Successful Resolution Applicant's objections to conditional Letter of Intent deemed afterthought, liquidation order upheld

NCLAT Principal Bench dismissed appeals challenging liquidation order of Corporate Debtor. Successful Resolution Applicant (SRA) objected to conditional Letter of Intent (LoI) after CoC approval, claiming conditions were not part of original resolution plan. NCLAT held SRA's objections were afterthought as conditions were discussed in CoC meetings where SRA participated. SRA was aware LoI would be subject to Adjudicating Authority's prospective orders but raised objections only after receiving conditional LoI. Court found no infirmity in liquidation decision as CIRP's 330-day limit expired due to SRA's procrastination in accepting LoI, and CoC has commercial wisdom to decide liquidation before resolution plan confirmation.

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Issues Involved:
1. Conditionality of the Letter of Intent (LoI) issued by the Resolution Professional (RP) and its conformity with the approved resolution plan and addendum.
2. Validity of the order for liquidation of the Corporate Debtor.

Detailed Analysis:

Issue 1: Conditionality of the Letter of Intent (LoI)
The central contention revolves around whether the LoI issued by the RP, with CoC's approval, was conditional and not aligned with the resolution plan and addendum submitted by the Successful Resolution Applicant (SRA). The SRA argued that the LoI imposed conditions not present in the resolution plan approved by the Committee of Creditors (CoC) with a 99.90% majority. The SRA maintained that the LoI should have been unconditional and that the CoC could not impose additional conditions post-approval of the resolution plan.

The tribunal examined the sequence of events, noting that the SRA was aware of ongoing litigations concerning other resolution applicants and that the resolution plan was subject to the outcome of these proceedings. The tribunal found that the SRA had not objected to the conditionality of the LoI during the CoC meetings and only raised objections after the issuance of the LoI. The tribunal concluded that the conditions in the LoI were not alien to the resolution plan and that the SRA was precluded from raising objections post-CoC approval. The tribunal emphasized that the resolution plan, once approved by the CoC, could not be withdrawn or modified by the SRA, as per the legal precedent set by the Supreme Court in the Ebix Singapore Pvt. Ltd. case.

Issue 2: Validity of the Order for Liquidation
The tribunal addressed whether the Adjudicating Authority's order for the liquidation of the Corporate Debtor was valid. The CoC, with a 99.61% majority, decided to liquidate the Corporate Debtor after the SRA failed to provide an unconditional acceptance of the LoI. The tribunal noted that the Corporate Insolvency Resolution Process (CIRP) period had expired, and no resolution plan was available for submission to the Adjudicating Authority for approval. The tribunal found that the CoC was within its rights to opt for liquidation, as no approved resolution plan was submitted within the statutory timeline.

The tribunal referred to the statutory provisions of Section 33 of the Insolvency and Bankruptcy Code (IBC), which empower the CoC to decide on liquidation before the confirmation of the resolution plan by the Adjudicating Authority. The tribunal upheld the CoC's decision, emphasizing the supremacy of the CoC's commercial wisdom, which is not subject to judicial review unless statutory requirements are unmet. The tribunal found no statutory aberration by the RP or CoC and concluded that the decision to liquidate was in the best interest of all stakeholders, given the prolonged CIRP and the potential depreciation of the Corporate Debtor's assets.

Conclusion:
The tribunal dismissed the appeals, finding no merit in the arguments presented by the SRA. The tribunal directed the liquidator to proceed with the liquidation process as per the e-auction notice already issued.

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