Binding resolution plan cannot be withdrawn after CoC approval once submitted for adjudicatory consideration.
A resolution plan approved by the Committee of Creditors becomes binding on the Committee of Creditors and the successful resolution applicant once it is submitted for adjudicatory approval. After that stage, the insolvency framework does not permit the Committee of Creditors or the Resolution Professional to withdraw or alter the pending approval application so as to defeat the approved plan. Regulation 18(2) of the CIRP Regulations, 2016 confines committee meetings to matters that do not affect the submitted plan, and later concerns over feasibility or better recovery do not create jurisdiction to reverse the approval process. The approved plan therefore had to be considered on merits.
Issues: Whether, after the Committee of Creditors had approved the resolution plan and the application for approval was pending before the adjudicating authority, the Resolution Professional and the Committee of Creditors could seek withdrawal of that application and thereby defeat the approved plan.
Analysis: A resolution plan approved by the Committee of Creditors attains binding effect inter se the Committee of Creditors and the successful resolution applicant even before approval by the adjudicating authority. Once the approved plan has been submitted for approval, the insolvency framework does not permit the Committee of Creditors to take a decision that affects that plan, and Regulation 18(2) of the CIRP Regulations, 2016 restricts committee meetings to matters that do not affect the resolution plan submitted before the adjudicating authority. The later passage of time, alleged changes in feasibility, or the existence of a better recovery possibility do not confer jurisdiction on the Committee of Creditors to withdraw a plan already approved and pending consideration. The adjudicating authority therefore erred in allowing withdrawal of the approval application merely on the oral request of the Resolution Professional acting on the Committee of Creditors' mandate.
Conclusion: The withdrawal of the plan approval application was impermissible, and the impugned order could not be sustained; the approval application was required to be heard on merits.
Final Conclusion: The approved resolution plan could not be withdrawn at the instance of the Committee of Creditors, and the matter was restored for consideration in accordance with law.
Ratio Decidendi: A resolution plan approved by the Committee of Creditors becomes binding on the Committee of Creditors and the successful resolution applicant, and no post-approval committee decision may be taken to withdraw or alter that plan once it has been submitted for adjudicatory approval.
TaxTMI 
AI Drafter ✕
TaxTMI 
