TaxTMI 
TaxTMI 
2021 (9) TMI 672
X X X X Extracts X X X X
X X X X Extracts X X X X
....v., Mr. Avinash B. Amarnath, AOR, Ms. Mahima Singh, Adv., Mr. S. Mahajan Adv., Ms. Neelu Mohan, Adv., Mr. Nakul Dewan, Sr. Adv., Mr. Atul Sharma, Adv., Mr. Abhishek Sharma, Adv., Ms. Ashly Cherian, Adv, Ms. Anisha Mahajan, Adv, Ms. Harshita Agarwal, Adv., Mr. Gautam Talukdar, AOR, Mr. V. Giri, Sr. Adv., Mr. Ashish Rana, AOR, Mr. Anurag Singh, Adv., Mr. Jayant Mehta, Sr. Adv., Ms. Sonia Dube, Adv., Mr. Shatadru Chakraborty, Adv., Ms. Kanchan Yadav, Adv., Ms. Surbhi Anand, Adv., Mr. Surya Kapoor, Adv. And M/s. Legal Options, AOR JUDGMENT Dr Dhananjaya Y Chandrachud, J This judgment has been divided into sections to facilitate analysis. Further, a Glossary of defined terms which have been used throughout the judgment has also been provided. The sections in the judgment are as follows: Glossary ............................................................................................................ 5 A Civil Appeal No 3224 of 2020 - the Ebix Appeal ...................................... 11 A.1 The appeal .......................................................................................... 11 A.2 Initiation of CIRP ...................................
X X X X Extracts X X X X
X X X X Extracts X X X X
.............. 76 E.3 Submissions for the second respondent ............................................. 78 F Submissions of counsel in the Seroco Appeal .......................................... 80 F.1 Submissions for the appellant ............................................................. 80 F.2 Submissions for the second and third respondents ............................ 82 G Purpose of a law on insolvency.............................................................. 84 H Nature of a Resolution Plan ...................................................................... 90 I Statutory framework governing the CIRP ................................................ 115 J Withdrawal of the Resolution Plan by a successful Resolution Applicant under the IBC ................................................................................................ 134 J.1 The absence of a legislative hook or a regulatory tether to enable a withdrawal .................................................................................................. 134 J.2 Terms of the Resolution Plan are not sufficient to effect withdrawals or modificatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Gratuity and Pension Trust and Chhattisgarh State Electricity Board Provident Fund Trust CSEB Application CA No 160 (PB) of 2018 - filed by E-RP before NCLT Ebix Ebix Singapore Private Limited Ebix Appeal Civil Appeal No 3224 of 2020 E-CoC Committee of Creditors of Educomp Solutions Limited Educomp Educomp Solutions Limited EMD Earnest Money Deposit EOI Expression of Interest E-RP Resolution Professional for Educomp Solutions Limited Essar Steel CoC of Essar Steel India Ltd. v. Satish Kumar Gupta & Ors. EXIM Bank Export Import Bank of India First Withdrawal Application CA 1252 (PB) of 2019 in CP (IB) No 101 (PB) of 2017 - filed by Ebix before NCLT Ghanshyam Mishra & Sons Ghanashyam Mishra and Sons Private Limited through the Authorized Signatory v. Edelweiss Asset Reconstruction Company Limited through the Director & Ors. Gujarat Urja Gujarat Urja Vikas Nigam Limited v. Amit Gupta & Ors. GUVNL Gujarat Urja Vikas Nigam Limited GUVNL Appeal Civil Appeal No 9241 of 2019 - filed by GUVNL before Supreme Court IBC Insolvency and Bankruptcy Code, 2016 IBBI Insolvency and Bankruptcy Board....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... out of an appeal from a judgment dated 29 July 2020 of the NCLAT. The NCLAT allowed the Withdrawal Appeal, Company Appeal (AT) (Insolvency) No 203 of 2020 instituted by the first respondent, E-CoC, under Section 61 of the IBC against a judgment dated 2 January 2020 of the NCLT at its Principal Bench in New Delhi. 2 The NCLT allowed the Third Withdrawal Application, CA No 1816 (PB) of 2019 in CP (IB) No 101 (PB) of 2017 filed by Ebix under Section 60(5) of the IBC to withdraw its Resolution Plan submitted for Educomp. While reversing that order, the NCLAT held that the application to withdraw from the Resolution Plan could not have been allowed since: (i) it was barred by res judicata; and (ii) the NCLT does not have jurisdiction to permit such a withdrawal. The correctness of the view of the NCLAT comes up for determination in the present appeal. A.2 Initiation of CIRP 3 On 5 May 2017, Educomp filed a petition, CP (IB) No 101 (PB) of 2017 under Section 10 of the IBC seeking to initiate voluntary CIRP. The NCLT admitted this petition on 30 May 2017, and appointed an IRP. Hence, 30 May 2017 would be taken as the 'Insolvency Commencement Date' for the purposes of Section 5(1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ution Plan; (ii) 17.29 per cent members voted to reject the Resolution Plan; and (iii) the remaining members, having cumulatively 8.55 per cent share, abstained from voting on the Resolution Plan. The Resolution Plan thus failed to achieve the minimum percentage of 75 per cent, in accordance with Section 30(4) of the IBC (as it stood then). 12 A day later on 23 February 2018, one of the members of the E-CoC (CSEB) informed the E-RP by an email that due to a technical error, they could not participate in the e-voting process. CSEB had a voting share of 1.195 per cent in the E-CoC, and wanted its affirmative vote to be recorded on the Resolution Plan. CSEB's vote would enhance the voting share in favour of Ebix's resolution plan to 75.35 per cent, thus meeting the threshold under Section 30(4). 13 The E-RP filed the CSEB Application, CA No 160 (PB) of 2018 under Section 60(5) to seek the directions of the NCLT in regard to CSEB's late vote. NCLT by its order dated 28 February 2018, directed the E-RP to file an application for approval of Ebix's Resolution Plan under Section 30(6) of the IBC, clarifying that the issue of CSEB's vote would be taken up together with the applicatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oj Gairola, "How Educomp May Have Subverted the Spirit of India's Insolvency and Bankruptcy Process" (The Wire, 3 April 2018) available at accessed on 26 July 2021. Another article titled "Educomp's Insolvency Process Becomes Murkier as Ebix Buys Smartclass Educational Services" was published by The Wire on 26 April 2018, Manoj Gairola, "Educomp's Insolvency Process Becomes Murkier as Ebix Buys Smartclass Educational Services" (The Wire, 26 April 2018) available at accessed on 26 July 2021. 16 The E-RP has stated before this Court that based on these reports, IFC, a financial creditor of Educomp, filed the IFC Application, CA No 358 of 2018 under Section 60(5) of the IBC seeking investigation of the affairs/transactions of Educomp. On 4 May 2018, when the IFC Application came up before the NCLT, along with the CSEB Application and the Approval Application, it directed the E-RP to file its reply and also directed IFC to serve a notice on Ebix. 17 Similar applications- Axis Application, IA No 448 (PB) of 2018 and SBI Application, CA No 639 (PB) of 2018, under Section 60(5) of the IBC read with Section 213 of the 2013 Act were filed by other financial creditors of Educomp, Axis ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t with Digital Learning Solution SDN BHD; (viii) Transactions referred to in the applications filed by International Finance Corporation, Axis Bank Limited and State Bank of India with the Hon'ble National Company Law Tribunal; and (ix) Review of provisions against receivables done by Educomp Solutions Limited; (x) All other transactions/points raised in the applications filed by Axis Bank, IFC and SBI with Hon'ble NCLT; (xi) Any other issue, which the Committee of Creditors may deem fit RESOLVED FURTHER THAT the Resolution Professional, be and is hereby authorized by the Committee of Creditors and directed to file appropriate application/petition with the Hon'ble National Company Law Tribunal, inter alia, seeking consent/order of the Hon'ble NCLT on the proposed special investigation audit to be conducted by the independent agency. RESOLVED FURTHER THAT given the limitations inherent in the previous audits conducted on the Company, and in order for the said investigation to be comprehensive, the Resolution Professional, while filing such application/ petition, shall also, as an additional prayer, seek consent/ order of the Hon'....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g conducted by agencies such as SFIO and CBI. The material parts of the disclosure read thus: "This is with reference to your mail dated June 10, 2019, related to news appeared in the "Business Standard" captioned "Transactions of debt-ridden Educomp Solutions come under SFIO scanner". [...] 3. It is pertinent to note that BDO India LLP carried out transaction audit in order to ascertain if there was any preferential, undervalued, extortionate or fraudulent transactions falling within the ambit of Section 43, 45, 50 and 66 of the Code. The Transaction review report was prepared by BDO India LLP in February 2018 which was further circulated and discussed with the CoC. On examination of the BDO Report and other relevant material available with the Resolution Professional during the CIRP period, no transaction was found by the Resolution Professional which was required to be avoided in terms of the said Sections. Further, the two land transactions as alleged in the Media Report have not been reported by BDO in their Report and hence, the Resolution Professional is not in a position to comment on the same. As regards allegation in the Media Report th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pplication filed by one Ebix Singapore Ptd. Limited seeking re-valuation of the Resolution Plan submitted by it before the Resolution Professional. No ground for considering the prayer sought in the application is made out. The application is dismissed as such." 28 Thereafter, Ebix filed the Second Withdrawal Application, CA 1310 (PB) of 2019 in CP (IB) No 101 (PB) of 2017 under Section 60(5) of the IBC, seeking the following reliefs: "i. Allow the Resolution Applicant to withdraw the Resolution Plan dated 19.02.2018 (along with the Addendum/Financial Proposal dated 21.02.2019) submitted by it, and as approved by the Committee of Creditors; ii. Direct the Ld. Resolution Professional and/or Educomp Solutions Limited and the Committee of Creditors to refund the Earnest Money Deposit of Rs. 2,00,00,000/- furnished by the Resolution Applicant in respect of the Resolution Plan; iii. Withhold approval of the Resolution Plan sanctioned by the Committee of Creditors of the Corporate Debtor, as filed before this Hon'ble Tribunal on 07.03.2018 and recorded vide order dated 1.1.04.2018, pending detailed consideration of the same by the Resol....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r applications for withdrawal were referred to: "xiv. It may be noted that, the present Applicant had also filed an Application dated 05.07.2019 bearing PB/IA/1252/2019 under Section 60(5) of the Code, seeking revision/revaluation and/or withdrawal of the Resolution Plan. The said application was dismissed by this Hon'ble Tribunal on the basis that modification/revaluation of the Resolution Plan could not be permitted. The Applicant thereafter filed an Application bearing PB/IA/1310/2019 seeking withdrawal of the Resolution Plan simpliciter, which was dismissed by the Hon'ble Tribunal vide order dated 07.09.2019, while granting liberty to file a fresh application seeking withdrawal of the Resolution Plan." The reasons for withdrawal were the same as those in the previous applications for withdrawal. 31 On 18 September 2019, the NCLT issued notice in the Third Withdrawal Application and directed the E-RP to place it before the E-CoC. The E-RP placed the application before the E-CoC at the 14th meeting on 26 September 2019. The E-CoC resolved not to allow the application for withdrawal. A.6 Orders of NCLT and NCLAT 32 By its order dated 2 January 2020, NC....
