EBIX SINGAPORE PRIVATE LIMITED versus COMMITTEE OF CREDITORS OF EDUCOMP SOLUTIONS LIMITED & ANR. on 13 September 2021

[2021] 14 S.C.R.321

EBIX SINGAPORE PRIVATE LIMITED

v.

COMMITTEE OF CREDITORS OF EDUCOMP SOLUTIONSLIMITED & ANR.

(Civil Appeal No. 3224 of 2020)

SEPTEMBER 13, 2021

[DR DHANANJAYA Y. CHANDRACHUD AND

M. R. SHAH, JJ.]

Insolvency and Bankruptcy Code, 2016 – ss.5(26), 7, 9, 10,12, 23, 25, 30, 31, 60(5), 61 & 74(3) – National Company LawTribunal Rules, 2016 – r.11 – Insolvency and Bankruptcy Board ofIndia (Insolvency Resolution Process For Corporate Persons)regulations, 2016 – regn. 36A, 36B and 39 – Whether withdrawalsor modifications by successful Resolution Applicants are permissibleunder IBC – Held: The framework, as it stands, only enableswithdrawals from the CIRP process by following the proceduredetailed in Section 12A of the IBC and Regulation 30A of the CIRPRegulations and in the situations recognized in those provisions –Enabling withdrawals or modifications of the Resolution Plan atthe behest of the successful Resolution Applicant, once it has beensubmitted to the Adjudicating Authority after due compliance withthe procedural requirements and timelines, would create anothertier of negotiations which will be wholly unregulated by the statute– Since the 330 days outer limit of the CIRP u/s. 12(3) of the IBC,including judicial proceedings, can be extended only in exceptionalcircumstances, this open-ended process for further negotiations ora withdrawal, would have a deleterious impact on the CorporateDebtor, its creditors, and the economy at large as the liquidationvalue depletes with the passage of time – A failed negotiation formodification after submission, or a withdrawal after approval bythe CoC and submission to the Adjudicating Authority, irrespectiveof the content of the terms envisaged by the Resolution Plan, whenunregulated by statutory timelines could occur after a lapse of time,as is the case in the present appeals – Permitting such a course ofaction would either result in a down-graded resolution amount ofthe Corporate Debtor and/or a delayed liquidation with depreciatedassets which frustrates the core aim of the IBC – If the legislature in

A

B

CDEF

GH

Aits wisdom, were to recognize the concept of withdrawals ormodifications to a Resolution Plan after it has been submitted to theAdjudicating Authority, it must specifically provide for a tether underthe IBC and/or the Regulations – These are matters for legislativepolicy – In the present framework, even if an impermissibleunderstanding of equity is imported through the route of residualBpowers or the terms of the Resolution Plan are interpreted in amanner that enables the appellants’ desired course of action, it iswholly unclear on whether a withdrawal of a CoC-approvedResolution Plan at a later stage of the process would result in theAdjudicating Authority directing mandatory liquidation of theCCorporate Debtor – Pertinently, this direction has been otherwiseprovided in Section 33(1)(b) of the IBC when an AdjudicatingAuthority rejects a Resolution Plan under Section 31 – In thiscontext, the existing insolvency framework in India provides noscope for effecting further modifications or withdrawals of CoC- approved Resolution Plans, at the behest of the successful ResolutionDApplicant, once the plan has been submitted to the AdjudicatingAuthority – A Resolution Applicant, after obtaining the financialinformation of the Corporate Debtor through the informationalutilities and perusing the IM, is assumed to have analyzed the risksin the business of the Corporate Debtor and submitted a consideredEproposal – A submitted Resolution Plan is binding and irrevocableas between the CoC and the successful Resolution Applicant in termsof the provisions of the IBC and the CIRP Regulations.

Insolvency and Bankruptcy Code, 2016 – Res judicata –Applicability of – Held: The prayer for withdrawal of the Resolution

Relief

FPlan in the First Withdrawal Application was not substantial andone that the Court was bound to grant, since it was contingent upona re-evaluation, which in itself was contingent upon receiving theinformation sought in prayers (i) and (ii) – Since the latter twocontingencies never arose, the NCLT did not apply its mind to the prayer for withdrawal independently – When it filed the SecondGWithdrawal Application, it was dismissed on a technical ground andnot on its merits – When a revised Third Withdrawal Applicationwas filed, the NCLT then adjudicated it on its merits and allowed it– Hence, since the NCLT did not adjudicate Resolution applicant‘E’ prayer for withdrawal of their Resolution Plan on its merits whileHdismissing the First Withdrawal Application, the opportunity to seek the relief was not available to resolution applicant ‘E’ in a realsense – Therefore, the finding of the NCLAT on this issue is reversedand hold that resolution applicant ‘E’ Third Withdrawal Applicationwas not barred by res judicata.

Disposing of the appeals, the Court

HELD: 1. A reading together of the UNCITRAL Guide andthe BLRC Report clarifies, in no uncertain terms, that theprocedure designed for the insolvency process is critical forallocating economic coordination between the parties who partakein, or are bound by the process. This procedure producessubstantive rights and obligations. For instance, the compositionof the CoC, the method and percentage of its voting, the timelinesfor CIRP, the obligation on the RP to file specific forms afterevery stage of the process and the obligation to explain to theAdjudicating Authority reasons for any deviations from thetimeline while submitting a Resolution Plan, and other suchprocedural requirements create a mechanism which tightlystructures the conduct of all participants in the insolvencyprocess. This process invariably has an impact on the conduct ofthe Resolution Applicant who participates in the process andconsents to be bound by the RFRP and the broader insolvencyframework. An analysis of the framework of the statute andregulations provides an insight into the dynamic andcomprehensive nature of the statute. Upholding the proceduraldesign and sanctity of the process is critical to its functioning.The interpretative task of the Adjudicating Authority, AppellateAuthority, and even this Court, must be cognizant of, and alliedwith that objective. The UNCITRAL Guide has echoed thisposition by noting the interplay between the procedural designof the insolvency law.

Any claim seeking an exercise of the AdjudicatingAuthority’s residuary powers under Section 60(5)(c) of the IBC,the NCLT’s inherent powers under Rule 11 of the NCLT Rules2016 or even the powers of this Court under Article 142 of theConstitution must be closely scrutinized for broader compliancewith the insolvency framework and its underlying objective. Theadjudicating mechanisms which have been specifically createdby the statute, have a narrowly defined role in the process and A

BC

D

EF

G

H

Amust be circumspect in granting reliefs that may run counter tothe timeliness and predictability that is central to the IBC. Anyjudicial creation of a procedural or substantive remedy that isnot envisaged by the statute would not only violate the principleof separation of powers, but also run the risk of altering thedelicate coordination that is designed by the IBC framework andBhave grave implications on the outcome of the CIRP, the economyof the country and the lives of the workers and other allied partieswho are statutorily bound by the impact of a resolution orliquidation of a Corporate Debtor. [Paras 97-98][422-D-H; 423-C-E]C

2. The IBC provides a roadmap for the entire CIRP inChapter II of Part II. This process is tightly regulated to include,inter alia, timelines of the CIRP specified by Section 12, duties ofthe RP to provide adequate information to propose a ResolutionPlan in Section 29 and restrictions on who can be a ResolutionDApplicant in Section 29A.

Once a Resolution Applicant submits a Resolution Planunder sub-Section (1) of Section 30, the RP must assess whetherit conforms with all the requirements of sub-Section (2). Havingsatisfied itself, the RP under sub-Section (3) must then presentEthose Resolution Plans to the CoC which fulfill the criteria undersub- Section (2). The CoC will then proceed to decide on theapproval of the Resolution Plan, with a majority vote of sixty-sixpercent, after satisfying itself that the requirements under sub-Section (4) have been met, including testing the Resolution Planfor its feasibility and viability. A Resolution Applicant may attendFthis meeting of the CoC under sub-Section (5), but it does nothave a right to vote unless it is also a financial creditor. TheResolution Plan approved by the CoC under sub-Section (4) isthen placed by the RP before the Adjudicating Authority for itsapproval under sub-Section (6).G

Other than the IBC, the process is also regulated by theCIRP Regulations created under the IBC. Regulation 37 providesan illustration of the solutions which can be proposed in aResolution Plan. Regulation 38 provides for the mandatorycontents of a Resolution Plan, which are similar to the pre-Hconditions mentioned in Section 30(2) of the IBC. Regulation 39

provides for the process of approval of a Resolution Plan by theCoC, and under sub-Regulation (3), the CoC has to evaluate everyResolution Plan based on an “evaluation matrix” it has come upwith under Regulation 5(ha).

