Resolution plan protection: court preserved an accepted settlement while safeguarding dissenting debenture holders through an opt-out remedy.

Where a proposed resolution plan has been substantially accepted and reversal would cause delay and prejudice to retail stakeholders, relief may be moulded to preserve the settlement while protecting dissenting debenture holders. The Court treated the facts as materially similar to an earlier matter, noted that fresh insistence on a voting mechanism would unsettle an advanced resolution process, and allowed the plan to proceed. It also held that dissenting debenture holders could be safeguarded by an opt-out arrangement, enabling them to stand outside the plan and pursue other remedies.

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Issues: (i) Whether the High Court could decline approval of the resolution plan by holding that the relief granted by this Court under Article 142 of the Constitution of India could not be replicated in exercise of inherent powers under Section 151 of the Civil Procedure Code, 1908; (ii) Whether the resolution plan, approved by the ICA lenders and supported by the retail debenture holders in substantial numbers, could be accepted with protection for dissenting debenture holders.

Issue (i): Whether the High Court could decline approval of the resolution plan by holding that the relief granted by this Court under Article 142 of the Constitution of India could not be replicated in exercise of inherent powers under Section 151 of the Civil Procedure Code, 1908;

Analysis: The facts were treated as materially similar to the earlier matter in which the resolution process had already been upheld and relief had been moulded to prevent disruption of an advanced settlement. The Court found that a fresh insistence on the voting mechanism would delay the resolution process, unsettle an agreed course of action, and prejudice retail debenture holders who had already benefited from the proposed settlement. In those circumstances, the Court considered it appropriate to extend similar relief, while preserving the position of dissenting debenture holders.

Conclusion: The High Court's refusal to approve the plan was not sustained, and the relief was moulded in favour of the appellants.

Issue (ii): Whether the resolution plan, approved by the ICA lenders and supported by the retail debenture holders in substantial numbers, could be accepted with protection for dissenting debenture holders.

Analysis: The Court noted that small debenture holders were receiving full principal and that the remaining debenture holders were also receiving a substantial return. It held that undoing the process would be time-consuming and adverse to the interests of retail investors. At the same time, the Court accepted the need to safeguard dissenting debenture holders by allowing them either to accept the plan or to stand outside it and pursue other remedies.

Conclusion: The resolution plan was approved, with an option preserved for dissenting debenture holders to opt out and pursue other legal remedies.

Final Conclusion: The appeals succeeded to the extent that the proposed resolution plan was approved and given effect, while the rights of dissenting debenture holders were protected by an opt-out mechanism.

Ratio Decidendi: Where a proposed resolution plan has been substantially accepted and its reversal would cause avoidable delay and prejudice to retail stakeholders, the Court may mould relief to preserve the plan while safeguarding dissenting creditors through an opt-out remedy.

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