X X X X Extracts X X X X
X X X X Extracts X X X X
....implement the Resolution Plan. The relevant parts of the order are extracted below: "20. In the instant case the Resolution Plan is still pending before the Adjudicating Authority for approval. Under the provisions of Section 31 of the Code, a Resolution Plan becomes binding only after acceptance of a plan by the Adjudicating Authority. [...] 23. Section 30(2)(d) of the Code mandates the Adjudicating Authority to ensure that there are effective means of enforcement and implementation of the Resolution Plan. Similarly, the proviso to sub-section (1) of Section 31 of the Code mandates Adjudicating Authority to ensure effective implementation of the resolution plan. The object. in approval of the resolution plan is to save the corporate debtor and to put it back on its feet. An unwilling and reluctant resolution applicant, who has withdrawn his resolution plan, neither can put the corporate debtor back to its feet nor the effective implementation of its resolution plan can be ensured. 24. No doubt the withdrawal of the resolution plan at this advance stage has caused great prejudice to the creditors/stake holders and legal consequences on the withdr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... CA 1252 of 2019 order dated 10.7.2019 binds the 1st Respondent/'Resolution Applicant' as an 'Inter-se' party. [...] 84....the Adjudicating Authority in the particular circumstances of the present case has no power to grant /reserve liberty to bring a fresh application and hence, the subsequent application filed by the 1st Respondent /'Resolution Applicant is barred by the principle of 'Res Judicata' notwithstanding the liberty to file fresh one." On the merits of the application for withdrawal, the NCLAT held that: (i) once the Resolution Plan was approved by the CoC, the NCLT did not have jurisdiction to permit its withdrawal; (ii) the Adjudicating Authority could not enter upon the wisdom of the decision of the CoC to approve the Resolution Plan; (iii) the Resolution Applicant had accepted the conditions of the Resolution Plan and no change could be permitted; (iv) orders have already been reserved in the Approval Application; (v) no Special Investigation Audit had been conducted; (vi) Section 32A of the IBC grants full immunity to the Resolution Applicant from any offences committed before the commencement of the CIRP; and (vii) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 62 of the IBC from a judgment dated 30 September 2020 of the NCLAT. The NCLAT dismissed an appeal, Company Appeal (AT) (Insolvency) No 653 of 2020 instituted by the appellant, Kundan Care, under Section 61 of the IBC against an order dated 3 July 2020 of the NCLT. 41 The NCLT had dismissed an application, IA No 1679 of 2019 in CP No (IB)-940 (ND) of 2018 filed by Kundan Care under Section 60(5) of the IBC to withdraw its Resolution Plan submitted for the fourth respondent - Corporate Debtor, Astonfield. In appeal, the NCLAT upheld the NCLT's decision, relying on its judgment impugned in the Ebix Appeal. It held that an application filed by a Resolution Applicant to withdraw from the Resolution Plan approved by the CoC could not be allowed since: (i) there was no provision in the IBC for it; (ii) the Resolution Plan is enforceable as a contract against the Resolution Applicant; and (iii) the Resolution Applicant was estopped from withdrawing. 42 The correctness of this view of the NCLAT now comes up for determination in the present appeal. While issuing notice on 16 November 2020, this Court had directed for an ad-interim stay on the judgment of the NCLAT, which continues til....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m on 13 November 2019. 51 The A-CoC voted on the Resolution Plans on 14 November 2019, where the Resolution Plan submitted by Kundan Care was approved with a majority of 99.28 per cent, with 0.72 per cent abstaining. On 15 November 2019, the A-RP issued a Letter of Award to Kundan Care. Kundan Care also deposited a PBG of Rs. 5 Crores with the A-RP/A-CoC. 52 A-RP then filed an application, CA No 1526 of 2019 for approval of the Resolution Plan under Section 31 of the IBC before the NCLT, along with Form H, as mandated under the CIRP Regulations. This application is currently pending adjudication before the NCLT. B.4 Astonfield's dispute with GUVNL 53 Before proceeding further, it is important to discuss the dispute arising out of Astonfield's PPA with GUVNL. The PPA was signed on 30 April 2010, came into force in December 2012. and was valid for a period of 25 years. Crucially, this PPA was the only agreement entered into by Astonfield and formed the entirety of its business. 54 When CIRP was initiated against Astonfield, GUVNL issued a notice of default under Article 9.2.1(e) of the PPA, stating that the initiation of insolvency was an "event of default". This was c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....GUVNL Appeal was pending before this Court. However, it has been disposed by a judgment dated 8 March 2021, in the following terms: "165 Given that the terms used in Section 60(5)(c) are of wide import, as recognized in a consistent line of authority, we hold that the NCLT was empowered to restrain the appellant from terminating the PPA. However, our decision is premised upon a recognition of the centrality of the PPA in the present case to the success of the CIRP, in the factual matrix of this case, since it is the sole contract for the sale of electricity which was entered into by the Corporate Debtor. In doing so, we reiterate that the NCLT would have been empowered to set aside the termination of the PPA in this case because the termination took place solely on the ground of insolvency. The jurisdiction of the NCLT under Section 60(5)(c) of the IBC cannot be invoked in matters where a termination may take place on grounds unrelated to the insolvency of the corporate debtor. Even more crucially, it cannot even be invoked in the event of a legitimate termination of a contract based on an ipso facto clause like Article 9.2.1(e) herein, if such termination will not have th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....insurance claim of Rs. 46.40 crores in relation to floods in 2017 had been repudiated by the insurer. Further, it also noted that this may also adversely affect the claim for the floods in 2019; and (iv) That the IM issued by A-RP represented that since Astonfield had not availed the benefit of "Accelerated Depreciation" under the PPA, hence, it was entitled to a sum of Rs. 6.614 crores from GUVNL, which was a "Trade Receivable". However, it noted that Kundan Care had subsequently discovered a previous judgment of this Court upon identical facts, where it was noted that the Project Developer shall not be entitled to a higher/revised tariff in case of not availing "Accelerated Depreciation". 60 On 6 January 2020, Kundan Care filed an additional affidavit outlining the additional costs it would face on account of: (i) deterioration of the solar panels due to GUVNL unilaterally not permitting their replacement, thereby leading to additional cost of Rs. 30 crores (against an initial expected cost of Rs. 9 crore); (ii) Astonfield's Plant not producing electricity at its optimum level, thereby leading to a loss of revenue up to Rs. 150 lacs per month; and (iii) CIRP costs on ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....efunded to the Applicant;" 62 While the GUVNL appeal and its application remained pending, on 14 May 2020, Kundan Care requested the NCLT to take up its application for an early hearing. Following this, the application was listed on 15 June 2020. 63 On 12 June 2020, A-RP filed its reply to Kundan Care's application and additional affidavit, where it opposed the withdrawal of the Resolution Plan after its approval by the A-CoC and stated that: (i) In relation to the ongoing dispute with GUVNL, Kundan Care was aware of the same when it submitted the Resolution Plan; (ii) In relation to the damage to the solar panels, it pointed out that the A-RP had informed Kundan Care about the floods in 2019 and an Operation and Management Agency had been hired to clear the water at the Project Site, which had been done; (iii) In relation to the repudiation of the insurance claim, the RFRP or IM never guaranteed that the claim would be successful. In any case, the A-RP was actively pursuing the challenge to its repudiation; (iv) In relation to the "Accelerated Depreciation", that the same had been listed as a "doubtful debt" by the A-RP in the IM. Further,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y the Counsel for the COC that another matter is subjudiced before the Hon'ble Supreme Court in which inter-alia a similar request has been made. This has been submitted by the Cotinsel for the COC on page 31 of the reply filed by COC in response to the application. Keeping this in view, it will not be appropriate for this Tribunal to deal with an issue which is already subjudiced before the Hon'ble Supreme Court. The Application is hereby rejected." 67 In view of the NCLT's order, Kundan Care made an oral request for withdrawal of its application to this Court when the GUVNL Appeal was listed on 20 July 2020. This request was allowed by this Court. 68 Thereafter, the appellant filed an appeal before the NCLAT, challenging the order dated 3 July 2020 passed by the NCLT. NCLAT did not issue notice in the appeal, but heard the submissions of all parties at the stage of admission and directed them to file their written submissions. 69 By the impugned judgment dated 30 September 2020, the NCLAT dismissed the appeal by Kundan Care, relying on the judgment impugned in the Ebix Appeal. It noted: "7. Be it seen that the CIRP process undertaken involves fi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t there is no provision in the I&B Code compelling specific performance of Resolution Plan by the Successful Resolution Applicant has to be repelled on four major grounds:- (i) There is no provision in the l&B Code entitling the Successful Resolution Applicant to seek withdrawal after its Resolution Plai1 stands approved by the Committee of Creditors with requisite majority; (ii) The successful Resolution Plan incorporates contractual terms binding the Resolution Applicant but it is not a contract of personal service which may be legally unenforceable; (iii) The Resolution Applicant in such case is estopped from wriggling out of the liabilities incurred under the approved Resolution Plan and the principle of estoppel by conduct would apply to it; (iv) The value of the assets of the Corporate Debtor is bound to have depleted because of passage of time consumed in Corporate Insolvency Resolution Process and in the event of Successful Resolution Applicant being permitted to walk out with impunity, the Corporate Debtor's depleting value would leave all stake holders in a state of devastation." The NCLAT held that withdrawal of a Resolution Pla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....king to initiate CIRP. 74 By an order dated 17 August 2018, the NCLT initiated CIRP against Arya Filaments and appointed the first respondent, Mr Ravi Kapoor, as the IRP. Thereafter, a CoC was constituted, which consisted of Kotak Mahindra and the third respondent, UBIL. The Arya-CoC then appointed Mr Ravi Kapoor as the RP. C.3 Submission and Approval of Resolution Plan 75 The Arya-RP thereafter invited Resolutions Plans for Arya Filaments. Seroco, being a company formed by the former employees of Arya Filaments, submitted a Resolution Plan on 13 March 2019 where, inter alia, they offered to pay Rs. 6,79,22,000. This was the only Resolution Plan which was received. 76 At its 4th meeting held on 16 April 2019, the Arya-CoC noted that Seroco's Resolution Plan needed some improvements and directed it to submit a revised Plan. Seroco's revised Resolution Plan was then approved by the Arya-CoC in its 5th meeting held on 10 May 2019, with 100 per cent approval. 77 On or about 15 May 2019, the Arya-RP filed an application, IA No 280 of 2019 in CP (IB) No 29 of 2018 under Section 30(6) before NCLT for confirmation of the Resolution Plan. Form H under the CIRP Regulations was....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r on 23 October 2020, the NCLT allowed the Arya-RP's application and confirmed Seroco's Resolution Plan which had been approved by the Arya-CoC. In relation to Seroco's application for modification, it noted: "18. It is the matter of record that the instant application was filed subsequent to the filling of the above stated IA ie. IA 280 of 2019 filed under Section 30(6) of the IB Code. It is stated by the Applicant that the Resolution Plan, so submitted by the Applicant, is based on the Information Memorandum which was published two years ago. Considering the time of two years and outbreak of Covid-19, the Applicant is not aware of the current financial condition of the Corporate Debtor and is now not in a position to bear the costs/losses of the Corporate Debtor and hence, is seeking for withdrawal of the Resolution Plan. This story is not believable as the Corporate Debtor, being a MSME, has filed the plan considering the financial 'condition of the Corporate Debtor and have shown his interest to take the Company. Hence, having no knowledge of the financial condition does not arise at all. 19. It is pertinent to mention herein that in view of the judgement pass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted that a successful Resolution Applicant may be permitted to withdraw the resolution plan (pending approval of the Adjudicating Authority), on account of: (a) subsequent developments in relation to Educomp (which in this case relate to investigations of fraud and mismanagement during the pre-CIRP period); and (b) due to an inordinate lapse of time, which has resulted in the complete erosion of the fundamental commercial substratum underlying the Resolution Plan. Further, he argues that the NCLAT did not correctly apply the doctrine of constructive res judicata. He has made the following submissions: (i) Ebix is not bound by the Resolution Plan prior to the approval of the Adjudicating Authority, in terms of the CIRP documents read with the scheme of IBC. In this regard, our attention was drawn to: (a) Section 31(1) of the IBC, which provides that the Resolution Plan is "binding...on all stakeholders" only upon approval by the Adjudicating Authority; (b) Section 74(3) of the IBC, which provides that a person can be prosecuted or punished for contravening the Resolution Plan only after its approval by the Adjudicating Authority; (c) The documents....