Having briefly taken an overview of the process, we nowunderstand that there are broadly three stages: (i) the first stageis prior to and ends with the approval of the Resolution Plan bythe CoC; (ii) the second stage is the interim period between theResolution Plan’s approval by the CoC and before its confirmationby the Adjudicating Authority; and (iii) the third stage is after theapproval of the Resolution Plan by the Adjudicating Authority. Inthe first stage, the relationship between the parties is explicitlygoverned by the provisions of the IBC – such as the right of aprospective Resolution Applicant to seek the IM and RFRP uponsubmission of its EOI, which may have been rejected by the RP(as it happened in the K’s Appeal). In the third stage, the sameholds true since Section 31(1) makes the Resolution Plan bindingupon all the stakeholders and its violation will attract a penaltyunder Section 74 of the IBC. However, what we are assessingright now is the interim second stage between both of those. Tounderstand the relationship of the parties therein, it becomesimportant to understand the exact “nature” of the ResolutionPlan after it has been submitted to the Adjudicating Authorityand before it has been approved under Section 31(1). [Paras 101-103][424-D; 427-C-H; 428-A-C]

3. The determination of the nature of the Resolution Planwould help us establish the source of the legal force of theResolution Plan – whether it is the statute, i.e., the IBC or thelaw of contract. The insolvency process, as governed by the IBC,does not merely structure the conduct of all the participants inthe process after finalization and approval of a Resolution Planby a CoC, but also the conduct stemming from the very first stepsof inviting prospective Resolution Applicants. The RP, with theapproval of the CoC62, invites prospective Resolution Applicantsthrough an RFRP. Once an unconditional EOI has been receivedfrom prospective Resolution Applicants who are otherwiseeligible under Section 29A, the RP prepares an IM as per theprovisions of Section 29 which furnishes all relevant information A

BC

D

E

F

G

H

A

BC

D

E

F

G

H

Aof the Corporate Debtor to enable prospective ResolutionApplicants to make an informed decision, before proposing aResolution Plan. As a consequence of the IBC and its regulations,prospective Resolution Applicants, who are not disqualified underSection 29A, propose drafts of their Resolution Plans. The RPexamines the Resolution Plan against the contours of SectionB30(2) and submits only the eligible plans to the CoC63. Prior tothe IBBI (CIRP) (Fourth Amendment) Regulations 2020, whichnow requires the CoC to vote on all Plans simultaneously afterrecording its deliberations on the feasibility and viability of eachPlan, Regulation 39(3) earlier enabled the CoC to approve aCResolution Plan with “such modifications as it deems fit”. Thismeant that the prospective Resolution Applicants and the CoCwould indulge in several rounds of negotiations, within a stricttime-frame, to arrive at a mutually agreeable Resolution Planwhich was then subject to voting by the CoC. Subsequent to thevoting, the RP would submit the plan to the Adjudicating AuthorityDalong with receipt of the PBG and a compliance certificate in theform of Form H. Each of the stages detailed above correspond toseveral rights and obligations on all parties that are specificallycreated by the statute. [Para 105][428-H; 429-A-E]

4. If this court were to hold that CoC-approved ResolutionEPlans are indeed contracts, their provisions would still have toconform to the statutory provisions of the IBC. However, suchan interpretation would entail that CoC-approved ResolutionPlans are at the intersection of the IBC and the Contract Act.This would mean that certain principles of contract law, forFexample those relating to discharge, penalties, remedies anddamages would become applicable to CoC- approved ResolutionPlans. For instance, in the United States, plans confirmed by courtshave been characterized as contracts, whose breach can evengive rise to contractual remedies. In In re Hoffinger Indus, Inc65, a bankruptcy court in Arkansas has held that “a confirmed planGshould be enforceable and amenable to damages betweencontractually bound parties.” Indeed, it has been argued beforeus that Resolution Plans should be enforced through thecontractual remedy of specific performance. Further, adetermination that Resolution Plans are contracts in the periodH

between approval by the CoC and the approval of the AdjudicatingAuthority would require us to analyse whether all elements ofcontract formation have been satisfied, including the question ofwhether the acceptance of the Resolution Plan by the CoC fulfilsthe criteria laid down under Section 7 of the Contract Act orwhether the conditionality of seeking approval from theAdjudicating Authority makes the Resolution Plan a contingentcontract. Our intent of laying down the consequences of ourdetermination of Resolution Plans as contracts is to highlight theimportance of ascertaining the nature of a CoC-approvedResolution Plan, prior to its approval by the AdjudicatingAuthority.

The text of the IBC does not specify whether ResolutionPlans at the second stage of the process, i.e., in the interveningperiod of submission to and approval by the AdjudicatingAuthority, are pure contracts. As noted previously, byspecifications such as eligibility for resolution applicants, thecontents of the IM and duties of the RP to prospective ResolutionApplicants and statutory procedures on timelines and voting,strictly govern the insolvency process even prior to thesubmission of the Plan to the Adjudicating Authority. The CoC,who the appellants allege is in the nature of a free contractingparty, is governed by the binding principles of the statute withregard to the contents and nature of the statutory plan that itapproves under Section 30(4) and even its own composition.

Section 30(4) provides that the consent of all the membersof the CoC, though a unanimous vote is not required and a sixty-six per cent vote is sufficient for approval of a resolution plan.The constitution of the CoC is based on specific scenariosenvisaged in the statute and accounts for varying compositions,based on factors such as the nature and quantum of debt owed.For example, if it comprises of operational creditors alone, thepercentage of debt owed between the operational and financialcreditors and other such variables impact voting thresholds interse members of the CoC. A sixty-six per cent vote of the CoC isrequired to approve a Resolution Plan. The dissenting creditorsare deemed to have given their approval and are bound by thedecision of the majority of the CoC. The dissenting creditors are ABC

D

E

F

G

H

Abound as a result of the statutory provision and not because theyhave actually consented to be parties to such an arrangement.Other elements governing the Resolution Plan indicate that theentire process from initiation and leading up to its acceptance bythe CoC takes place within the framework of the IBC. In addition,the IBC provides penalties for non-compliance with theBResolution Plan after its approval under Section 31 and forfeitureof the PBG for failing to implement the Resolution Plan orcontributing to the failure of its implementation. The violation ofthe terms of the Resolution Plan does not give rise to a claim ofdamages, rather it leads to prosecution and imposition ofCpunishment under Section 74 of the IBC. On the contrary, a CoC’swithdrawal of the CIRP under Section 12A is coupled with arequirement of payment of CIRP costs, but no damages arestatutorily payable to the Resolution Applicant, irrespective ofthe stage of the withdrawal.

