CoC-approved insolvency resolution plan and LoI cancellation after 100% vote held invalid; remand set aside, plan restored.

After the CoC had approved a resolution plan with 100% vote share and the approval application was pending before the AA, the CoC's subsequent resolutions (post reconstitution) to withdraw the plan and cancel the LoI were held ultra vires, as the CoC becomes functus officio on plan approval and such meetings violated CIRP Regulations, 2016; consequently, the AA's reliance on those resolutions and remand to the CoC was set aside. On alleged non-compliance with s.30(2)(b) IBC regarding payment to a secured creditor, the tribunal held that mandatory minimum payments apply only to specified creditor categories and the plan already contemplated payment to the secured creditor per the plan terms; accordingly, the plan could not be rejected on this ground. The appeal was allowed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the Committee of Creditors, after a resolution plan had been approved by 100% vote and an approval application had been filed before the Adjudicating Authority, could validly convene later meetings and pass resolutions withdrawing the plan-approval application and cancelling the Letter of Intent, thereby affecting the pending plan.

(ii) Whether the Adjudicating Authority was justified in remanding the approved resolution plan to the Committee of Creditors for reconsideration on the grounds that (a) the plan did not provide payment to a secured creditor "in terms of Section 53", (b) reconstitution of the Committee of Creditors required giving the newly inducted member an opportunity to deliberate/assent/dissent to the already approved plan, and (c) alleged ineligibility/procedural irregularities relating to a supposed "consortium" justified cancellation of the Letter of Intent and remand.

(iii) Whether the withdrawal/recall application by the Resolution Professional and the remand application by the newly inducted creditor seeking reconsideration of the approved plan were maintainable in law.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Power of the CoC to take decisions affecting a plan already submitted for approval

Legal framework (as discussed by the Court): The Court applied Regulation 18(2) of the CIRP Regulations along with its Explanation (effective 16.09.2022), which clarifies that while meetings may be convened till approval under Section 31(1) or liquidation under Section 33, the Committee of Creditors may decide only on matters which do not affect the resolution plan already submitted before the Adjudicating Authority.

Interpretation and reasoning: The Court held that the later resolutions directing withdrawal of the plan-approval application and cancelling the Letter of Intent directly affected the resolution plan already filed before the Adjudicating Authority. Such decisions were therefore beyond the Committee of Creditors' authority and in breach of Regulation 18(2) Explanation. The Court further treated the approved plan as binding between the Committee of Creditors and the successful resolution applicant once approved by the Committee of Creditors and submitted for approval, and found that the Committee of Creditors could not "take a U-turn" and withdraw from the plan.

Conclusions: The later Committee of Creditors' decisions (including withdrawal of the approval application and cancellation of the Letter of Intent) were unauthorised, exceeded jurisdiction, and could not be relied upon to derail the pending approval of the already approved plan.

Issue (ii): Validity of remand to CoC based on the three reasons in the impugned order

(A) Alleged non-payment to secured creditor "in terms of Section 53" / non-compliance with Section 30(2)

Legal framework (as discussed by the Court): The Court examined Section 30(2), particularly clause (b), and assessed whether the plan contravened mandatory payment requirements. The Court also examined the plan's provisions dealing with creditors, including clauses addressing the pending claims and the plan's undertaking to ensure statutory compliance where applicable.

Interpretation and reasoning: The Court found that the resolution plan expressly contemplated the pending claim of the creditor later represented by the assignee (secured creditor) and provided that if the claim were accepted as a financial creditor, payment would be made on a pro-rata basis within the overall plan outlay. The Court accepted that, on the plan's own terms, the creditor was not proposed "nil" payment; rather, payment was contemplated on pro-rata basis within the plan amount. The Court also relied on the successful resolution applicant's subsequent letter undertaking to rework amounts within the same total plan outlay after admission of the relevant claims. On these facts, the Court held the plan could not be treated as non-compliant with Section 30(2) on the ground relied upon by the Adjudicating Authority.

Conclusions: The Court rejected the finding that the plan lacked provision for payment to the secured creditor so as to warrant remand; the plan was treated as providing payment to the concerned secured creditor as per its terms and the applicant's undertaking, and therefore could not be faulted as non-compliant on this ground.

(B) Reconstitution of CoC and "opportunity" to newly inducted member to assent/dissent

Legal framework (as discussed by the Court): The Court applied Regulation 12(3) of the CIRP Regulations, which provides that inclusion of a financial creditor in the committee from the date of admission of claim shall not affect the validity of any decision taken by the committee prior to such inclusion.

Interpretation and reasoning: The Court held that the resolution plan had been approved in 2019, whereas the new financial creditor entered the committee only after admission in 2024. By Regulation 12(3), earlier decisions remained valid and unaffected. Therefore, there was no legal requirement to reopen deliberation or voting on the already approved plan to provide the new member an opportunity to assent/dissent. Additionally, post-filing of the plan before the Adjudicating Authority, the committee could not take decisions affecting the pending plan.

Conclusions: The Court held the second reason for remand had no substance; reconstitution did not invalidate the earlier approval or require re-voting/deliberation.

(C) Alleged eligibility/procedural irregularity: "consortium" issue and cancellation of Letter of Intent

Legal framework (as discussed by the Court): The Court examined the plan and the Expression of Interest documents, and considered reliance placed on a clause of the request-for-resolution-plan documentation concerning "submission by a consortium".

Interpretation and reasoning: The Court found that the Expression of Interest and the resolution plan were submitted by a single incorporated entity (a company), not a consortium. The clause relied upon (prohibiting change of consortium composition) applied only where the resolution applicant was a consortium; thus, it had no application. The Court further held that once the resolution professional and the committee had examined eligibility and approved the plan, the reconstituted committee-acting through meetings that were themselves unauthorised insofar as they affected the pending plan-could not use such allegations to cancel the Letter of Intent or justify remand.

Conclusions: The third reason for remand was rejected as factually incorrect and legally irrelevant, and could not justify remand of the plan.

Issue (iii): Maintainability of the withdrawal/recall and remand applications seeking to derail the approved plan

Legal framework (as discussed by the Court): The Court's analysis flowed from the binding nature of a CoC-approved plan once submitted for approval, and from the restriction under Regulation 18(2) Explanation against committee decisions affecting the submitted plan.

Interpretation and reasoning: Given that the committee lacked authority to withdraw from the plan after submission for approval and its later resolutions were beyond jurisdiction, the Court held there was no jurisdiction to seek withdrawal/recall of the plan-approval application. Consequently, the withdrawal application by the Resolution Professional and the application by the newly inducted creditor seeking remand for reconsideration were held not maintainable.

Conclusions: The Court rejected both applications seeking withdrawal/remand, set aside the remand order, revived the pending plan-approval application for fresh decision in accordance with law, and directed expeditious disposal.

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