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the resolution plan (i.e., 19 February 2018) and twenty-seven months from the CIRP commencement date. Such severe and inordinate delay is impermissible under Section 12 of the IBC and justifies the withdrawal of the Plan; (e) The delay in the approval was on account of the actions of members of the E-CoC, who had sought a special audit of Educomp due to the concerns relating to mismanagement of its affairs. Several members had filed applications (IFC, Axis Bank and SBI) before the Adjudicating Authority in this regard. The Adjudicating Authority by orders dated 13 August 2018, 20 August 2018 and 31 August 2018 took cognizance of these applications and directed them to be placed before the E-CoC. The E-CoC approved the Investigation Audit Application filed on its behalf before the Adjudicating Authority for conducting a special audit by 77.85 per cent votes; (f) SFIO initiated investigation against Educomp. Ebix became aware of the investigation only through disclosures made to NSE/BSE and regulators on 12 June 2019; (g) Ebix had sent a notice dated 2 July 2018 to the E-CoC/E-RP stating that the severe delays in the CIRP have prejudiced the commercial co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rally mismanaged and are susceptible to criminal investigations; (d) There has been a lapse of over three years resulting in an erosion of vital business prospects of Educomp; and (e) The implementation and viability of a Resolution Plan is to be assessed at the time of consideration of such plan by the competent Court/Tribunal, and not at the time of submission of the Plan. The subsequent events that have transpired after the submission of the Resolution Plan are relevant for evaluating the commercial viability and the capability to implement the plan. In the present case, the substratum forming the basis of the resolution plan has been eroded by the occurrence of the abovementioned events. Thus, the successful Resolution Applicant has the right to withdraw the Resolution Plan in such circumstances; (iv) Material information relating to the financial position and affairs of Ebix was not provided to Ebix after the submission of the Resolution Plan, as a consequence of which, there is an impairment of a fair process in the conduct of a commercial transaction. In this context: (a) Section 29(2) of the IBC, provides that all relevant information sho....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Plan and an inordinate lapse of time; (vi) The NCLT had good and valid reasons allowing for the withdrawal of the resolution plan since: (a) There was no approval by the E-CoC with the requisite majority of 75 per cent. When the voting took place on the resolution plan submitted by the Appellant on 22 February 2018, there was a shortage in the votes required to achieve the statutory requirement of 75 per cent of votes in the E-CoC. On 23 February 2018, one of the financial creditors who was not present at the meeting of the E-CoC intimated its agreement with the resolution plan and accordingly the Approval Application was filed on 7 March 2018. Orders have been reserved on the Approval Application on 10 January 2018; and (b) Fulfilment of the Plan cannot be foisted on an unwilling Applicant. This view of the NCLT is consistent with the legal position which vests it with the power to permit a withdrawal from a resolution plan for good and substantial reasons; and (vii) The doctrine of res judicata does not bar the relief that Ebix had sought in its Third Withdrawal Application of its Resolution Plan. The First Withdrawal Application arose from a ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le introducing the amendments, shifted the paradigm on contract enforcement in India where specific performance is now the norm, rather than the exception; (v) The resolution process involves significant public money, resources and time. Enabling withdrawals would undermine the goals of predictability and finality, which the legislature had recognized as the need of the hour in the Rajya Sabha debates on the IBC; (vi) Non-implementation of Resolution Plans after approval from the Adjudicatory Authority under Section 31 of the IBC, pertinently on a narrow scope of judicial review, is liable to criminal prosecution under Section 74(3) of the IBC. This Court should not allow a successful Resolution Applicant to withdraw from a duly concluded contract; (vii) The consequences of permitting a withdrawal by Ebix would push Educomp towards liquidation, which would risk thousands of crores of public monies owed to public sector banks during the economic crisis caused by the COVID-19 pandemic; (viii) Permitting withdrawal of an approved Resolution Plan would tread on the exclusive domain of the CoC, which has the power to determine the feasibility and viab....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... with Clause 1.9.1, enables a party to submit a Resolution Plan upon payment of an earnest money deposit of Rs. 2 crore. Along with the Resolution Plan, the Resolution Applicant was required to submit an undertaking accepting the terms of the RFRP, including the minimum six-month period of Resolution Plan validity; (c) Clause 1.9.3, read with Clause 1.9.5, ensures that a CoC approved Resolution Plan becomes a binding contract between the E-CoC and Ebix, since the earnest money deposit needs to be replaced with a performance guarantee, which is 10 per cent of the Resolution Plan value. Any violation of the concluded contract, which would be the approved Resolution Plan in this case, would give the E-CoC the right to invoke the performance guarantee; (d) The above clauses, in addition to clause 1.8.3, read with 1.9.5, evince that the six-month validity is with respect of the EMD alone, and is hence only related to a period until acceptance by the E-CoC; (e) The consequence of approval by the Adjudicating Authority under Section 31 of the IBC is that the parties enter into definitive binding agreements, the implementation of the Resolution Plan commences and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d to withdraw from a plan which provided a 90 per cent haircut; and (b) actus curiae neminem gravabit, i.e., the act of Court shall harm no man, is a settled principle in law; (xvi) Ebix's argument that the substratum or commercial viability has eroded due to the subsequent circumstances is facetious since: (a) Ebix had conducted its own due diligence, in accordance with the RFRP. Section 29 of the IBC also enabled the appellant to access to an IM on Educomp, which would include all relevant information, including financial position and pending disputes. Clause 1.13.7 of the RFRP also stipulates that failure to conduct adequate due diligence is not a ground to relieve the Resolution Applicant from its obligations under a submitted Resolution Plan; (b) Ebix continued to be interested in Educomp as late as 1 June 2020, when it addressed a letter stating that the software licenses for online education, issued by Educomp, have become even more relevant in the circumstances of the pandemic; (c) The Investigation Audit Application for investigations into the affairs of Educomp was filed in May 2018 and disposed of by August 2018, which was pri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rting the submissions of the E-CoC, Mr Nakul Dewan, learned Senior Counsel, has appeared on behalf of the E-RP. He has submitted that: (i) Upon the approval of a Resolution Plan by the CoC, a concluded contract comes into existence between the Resolution Applicant and CoC. Any withdrawal of the Resolution Plan would violate the concluded contract; (ii) In the present case, Clauses 1.9.3 and 1.9.5, give the right to the E-CoC to invoke the PBG submitted by Ebix if it attempts to renege from its contractual obligation to implement the Resolution Plan; (iii) The withdrawal would also be in violation of the objective of the IBC, as noted by this Court in Swiss Ribbons (supra), which is to ensure the revival and continuation of the Corporate Debtor. The withdrawal of the Resolution Plan at a belated stage, would lead to the Corporate Debtor going into liquidation; (iv) The withdrawal of a Resolution Plan after its approval by the CoC is not contemplated by: (a) The UNCITRAL Guide, according to which the role of judicial authorities is limited to approving the Resolution Plan after ensuring that it was approved by the CoC properly. It does not....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... August 2018; (vii) The investigations by the SFIO and CBI were initiated after the filing of the Approval Application before the NCLT. Since the E-RP was not aware of any discrepancies or illegalities committed by the former management of Educomp, information about such activities could not have been provided to intending Resolution Applicants under Section 29 of the IBC. Section 29 only envisages that the RP will provide information to prospective Resolution Applicants on a best-effort basis; (viii) Ebix is a professional corporate entity, and through the express provisions of its own Resolution Plan, has stated that it has significant previous experience in the revival of stressed assets. Before submitting its Resolution Plan for Educomp, Ebix was provided access to the Virtual Data Room by the E-RP and conducted its due diligence. Hence, it should not be allowed to seek a withdrawal, by arguing that certain facts were not within its knowledge; and (ix) In view of the decision of this court in Nagabhushanammal v. C Chandikeswaralingam, (2016) 4 SCC 434, para 15, the Third Withdrawal Application was barred by the principles of res judicata since it soug....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tor at the heart of the insolvency process. The CIRP mandates interests of stakeholders to be better preserved by reorganization than liquidation. The BLRC Report was relied upon by this Court in K Sashidhar (supra) to propound the principle of "commercial wisdom of the CoC" which the Adjudicating Authority cannot interfere with as the creditors, as the loss-making party in the insolvency, are best placed to determine the terms of the resolution. However, this principle does not touch upon instances where there is a conflict between the CoC and the Resolution Applicant where the latter will prima facie suffer a loss. The Resolution Applicant has no stake in the process until their Plan is approved by the NCLT and the probability of a complete loss, prior to the approval of the Plan, is justiciable; (f) The IBC contemplates strict timelines, and therefore did not envisage a scenario of withdrawal, prior to approval of the Resolution Plan under Section 31(1) of the IBC. This Court, in Essar Steel (supra), held that the 330-day outer limit is directory which has resulted in Kundan Care's Plan remaining pending before the NCLT for over a year, resulting in unviability and loss....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (a) There is no concluded contract between the Resolution Applicant and the CoC until the NCLT approves of the same. Section 7 of the Contract Act requires the acceptance of offer to be absolute, unconditional and unqualified. Clauses 1.1.9, 1.2, 1.9.4 and 2.2.6 of the RFRP record the fact that the Plan would be binding only after the approval of the Adjudicating Authority; (b) The RFRP is in the nature of an invitation to offer. Kundan Care's Resolution Plan is an offer that is made in pursuance of the RFRP. A contract is concluded and becomes binding between the parties, only upon the communication of its acceptance under Regulation 39(5) of the CIRP Regulation, after the approval of the Adjudicating Authority under Section 31 of the IBC. It would be incorrect to term it as a concluded contract, since it would have unforeseeable public ramifications; (c) Since there is no concluded contract, withdrawal of an offer prior to acceptance is a settled principle in contract law and the Adjudicating Authority can give effect to this under Section 60(5) of the IBC; (d) Arguendo, if there is a concluded contract, it has become void under Sections 32 and 35 of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion Plan is a contingent contract under Section 32 of the Indian Contract Act: (a) The contract has become void since the contingency of certainty of PPA with GUVNL within a specified time through approval of the NCLT has become impossible; (b) GUVNL's Appeal against the continuation of the PPA, resolved by this Court in Gujarat Urja (supra), compounded by the COVID-19 pandemic and the lockdown, is primarily responsible for the delay in the conclusion of the CIRP. The delay, as of 14 July 2021, in concluding the CIRP is 608 days. The CIRP costs (Rs. 12 lakhs per month approx.) are also increasing, which have to be borne entirely by Kundan Care. The NCLT should have considered the alternative prayer of permission to re-negotiate the financial proposal with the CIRP; (c) The A-CoC's approval through voting constitutes 'provisional acceptance of offer', as was held analogously by this Court in Haridwar Singh v. Bagun Sumbrui, (1973) 3 SCC 889 which held that the contract was not concluded in the absence of the confirmation by the Government of the conditional acceptance by the Divisional Forest Officer. A statutory reading of Resolution Plans as contingent ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng submissions, in addition to the arguments recorded above in the Ebix Appeal: (i) There is no direct provision with respect to withdrawal of a Resolution Plan under the IBC by a Resolution Applicant, once approved by the CoC. Consequently, the Adjudicating or Appellate Authority has no jurisdiction to direct withdrawals or modification of Resolution Plans; (ii) Section 12 of the IBC provides for a time bound period of 180 days extendable up to 330 days for the completion of the CIRP. Permitting the Resolution Applicant to withdraw the Resolution Plan after the approval of the CoC sets at naught the entire time period subsumed in negotiating and voting upon a Resolution Plan; (iii) Kundan Care was permitted to submit its Resolution Plan in spite of a failure to submit an EOI in time. Kundan Care was aware of the pending litigation regarding the continuance of the PPA with GUVNL and had negotiated with the A-CoC on that basis. Yet, Kundan Care filed an application to withdraw its Plan within a month of its approval and filing before the Adjudicating Authority. The plea of withdrawal is an opportunistic tactic for re-negotiation; (iv) Clause 1.8.4....