DThe CoC even with the requisite majority, while approvingthe Resolution Plan must consider the feasibility and viability ofthe Plan and the manner of distribution proposed, which may takeinto account the order of priority amongst creditors as laid downin sub-section (1) of section 53 of the IBC. The CoC cannotapprove a Resolution Plan proposed by an applicant barred underESection 29A of the IBC. Regulation 37 and 38 of the CIRPRegulations govern the contents of a Resolution Plan.Furthermore, a Resolution Plan, if in compliance with the mandateof the IBC, cannot be rejected by the Adjudicating Authority andbecomes binding on its approval upon all stakeholders – includingFthe Central and State Government, local authorities to whomstatutory dues are owed, operational creditors who were not apart of the CoC and the workforce of the Corporate Debtor whowould now be governed by a new management. Such features ofa Resolution Plan, where a statute extensively governs the form, mode, manner and effect of approval distinguishes it from aGtraditional contract, specifically in its ability to bind those whohave not consented to it. In the pure contractual realm, anagreement binds parties who are privy to the contract. In thecontext of a resolution Plan governed by the IBC, the element ofprivity becomes inapplicable once the Adjudicating AuthorityHconfirms the Resolution Plan under Section 31(1) and declares it

to be binding on all stakeholders, who are not a part of thenegotiation stage or parties to the Resolution Plan. In fact, acommentator has noted that the purpose of bankruptcy law is toactually solve a specific ‘contracting failure’ that accompaniesfinancial distress. Such a contracting failure arises because“financial distress involves too many parties with strategicbargaining incentives and too many contingencies for the firmand its creditors to define a set of rules of every scenario.” Thus,insolvency law recognizes that parties can take benefit of such‘incomplete contract’ to hold each other up for their individualgain. In an attempt to solve the issue of incompleteness and thehold-up threat, the insolvency law provides procedural protectionsi.e., “the law puts in place guardrails that give the parties roomto bargain while keeping them from taking position that veertoward extreme hold up. [Paras 107-110][430-C-G; 431-A-H; 432-A-G]

5. While the above observations were made in the contextof a scheme that has been sanctioned by the Court, the ResolutionPlan even prior to the approval of the Adjudicating Authority isbinding 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 itsacceptance by the CoC and the approval of the AdjudicatingAuthority. Even at that stage, its binding effects are produced bythe IBC framework. The BLRC Report mentions that “[w]hen75% of the creditors agree on a revival plan, this plan would bebinding on all the remaining creditors”. The BLRC Report alsomentions that, “the RP submits a binding agreement to theAdjudicator before the default maximum date”. We have furtherdiscussed the statutory scheme of the IBC in Sections I and J ofthis judgement to establish that a Resolution Plan is binding interse the CoC and the successful Resolution Applicant. Thus, theability of the Resolution Plan to bind those who have not consentedto it, by way a statutory procedure, indicates that it is not a typicalcontract.

The BLRC Report, which furnished the first draft of theIBC and elaborated on the aims behind the overhaul of theinsolvency regime, refers to a CoC- approved Resolution Plan A

B

C

D

E

F

G

H

Aas a ‘binding contract’ in one instance and refers to it as a ‘bindingagreement’ in other instances. The report also refers to a CoC-approved Resolution Plan as a ‘financial arrangement’, ‘revivalplan’ or a ‘solution’. The interchangeability of the terms –‘agreement’, ‘contract’, ‘financial arrangement’, ‘revival plan’ and‘solution’ indicates that there is no clear intention of the BLRCBin characterizing the nature of the Resolution Plan as a contract.The binding effect of the Resolution Plan has the consequence ofpreventing the CoC or the Resolution Applicant to renege fromits terms after the plan has been approved by the CoC through avoting mechanism. The fleeting mention of a ‘binding contract’Con one occasion in the BLRC Report (which was a pre- legislativetext that underwent subsequent modifications by the Legislature)to indicate the binding nature of the Resolution Plan and the finalityof negotiations once it is approved by the CoC, does not establishthe legal nature of the document, especially when it is notcomplemented by the text and design of the IBC.D

Certain stages of the CIRP resemble the stages involvedin the formation of a contract. Echoes of the process involved inthe formation of a contract resonate in the steps antecedent tothe approval of a Resolution Plan such as: (i) the issuance of anRFRP may be equated to an invitation to offer; (ii) a ResolutionEPlan can be considered as a proposal or offer; and (iii) the approvalby the CoC may be similar to an acceptance of offer. The terms ofthe Resolution Plan contain a commercial bargain between theCoC and Resolution Applicant. There is also an intention to createlegal relations with binding effect. However, it is the structure of Fthe IBC which confers legal force on the CoC-approvedResolution Plan. The validity of the Resolution Plan is notpremised upon the agreement or consent of those bound (althoughas a procedural step the IBC requires sixty-six percent votes ofcreditors), but upon its compliance with the procedure stipulatedunder the IBC. [Paras 112-114][433-D-G; 434-A-F]G

6. The above observations were in the context of a PPAentered into under the provisions of Electricity Supply Act 1948.Section 43-A(1) of the Act stipulated that the generating companymay enter into a contract with the Electricity Board. Thus, the H

judgement pre-supposes the existence of a subsisting contract.The controversy in the case was whether the PPA could becharacterized as a statutory contract. To say that a ResolutionPlan is a statutory contract, we must first consider whether theIBC envisages the CoC-approved Resolution Plan as a contract.There is no provision under the IBC referring to a ResolutionPlan as a contract, unlike Section 43-A(1) of the Electricity SupplyAct 1948 which mentions that a contract may be entered intobetween the concerned parties. The legal force of a ResolutionPlan arises due to the framework provided under the IBC. Themechanisms of the IBC provide sufficient guidance on the conductof all participants in the process and the binding effect of theCoC- approved Resolution Plan is evidenced by the execution ofa PBG furnished by the successful Resolution Applicant, incompliance with the CIRP Regulations. This PBG is returnableonce the Adjudicating Authority approves the Resolution Planunder Section 31 and makes it binding on all stakeholders.Therefore, the IBC and its regulations institute sufficientsafeguards to ensure the binding effect of a CoC-approvedResolution Plan. In our discussion in Sections I and J below, wefurther elaborate on the nature of a CoC-approved ResolutionPlan and the code of conduct that is permissible by the statutoryframework. [Para 116][435-G-H; 436-A-D]

7. The lack of an apparent international consensus on theissue of whether instruments like CoC-approved Resolution Plansare contracts, prior to the Court’s sanction, is also attributableto the peculiarity of the insolvency regime in each jurisdiction.This Court will have to be wary of transplanting internationaldoctrines that are evolved as responses to the specific featuresof a jurisdiction’s insolvency regime, without identifying ananalogous framework in our insolvency regime.

The absence of any specific provision in the IBC or theregulations referring to a CoC-approved Resolution Plan as acontract and the lack of clarity in the BLRC report regarding thenature of such a Resolution Plan, constrains us from arriving atthe conclusion that CoC-approved Resolution Plans will begoverned by the Contract Act and common law principlesgoverning contracts, save and except for the specific prohibitions AB

C

DE

F

G

H

Aand deeming fictions under the IBC. Regulation 39(3) of CIRPregulations, as it stood before the IBBI (CIRP) (FourthAmendment) Regulations 2020 and applicable to the threeappellants before us, enabled a framework where a draftResolution Plan would involve several rounds of negotiations andrevisions between the Resolution Applicant and the CoC, beforeBit is approved by the latter and submitted to the AdjudicatingAuthority. However, this statutorily-enabled room for commercialnegotiation is not enough to over-power the other elements ofregulation that detract from the view that CoC-approvedResolution Plans are contracts. CoC-approved Resolution Plans,Cbefore the approval of the Adjudicating Authority under Section31, are a function and product of the IBC’s mechanisms. Theirvalidity, nature, legal force and content is regulated by theprocedure laid down under the IBC, and not the Contract Act.The voting by the CoC also occurs only after the RP has verified the contents of the Resolution Plan and confirmed that it meetsDthe conditions of the IBC and the regulations therein. Theamended Regulation 39(3) further regulates the conduct of theCoC on voting on Resolution Plans and has introduced therequirement of simultaneous voting. The IBBI’s DiscussionPaper issued on 27 August 2021 has invited comments onEregulating the process on revisions that can be made to resolutionplans submitted to the CoC. These developments bolster theconclusion that the mechanism prior to submission of a CoC-approved resolution plan is subject to continuous proceduralscrutiny by the IBC and cannot be considered as a simplecontractual negotiation between two parties. Section J belowFdetails how a common law remedies of withdrawal or modificationon account of frustration or force majeure are not applicable toCoC- approved Resolution Plans owing to the nature of the IBC.Similarly, the whole host of remedies such as liquidated andunliquidated damages, restitution, novation and frustration, unlessGspecifically provided by the IBC, are not available to a successfulResolution Applicant whose Plan has been approved by the CoCand is awaiting the approval of the Adjudicating Authority. TheInsolvency Law Committee Report of February 2020 hasrecommended the CIRP process to mandate Resolution Plans toprovide for the apportionment of the profit or loss accrued by theH

