacks the authority to allow the withdrawal/modification of the Resolution Plan by an SRA, as this would defeat the very objective of the statute. In the instant case, though it is not the SRA which is seeking withdrawal, the effect of the CoC seeking withdrawal of an already approved Resolution Plan would have identical repercussions with respect to ‘timelines’ as the same would have the effect of restarting the CIRP Process from the valuation stage when all the statutory timelines have long since been exhausted - The principle with respect to ‘timelines’ is applicable to the facts of this case. This Order has attained finality and no fresh consideration of any Resolution Plan at this stage can be entertained. It is reiterated that the ‘Maximisation of Value of Assets’ ought to be ‘within the specified timelines’ and if it is not a ‘timebound process’, the entire scope and objective of the Code would fail merely because there is another higher offer made by a third party, the CoC cannot consider another Plan of a third party who did not participate in the CIRP Proceedings. This Tribunal is of the earnest view that once Plan is submitted for approval, it is binding between the CoC and the SRA, unless there is any material irregularity or is against the provisions of Section 30(2) of the Code the Adjudicating Authority cannot, in its limited jurisdiction, interfere - Appeal allowed. Issues Involved:1. Whether the Committee of Creditors (CoC) can withdraw approval of a Resolution Plan after more than two years.2. Whether the Adjudicating Authority can direct the CoC to consider a new Resolution Plan from a third party who was not part of the Corporate Insolvency Resolution Process (CIRP).3. The binding nature of a Resolution Plan once submitted to the Adjudicating Authority.Issue-wise Detailed Analysis:1. Withdrawal of Approval by CoC:The main issue in this appeal was whether the CoC, after having approved the Resolution Plan on 11.11.2019, can seek direction to consider a new Resolution Plan from a third party who was not part of the CIRP proceedings and withdraw their approval after more than two years. The Tribunal noted that the CoC had approved the Resolution Plan on 11.11.2019, and the application for approval of the Plan under Section 31 of the Insolvency and Bankruptcy Code (IBC) was filed in January 2019. The Tribunal emphasized that once the Plan is submitted to the Adjudicating Authority, it becomes binding and irrevocable between the CoC and the Successful Resolution Applicant (SRA) in terms of the provisions of the Code. The Tribunal relied on the Supreme Court's judgment in 'Ebix Singapore Pvt. Ltd. vs. Committee of Creditors of Educomp Solutions Ltd. & Anr.' which held that the existing insolvency framework in India provides no scope for effecting further modifications or withdrawals of CoC-approved Resolution Plans once submitted to the Adjudicating Authority. Therefore, the CoC cannot withdraw its approval after more than two years.2. Consideration of New Resolution Plan:The Tribunal assessed whether the Adjudicating Authority can direct the CoC to consider the Resolution Plan of a third party who was not part of the CIRP. It was noted that the Adjudicating Authority had previously directed the Resolution Professional (RP) to consider the new Resolution Plan of Hindustan Coils Limited (HCL), which was challenged and set aside by this Tribunal. The Tribunal reiterated that the Adjudicating Authority cannot entertain an application from a person who has not participated in the CIRP, even if such a person is ready to pay more than the SRA. The Tribunal emphasized that the maximization of the value of assets must be within the specified timelines, and considering a new Plan beyond these timelines would defeat the objective of the Code.3. Binding Nature of Resolution Plan:The Tribunal discussed the binding nature of a Resolution Plan once submitted to the Adjudicating Authority. It was underscored that a submitted Resolution Plan is binding and irrevocable between the CoC and the SRA, as per the provisions of the IBC and the CIRP Regulations. The Tribunal referred to the Supreme Court's judgment in 'Ebix Singapore Pvt. Ltd.' which highlighted that any modification or withdrawal of a Resolution Plan after approval by the CoC and submission to the Adjudicating Authority would lead to delays and defeat the objective of the Code. The Tribunal also noted that the Adjudicating Authority's jurisdiction is limited to interfering only if the Plan is against the provisions of the Code or involves material irregularity.Conclusion:The Tribunal concluded that the CoC cannot withdraw its approval of the Resolution Plan after more than two years, and the Adjudicating Authority cannot direct the CoC to consider a new Resolution Plan from a third party who was not part of the CIRP. The Tribunal emphasized that once a Resolution Plan is submitted for approval, it is binding and irrevocable between the CoC and the SRA, unless there is any material irregularity or it is against the provisions of Section 30(2) of the Code. Consequently, the appeal was allowed, and the Impugned Order dated 26.07.2021 passed by the Adjudicating Authority was set aside.