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e the NCLT is satisfied that the Resolution Plan complies with the requirements of Section 30(2), it grants its approval to the Plan, which becomes binding on all the stakeholders involved in the Resolution Plan. Thus, in the above scheme of things, IBC does not contemplate withdrawal of Resolution Plan once it has been approved by the CoC; (ii) The penal provision under Section 74(3) is applicable to a successful Resolution Applicant as it is a stakeholder in the CIRP. The existence of a penal provision indicates that the legislature intended to deter and discourage withdrawals of Resolution Plans; (iii) CIRP is a time bound process of 180 days, which can be further extended up to 330 days. If a successful Resolution Applicant is allowed to withdraw its Resolution Plan, it will set the clock back on the time spent on receiving the Resolution Plan, evaluating it under Section 30(2) of the IBC, putting it to vote before the CoC and finally obtaining its approval from the Adjudicating Authority; (iv) Withdrawal of the Resolution Plan at this stage would result in the failure of the CIRP and Astonfield will go into liquidation. IBC envisages liquidation as t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons on behalf of Seroco: (i) The Resolution Plan was submitted on the basis of information that was provided under the IM issued by the Arya-RP in August 2018. Over 18 months have passed since the Resolution Plan was submitted. The inordinate delay in the approval of the Resolution Plan by the NCLT, along with the outbreak of COVID-19 pandemic, has substantially affected the valuation of Arya Filaments, apart from impacting its business operations and financial position. Thus, Seroco is entitled to re-evaluate and modify the Resolution Plan based on such considerations; (ii) The delay cannot be attributed to Seroco; (iii) The value of assets and the working capital funds of Arya Filaments have plummeted due to the losses that have occurred in the past eighteen months rendering the implementation of the current Resolution Plan impossible, thereby making it necessary to modify the Plan to suit the current circumstances; (iv) Seroco was not made aware of the updated financial status of Arya Filaments. It will be unjust if it is made to abide by a Resolution Plan that was submitted eighteen months ago based on the IM that was issued over twenty-four ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....crore; (iii) There has been no material change in the assets or valuation of Arya Filaments. Seventy-five per cent of the funds were to be generated by Seroco by the sale of the Arya Filament's assets; and (iv) The following authorities were cited to elucidate on the power of the Adjudicating Authority, which is tightly circumscribed by the IBC, and designed to uphold the commercial wisdom of the CoC: K Sashidhar, Paras 52-58, 62, 68, 65 (supra), Essar Steel, Paras 65, 67, 69 and 88 (supra), Committee of Creditors AMTEK Auto Limited Through Corporation Bank v. Dinkar T Venkatasubramanian & Ors., (2021) 4 SCC 457, Kalparaj Dharamshi v. Kotak Investment Advisors Ltd., 2021 SCC OnLine SC 204, para 143, Jaypee Kensington Boulevard Apartments Welfare Association & Ors. v. NBCC (India) Ltd. & Ors., 2020 SCC OnLine SC 1192, para 170 and Ghanashyam Mishra and Sons Private Limited through the Authorized Signatory v. Edelweiss Asset Reconstruction Company Limited through the Director & Ors., 2021 SCC OnLine SC 313, paras 55-57, 67, 77 An appeal under Section 61(3) of IBC, is therefore not maintainable for a Resolution Applicant seeking modification of its approved Resolutio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ks of insolvency in a way that suits a State's economic, social and political goals. As such, an insolvency law can have widespread effects in the broader economy..... [...] 17. There is no universal solution to the design of an insolvency law because States vary significantly in their needs, as do their laws on other issues of key importance to insolvency, such as security interests, property and contract rights, remedies and enforcement procedures. Although there may be no universal solution, most insolvency laws address the range of issues raised by the key objectives discussed above, albeit with different emphasis and focus. Some laws favour stronger recognition and enforcement of creditor rights and commercial bargains in insolvency and give creditors more control over the conduct of insolvency proceedings than the debtor (sometimes referred to as "creditor-friendly" regimes). Other laws lean towards giving the debtor more control over the proceedings (referred to as "debtor-friendly" regimes), while yet others seek to strike a balance in the middle....." (emphasis supplied) 95 With this legislative guidance from international law, the BLRC was commissione....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lay, adjudicating mechanisms were identified as one of the two important sources of delay which need to be equipped with the right resources. In order to respond to the rapid changes in the economy, the BLRC report recommended the formation of an IBBI which would function as a regulator and formulate regulations that dynamically detail the procedural norms of the working of the IBC with the necessary immediacy. It is also important for this Court, as a constitutional authority which determines questions of law concerning the IBC framework, to note that a rapid liquidation may sometimes be preferable to a protracted CIRP. This sentiment was stressed in the BLRC Report, in its concluding statement in the Executive Summary, which noted: "Conclusion The failure of some business plans is integral to the process of the market economy. When business failure takes place, the best outcome for society is to have a rapid re-negotiation between the financiers, to finance the going concern using a new arrangement of liabilities and with a new management team. If this cannot be done, the best outcome for society is a rapid liquidation. When such arrangements can be put into pla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat objective. The UNCITRAL Guide has echoed this position by noting the interplay between the procedural design of the insolvency law and the corresponding institutional infrastructure by observing, page 20, UNCITRAL Guide, supra note 56: "27. While the institutional framework is not discussed in any detail in the Legislative Guide, some of the issues are touched upon below. Notwithstanding the variety of substantive issues that must be resolved, insolvency laws are highly procedural in nature. The design of the procedural rules plays a critical role in determining how roles are to be allocated between the various participants, in particular in terms of decision-making. To the extent that the insolvency law places considerable responsibility upon the institutional infrastructure to make key decisions, it is essential that that infrastructure be sufficiently developed to enable the required decisions to be made." 98 Any claim seeking an exercise of the Adjudicating Authority's residuary powers under Section 60(5)(c) of the IBC, the NCLT's inherent powers under Rule 11 of the NCLT Rules 2016 or even the powers of this Court under Article 142 of the Constitution must be c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....equate information to propose a Resolution Plan in Section 29 and restrictions on who can be a Resolution Applicant in Section 29A. Thereafter, Section 30 provides for the submission of a Resolution Plan, and it reads as follows: "30. Submission of resolution plan.-(1) A resolution applicant may submit a resolution plan along with an affidavit stating that he is eligible under Section 29-A to the resolution professional prepared on the basis of the information memorandum. (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan- (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor; (b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than- (i) the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under Section 53; or (ii) the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... cent of voting share of the financial creditors, after considering its feasibility and viability the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of Section 53, including the priority and value of the security interest of a secured creditor, and such other requirements as may be specified by the Board: Provided that the committee of creditors shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017, where the resolution applicant is ineligible under Section 29-A and may require the resolution professional to invite a fresh resolution plan where no other resolution plan is available with it: Provided further that where the resolution applicant referred to in the first proviso is ineligible under clause (c) of Section 29-A, the resolution applicant shall be allowed by the committee of creditors such period, not exceeding thirty days, to make payment of overdue amounts in accordance with the proviso to clause (c) of Section 29-A: Provided also that nothing in the second proviso shall be const....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oC, and under sub-Regulation (3), the CoC has to evaluate every Resolution Plan based on an "evaluation matrix" it has come up with under Regulation 5(ha). 103 Having briefly taken an overview of the process, we now understand that there are broadly three stages: (i) the first stage is prior to and ends with the approval of the Resolution Plan by the CoC; (ii) the second stage is the interim period between the Resolution Plan's approval by the CoC and before its confirmation by the Adjudicating Authority; and (iii) the third stage is after the approval of the Resolution Plan by the Adjudicating Authority. In the first stage, the relationship between the parties is explicitly governed by the provisions of the IBC - such as the right of a prospective Resolution Applicant to seek the IM and RFRP upon submission of its EOI, which may have been rejected by the RP (as it happened in the Kundan Care Appeal). In the third stage, the same holds true since Section 31(1) makes the Resolution Plan binding upon all the stakeholders and its violation will attract a penalty under Section 74 of the IBC. However, what we are assessing right now is the interim second stage between both of those. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... information of the Corporate Debtor to enable prospective Resolution Applicants to make an informed decision, before proposing a Resolution Plan. As a consequence of the IBC and its regulations, prospective Resolution Applicants, who are not disqualified under Section 29A, propose drafts of their Resolution Plans. The RP examines the Resolution Plan against the contours of Section 30(2) and submits only the eligible plans to the CoC, Regulation 39(2), CIRP Regulations. Prior to the IBBI (CIRP) (Fourth Amendment) Regulations 2020, which now requires the CoC to vote on all Plans simultaneously after recording its deliberations on the feasibility and viability of each Plan, Regulation 39(3) earlier enabled the CoC to approve a Resolution Plan with "such modifications as it deems fit". This meant that the prospective Resolution Applicants and the CoC would indulge in several rounds of negotiations, within a strict time-frame, to arrive at a mutually agreeable Resolution Plan which was then subject to voting by the CoC. Subsequent to the voting, the RP would submit the plan to the Adjudicating Authority along with receipt of the PBG and a compliance certificate in the form of Form H. E....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that "a confirmed plan should be enforceable and amenable to damages between contractually bound parties." Indeed, it has been argued before us that Resolution Plans should be enforced through the contractual remedy of specific performance. Further, a determination that Resolution Plans are contracts in the period between approval by the CoC and the approval of the Adjudicating Authority would require us to analyse whether all elements of contract formation have been satisfied, including the question of whether the acceptance of the Resolution Plan by the CoC fulfils the criteria laid down under Section 7 of the Contract Act or whether the conditionality of seeking approval from the Adjudicating Authority makes the Resolution Plan a contingent contract. Our intent of laying down the consequences of our determination of Resolution Plans as contracts is to highlight the importance of ascertaining the nature of a CoC-approved Resolution Plan, prior to its approval by the Adjudicating Authority. 108 The text of the IBC does not specify whether Resolution Plans at the second stage of the process, i.e., in the intervening period of submission to and approval by the Adjudicating Autho....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the withdrawal. 110 The CoC even with the requisite majority, while approving the Resolution Plan must consider the feasibility and viability of the Plan and the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of section 53 of the IBC. The CoC cannot approve a Resolution Plan proposed by an applicant barred under Section 29A of the IBC. Regulation 37 and 38 of the CIRP Regulations govern the contents of a Resolution Plan. Furthermore, a Resolution Plan, if in compliance with the mandate of the IBC, cannot be rejected by the Adjudicating Authority and becomes binding on its approval upon all stakeholders - including the Central and State Government, local authorities to whom statutory dues are owed, operational creditors who were not a part of the CoC and the workforce of the Corporate Debtor who would now be governed by a new management. Such features of a Resolution Plan, where a statute extensively governs the form, mode, manner and effect of approval distinguishes it from a traditional contract, specifically in its ability to bind those who have not consented to it. In the pure contractual r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r-i-Hind Spg. & Wvg. Co. Ltd. [AIR 1970 SC 1041 : (1969) 2 SCR 866, 891 : (1970) 40 Com Cas 689] ].." (emphasis supplied) 112 While the above observations were made in the context of a scheme that has been sanctioned by the Court, the Resolution Plan even prior to the approval of the Adjudicating Authority is binding inter se the CoC and the successful Resolution Applicant. The Resolution Plan cannot be construed purely as a 'contract' governed by the Contract Act, in the period intervening its acceptance by the CoC and the approval of the Adjudicating Authority. Even at that stage, its binding effects are produced by the IBC framework. The BLRC Report mentions that "[w]hen 75% of the creditors agree on a revival plan, this plan would be binding on all the remaining creditors", Page 13, BLRC Report, supra note 55. The BLRC Report also mentions that, "the RP submits a binding agreement to the Adjudicator before the default maximum date", Page 92, BLRC Report, supra note 55. We have further discussed the statutory scheme of the IBC in Sections I and J of this judgement to establish that a Resolution Plan is binding inter se the CoC and the successful Resolution Applicant. Thus,....