Corporate Debtor during the CIRP. These reports are periodicallycommissioned by the parliament to review the functioning of theCode and suggest amendments. However, if the intention was toview a CoC- approved Resolution Plan as a contract, the principlesof unjust enrichment would have been sufficient to address theissue and an amendment may not be considered necessary. AResolution Applicant, as a third party partaking in the insolvencyregime, seeks to acquire the business of the Corporate Debtorwithout the entirety of its debts, statutory liabilities and avoidingcertain transactions with third parties. These benefits are afunction of the coercive mechanisms of the IBC which enable athird party to acquire the assets of a Corporate Debtor withoutits liabilities, for a negotiated amount of the debt that is owed bythe Corporate Debtor. Typically, resolution amounts envisagepayment of a fraction of debt that is owed to the creditors and thebusiness is acquired as a going concern with its employees. TheResolution Plan is drafted in a way that it is implementable in thefuture and brings about a quietus to the CIRP. Enabling ResolutionApplicants to seek remedies that are not specified by the IBC,by seeking recourse to the Contract Act would be antithetical tothe IBC’s insolvency regime. The elements of contractualinterpretation can be relied upon to construe the language of theterms of the Resolution Plan, in the event of a dispute, but not tore-fashion and distort the mechanism of the IBC altogether. ThisCourt in Laxmi Pat Surana v. Union Bank of India has held thatthe IBC is a self-contained Code. Thus, importing principles ofany other law or a statute like the Contract Act into the IBCregime would introduce unnecessary complexity into the workingof the IBC and may lead to protracted litigation on considerationsthat are alien to the IBC. To give an example, the CoC can forfeitthe PBG furnished by the successful Resolution Applicant undercertain circumstances in terms of the RFRP and Resolution Planincluding, inter alia, on the ground that the Resolution Applicanthas failed to implement the resolution or has contributed to itsfailure. Regulation 36B (4A) of CIRP regulations provides forthe furnishing of such performance security once the plan isapproved by creditors. The Regulations do not provide that theperformance security has to be a reasonable estimate of loss as AB

C

DEF

G

H

AB

C

DEF

G

H

Ais expected of penalty clauses under contract law, rather theexplanation provides that the performance security should be of“such nature, value, duration and source, as may be specified inthe request for resolution plans with the approval of thecommittee, having regard to the nature of resolution plan andbusiness of the corporate debtor”. Further, in the event that theBCoC enters into a settlement with the Corporate Debtor andwithdraws from the CIRP under Section 12A, Regulation 30Aprovides for only payment of insolvency costs and notcompensation or damages to Resolution Applicant for investingtime and money in the process. The parties may resort to invokingCprinciples of frustration or force majeure to evade implementationof the Resolution Plan leading to unnecessary litigation. ThisCourt in Amtek Auto (supra), had curbed a similar attempt by asuccessful Resolution Applicant who had relied on a force majeureclause in its Resolution Plan to seek a direction compelling theCoC to negotiate a modification to its Resolution Plan. The CourtDheld that there was no scope for negotiations between the partiesonce the Resolution Plan has been approved by the CoC. Thus,contractual principles and common law remedies, which do notfind a tether in the wording or the intent of the IBC, cannot beimported in the intervening period between the acceptance ofEthe CoC and the approval by the Adjudicating Authority. Principlesof contractual construction and interpretation may serve asinterpretive aids, in the event of ambiguity over the terms of aResolution Plan. However, remedies that are specific to theContract Act cannot be applied, de hors the over-riding principlesof the IBC. [Paras 124-125][440-D-G; 441-A-E; 442-A-G; 443-FA-E]

8. The statutory framework governing the CIRP seeks tocreate a mechanism for resolving insolvency in an efficient,comprehensive and timely manner. The IBC provides a detailedlinear process for undertaking CIRP of the Corporate Debtor toGminimize any delays, uncertainty in procedure and disputes. Theroles and responsibilities of the important actors in the CIRP areclearly defined under the IBC and its regulations. In InnoventiveIndustries Ltd v. ICICI Bank a three judge Bench of this Courtobserved that “one of the important objectives of the Code is tobring the insolvency law in India under a single unified umbrellaHwith the object of speeding up of the insolvency process”.

Recently, in Gujarat Urja (supra) a three judge Bench of this Courtobserved that a “delay in completion of the insolvencyproceedings would diminish the value of the debtor’s assets andhamper the prospects of a successful reorganization or liquidation.For the success of an insolvency regime, it is necessary thatinsolvency proceedings are dealt with in a timely, effective andefficient manner”. The stipulation of timelines and a detailedprocedure under the IBC ensures a timely completion of CIRPand introduces transparency, certainty and predictability in theinsolvency resolution process. The UNCITRAL Guide also statesthat the insolvency law of a jurisdiction should be transparentand predictable. [Para 143][458-G-H; 459-A-C]

9. Judicial restraint must not only be exercised whileadjudicating upon the constitutionality of the statute relating toeconomic policy but also in matters of interpretation of economicstatutes, where the interpretative maneuvers of the Court havean effect of transgressing into the law-making power of thelegislature and disturbing the delicate balance of separation ofpowers between the legislature and the judiciary. Judicial restraintmust be exercised in such cases as a matter of prudence, sincethe court neither has the necessary expertise nor the power tohold consultations with stakeholders or experts to decide thedirection of economic policy. A court may be inept in laying downa detailed procedure for exercise of the power of withdrawal ormodification by a successful Resolution Applicant withoutimpacting the other procedural steps and the timelines underthe IBC which are sacrosanct. Thus, judicial restraint must beexercised while intervening in a law governing substantiveoutcomes through procedure, such as the IBC. In this case, ifResolution Applicants are permitted to seek modifications aftersubsequent negotiations or a withdrawal after a submission of aResolution Plan to the Adjudicating Authority as a matter of law,it would dictate the commercial wisdom and bargaining strategiesof all prospective Resolution Applicants who are seeking toparticipate in the process and the successful ResolutionApplicants who may wish to negotiate a better deal, owing tomyriad factors that are peculiar to their own case. The broaderlegitimacy of this course of action can be decided by the legislaturealone, since any other course of action would result in a flurry of A

B

C

DE

F

G

H

Alitigation which would cause the delay that the IBC seeks todisavow.

The IBC is silent on whether a successful ResolutionApplicant can withdraw its Resolution Plan. However, thestatutory framework laid down under the IBC and the CIRPBRegulations provide a step-by-step procedure which is to befollowed from the initiation of CIRP to the approval by theAdjudicating Authority. Regulation 40A describes a model-timeline for the CIRP that accounts for every eventuality thatmay arise between the commencement of the CIRP and approvalof the Resolution Plan by the Adjudicating Authority, includingCthe different stages for pressing a withdrawal of the CIRP underSection 12A. Even a modification to the RFRP is envisaged bythe CIRP Rules and is subject to a timeline. The absence of anyexit routes being stipulated under the statute for a successfulResolution Applicant is indicative of the IBC’s proscription ofDany attempts at withdrawal at its behest. The rule of casus omissusis an established rule of interpretation, which provides that anomission in a statute cannot be supplied by judicial construction.

The treatise further discusses that a departure from thisrule is only allowed in cases where words have been accidentlyEomitted or the omission has an effect of making any part of thestatute meaningless. Further, only such words can be supplied tothe statute which would have certainly been inserted by theParliament, had the omission come to its notice.

