2026 (4) TMI 227 - AT - IBC

Promoter restructuring proposals cannot replace a compliant resolution plan; liquidation follows when IBC approval requirements are not met.

A promoter's restructuring proposal cannot be treated as a resolution plan unless it satisfies the Insolvency and Bankruptcy Code's mandatory approval ... Resolution Plan - Validity of Promoter restructuring proposal - Liquidation on failure of approved resolution plan - Non- compliance with Section 30(2) of the I & B Code, 2016. Resolution plan compliance - Promoter restructuring proposal - Section 12A withdrawal proposal - HELD THAT: - The Appellate Tribunal held that, from the minutes of the Committee of Creditors, the proposal submitted by the promoter was not a resolution plan within the meaning of the Code. At best, such a restructuring proposal could be a proposal to the financial creditors for permitting withdrawal under Section 12A. For a plan to be considered a resolution plan, the statutory requirements under the Code and the CIRP Regulations had to be satisfied. In the present case, the plan had not been submitted pursuant to the expression of interest invited by the Resolution Professional on the instructions of the Committee of Creditors. On that basis, the Adjudicating Authority was found justified in holding that the proposal did not comply with Section 30(2). [Paras 7, 8] The rejection of the promoter's restructuring plan as non-compliant with the Code was upheld. Liquidation on failure of approved resolution plan - Infructuous appeal - HELD THAT:- The Appellate Tribunal held that once there was no plan approved in accordance with the Code, liquidation had to follow under Section 33(1)(b). It further noted that, as stated by the appellant himself, the corporate debtor had already been sold in liquidation and a sale certificate had been issued. In these circumstances, no effective relief could be granted to the appellant. The contention regarding the appellant's eligibility under Section 29A did not alter the position, since the foundational defect was the absence of a valid resolution plan under the Code. [Paras 8, 9, 10, 11] The liquidation order was sustained, and the appeal was dismissed as disclosing no ground for interference and as having become infructuous. Final Conclusion: The Appellate Tribunal upheld the rejection of the promoter's restructuring proposal on the ground that it was not a resolution plan compliant with the Code and the CIRP framework. Consequently, the liquidation order was affirmed, and the appeal was dismissed, the corporate debtor having already been sold in liquidation. Issues: Whether the promoter's restructuring proposal could be treated as a valid resolution plan under the Insolvency and Bankruptcy Code, 2016, and whether the liquidation order passed under the Code called for interference.Analysis: The restructuring proposal submitted by the promoter was not part of a resolution plan submitted pursuant to the insolvency process and did not satisfy the statutory requirements applicable to a resolution plan. A proposal of that nature could, at best, be considered in the context of withdrawal under Section 12A of the Insolvency and Bankruptcy Code, 2016, but not as a substitute for the mandatory requirements governing approval of a resolution plan. Since no compliant resolution plan had been placed before the authority and the requirements of Section 30(2) of the Insolvency and Bankruptcy Code, 2016 were not met, liquidation under Section 33(1)(b) of the Insolvency and Bankruptcy Code, 2016 was justified.Conclusion: The restructuring proposal was not a valid resolution plan, and the liquidation order was in law and not liable to be interfered with.Final Conclusion: The challenge to the liquidation direction failed, and the appellate relief sought by the appellant was not granted.Ratio Decidendi: A promoter's restructuring proposal cannot be treated as a resolution plan unless it complies with the statutory requirements of the insolvency process and the approval framework under the Insolvency and Bankruptcy Code, 2016; in the absence of a compliant and approved resolution plan, liquidation under the Code is warranted.