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... step the IBC requires sixty-six percent votes of creditors), but upon its compliance with the procedure stipulated under the IBC. 115 It was argued for the E-RP that a Resolution Plan is a contract executed in furtherance of a statutory regime under the IBC. A question arises whether a Resolution Plan can be classified as a 'statutory contract'. This Court has defined a statutory contract in India Thermal Power Ltd. v. State of MP, (2000) 3 SCC 379 in the following terms: "11. Section 43 empowers the Electricity Board to enter into an arrangement for purchase of electricity on such terms as may be agreed. Section 43-A(1) provides that a generating company may enter into a contract for the sale of electricity generated by it with the Electricity Board. As regards the determination of tariff for the sale of electricity by a generating company to the Board, Section 43(1)(2) provides that the tariff shall be determined in accordance with the norms regarding operation and plant-load factor as may be laid down by the authority and in accordance with the rates of depreciation and reasonable return and such other factors as may be determined from time to time by the Central Go....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Plan under Section 31 and makes it binding on all stakeholders. Therefore, the IBC and its regulations institute sufficient safeguards to ensure the binding effect of a CoC-approved Resolution Plan. In our discussion in Sections I and J below, we further elaborate on the nature of a CoC-approved Resolution Plan and the code of conduct that is permissible by the statutory framework. 117 While insolvency regimes are specific to each jurisdiction, it may be useful to analyze how Resolution Plans or similar instruments are characterized in foreign jurisdictions. 118 Certain precedents from other jurisdictions have been cited by Mr Nakul Devan for the E-RP, to argue that contracts entered into, in furtherance of a statutory regime have to be interpreted in accordance with the objective and intent of the concerned statute. It has been submitted that the Resolution Plan is one variety of such a statutory contract. However, since we have arrived at the decision that Resolution Plans are not statutory contracts, it is not required for us to analyze whether terms of the Resolution Plan can be given effect to, as terms of a contract, as long as they further the statutory objective. It ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly settled. In a recent decision of the High Court of Justice, Re Rhino Enterprises Properties Ltd. Schofield v Smith [2020] EWHC 2370 (Ch)., it was held that the CVA is not a contract. Crucially the court made the following observations: "83. Further, and as noted by Mr Pymont QC in SHB Realisations Ltd, a voluntary arrangement is not formed or analysed as a contract. Certain legal principles applicable to contracts, for example their interpretation, are applied to voluntary arrangements; that is no less true of other instruments which are not contracts. Other principles of contract law, for example those relating to penalties, are not applicable to voluntary arrangements. Mr Pymont QC concluded that a voluntary arrangement is not a contract. Characterising a CVA as a hypothetical agreement or by reference to a statutory hypothesis neatly and accurately makes clear that a CVA is different from, and is not in fact, a contract." (emphasis supplied) 120 In Singapore, under Section 210 (3AA and 3AB) of the Singapore Act, a compromise or arrangement between the company and its creditors becomes binding when the requisite majority of creditors agree to it and it is approv....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Under the United States Bankruptcy Code, a restructuring plan becomes binding once it is confirmed by the court in terms of Section 1141. There are decisions of the bankruptcy courts in the United States which indicate that such restructuring plans are characterized as contracts, In re Hoffinger Indus, Inc, 327 B.R. 389 (Bankr. E.D. Ark. 2005), United States Bankruptcy Court, E.D. Arkansas. It has been held that a confirmed plan is binding on the debtor and the plan proponent and has the same effect as contract, In Re Shenandoah Realty Partners, L.P. v. Ascend Health Care, Inc, 287 BR 867 (US Bankruptcy Court, WD). However, commentators have noted that the United States Bankruptcy Code's, "embrace of a contractual paradigm is somewhat inconsistent...Both bankruptcy courts and the Code itself are far more sympathetic to ex post than to ex ante contracting", David Skeel and George Triantis, 'Bankruptcy's Uneasy Shift to a Contractual Paradigm', Faculty Scholarship at Penn Law, (2018), available at accessed on 5 September 2021. It has been further observed that, "there are a few provisions in the Bankruptcy Code inviting parties to "otherwise agree" by contract and in some contexts t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t Act and common law principles governing contracts, save and except for the specific prohibitions and deeming fictions under the IBC. Regulation 39(3) of CIRP regulations, as it stood before the IBBI (CIRP) (Fourth Amendment) Regulations 2020 and applicable to the three appellants before us, enabled a framework where a draft Resolution Plan would involve several rounds of negotiations and revisions between the Resolution Applicant and the CoC, before it is approved by the latter and submitted to the Adjudicating Authority, "(3) The committee shall evaluate the resolution plans received under sub-regulation (1) strictly as per the evaluation matrix to identify the best resolution plan and may approve it with such modifications as it deems fit: Provided that the committee shall record its deliberations on the feasibility and viability of the resolution plans". However, this statutorily-enabled room for commercial negotiation is not enough to over-power the other elements of regulation that detract from the view that CoC-approved Resolution Plans are contracts. CoC-approved Resolution Plans, before the approval of the Adjudicating Authority under Section 31, are a function and produc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ution Applicant whose Plan has been approved by the CoC and is awaiting the approval of the Adjudicating Authority. The Insolvency Law Committee Report of February 2020 has recommended the CIRP process to mandate Resolution Plans to provide for the apportionment of the profit or loss accrued by the Corporate Debtor during the CIRP, Pages 55-56, Report of the Insolvency Law Committee (February 2020), Ministry of Corporate Affairs, available at accessed on 20 August 2021. These reports are periodically commissioned by the parliament to review the functioning of the Code and suggest amendments. However, if the intention was to view a CoC-approved Resolution Plan as a contract, the principles of unjust enrichment would have been sufficient to address the issue and an amendment may not be considered necessary. A Resolution Applicant, as a third party partaking in the insolvency regime, seeks to acquire the business of the Corporate Debtor without the entirety of its debts, statutory liabilities and avoiding certain transactions with third parties. These benefits are a function of the coercive mechanisms of the IBC which enable a third party to acquire the assets of a Corporate Debtor wi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ustration or force majeure to evade implementation of the Resolution Plan leading to unnecessary litigation. This Court in Amtek Auto (supra), had curbed a similar attempt by a successful Resolution Applicant who had relied on a force majeure clause in its Resolution Plan to seek a direction compelling the CoC to negotiate a modification to its Resolution Plan. The Court held that there was no scope for negotiations between the parties once the Resolution Plan has been approved by the CoC. Thus, contractual principles and common law remedies, which do not find a tether in the wording or the intent of the IBC, cannot be imported in the intervening period between the acceptance of the CoC and the approval by the Adjudicating Authority. Principles of contractual construction and interpretation may serve as interpretive aids, in the event of ambiguity over the terms of a Resolution Plan. However, remedies that are specific to the Contract Act cannot be applied, de hors the over-riding principles of the IBC. I Statutory framework governing the CIRP 126 The CIRP is a time bound process with a specific aim of maximizing the value of assets. IBC and the regulations made under it lay ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... diluted. It is therefore essential to have time-bound decisions to reinstate this legislative intent. It was also pointed out on the floor of the House that the experience in the working of the Code has not been encouraging. The Minister in her speech to the Rajya Sabha gives the following facts and figures: "Now, regarding the Corporate Insolvency Resolution Process (CIRP), under the Code, I want to give you data again as of 30-6-2019. First, I will talk about the status of CIRPs. Number of admitted cases is 2162; number of cases closed on appeal, which I read out about, is 174; number of cases closed by withdrawal under Section 12-A, is 101, I have given you a slightly later data; number of cases closed by resolution is 120; closed by liquidation, 475; and ongoing CIRPs are 1292. So, now, I would like to mention the number of days of waiting. I would like to mention here the details of the ongoing CIRPs, along with the timelines. Ongoing CIRPs are 1292, the figure just now I gave you. Over 330 days, 335 cases; over 270 days, 445 cases; over 180 days and less than 270 days, 221 cases; over 90 days but less than 180 days, 349 cases; less than 90 days, 277 cases. The numbe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e facts of a given case, if it can be shown to the Adjudicating Authority and/or Appellate Tribunal under the Code that only a short period is left for completion of the insolvency resolution process beyond 330 days, and that it would be in the interest of all stakeholders that the corporate debtor be put back on its feet instead of being sent into liquidation and that the time taken in legal proceedings is largely due to factors owing to which the fault cannot be ascribed to the litigants before the Adjudicating Authority and/or Appellate Tribunal, the delay or a large part thereof being attributable to the tardy process of the Adjudicating Authority and/or the Appellate Tribunal itself, it may be open in such cases for the Adjudicating Authority and/or Appellate Tribunal to extend time beyond 330 days. Likewise, even under the newly added proviso to Section 12, if by reason of all the aforesaid factors the grace period of 90 days from the date of commencement of the Amending Act of 2019 is exceeded, there again a discretion can be exercised by the Adjudicating Authority and/or Appellate Tribunal to further extend time keeping the aforesaid parameters in mind. It is only in such e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iately' here means not later than three days from the date of appointment as provided in the explanation to Regulation 6(1) of the CIRP Regulations. Section 15 of the IBC lists down the information that should be included in the public announcement of CIRP. It should specify the last date up to which the claims, i.e., a right of payment or right to remedy as defined under Section 3(6) of the IBC, can be made by creditors, workmen and employees. Regulation 6(2)(c) provides that the last date of submission of claims shall be fourteen days from the date of appointment of the IRP. The public announcement also specifies the date on which the CIRP shall close, which is the one hundred and eightieth day from the date of the admission of the application under Sections 7, 9 or 10, as may be applicable. Regulation 6 of the CIRP Regulations stipulates additional requirements relating to how the public announcement is to made. 131 On receipt of claims from the operational creditors, financial creditors, workmen and employees, the IRP prepares a list of creditors after verifying the claims. Regulation 13(1) provides that the verification of all the claims is to be done within seven days from....