In the wake of the COVID-19 pandemic, severalFResolution Plans remained pending before AdjudicatingAuthorities due to the lockdown and significant barriers tosecuring a hearing. An Ordinance was swiftly promulgated on 5June 2020 which imposed a temporary suspension of initiation ofCIRP under Sections 7, 9 and 10 of the IBC for defaults arisingfor six months from 25 March 2020 (extendable by one year).GThis was followed by an amendment through the IBC (SecondAmendment) Act 2020 on 23 September 2020 which providedfor a carve-out for the purpose of defaults arising during thesuspended period. The delays on account of the lockdown werealso mitigated by the IBBI (Insolvency Resolution Process forCorporate Persons) (Third Amendment) Regulations 2020, whichH

inserted Regulation 40C on 20 April 2020, with effect from29 March 2020, and excluded such delays for the purposes ofadherence to the otherwise strict timeline. Recently, the IBC(Amendment) Ordinance 2021 was promulgated with effect from04 April 2021 providing certain directions to preserve businessesof MSMEs and a fast-track insolvency process. There has beena clamor on behalf of successful Resolution Applicants who nolonger wish to abide by the terms of their submitted ResolutionPlans that are pending approval under Section 31, on account ofthe economic slowdown that impacted every business in thecountry. However, no legislative relief for enabling withdrawalsor re- negotiations has been provided, in the last eighteen months.In the absence of any provision under the IBC allowing forwithdrawal of the Resolution Plan by a successful ResolutionApplicant, vesting the Resolution Applicant with such a reliefthrough a process of judicial interpretation would beimpermissible. Such a judicial exercise would bring in the evilswhich the IBC sought to obviate through the back-door.[Paras146-147][464-D-H; 465-A-D, F; 466-C-H]

10. The approval of the Adjudicating Authority underSection 31(1) of the IBC has the effect of making the ResolutionPlan binding on all stakeholders. These stakeholders include theemployees of the corporate debtor whose terms of employmentwould be governed by the Resolution Plan, the Central and StateGovernments who would receive their tax dues on the basis ofthe terms of the Resolution Plan and local authorities to whomdues are owed. These stakeholders are not direct participants inthe CIRP but are bound by its consequence by virtue of theapproval of the Resolution Plan, under Section 31(1) of the IBC.Section 31(1) ensures that the Resolution Plan becomes bindingon all stakeholders after it is approved by the AdjudicatingAuthority. The language of Section 31(1) cannot be construed tomean that a Resolution Plan is indeterminate or open towithdrawal or modification until it is approved by the AdjudicatingAuthority or that it is not binding between the CoC and thesuccessful Resolution Applicant. Regulation 39(4) of CIRPRegulations mandates that the RP should endeavour to submitthe Plan at least fifteen days before the statutory period of theCIRP under Section 12 is due to expire along with a receipt of a AB

C

D

E

F

G

H

APBG and a compliance certificate as Form H. It is pertinent tonote that sub-Section (3) to Section 12 mandates that the CIRPprocess, including legal proceedings, must be concluded within330 days. This three-hundred-and- thirty-day period can beextended only in exceptional circumstances, if the process is atnear conclusion and serves the object of the IBC, as held by aBthree judge Bench of this Court in Essar Steel (supra). Therefore,after accounting for all statutorily envisaged delays which the RPhas to explain in its Form H and otherwise through Regulation40B, the procedure envisages a fifteen-day window betweensubmission of Resolution Plan and its approval or rejection byCthe Adjudicating Authority. This clearly indicates that the statuteenvisages a certain level of finality before the Resolution Plan issubmitted for approval to the Adjudicating Authority. Even theCoC is not permitted to approve multiple Resolution Plans orsolicit EOIs after submission of a Resolution Plan to theAdjudicating Authority, which would possibly be in contemplationDif the Resolution Applicant was permitted to withdraw from, ormodify, the Plan after acceptance by the CoC. Regulation 36B(4A)requires the furnishing of a performance security which will beforfeited if a Resolution Applicant fails to implement the Plan.This is collected before the Adjudicating Authority approves theEPlan. Notably, the regulations also direct forfeiture of theperformance security in case the Resolution Applicant“contributes to the failure of implementation”, which couldpotentially include any attempts at withdrawal of the Plan.

The report of the BLRC also notes that the negotiations inFthe CIRP must be time bound and it envisages that one of theways in which the CIRP comes to a close is that the RP is able toobtain a binding agreement from the CoC. Such a bindingagreement is placed before the Adjudicating Authority, whichorders the closure of the CIRP. If the Adjudicating Authority does not receive a binding agreement, it can send the Corporate DebtorGinto liquidation. [Paras 150-151][468-F-H; 469-A-G]

11. Regulation 38(3) mandates that a Resolution Plan befeasible, viable and implementable with specific timelines. AResolution Plan whose implementation can be withdrawn at the H

behest of the successful Resolution Applicant, is inherentlyunviable, since open-ended clauses on modifications/withdrawalwould mean that the Plan could fail at an undefined stage, beuncertain, including after approval by the Adjudicating Authority.It is inconsistent to postulate, on the one hand, that no withdrawalor modification is permitted after the approval by the AdjudicatingAuthority under Section 31, irrespective of the terms of theResolution Plan; and on the other hand, to argue that the termsof the Resolution Plan relating to withdrawal or modification mustbe respected, in spite of the CoC’s approval, but prior to theapproval by the Adjudicating Authority. The former position followsfrom the intent, object and purpose of the IBC and from Section31, and the latter is disavowed by the IBC’s structure andobjective. The IBC does not envisage a dichotomy in the bindingcharacter of the Resolution Plan in relation to a ResolutionApplicant between the stage of approval by the CoC and theapproval of the Adjudicating Authority. The binding nature of aResolution Plan on a Resolution Applicant, who is the proponentof the Plan which has been accepted by the CoC cannot remainindeterminate at the discretion of the Resolution Applicant. Thenegotiations between the Resolution Applicant and the CoC arebrought to an end after the CoC’s approval. The onlyconditionality that remains is the approval of the AdjudicatingAuthority, which has a limited jurisdiction to confirm or deny thelegal validity of the Resolution Plan in terms of Section 30 (2) ofthe IBC. If the requirements of Section 30(2) are satisfied, theAdjudicating Authority shall confirm the Plan approved by theCoC under Section 31(1) of the IBC.

If the appellants’ claim were to succeed, a clause enablinga Resolution Applicant to withdraw/seek modification for reasonssuch as a ‘Material Adverse Event’ could also be set up by aResolution Applicant when it is being prosecuted under Section74 (3). It was contended before us that Form H, which is acompliance certificate that is to be submitted by the RP to theAdjudicating Authority along with the Resolution Plan, mentionsthat the RP can enter details as to whether the Resolution Plan issubject to any conditionalities under Clause 12. Thus, theargument goes that this permits the Resolution Applicant tostipulate in the Resolution Plan certain contingencies under which AB

C

D

EF

GH

AB

C

D

EF

GH

Ait can withdraw the Plan, for instance if there is an occurrence ofan ‘Material Adverse Event’. A form is subservient to the statute.The conditionalities contemplated in Form H could be those whichdo not strike at the root of the IBC. They can include commercialconditions and business arrangements with the CoC. However,conditions for withdrawal or re-negotiation of the Resolution PlanBcannot pass the test of ‘viability’ and ‘implementability’ as theywould make the resolution process indeterminate andunpredictable. A two judge Bench of this Court in K Sashidhar(supra), while discussing the jurisdiction of the AdjudicatingAuthority under Section 31 to evaluate a Resolution Plan, hasCobserved that the Resolution Plan should “be an overall credibleplan, capable of achieving timelines specified in the Codegenerally, assuring successful revival of the corporate debtor anddisavowing endless speculation”. Section 30(2)(d) of the IBC andRegulation 38 of the CIRP Regulations also provide that theResolution Plan should be implementable. In the absence ofDspecific statutory language allowing for withdrawals or evenmodifications by the successful Resolution Applicant, it would bedifficult to imply the existence of such an option based on theterms of the Resolution Plan, irrespective of, and especially whenthey do not form a part of Clause 12 in Form H, as is the case inEall the three Resolution Plans that are in dispute in this presentappeal. [Paras 153-154][471-B-H; 472-A-F]

12. Regulation 40A envisages a model-time line for theCIRP. Any deviation from this timeline needs to be specificallyexplained by the RP in Clause 10 of Form H. Regulation 40B

Fimposes a time-limit on the RP for filing the requisite forms atdifferent stages of the CIRP, including forms seeking extensionson account of delays at any stage. The failure to fill these formswithin the stipulated deadline results in disciplinary action againstthe RP by the IBBI. Further, as discussed in Section I of the judgement, various mandatory timelines have been imposed forGundertaking specific actions under the CIRP. If the legislatureintended to allow withdrawals or subsequent negotiations bysuccessful Resolution Applicants, it would have prescribedspecific timelines for the exercise of such an option. Therecognition of a power of withdrawal or modification afterHsubmission of a CoC-approved Resolution Plan, by judicial interpretation, will have the effect of disturbing the statutorytimelines and delaying the CIRP, leading to a depletion in thevalue of the assets of a Corporate Debtor in the event of apotential liquidation. Hence, it is best left to the wisdom of thelegislature, based on the experiences gained from the workingof the enactment, to decide whether the option of modification orwithdrawal at the behest of the Resolution Applicant should bepermitted after submission to the Adjudicating Authority; if so,the conditions and the safeguards subject in which it can be allowedand the statutory procedure to be adopted for its exercise.

