CoC cannot reconsider approved resolution plan, NCLAT rules plan becomes binding under Section 30(2)

The NCLAT set aside an Adjudicating Authority's order that remitted a resolution plan back to the Committee of Creditors (CoC) for reconsideration. The tribunal held that once a resolution plan is approved by the CoC, it becomes binding and cannot be reviewed by the CoC itself. The case involved delays in implementation of previous resolution plans by the appellant, but the CoC was aware of these delays when approving the current plan. Since the CoC did not claim any violation of Section 30(2) provisions and there were no valid grounds for reconsideration, both appeals were allowed.

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Issues Involved:

1. Jurisdiction of the Adjudicating Authority to allow reconsideration of an approved Resolution Plan.
2. Grounds for reconsideration of the Resolution Plan.
3. Binding nature of the Resolution Plan on the Committee of Creditors (CoC) and the Successful Resolution Applicant (SRA).
4. Applicability of judicial precedents and statutory provisions.

Summary:

1. Jurisdiction of the Adjudicating Authority to allow reconsideration of an approved Resolution Plan:

The Appellant challenged the orders of the Adjudicating Authority allowing the reconsideration of the approved Resolution Plan. The Appellant contended that the Adjudicating Authority had no jurisdiction to allow the reconsideration after the CoC had already approved the plan. The Tribunal referred to the Supreme Court's judgment in "Ebix Singapore Pvt. Ltd. vs. CoC of Educomp Solutions Limited and Anr.," which established that a Resolution Plan, even prior to the approval of the Adjudicating Authority, is binding inter se between the CoC and the Successful Resolution Applicant. The Tribunal noted that the law is well settled that the Adjudicating Authority cannot allow the CoC to review its decision once the Resolution Plan is approved.

2. Grounds for reconsideration of the Resolution Plan:

The grounds for reconsideration included the Appellant's failure to implement two previous Resolution Plans, a freezing order against the parent company, and a downgrading of the Appellant's credit rating. The Tribunal noted that these grounds were already considered by the CoC at the time of approving the Resolution Plan. The Tribunal emphasized that the CoC cannot get a second chance to review its decision based on these grounds, as it would lead to unnecessary delays and defeat the objective of the Insolvency and Bankruptcy Code (IBC).

3. Binding nature of the Resolution Plan on the CoC and the Successful Resolution Applicant:

The Tribunal reiterated that once the CoC approves a Resolution Plan, it is binding on both the CoC and the Successful Resolution Applicant. The Tribunal referred to its previous judgments and the Supreme Court's rulings, which emphasized that the commercial wisdom of the CoC is paramount and not subject to judicial review, except for ensuring compliance with Section 30(2) of the IBC. The Tribunal noted that the CoC's decision to approve the Resolution Plan was a commercial decision that should not be interfered with.

4. Applicability of judicial precedents and statutory provisions:

The Tribunal referred to several judgments, including "Ebix Singapore Pvt. Ltd.," "K. Sashidhar vs. Indian Overseas Bank and Ors.," and "Committee of Creditors of Essar Steel India Ltd. vs. Satish Kumar Gupta & Ors.," to support its conclusions. The Tribunal emphasized that the Adjudicating Authority has the power to remit a Resolution Plan for reconsideration only if there is a violation of Section 30(2) of the IBC. In the present case, there was no such violation, and the grounds for reconsideration were not sufficient to warrant sending the plan back to the CoC.

Conclusion:

The Tribunal set aside the orders of the Adjudicating Authority dated 27.07.2022 and 01.08.2022, directing the reconsideration of the Resolution Plan. The Tribunal allowed both appeals, emphasizing that the CoC cannot review its decision once the Resolution Plan is approved, and directed the Adjudicating Authority to consider the pending application afresh within three months. Both parties were directed to bear their own costs.

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