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... information as specified by the IBBI for formulating a Resolution Plan in accordance with Section 29(1) of the IBC. The contents of the IM are specified under Regulation 36(2) of the CIRP Regulations. Regulation 36(1) of the CIRP Regulations specifies the timelines within which the RP must submit the IM to members of the CoC, which is within two weeks of his appointment but not later than the fifty-fourth day from the insolvency commencement date, whichever is earlier. Thereafter, the RP issues an invitation of EOI not later than the seventy-fifth day from the insolvency commencement date to seek expressions of interest from eligible prospective Resolution Applicants in terms of Regulation 36A of the CIRP Regulations. A prospective Resolution Applicant is required to submit an unconditional EOI within the time stipulated under the invitation, which shall not be less than fifteen days from the date of the issue of invitation. The RP conducts a due diligence of the Resolution Applicant based on material available on record in terms of Regulation 36A(8) of the CIRP Regulations. Thereafter, the RP issues a provisional list of eligible prospective Resolution Applicants within ten days ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ature of resolution plan and business of the corporate debtor". Regulations 37 and 38 list down the mandatory contents of the Resolution Plan. 137 The RP is required to review the Resolution Plan submitted in terms of Section 30(2) of the IBC, which provides that: "Section 30 - Submission of resolution plan [...] (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan-- (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor; (b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than-- (i) the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53; or (ii) the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of section 53, whichever is higher and provides for the payment of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....een given wide powers under the IBC. It can direct the Corporate Debtor into liquidation any time before the approval by the Adjudicating Authority, under Section 33(2) of the IBC. Further, under Section 12A of the IBC the Adjudicating Authority may allow withdrawal of the application submitted under Sections 7, 9 or 10 of the IBC for initiation of the CIRP (i.e., initiation of the CIRP by the financial creditor, operational creditor and the corporate applicant, respectively) if the withdrawal is approved by ninety per cent of the voting share of the CoC. Dealing with the question whether a successful Resolution Applicant can retreat through the route provided under Section 12A of the IBC, a three-judge Bench of this Court in Maharashtra Seamless v. Padmanabhan Venkatesh, (2020) 11 SCC 467 observed that, "[t]he exit route prescribed in Section 12A is not applicable to a Resolution Applicant. The procedure envisaged in the said provision only applies to applicants invoking Sections 7, 9 and 10 of the code". However, this Court left the question whether a successful Resolution Applicant "altogether forfeits their right to withdraw from such process [CIRP] or not", open for subsequent....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owingly and wilfully contravenes any of the terms of such resolution plan or abets such contravention, such corporate debtor, officer, creditor or person shall be punishable with imprisonment of not less than one year, but may extend to five years, or with fine which shall not be less than one lakh rupees, but may extend to one crore rupees, or with both." 140 If the Resolution Plan is rejected by the Adjudicating Authority, the Corporate Debtor goes into liquidation in accordance with Section 33(1) of the IBC. The order of the Adjudicating Authority rejecting a Resolution Plan and directing liquidation under Section 33 of the IBC can be appealed only on the grounds of material irregularity or fraud, as stipulated under Section 61(4) of the IBC. The order of the Adjudicating Authority approving a Resolution Plan can be appealed before the NCLAT under Section 61(3) of the IBC only on the grounds specified in that section. The grounds of appeal are as follows: "Section 61 - Appeals and Appellate Authority [....] (3) An appeal against an order approving a resolution plan under section 31 may be filed on the following grounds, namely:-- (i) the ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns 6(2)(c) and 12 (1) Submission of claims For 14 Days from Appointment of IRP T+14 Regulation 12(2) Submission of claims Up to 90th day of commencement T+90 Regulation 13(1) Verification of claims received under Regulation 12(1) Within 7 days from the receipt of the claim T+21 Verification of claims received under Regulation 12(2) T+97 Section 21(6A) (b)/Regulation 16-A Application for appointment of AR Within 2 days from verification of claims received under Regulation 12(1) T+23 Regulation 17(1) Report certifying constitution of CoC T+23 Section 22/Regulation 19(2) 1st meeting of the CoC Within 7 days of filing of the report certifying constitution of the CoC, but with five days' notice. T+30] Section 22(2) Resolution to appoint RP by the CoC In the first meeting of the CoC T+30 Section 16(5) Appointment of RP On approval by the AA ...... Regulation 17(3) IRP performs the functions of RP till the RP is appointed. If RP is not appointed by 40th day of commencement T+40 Regulation 27 Appointment of valuer Within 7 days of appointment of RP, but not later than 47....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... minimize any delays, uncertainty in procedure and disputes. The roles and responsibilities of the important actors in the CIRP are clearly defined under the IBC and its regulations. In Innoventive Industries Ltd v. ICICI Bank, (2018) 1 SCC 407, para 13 a three judge Bench of this Court observed that "one of the important objectives of the Code is to bring the insolvency law in India under a single unified umbrella with the object of speeding up of the insolvency process". Recently, in Gujarat Urja, (2021) SCC OnLine 194, para 71 (supra) a three judge Bench of this Court observed that a "delay in completion of the insolvency proceedings would diminish the value of the debtor's assets and hamper the prospects of a successful reorganization or liquidation. For the success of an insolvency regime, it is necessary that insolvency proceedings are dealt with in a timely, effective and efficient manner". The stipulation of timelines and a detailed procedure under the IBC ensures a timely completion of CIRP and introduces transparency, certainty and predictability in the insolvency resolution process. The UNCITRAL Guide also states that the insolvency law of a jurisdiction should be transp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ployment of the personnel; second, maximize the value of the assets of the corporate debtor and enable a higher pay-back to its creditors than under liquidation; and third, enable a smoother and faster transition to liquidation in the event that a time bound CIRP fails, in a bid to avert further deterioration of value. 145 Since the aim of the statute is to preserve the interests of the corporate debtor and the CoC, it was recognized that settlements between the corporate debtor and the CoC may be in the best interests of all stakeholders since insolvency is averted. Two decisions of two judge Benches of this Court, in Lokhandwala Kataria Construction (P) Ltd v. Nisus Finance and Investment Managers LLP, (2018) 15 SCC 589 and Uttara Foods and Feeds (P) Ltd v. Mona Pharmachem, (2018) 15 SCC 587, (prior to the insertion of Section 12A which enabled withdrawal of the CIRP on account of settlement between the parties), had refused to effectuate this remedy by exercising inherent powers of the Adjudicating Authority under Rule 11 of the NCLT Rules 2016 or the power of parties to make applications to the Adjudicating Authority under Rule 8 of the Insolvency and Bankruptcy (Application....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lows for withdrawals even after the invitation for expression of interest has been issued, provided that the applicant states the reasons justifying such withdrawal. Similarly, on 25 January 2019, a two judge Bench of this Court in Swiss Ribbons (supra) interpreted the true import of Section 12A and clarified that if the CoC is not yet constituted, a party can approach the Adjudicating Authority, which may in exercise of its inherent powers under Rule 11 of the NCLT Rules 2016, allow or reject an application for withdrawal or settlement. On 25 July 2019, the IBBI (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2019 amended Regulation 30A in terms of this decision in interpreting Section 12A and now specifically provides the procedure under the IBC that relates to affecting a withdrawal under Section 12A before the constitution of the CoC. The applicant submits an application for withdrawal through the IRP, directly before the Adjudicating Authority, since the CoC is not yet constituted to consider such an application. To ensure that the process for withdrawal is timely and efficient, the present Regulation 30A provides that the IRP shall submit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....BC which is a speedy, predictable and timely resolution. The Resolution Applicant is deemed to be aware of the IBC and its mechanisms before it steps into the fray and consents to be bound by its underlying objectives. A Resolution Applicant, after obtaining the financial information of the Corporate Debtor through the informational utilities and perusing the IM, is assumed to have analyzed the risks in the business of the Corporate Debtor and submitted a considered proposal. It cannot demand vesting of certain powers and rights which have been conspicuously omitted by the legislature under the statute, in furtherance of the policy objectives of the IBC. A court may not be able to lay down such detailed guidance on how a mechanism for withdrawal, if any, may be provided to a successful Resolution Applicant without disturbing the statutory timelines and adequately evaluating the interests of creditors and other stakeholders, which is ultimately a matter of legislative policy. In Essar Steel (supra), a three judge Bench of this Court, affirmed a two judge Bench decision in K Sashidhar, Para 62, supra note 35 (supra), prohibiting the Adjudicating Authority from second-guessing the com....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cedure for exercise of the power of withdrawal or modification by a successful Resolution Applicant without impacting the other procedural steps and the timelines under the IBC which are sacrosanct. Thus, judicial restraint must be exercised while intervening in a law governing substantive outcomes through procedure, such as the IBC. In this case, if Resolution Applicants are permitted to seek modifications after subsequent negotiations or a withdrawal after a submission of a Resolution Plan to the Adjudicating Authority as a matter of law, it would dictate the commercial wisdom and bargaining strategies of all prospective Resolution Applicants who are seeking to participate in the process and the successful Resolution Applicants who may wish to negotiate a better deal, owing to myriad factors that are peculiar to their own case. The broader legitimacy of this course of action can be decided by the legislature alone, since any other course of action would result in a flurry of litigation which would cause the delay that the IBC seeks to disavow. 147 The IBC is silent on whether a successful Resolution Applicant can withdraw its Resolution Plan. However, the statutory framework l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y also be read to give effect to the intention of the Legislature which is apparent from the Act read as a whole. Application of the mischief rule or purposive construction may also enable reading of words by implication when there is no doubt about the purpose which the Parliament intended to achieve. But before any words are read to repair an omission in the Act, it should be possible to state with certainty that these or similar words would have been inserted by the draftsman and approved by Parliament had their attention been drawn to the omission before the Bill passed into law." In the wake of the COVID-19 pandemic, several Resolution Plans remained pending before Adjudicating Authorities due to the lockdown and significant barriers to securing a hearing. An Ordinance was swiftly promulgated on 5 June 2020 which imposed a temporary suspension of initiation of CIRP under Sections 7, 9 and 10 of the IBC for defaults arising for six months from 25 March 2020 (extendable by one year). This was followed by an amendment through the IBC (Second Amendment) Act 2020 on 23 September 2020 which provided for a carve-out for the purpose of defaults arising during the suspended period. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in limited circumstances. It mentions that, "[a]n insolvency law may include limited provision for a plan to be modified after it has been approved by creditors (and both before and after confirmation) if its implementation breaks down or it is found to be incapable of performance, whether in whole or in part, and the specific problem can be remedied", IV. A. 66, page 230 of the UNCITRAL Guide, supra note 56. If permitted by the statute, the recommendations strongly urge the establishment of a mechanism for amendment after approval by creditors which details requirements of, inter alia, approval by creditors of the modification and consequences of failure to secure approval to the amendments, Recommendation 156: "The insolvency law should establish the mechanism for approval of amendments to a plan that has been approved by creditors. That mechanism should require notice to be given to the creditors and other parties affected by the proposed modification; specify the party required to give notice; require the approval of creditors and other parties affected by the modification; and require the rules for confirmation (where confirmation is required) to be satisfied. The insolvency l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o whom dues are owed. These stakeholders are not direct participants in the CIRP but are bound by its consequence by virtue of the approval of the Resolution Plan, under Section 31(1) of the IBC. Section 31(1) ensures that the Resolution Plan becomes binding on all stakeholders after it is approved by the Adjudicating Authority. The language of Section 31(1) cannot be construed to mean that a Resolution Plan is indeterminate or open to withdrawal or modification until it is approved by the Adjudicating Authority or that it is not binding between the CoC and the successful Resolution Applicant. Regulation 39(4) of CIRP Regulations mandates that the RP should endeavour to submit the Plan at least fifteen days before the statutory period of the CIRP under Section 12 is due to expire along with a receipt of a PBG and a compliance certificate as Form H. It is pertinent to note that sub-Section (3) to Section 12 mandates that the CIRP process, including legal proceedings, must be concluded within 330 days. This three-hundred-and-thirty-day period can be extended only in exceptional circumstances, if the process is at near conclusion and serves the object of the IBC, as held by a three ju....