Based on the plain terms of the statute, the AdjudicatingAuthority lacks the authority to allow the withdrawal ormodification of the Resolution Plan by a successful ResolutionApplicant or to give effect to any such clauses in the ResolutionPlan. Unlike Section 18(3)(b) of the erstwhile SICA which vestedthe Board for Industrial and Financial Reconstruction with thepower to make modifications to a draft scheme for sick industrialcompanies, the Adjudicating Authority under Section 31(2) of theIBC can only examine the validity of the plan on the anvil of thegrounds stipulated in Section 30(2) and either approve or rejectthe plan. The Adjudicating Authority cannot compel a CoC tonegotiate further with a successful Resolution Applicant. Arejection by the Adjudicating Authority is followed by a directionof mandatory liquidation under Section 33. Section 30(2) doesnot envisage setting aside of the Resolution Plan because theResolution Applicant is unwilling to execute it, based on termsof its own Resolution Plan.

Further, no such power can be vested with the AdjudicatingAuthority under its residuary jurisdiction in terms of Section 60(5)(c). In a decision of a three judge Bench of this Court in GujaratUrja (supra), it was held that, “the NCLT’s residuary jurisdiction[under Section 60(5)(c)] though wide, is nonetheless defined bythe text of the IBC. Specifically, the NCLT cannot do what theIBC consciously did not provide it the power to do”. Further, thecourt observed that “this Court must adopt an interpretation ofthe NCLT’s residuary jurisdiction which comports with the broadergoals of the IBC”. The effect of allowing the AdjudicatingAuthority to permit withdrawals of resolution plans that are AB

C

D

E

F

G

H

Asubmitted to it, would be to confer it with a power that is notenvisaged by the IBC and defeat the objectives of the statute,which seeks a timely and predictable insolvency resolution ofCorporate Debtors.

After the amendment to Section 12 in 2019 which mandateBa 330 days outer-limit for conclusion of the CIRP (which can bebreached only under exceptional circumstances as held in EssarSteel (supra)), it would be antithetical to the purpose of the IBCto allow the Adjudicating Authority to use its plenary powers underSection 60(5)(c) to potentially extend these timelines to enablethe CoC to either issue a fresh RFRP if the Resolution Plan isCwithdrawn by a successful Resolution Applicant or direct furthernegotiations with the Resolution Applicant who is seeking amodification of the plan, whose failure could result in withdrawalas well. The likely consequence of a withdrawal by a successfulResolution Applicant after going through the stages of the CIRP

Dfor nearly 180 days (provided all statutory timelines have beenstrictly followed)would inevitably be a delayed liquidation afterthe value of the assets has further depreciated. In the event ofintervening delays on account of litigation or otherwise, the delaywould be even more severe. If a CoC, could be compelled by theAdjudicating Authority to negotiate with the successfulEResolution Applicant, it would have to resign itself to a commercialbargain at a much lower value. If Parliament intended to permitsuch withdrawals/modifications sought by successful ResolutionApplicants as being beneficial to the economic policy, which ithas sought to pursue while enacting the IBC, it would have Fprescribed timelines for setting the clock-back or directingimmediate liquidation if the withdrawals occur after a certainperiod. For instance, under Regulation 36B (5) any modificationto the RFRP or the evaluation matrix is deemed as a fresh issueof the RFRP and the timeline for submission of Resolution Planstarts afresh. Parliament has not legislated to provide for theGeventuality argued by the appellants. [Paras 156-159][475-D-H;476-A-H; 477-A-D]

13. Before proceeding further, it is important to comparethe reliefs sought by ‘E’ in the First, Second and Third WithdrawalApplications.H

From the above table, it is clear that the prayers in theSecond and Third Withdrawal Applications were identical. Further,prayer (iii) of both corresponds to prayer (iii) of the FirstWithdrawal Application, in almost identical terms, while prayer(ii) was not present in the First Withdrawal Application at all. Atthe same time, prayers (i) and (ii) in the First WithdrawalApplication have not been repeated in the Second and ThirdWithdrawal Applications. However, what is at issue is prayer (iv)of the First Withdrawal Application and prayer (i) of the Secondand Third Withdrawal Applications. Through the former, ‘E’sought permission to re-evaluate its Resolution Plan and tosuitably “revise/modify and/or withdraw” it, while through thelatter, ‘E’ sought permission to withdraw its Resolution Plan. Nowwe must analyse whether this would attract the principle of resjudicata. [Para 165][480-C-E]

14. Res judicata cannot apply solely because the issue haspreviously come up before the court. The doctrine will apply wherethe issue has been “heard and finally decided” on merits througha conscious adjudication by the court. In the present case, theNLCT’s order dismissing the First Withdrawal Application makesit clear that it had only considered only that part of prayer (iv)which related to re-evaluation of the Resolution Plan, possiblybecause ‘E’ had hoped to re-evaluate the Resolution Plan on thebasis of the information received as a consequence of prayers (i)and (ii) and those prayers were rejected since such informationwas not available. [Para 171][483-D-F]

15. The prayer for withdrawal of the Resolution Plan in theFirst Withdrawal Application was not substantial and one that theCourt was bound to grant, since it was contingent upon a re-evaluation, which in itself was contingent upon receiving theinformation sought in prayers (i) and (ii). Since the latter twocontingencies never arose, the NCLT did not apply its mind tothe prayer for withdrawal independently. When it filed the SecondWithdrawal Application, it was dismissed on a technical groundand not on its merits. When a revised Third WithdrawalApplication was filed, the NCLT then adjudicated it on its meritsand allowed it. Hence, since the NCLT did not adjudicate E’sprayer for withdrawal of their Resolution Plan on its merits while AB

C

DE

F

G

H

Adismissing the First Withdrawal Application, the opportunity toseek the relief was not available to ‘E’ in a real sense. Therefore,we reverse the finding of the NCLAT on this issue and hold thatE’s Third Withdrawal Application was not barred by res judicata.[Para 174][484-G; 485-A-B]

B16. This submission of ‘E’ cannot be accepted since theterms of the RFRP or the Resolution Plan relate to the validity ofthe Resolution Plan for the period of negotiation with the E-CoCand not for a period after the Resolution Plan is submitted for theapproval of the Adjudicating Authority. The time which may betaken before the Adjudicating Authority is an imponderable whichCnone of the parties can predict. In fact, this is emphasized byClause 1.3.7 of the RFPF which contains a schedule of theResolution Plan submission process.

Parties cannot indirectly impose a condition on a judicialauthority to accept or reject its Plan within a specified time period,Dfailing which the CIRP process will inevitably come to an end. Inthis case, the draft Resolution Plan of ‘E’ was submitted on 29January 2018 and remained valid for the term of the multiplerounds of negotiations with the E-CoC, until its submission tothe Adjudicating Authority on 7 March 2018, which was withinEthe six-month period envisaged in the Plan.

Even if it were to be assumed, for the sake of argument,that the term in the submitted Resolution Plan was in the natureof a qualified offer which would expire after six months of itssubmission, failing the imprimatur of the Adjudicating AuthorityFunder Section 31 which would make it binding on all parties, thesurrounding terms of the RFRP and the subsequent legalmaterials including the LOI and the Compliance Certificate (FormH) under CIRP Regulations make it clear that there was no scopeto resile from the implementation of the Resolution Plan, once ithad been submitted to the Adjudicating Authority, except in theGevent of a rejection. Clause 1.9.3 of the RFRP required ‘E’ toreplace its EMD with a PBG equivalent to ten per cent of theResolution Plan value, if it were to be declared as the ‘successfulResolution Applicant’. This PBG can be invoked under Clause1.9.5 of the RFRP if the Resolution Applicant fails to implementHthe Resolution Plan. Further, Clause 1.8.4 of the RFRP states that “[a] Resolution Plan submitted by a Resolution Respondentshall be irrevocable”.

