Committee of Creditors cannot substitute Resolution Applicant with party not in final list under Regulation 39(1)(B) CIRP Regulations 2016

NCLAT set aside the Adjudicating Authority's approval of a resolution plan where the Committee of Creditors substituted the original Resolution Applicant with a party who was not part of the Corporate Insolvency Resolution Process. The tribunal held that CoC lacked jurisdiction to approve a plan from someone not included in the final list of Prospective Resolution Applicants, violating Regulation 39(1)(B) of CIRP Regulations 2016. The substitution was deemed contrary to IBC's statutory scheme. NCLAT directed fresh Form-G issuance and completion of the entire resolution process within 90 days. Appeal allowed.

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Issues Involved:

1. Jurisdiction of the Committee of Creditors (CoC) to substitute a Successful Resolution Applicant (SRA) after the approval of the Resolution Plan.
2. Authority of the CoC to modify an already approved Resolution Plan and submit it for approval to the Adjudicating Authority.

Issue-wise Detailed Analysis:

1. Jurisdiction of the CoC to Substitute an SRA:

The primary issue was whether the CoC had the jurisdiction to substitute the SRA after the Resolution Plan was approved by the CoC and submitted to the Adjudicating Authority for approval. The facts revealed that the CoC initially approved the Resolution Plan of Respondent No.3, 'Invent Assets Securitization & Reconstruction Private Limited', with 72.97% votes. However, due to an RBI Circular, Respondent No.3 became ineligible to continue as the Resolution Applicant. Subsequently, Respondent No.3 sought to substitute Respondent No.4 as the SRA, which was approved by the CoC with a 100% vote share. The Tribunal found that the CoC did not have the jurisdiction to substitute the SRA after the plan's approval, as such a substitution is contrary to the statutory scheme of the Insolvency and Bankruptcy Code (IBC) and the CIRP Regulations 2016. The Tribunal emphasized that the CoC's resolution and the subsequent filing of revised Form-H, which indicated Respondent No.4 as the new SRA, were not permissible under the existing legal framework.

2. Authority of the CoC to Modify an Approved Resolution Plan:

The second issue was whether the CoC had the authority to modify a Resolution Plan already approved by it and submitted to the Adjudicating Authority. The Tribunal noted that the CoC, after the plan's approval, passed a resolution to amend the Request for Resolution Plan (RFRP) to include provisions for substitution/replacement of the Resolution Applicant. However, it was admitted that no actual amendments were made to the RFRP. The Tribunal held that there was no provision in the RFRP allowing for a change of the Resolution Applicant after the plan's approval, making the CoC's actions unauthorized. The Tribunal referred to the Supreme Court's judgments, emphasizing that once a Resolution Plan is approved by the CoC, it is binding, and any modification is impermissible unless it is to ensure compliance with Section 30(2) of the IBC.

Conclusion:

The Tribunal concluded that the Adjudicating Authority erred in approving the modified Resolution Plan with Respondent No.4 as the SRA. The CoC's actions were found to be contrary to the IBC and CIRP Regulations. The Tribunal set aside the order approving the modified Resolution Plan and directed the Resolution Professional and the CoC to issue a fresh Form-G inviting new Resolution Applicants, completing the process within 90 days. If no Resolution Plan is approved, the Resolution Professional may file for liquidation under Section 33 of the IBC. The appeal was allowed, and the parties were directed to bear their own costs.

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