X X X X Extracts X X X X
X X X X Extracts X X X X
....close in either of two ways. Either the RP is able to get a binding agreement from the majority of the creditors committee or the calm period reaches the default maximum date set by the Adjudicator at the start of the IRP. If either condition is met, the Adjudicator will issue an order to close the IRP. However, the orders will vary depending upon the condition. If the RP submits a binding agreement to the Adjudicator before the default maximum date, then the Adjudicator orders the IRP case to be closed. If the Adjudicator does not receive a binding agreement by this date, the Adjudicator issues an order to close the IRP case along with an order to liquidate the entity." (emphasis supplied) 152 The binding nature, as between the CoC and the successful Resolution Applicant, of the Resolution Plan submitted for approval by the Adjudicating Authority is further evidenced from the fact that the CoC issues a LOI to a successful Resolution Applicant stating that it has been selected as the successful Resolution Applicant and its Plan would be submitted to the Adjudicating Authority for its approval. The successful Resolution Applicant is typically required to accept the LOI u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Applicant and the CoC are brought to an end after the CoC's approval. The only conditionality that remains is the approval of the Adjudicating Authority, which has a limited jurisdiction to confirm or deny the legal validity of the Resolution Plan in terms of Section 30 (2) of the IBC. If the requirements of Section 30(2) are satisfied, the Adjudicating Authority shall confirm the Plan approved by the CoC under Section 31(1) of the IBC. 154 If the appellants' claim were to succeed, a clause enabling a Resolution Applicant to withdraw/seek modification for reasons such as a 'Material Adverse Event' could also be set up by a Resolution Applicant when it is being prosecuted under Section 74 (3). It was contended before us that Form H, which is a compliance certificate that is to be submitted by the RP to the Adjudicating Authority along with the Resolution Plan, mentions that the RP can enter details as to whether the Resolution Plan is subject to any conditionalities under Clause 12. Thus, the argument goes that this permits the Resolution Applicant to stipulate in the Resolution Plan certain contingencies under which it can withdraw the Plan, for instance if there is an occurrenc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l would be on the successful resolution applicant as per the resolution plan itself, the Code should specify that the timeline will be as specified in the relevant law, and if the timeline for approval under the relevant law is less than one year from the approval of the resolution plan, then a maximum of one year will be provided for obtaining the relevant approvals, and section 31 shall be amended to reflect this. 16.2 Further, the Committee noted that there is no provision in the Code on the requirement to obtain an indication on the stance of the concerned regulators or authorities, if required, on the resolution plan prior to the resolution plan being approved by the NCLT. It was brought to the attention of the Committee that this was resulting in several conditional resolution plans being approved by the NCLT, and that the approval by the NCLT was being regarded as a 'single window approval.' This not being the intent of the Code, the Committee deliberated on introduction of a mechanism for obtaining preliminary observations from the concerned regulators and authorities in relation to a resolution plan approved by the CoC and submitted to the NCLT for its approval, b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h the conditions for approval within a period of one year from the approval of the resolution plan. 14.9. To ensure that this aligns with the time-line for resolution provided in the Code, the Committee recommended that the window of forty-five days given to government and regulatory agencies should be excluded from the computation of the time limit under Section 12 of the Code. Although some members of the Committee were of the view that this time-line should ideally run concurrently with the CIRP period, the Committee felt that this exclusion would be justified since it would streamline the process of gaining government approvals considerably, which would lead to more value maximising resolutions, offsetting value lost, if any, in this forty-five day period in which the corporate debtor will be run as a going concern." (emphasis supplied) The aim to tighten timelines for receiving regulatory approvals through the provision of in-principal approvals, prior to the approval of the Adjudicating Authority, indicates that the statutory framework under the IBC has consistently attempted to avoid situations which may introduce unpredictability in the insolvency resolution ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Section 18(3)(b) of the erstwhile SICA which vested the Board for Industrial and Financial Reconstruction with the power to make modifications to a draft scheme for sick industrial companies, the Adjudicating Authority under Section 31(2) of the IBC can only examine the validity of the plan on the anvil of the grounds stipulated in Section 30(2) and either approve or reject the plan. The Adjudicating Authority cannot compel a CoC to negotiate further with a successful Resolution Applicant. A rejection by the Adjudicating Authority is followed by a direction of mandatory liquidation under Section 33. Section 30(2) does not envisage setting aside of the Resolution Plan because the Resolution Applicant is unwilling to execute it, based on terms of its own Resolution Plan. 158 Further, no such power can be vested with the Adjudicating Authority under its residuary jurisdiction in terms of Section 60 (5)(c). In a decision of a three judge Bench of this Court in Gujarat Urja (supra), it was held that, "the NCLT's residuary jurisdiction [under Section 60(5)(c)] though wide, is nonetheless defined by the text of the IBC. Specifically, the NCLT cannot do what the IBC consciously did not....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed by the appellants. 160 Permitting the Adjudicating Authority to exercise its residuary powers under Section 60(5) to allow for further modifications or withdrawals at the behest of the successful Resolution Applicant, would be in the teeth of the decision of this Court in Essar Steel (supra) which held that "[s]ection 60(5)(c) cannot be used to whittle down Section 31(1) of the IBC, by the investment of some discretionary or equity jurisdiction in the Adjudicating Authority outside Section 30(2) of the Code, when it comes to a resolution plan being adjudicated upon by the Adjudicating Authority", Para 68-69, supra note 34. K Factual Analysis 161 We have held in Section H of this judgement that Resolution Plans are not in a nature of a traditional contract per se, and the process leading up to their formulation and acceptance by the CoC is comprehensively regulated by the insolvency framework. In Section J, we have further held that the IBC framework, does not enable withdrawals or modifications of Resolution Plans, once they have been submitted by the RP to the Adjudicating Authority after their approval by the CoC. In any event, and without affecting the legal position....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pplies as between past litigation and future litigation. When a matter - whether on a question of fact or a question of law - has been decided between two parties in one suit or proceeding and the decision is final, either because no appeal was taken to a higher court or because the appeal was dismissed, or no appeal lies, neither party will be allowed in a future suit or proceeding between the same parties to canvass the matter again. This principle of res judicata is embodied in relation to suits in Section 11 of the Code of Civil Procedure; but even where Section 11 does not apply, the principle of res judicata has been applied by courts for the purpose of achieving finality in litigation. The result of this is that the original court as well as any higher court must in any future litigation proceed on the basis that the previous decision was correct." From the above extract, it is clear that while res judicata may have been codified in Section 11, that does not bar its application to other judicial proceedings, such as the one in the present case. 165 Before proceeding further, it is important to compare the reliefs sought by Ebix in the First, Second and Third Withdrawal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ution Applicant; From the above table, it is clear that the prayers in the Second and Third Withdrawal Applications were identical. Further, prayer (iii) of both corresponds to prayer (iii) of the First Withdrawal Application, in almost identical terms, while prayer (ii) was not present in the First Withdrawal Application at all. At the same time, prayers (i) and (ii) in the First Withdrawal Application have not been repeated in the Second and Third Withdrawal Applications. However, what is at issue is prayer (iv) of the First Withdrawal Application and prayer (i) of the Second and Third Withdrawal Applications. Through the former, Ebix sought permission to re-evaluate its Resolution Plan and to suitably "revise/modify and/or withdraw" it, while through the latter, Ebix sought permission to withdraw its Resolution Plan. Now we must analyse whether this would attract the principle of res judicata. 166 In a judgment of this Court in Sheodan Singh v. Daryao Kunwar, (1966) 3 SCR 300, a four judge Bench of this Court elaborated on the various conditions which must be satisfied before the doctrine of res judicata can apply in a given case. Justice KN Wanchoo, speaking for the Court....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Court, held: "12. Insofar as the second ground given by the High Court - the same being bar of res judicata - it is clear from what has been noted above, that there was no decision on merits as regards the grievance of the appellant; and so, the principle of res judicata had no application. The mere fact that the learned Single Judge while disposing of the Writ Petition No. 23 of 78 had observed that: "This syndrome of errors, omissions and oddities, cannot be explained on any hypothesis other than the one that there is something fishy in the petitioner's version...." which observations have been relied upon by the High Court in holding that the suit was barred by res judicata do not at all make out a case of applicability of the principle of res judicata. The conclusion of the High Court on this score is indeed baffling to us, because, for res judicata to operate the involved issue must have been "heard and finally decided". There was no decision at all on the merit of the grievance of the petitioner in the aforesaid writ petition and, therefore, to take a view that the decision in earlier proceeding operated as res judicata was absolutely erron....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elated to re-evaluation of the Resolution Plan, possibly because Ebix had hoped to re-evaluate the Resolution Plan on the basis of the information received as a consequence of prayers (i) and (ii) and those prayers were rejected since such information was not available. 172 In the impugned judgment, the NCLAT has relied upon Explanation (V) to Section 11 to state that since withdrawal was also prayed for as a relief in prayer (iv) of the First Withdrawal Application, it would have also been assumed to have been rejected. Mulla's The Code of Civil Procedure states that Explanation V can only apply upon the fulfilment of two conditions: (i) the relief claimed must have been substantial, and not merely auxiliary; and (ii) the relief claimed must have been one which the Court is bound to grant, and not one which it is discretionary for the Court to grant, Sir Dinshaw Fardunji Mulla, The Code of Civil Procedure (18th edn, LexisNexis). 173 In Jaswant Singh v. Custodian of Evacuee Property, (1985) 3 SCC 648, a two judge Bench of this Court held that res judicata will only apply if the cause of action the same and that the party also had an earlier opportunity to apply for the relief....