E’s submission that Clause 1.10(l) is applicable only uponapproval of the Adjudicating Authority is not plausible since theResolution Plan becomes binding on all stakeholders as aconsequence of the approval under Section 31. The E- RP’sargument holds much weight when it is argued that Clause 1.10(l)cannot be construed to infer that the Adjudicating Authority woulddeclare ‘E’ as the ‘Successful Resolution Applicant’ once again,which would then impose the obligation of barring withdrawalsfor the first time. E-RP, has also submitted before us that thevalidity of the Resolution Plan being six months was notmentioned as a specific conditionality in Form H that wassubmitted by the E-RP along with the Resolution Plan to theAdjudicating Authority, which evinces that the six-month validitywas only vis-à- vis the acceptance by the E-CoC.

‘E’ has also tried to argue that its position has changedmanifestly because of new allegations which have come up inrelation to the financial conduct of Educomp. However, in thisregard, it is pertinent to note Clause 1.3.2 of the RFRP whichdirects prospective Resolution Applicants to conduct their owndue diligence.

‘E’ was responsible for conducting their own due diligenceof Educomp and could not use that as a reason to revise/modifytheir approved Resolution Plan. In any event, Section 32A of theIBC grants immunity to the Corporate Debtor for offencescommitted prior to the commencement of CRIP and it cannot beprosecuted for such offences from the date the Resolution Planhas been approved by the Adjudicating Authority under Section31, if the Resolution Plan results in a change of management orcontrol of the Corporate Debtor subject to certain conditions.

Thus, in any case even if it is found that there was anymisconduct in the affairs of Educomp prior the commencementof the CIRP, ‘E’ will be immune from any prosecution orpunishment in relation to the same. The submission that ‘E’ hasbeen placed in a prejudicial position due to the initiation ofinvestigation into the affairs of Educomp by the CBI and SFIO is AB

C

D

E

F

G

H

Anothing but a red herring since such investigations have nobearing on ‘E’.

Finally, it is also important to note that no clause of ‘E’ ownResolution Plans provides them with a right to revise/withdrawtheir Resolution Plan after its approval by the E-CoC, but beforeBits confirmation by the Adjudication Authority. Clause 9.1 permitswithdrawal in the event the Resolution Plan is not approved inits entirety by the NCLT, while Clause 9.7 allows for anamendment for the purposes of implementation of the ResolutionPlan but only when the E-CoC approves it with a seventy-fiveper cent vote. Hence, ‘E’ did not have any right under their ownCResolution Plan to revise/withdraw it.

It is also pertinent to note that ‘E’ did not stop pursuingtheir Resolution Plan after the expiry of six months, if the trueimport of the commercial bargain was a withdrawal of theResolution Plan after six months of its submission. The FirstDWithdrawal Application was filed on 10 September 2019, whichwas after one year of the alleged expiry of the six-month period.Therefore, even if the submitted Resolution Plan was consideredas a conditional offer the terms did not enable a withdrawal of theResolution Plan in the event that the Adjudicating Authority doesEnot approve it under Section 31 within six months of itssubmission. [Paras 179-183][487-B-C, E-H; 488-A-B, E-H; 489-E; 490-G-H; 491-A-D]

17. Section 29 of the IBC places a duty upon the RP toprovide an IM to the Resolution Applicant, containing suchFinformation which may be relevant to the Resolution Applicantto draft its Resolution Plan. [Para 186][491-G-H]

18. Under the IBC, there is a duty upon the RP to collectas much information about the Corporate Debtor as is accuratelypossible to do. When such information is communicated throughGan IM to the Resolution Applicant, the RP must be careful toclarify when its information is not comprehensive and what factorsmay cause a change. [Para 189][493-G-H]

19. ‘E’ cannot dispute that E-RP had provided it therelevant information required under Section 29 to formulate itsResolution Plan. The issues in relation to financial investigationsH

into the conduct of Educomp arose when the two articles werepublished by The Wire, both of which were after the ApprovalApplication had been filed by the E-RP. Further, ‘E’ was aware ofall the proceedings before the NCLT since the variousapplications were often listed along with the Approval Application,in which it continued to appear. Finally, ‘E’ has brought nothingon record to prove that E-RP knew of the SFIO and CBIinvestigations before a regulatory disclosure was made byEducomp. Hence, it cannot be stated that the E-RP had falteredin its duty to provide relevant information to ‘E’. [Para 191][494-F-G]

20. During the course of the hearing of the present appeal,the compilation of additional documents has been filed by ‘K’.On 5 July 2021, ‘K’ had addressed a communication to EXIMBank and PFCL “seeking a revision/renegotiation of theresolution amount/financial proposal” of ‘K’ for the resolution ofAstonfield. Responding to the above communication, EXIM Bankhas addressed a letter dated 12 July 2021 stating that a meetingwas held by “the lenders” (EXIM Bank and PFCL) on 9 July2021, on a without prejudice basis to deal with the issues raisedby ‘K’ in their letter dated 5 July 2021.

Pursuant to the above exchange of communications, a jointrequest has been made on behalf of ‘K’ and of the A-CoC.

This Court had been informed that EXIM Bank and PFCLrepresent 98 per cent of the financial creditors of Astonfeld. Inview of the above agreement which has been arrived at, we deemit appropriate to exercise our jurisdiction under Article 142 ofthe Constitution of India for a one-time relief and direct that:

(i) The A-CoC shall convene and take a decision on theproposal submitted by ‘K’ on 5 July 2021, and the response byEXIM Bank and PFCL dated 12 July 2021;

ii) In the event, that a revised Resolution Plan is agreedupon by the A-CoC, it shall be submitted through the A-RP forthe approval of the NCLT within a week thereafter. In the eventthat a revised Resolution Plan is not agreed upon, the originalResolution Plan, as submitted before the NCLT on 15 November2019, shall prevail; and AB

CD

EF

G

H

A(iii) The NCLT shall dispose of the application with therevised Resolution Plan expeditiously, and preferably within aperiod of two weeks from the date of receipt of an applicationfrom the A-RP for the approval of the revised Resolution Plan.

We clarify that the above directions have been issued inBview of the submission which has been urged as noted, and shallnot amount to any finding by this Court on the issues raised withregard to modification or withdrawal of Resolution Plans at thebehest of the Resolution Applicant. [Para 195-197][497-A-B, F-H; 498-A-C]

C21. ‘S’ has relied on the terms of its Resolution Plan whichenvisage payment to the Arya-CoC by sale of land and building,and old/unusable/spare plant and machineries to urge that therehas been a frustration of the contract because of the economicslowdown which must have impacted the value of these assets.The proposed revised solution envisages a further haircut to theDArya- CoC where Rs 1.5 crores less would be paid, over anextended timeline. There are no terms in the Resolution Plan orthe Form H submitted by Arya-RP that could provide such abenefit to ‘S’.

ConclusionE

Conclusion

ConclusionE

This Court is cognizant that the extraordinary circumstanceof the COVID- 19 pandemic would have had a significant impacton the businesses of Corporate Debtors and upon successfulResolution Applicants whose Plans may not have been sanctionedby the Adjudicating Authority in time, for myriad reasons. ButFthe legislative intent of the statute cannot be overridden by theCourt to render outcomes that can have grave economicimplications which will impact the viability of the IBC.

The residual powers of the Adjudicating Authority underthe IBC cannot be exercised to create procedural remedies whichGhave substantive outcomes on the process of insolvency. Theframework, as it stands, only enables withdrawals from the CIRPprocess by following the procedure detailed in Section 12A ofthe IBC and Regulation 30A of the CIRP Regulations and in thesituations recognized in those provisions. Enabling withdrawalsor modifications of the Resolution Plan at the behest of theH

successful Resolution Applicant, once it has been submitted tothe Adjudicating Authority after due compliance with theprocedural requirements and timelines, would create another tierof negotiations which will be wholly unregulated by the statute.Since the 330 days outer limit of the CIRP under Section 12(3) ofthe IBC, including judicial proceedings, can be extended only inexceptional circumstances, this open-ended process for furthernegotiations or a withdrawal, would have a deleterious impact onthe Corporate Debtor, its creditors, and the economy at large asthe liquidation value depletes with the passage of time. A failednegotiation for modification after submission, or a withdrawal afterapproval by the CoC and submission to the Adjudicating Authority,irrespective of the content of the terms envisaged by theResolution Plan, when unregulated by statutory timelines couldoccur after a lapse of time, as is the case in the present threeappeals before us. Permitting such a course of action would eitherresult in a down-graded resolution amount of the Corporate Debtorand/or a delayed liquidation with depreciated assets whichfrustrates the core aim of the IBC.

