2026 (1) TMI 1354 - AT - IBC

Approval of resolution plan and post-approval modification of acquisition structure; operational creditors and employee dues protected.

Clarifies that a resolution applicants contractual right to alter acquisition structure under an approved plan is permissible when exercised with ... Approval of resolution plan within the corporate insolvency resolution process timeline - Violation of timelines u/s 12(1) of the IBC - pay out to the operational creditors which include the employees - Modification of acquisition structure under an approved resolution plan (Clause 3.7.1) - Fair and equitable treatment of operational creditors including employees - Committee of Creditors' commercial wisdom - Role of the Resolution Professional in examining resolution plans - Violation of timelines under Section 12(1) - Section 12(1) of the IBC provides for time limit for completion of insolvency resolution process - HELD THAT:- When resolution applicant was entitled to alter the acquisition structure with the approval of the CoC or with the approval of the implementation in Monitoring Committee, the said alteration was clearly permissible even after the approval of the resolution plan. Thus, exercise of right by SRA under Clause 3.7.1 which was part of the approved resolution plan of the CoC in no manner be said to be beyond the timelines as fixed in Section 12(1) of the IBC. Approved resolution plan having already been submitted before the adjudicating authority on 11.03.2025 by the application of RP, no violation of timelines can be contended and the modification in the acquisition structure undertaken on 01.04.2025 and approved by the CoC on 01.04.2025 and placed before the adjudicating authority on 02.04.2025 cannot be said to be violating any timeline as prescribed under Section 12(1) of the IBC and the resolution plan stood approved in 10th CoC Meeting on 19.02.2025 and 21.02.2025 well within 180 days period of commencement of CIRP. We thus do not find any substance in the submission advanced by the counsel for the appellant in Comp. App. (AT) (Ins.) No. 1281/2025. Operational creditors - HELD THAT:- Operational creditors are statutorily entitled to receive the amount as provided under Section 30(2)(b) of the IBC. No case has been pleaded or proved by the appellant that amount paid in the plan to the operational creditors including employees is in violation of Section 30(2)(b) of the IBC i.e., and the appellants were entitled for some monitory statutory payment under Section 30(2)(b) of the IBC which is more than the amount as provided in the resolution plan. As per the impugned order of the adjudicating authority, the employees are entitled for provident fund dues and the gratuity dues which is required to be paid in full and same shall not be subject to the outer limit of Rs. 1 crore/- earmarked by the SRA in the resolution plan. Thus, entitlement of the employees to receive full provident fund and gratuity is fully protected by above clause. Thus, the submission of the appellant that employees are not being paid their full provident fund and gratuity cannot be accepted. Thus, we are of the view that the pay outs to the operational creditor including the employees cannot be said to be violating the provisions of Section 30(2)(b) of the IBC. Appellants have not been able to prove any other violation in the approval of the resolution plan. Thus, we are of the view that no grounds have been made out to interfere with the order impugned approving the resolution plan submitted by respondent No. 2. In result, both the appeals are dismissed. Issues: (i) Whether approval of the resolution plan and subsequent modification/alteration effected on 01.04.2025 violated the time-limit under Section 12(1) of the Insolvency and Bankruptcy Code, 2016; (ii) Whether the approved resolution plan contravenes Section 30(2)(b) of the IBC and Section 53 by providing an inadequate payout to operational creditors (including employees) and failing to protect statutory dues.Issue (i): Whether the approval of the resolution plan and the modification of the acquisition structure on 01.04.2025 violated the 180-day time-limit under Section 12(1) of the IBC.Analysis: The CIRP commenced on 30.09.2024, making the 180-day period expire on 28.03.2025. The CoC approved the resolution plan in the 10th CoC meetings held on 19.02.2025 and 21.02.2025, a Letter of Intent was issued on 24.02.2025, accepted on 24.02.2025, and performance security was submitted on 27.02.2025. The approved resolution plan expressly reserved under Clause 3.7.1 the right of the SRA to alter the acquisition structure without changing amounts payable to stakeholders, subject to CoC approval. The revised acquisition structure approved by the CoC on 01.04.2025 did not alter amounts receivable by stakeholders and was within the contractual power retained under the approved plan; the RP had already filed the application for approval before expiry of 180 days.Conclusion: The Court concluded that there was no violation of Section 12(1); the resolution plan was approved by the CoC within 180 days and the modification under Clause 3.7.1 did not contravene the statutory timeline.Issue (ii): Whether the resolution plan violated Section 30(2)(b) of the IBC and Section 53 by providing only Rs. 1 crore to operational creditors including employees and by not protecting provident fund and gratuity dues.Analysis: Section 30(2)(b) requires that operational creditors receive not less than what they would obtain under liquidation as per Section 53. The liquidation value of the corporate debtor was shown to be insufficient to satisfy financial creditors and left operational creditors effectively with nil liquidation recovery. The plan provided Rs. 1 crore to operational creditors (0.18% of admitted operational claims) which is not less than their liquidation entitlement in the factual matrix. The adjudicating authority expressly directed payment in full of Employees Provident Fund and gratuity dues (paragraph 12.12), excluding those statutory dues from the Rs. 1 crore outer limit.Conclusion: The Court held that the resolution plan did not violate Section 30(2)(b) or Section 53; payment to operational creditors was not less than liquidation value and statutory PF and gratuity dues are to be paid in full as directed by the adjudicating authority.Final Conclusion: The appeals do not disclose any valid ground to interfere with the adjudicating authority's approval of the resolution plan; the challenges on timeline and inadequate payment to operational creditors fail and the impugned order approving the resolution plan is upheld.Ratio Decidendi: Where a resolution plan is approved by the Committee of Creditors within the 180-day CIRP period and the approved plan expressly reserves a contractual right to modify acquisition structure without altering amounts payable to stakeholders, such post-approval modifications (with CoC approval) do not constitute a breach of Section 12(1); and under Section 30(2)(b) operational creditors must receive not less than their liquidation entitlement, so a plan providing amounts not less than liquidation value (with statutory dues protected) complies with the Code.