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the Resolution Plan of Ebix 175 To briefly recount the relevant facts for determination of the dispute over the terms of the resolution plan - the CIRP of Educomp commenced on 30 May 2017. After consultation with the E-CoC, the E-RP invited EOIs on 18 October 2017. The RFRP was issued on 5 December 2017, and was revised on 17 January 2018 and 20 January 2018. Ebix submitted its draft Resolution Plan after the last date of 27 January 2018, and after securing an extension from the Adjudicating Authority, on 29 January 2018. Ebix took the benefit of an extension of time which was granted to it to submit its Resolution Plan. In the absence of an extension of time, it would not have been permitted to enter the fray. After multiple rounds of negotiations, on 9 February 2018, Ebix was declared the successful Resolution Applicant and a LOI was issued by the E-CoC. On 17 February 2018, Ebix's Resolution Plan was approved by a 74.16 per cent voting share of the E-CoC, which was subsequently upgraded to 75.35 per cent by CSEB's vote being added belatedly on 23 February 2018. While it is true that the votes of CSEB were received in favour of the Resolution Plan on a later date, all the p....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to be valid for a period of 6 (six) months from such revised Resolution Plan Submission date. If any Resolution Plan as approved by the CoC and submitted to the Adjudicating Authority is rejected by the Adjudicating Authority, then the Resolution Professional and the CoC shall act in accordance with the instructions/directions issued by the Adjudicating Authority." Ebix urges that in compliance with the above clause of the RFRP, Clause 7 of its Resolution Plan specified that it shall be valid for a term of six months from the date of submission: "7. Term of the Resolution Plan This Resolution Plan proposed by the Resolution Applicant is valid for a term of six months from the date of submission of this plan" Ebix urges that these matching terms of the offer (the RFRP) and the acceptance (the Resolution Plan) are binding on the E-CoC and the Resolution Plan is voidable and revocable at the instance of Ebix, upon the failure to seek timely approval under Section 31. 179 This submission of Ebix cannot be accepted since the terms of the RFRP or the Resolution Plan relate to the validity of the Resolution Plan for the period of negotiation with the E....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 1.10 of the RFRP "By procuring this RFRP and obtaining access to the Data room and Information Memorandum, in accordance with the terms of this RFRP, the Resolution Respondent is deemed to have made the following acknowledgements and representations: [...] (l) The Resolution Respondent upon declaration as Successful Resolution Respondent shall remain responsible for the implementation and supervision of the Resolution Plan from the date of approval by the Adjudicating Authority, and will not be permitted to withdraw the Resolution Plan and the Resolution Professional, PwC or the CoC assume no responsibility or liability in this respect." (emphasis supplied) Ebix's submission that Clause 1.10(l) is applicable only upon approval of the Adjudicating Authority is not plausible since the Resolution Plan becomes binding on all stakeholders as a consequence of the approval under Section 31. The E-RP's argument holds much weight when it is argued that Clause 1.10(l) cannot be construed to infer that the Adjudicating Authority would declare Ebix as the 'Successful Resolution Applicant' once again, which would then impose the obligation of barring withdrawal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cement of the corporate insolvency resolution process shall cease, and the corporate debtor shall not be prosecuted for such an offence from the date the resolution plan has been approved by the Adjudicating Authority under section 31, if the resolution plan results in the change in the management or control of the corporate debtor to a person who was not- (a) a promoter or in the management or control of the corporate debtor or a related party of such a person; or (b) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession, reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court: [...] (2) No action shall be taken against the property of the corporate debtor in relation to an offence committed prior to the commencement of the corporate insolvency resolution process of the corporate debtor, where such property is covered under a resolution plan approved by the Adjudicating Authority under section 31, which results in the change in control of the corporate debtor to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....019, which was after one year of the alleged expiry of the six-month period. Therefore, even if the submitted Resolution Plan was considered as a conditional offer the terms did not enable a withdrawal of the Resolution Plan in the event that the Adjudicating Authority does not approve it under Section 31 within six months of its submission. 184 Before we conclude our analysis on the substantive arguments raised by Ebix, we will be briefly dealing with its arguments that the RP had failed in its obligation to provide information under Section 29 of the IBC. K.1.3 Duties of the RP 185 Appearing on behalf of Ebix, Mr KV Vishwanathan has argued before this Court that the E-RP failed in its duties under Section 29 of the IBC when it failed to inform Ebix about the ongoing investigations against Educomp. While this argument was made in order to justify Ebix's withdrawal of its Resolution Plan, which we have already rejected, we shall assess it nonetheless. On behalf of the E-RP, Mr Nakul Dewan has appeared and argued that the obligation on an RP to provide information under Section 29 has to be understood on a "best effort basis". 186 Section 29 of the IBC places a duty upon....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e information memorandum with a degree of completeness of the information that she is willing to certify. For example, as part of the information memorandum, the RP must clearly state the expected shortfall in the coverage of the liabilities and assets of the entity presented in the information memorandum. Here, the asset and liabilities include those that the RP can ascertain and verify from the accounts of the entity, the records in the information system, the liabilities submitted at the start of the IRP, or any other source as may be specified by the Regulator. 3. Once the information memorandum is created, the RP must make sure that it is readily available to whoever is interested to bid a solution for the IRP. She has to inform the market (a) that she is the RP in charge of this case, (b) about a transparent mechanism through which interested third parties can access the information memorandum, (c) about the time frame within which possible solutions must be presented and (d) with a channel through which solutions can be submitted for evaluation. The Code does not specify details of the manner or the mechanism in which this should be done, but rather emphasi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ll the proceedings before the NCLT since the various applications were often listed along with the Approval Application, in which it continued to appear. Finally, Ebix has brought nothing on record to prove that E-RP knew of the SFIO and CBI investigations before a regulatory disclosure was made by Educomp. Hence, it cannot be stated that the E-RP had faltered in its duty to provide relevant information to Ebix. K.2 The Kundan Care Appeal 192 The CIRP of Astonfield commenced on 27 November 2018. On 1 May 2019, GUVNL issued a default notice under Article 9.3.1(e) of the PPA, taking the initiation of the CIRP as an event of default for the termination of the PPA. The validity of the default notice was adjudicated upon by the NCLT in a judgment dated 29 August 2019. The NCLT set aside the default notice on the ground that the termination of the PPA would adversely affect the "going concern" status of Astonfield. On 15 October 2019, the NCLAT dismissed an appeal filed by GUVNL. On 29 October 2019, Kundan Care submitted a Resolution Plan for being considered by the A-CoC, which was followed by a final version on 12 November 2019. On 14 November 2019, the Resolution Plan submitted ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ever, the A-RP has pointed out to the court that the LOI awarded to Kundan Care clearly stipulated that the submitted Resolution Plan is irrevocable and there were no conditionalities mentioned in the Form H that was submitted to the Adjudicating Authority. Clause 9 of Kundan Care's Resolution Plan confirms this position, since it states: "9 Condition Precedent THERE ARE NO CONDITION PRECEDENT FOR APPROVAL OF THIS RESOLUTION PLAN" This is also reaffirmed by the fact that Clause 1.6.2 of the RFRP issued by the A-RP, specifically indicated that the A-CoC may reject a Resolution Plan if it did not agree with any of the conditions precedent in the nature of "walk away conditions". Clause 1.6.2 states: "1.61 The CoC reserves the right to reject the Resolution Plan, if any of the Conditions Precedent (as defined in Format VA - Resolution Plan), are not acceptable to the CoC. The Conditions Precedent, if any, in a Resolution Plan would mean the 'walk-away conditions' and shall be required to be specifically mentioned as such in the said Plan, with a conspicuous heading and placement of a paragraph in the Plan, and all such conditions shall be placed i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Care on 5 July 2021, and the response by EXIM Bank and PFCL dated 12 July 2021; (ii) In the event, that a revised Resolution Plan is agreed upon by the A-CoC, it shall be submitted through the A-RP for the approval of the NCLT within a week thereafter. In the event that a revised Resolution Plan is not agreed upon, the original Resolution Plan, as submitted before the NCLT on 15 November 2019, shall prevail; and (iii) The NCLT shall dispose of the application with the revised Resolution Plan expeditiously, and preferably within a period of two weeks from the date of receipt of an application from the A-RP for the approval of the revised Resolution Plan. 197 We clarify that the above directions have been issued in view of the submission which has been urged as noted, and shall not amount to any finding by this Court on the issues raised with regard to modification or withdrawal of Resolution Plans at the behest of the Resolution Applicant. K.3 The Seroco Appeal 198 The CIRP of Arya Filaments, an MSME, was instituted on 17 August 2018. Seroco submitted a draft Resolution Plan on 13 March 2019 for an amount of Rs. 6.79 crores (approx.). Subsequent to meetin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Corporate Debtors and upon successful Resolution Applicants whose Plans may not have been sanctioned by the Adjudicating Authority in time, for myriad reasons. But the legislative intent of the statute cannot be overridden by the Court to render outcomes that can have grave economic implications which will impact the viability of the IBC. 202 The residual powers of the Adjudicating Authority under the IBC cannot be exercised to create procedural remedies which have substantive outcomes on the process of insolvency. The framework, as it stands, only enables withdrawals from the CIRP process by following the procedure detailed in Section 12A of the IBC and Regulation 30A of the CIRP Regulations and in the situations recognized in those provisions. Enabling withdrawals or modifications of the Resolution Plan at the behest of the successful Resolution Applicant, once it has been submitted to the Adjudicating Authority after due compliance with the procedural requirements and timelines, would create another tier of negotiations which will be wholly unregulated by the statute. Since the 330 days outer limit of the CIRP under Section 12(3) of the IBC, including judicial proceedings, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....proved Resolution Plans, at the behest of the successful Resolution Applicant, once the plan has been submitted to the Adjudicating Authority. A Resolution Applicant, after obtaining the financial information of the Corporate Debtor through the informational utilities and perusing the IM, is assumed to have analyzed the risks in the business of the Corporate Debtor and submitted a considered proposal. A submitted Resolution Plan is binding and irrevocable as between the CoC and the successful Resolution Applicant in terms of the provisions of the IBC and the CIRP Regulations. In the case of Kundan Care, since both, the Resolution Applicant and the CoC, have requested for modification of the Resolution Plan because of the uncertainty over the PPA, cleared by the ruling of this Court in Gujarat Urja (supra), a one-time relief under Article 142 of the Constitution is provided with the conditions prescribed in Section K.2. 205 It would also be sobering for us to recognize that whilst this Court has declared the position in law to not enable a withdrawal or modification to a successful Resolution Applicant after its submission to the Adjudicating Authority, long delays in approving t....