2024 (11) TMI 727 - AT - IBC

Resolution plan approval upheld despite five-year delay and financial deterioration concerns under IBC

The NCLAT dismissed an appeal challenging approval of a resolution plan under IBC. The appellant argued the plan was no longer implementable due to five ... Implementation and viability of the Resolution Plan - Section 31, and Section 30, sub-section (2) (d) as well as Regulation 38(3) of the IBBI (CIRP) Regulations - HELD THAT:- The requirement of the law is that the Plan contains provision for effective implementation. It is not the case that Plan does not contain effective provision for implementation. The Adjudicating Authority in the impugned order specifically noticed the provisions of the Resolution Plan, which provides for implementation. It is not the case that there are no provisions in Resolution Plan for effective implementation. The submission of the Appellant that in view of lapse of more than five years and the deterioration of the financial status of the Corporate Debtor, the Plan is no more implementable, cannot be accepted as a ground to withdraw from the Resolution Plan. It is further relevant to notice that before the Hon’ble Supreme Court in Ebix Singapore, the SRA has raised similar contentions, including that position has changed manifestly in relation to the financial conduct of Educomp. It is reflected from the record that an affidavit was filed on 22.09.2023 before the Adjudicating Authority by RP stating that CD is a going concern. The RP, who has been running the Corporate Debtor after initiation of CIRP, has stated in the affidavit that the CD is a going concern - The Adjudicating Authority in paragraph 35, as extracted above has noticed that revenue for the year 2021-22 reflects the impact of the pandemic Covid-19 and it was further noticed that revenue of the CD could rise to Rs.40 million in the year 2021-22. There are no substance in the submission of the Appellant that Corporate Debtor was not a going concern. Insofar as, feasibility and viability of the Resolution Plan is concerned, the feasibility and viability of a Resolution Plan is in the domain of commercial wisdom of CoC. The Plan having been found feasible and viable and approved by the CoC, the Appellant cannot ask the Adjudicating Authority to enter into feasibility and viability of the Plan. Thus, no valid grounds are raised by the Appellant, before the Adjudicating Authority to reject the Application filed by the RP for approval of the Resolution Plan - No error has been committed by the Adjudicating Authority in allowing IA No.195 of 2018 and approving the Resolution Plan. There is no merit in the Appeal. The Appeal is dismissed. Issues Involved:1. Implementation and viability of the Resolution Plan.2. The ability of the Successful Resolution Applicant (SRA) to withdraw the Resolution Plan.3. Impact of delay in the approval of the Resolution Plan.4. Status of the Corporate Debtor as a going concern.5. Feasibility and viability of the Resolution Plan.Issue-wise Detailed Analysis:1. Implementation and Viability of the Resolution Plan:The appellant contended that the Adjudicating Authority failed to consider whether the Resolution Plan was capable of implementation, as required under Section 31 and Section 30(2)(d) of the IBC, and Regulation 38(3) of the IBBI (CIRP) Regulations. The appellant argued that the Corporate Debtor's financial status had deteriorated significantly, rendering the Plan unimplementable. However, the Tribunal noted that the Resolution Professional (RP) had examined the Plan for its implementation and supervision, and the Adjudicating Authority had specifically acknowledged provisions for the Plan's implementation. The Tribunal emphasized that changes in the financial status of the Corporate Debtor do not justify withdrawing from the Resolution Plan, as similar contentions were previously rejected by the Supreme Court in the Ebix Singapore judgment.2. The Ability of the Successful Resolution Applicant to Withdraw the Resolution Plan:The appellant sought to withdraw the Resolution Plan, citing changes in the Corporate Debtor's financial status and the delay in the Plan's approval. The Tribunal referred to the Supreme Court's decision in Ebix Singapore, which categorically held that a Successful Resolution Applicant cannot withdraw the Resolution Plan under the IBC. The statutory framework does not provide any exit routes for a successful Resolution Applicant, indicating the IBC's prohibition against withdrawal attempts. The Tribunal reiterated that the binding nature of a Resolution Plan on a Resolution Applicant cannot remain at the discretion of the Resolution Applicant once approved by the CoC.3. Impact of Delay in the Approval of the Resolution Plan:The appellant argued that the delay in approving the Resolution Plan affected its implementation. The Tribunal acknowledged that delays could impact the Plan's implementation but noted that the appellant itself contributed to the delay by filing multiple applications and appeals. The Tribunal emphasized that parties cannot impose conditions on judicial authorities to accept or reject Plans within a specified timeframe. The Tribunal found that the delay, primarily caused by the appellant, was not a valid ground to reject the Resolution Plan.4. Status of the Corporate Debtor as a Going Concern:The appellant claimed that the Corporate Debtor was no longer a going concern, which should prevent the approval of the Resolution Plan. The Tribunal referred to an affidavit filed by the RP, affirming that the Corporate Debtor was a going concern. The Tribunal reviewed the financials of the Corporate Debtor, noting revenue generation even during the pandemic, and concluded that the Corporate Debtor was indeed a going concern. The Tribunal found no merit in the appellant's claim.5. Feasibility and Viability of the Resolution Plan:The Tribunal highlighted that the feasibility and viability of a Resolution Plan fall within the commercial wisdom of the CoC. The CoC had approved the Plan, finding it feasible and viable. The Tribunal stated that the appellant could not challenge the Adjudicating Authority's decision on the Plan's feasibility and viability, as it is not within the judicial purview to second-guess the CoC's commercial decisions. The Tribunal found no error in the Adjudicating Authority's approval of the Resolution Plan.Conclusion:The Tribunal dismissed the appeal, finding no valid grounds raised by the appellant to reject the Resolution Plan's approval. The Tribunal upheld the Adjudicating Authority's decision to approve the Resolution Plan, emphasizing the binding nature of the Plan and the lack of any statutory provision allowing the SRA to withdraw the Plan. The Tribunal concluded that the appeal lacked merit and was dismissed without any order as to costs.