If the legislature in its wisdom, were to recognize theconcept of withdrawals or modifications to a Resolution Plan afterit has been submitted to the Adjudicating Authority, it mustspecifically provide for a tether under the IBC and/or theRegulations. This tether must be coupled with directions onnarrowly defined grounds on which such actions are permissibleand procedural directions, which may include the timelines inwhich they can be proposed, voting requirements and thresholdfor approval by the CoC (as the case may be). They must alsocontemplate at which stage the Corporate Debtor may be sentinto liquidation by the Adjudicating Authority or otherwise, inthe event of a failed negotiation for modification and/or withdrawal.These are matters for legislative policy.

In the present framework, even if an impermissibleunderstanding of equity is imported through the route of residualpowers or the terms of the Resolution Plan are interpreted in amanner that enables the appellants’ desired course of action, itis wholly unclear on whether a withdrawal of a CoC-approvedResolution Plan at a later stage of the process would result in the AB

C

D

E

F

G

H

AAdjudicating Authority directing mandatory liquidation of theCorporate Debtor. Pertinently, this direction has been otherwiseprovided in Section 33(1)(b) of the IBC when an AdjudicatingAuthority rejects a Resolution Plan under Section 31. In thiscontext, we hold that the existing insolvency framework in Indiaprovides no scope for effecting further modifications orBwithdrawals of CoC-approved Resolution Plans, at the behest ofthe successful Resolution Applicant, once the plan has beensubmitted to the Adjudicating Authority. A Resolution Applicant,after obtaining the financial information of the Corporate Debtorthrough the informational utilities and perusing the IM, isCassumed to have analyzed the risks in the business of theCorporate Debtor and submitted a considered proposal. Asubmitted Resolution Plan is binding and irrevocable as betweenthe CoC and the successful Resolution Applicant in terms of theprovisions of the IBC and the CIRP Regulations. In the case ofKundan Care, since both, the Resolution Applicant and the CoC,Dhave requested for modification of the Resolution Plan becauseof the uncertainty over the PPA, cleared by the ruling of thisCourt in Gujarat Urja (supra), a one-time relief under Article 142of the Constitution is provided with the conditions prescribed inSection K.2.

EIt would also be sobering for us to recognize that whilstthis Court has declared the position in law to not enable awithdrawal or modification to a successful Resolution Applicantafter its submission to the Adjudicating Authority, long delays inapproving the Resolution Plan by the Adjudicating Authority affectFthe subsequent implementation of the plan. These delays, ifsystemic and frequent, will have an undeniable impact on thecommercial assessment that the parties undertake during thecourse of the negotiation. The thirty-second report of the Ministryof Corporate Affairs’ Standing Committee on Finance (2020-2021)on the ‘Implementation of Insolvency and Bankruptcy Code-GPitfalls and Solutions’ represented a despondent state of affairswith regard to pendency of applications before the AdjudicatingAuthority.

In its observations, the Report noted that a delay in theresolution process with more than seventy-one per cent casesH

pending for more than 180 days is in deviation of the originalobjective and timeline for CIRP that was envisaged by the IBC.The delays were attributable to: (i) the NCLT taking considerabletime in admitting CIRPs; (ii) late and unsolicited bids byResolution Applicants after the original bidder becomes publicupon passage of the deadline for submission of the Plan; and (iii)multiplicity of litigation and the appellate process to the NCLATand the Supreme Court. Such inordinate delays cause commercialuncertainty, degradation in the value of the Corporate Debtorand makes the insolvency process inefficient and expensive. Weurge the NCLT and NCLAT to be sensitive to the effect of suchdelays on the insolvency resolution process and be cognizant thatadjournments hamper the efficacy of the judicial process. TheNCLT and the NCLAT should endeavor, on a best effort basis,to strictly adhere to the timelines stipulated under the IBC andclear pending resolution plans forthwith. Judicial delay was oneof the major reasons for the failure of the insolvency regime thatwas in effect prior to the IBC.

In light of the above, the appeals preferred by ‘E’(CivilAppeal 3224 of 2020) and ‘S’ (Civil Appeal 295 of 2021) standdismissed. The parties to the appeal preferred by ‘K’ (Civil Appeal3560 of 2020) shall abide by the directions issued by this Courtin exercise of its Article 142 powers as a one-time relief, asspecified in paragraph 196 (Section K.2) of this judgement. [Para200-206][498-G-H; 499-E-H; 500-A-H; 501-A-E; 502-A-E]

SK Gupta v. KP Jain (1979) 3 SCC 54 : [1979] 2 SCR1184; India Thermal Power Ltd. v. State of MP (2000) 3SCC 379 : [2000] 1 SCR 925; CoC of Essar Steel IndiaLtd. v. Satish Kumar Gupta & Ors. (2020) 8 SCC 531 :[2019] 16 SCR 275; Government of Andhra Pradeshv. P Laxmi Devi (2008) 4 SCC 720 : [2008] 3 SCR330; Satyadhyan Ghosal v. Deorajin Debi (1960) 3SCR 590; Sheodan Singh v. Daryao Kunwar (1966) 3SCR 300; Krishan Lal v. State of J&K (1994) 4 SCC422 : [1994] 2 SCR 149; Daryao v. State of U.P. (1962)1 SCR 574; Erach Boman Khavar v. Tukaram ShridharBhat (2013) 15 SCC 655 : [2013] 17 SCR 1055;Jaswant Singh v. Custodian of Evacuee Property (1985)3 SCC 648 : [1985] 1 Suppl. SCR 331 – relied on.

AB

C

D

E

F

G

H

A

B

C

D

E

F

G

H

Riya Travel & Tours (India) (P) Ltd. v. C.U. Chengappa(2001) 9 SCC 512; K Sashidhar v. IOC (2019) 12 SCC150 : [2019] 3 SCR 845; M/s Embassy PropertyDevelopments Pvt. Ltd. v. State of Karnataka & Ors.(2020) 13 SCC 308 : [2019] 17 SCR 559; M/sInnoventive Industries Ltd. v. ICICI Bank & Anr. (2018)1 SCC 407 : [2017] 8 SCR 33; Gujarat Urja VikasNigam Limited v. Amit Gupta (2021) SCC OnLine SC194; Swiss Ribbons (P) Ltd v. Union of India (2019) 4SCC 17 : [2019] 3 SCR 535; Nagabhushanammal v. CChandikeswaralingam (2016) 4 SCC 434 : [2016] 2SCR 19; National Thermal Power Corporation Ltd. v.Siemens Atkeingesellschaft AIR 2007 SC 1491 : [2007]3 SCR 399; Haridwar Singh v. Bagun Sumbrui (1973)3 SCC 889 : [1972] 3 SCR 629; Committee of CreditorsAMTEK Auto Limited Through Corporation Bank v.Dinkar T Venkatasubramanian & Ors. (2021) 4 SCC457; Kalparaj Dharamshi v. Kotak Investment AdvisorsLtd. (2021) SCC OnLine SC 204; Jaypee KensingtonBoulevard Apartments Welfare Association & Ors. v.NBCC (India) Ltd. & Ors. (2020) SCC OnLine SC1192; Ghanashyam Mishra and Sons Private Limitedthrough the Authorized Signatory v. Edelweiss AssetReconstruction Company Limited through the Director& Ors. (2021) SCC OnLine SC 313; Laxmi Pat Suranav. Union Bank of India (2020) SCC OnLine SC 1187;Arcelor Mittal (India) (P) Ltd. v. Satish Kumar Gupta(2019) 2 SCC 1 : [2018] 12 SCR 362; MaharashtraSeamless v. Padmanabhan Venkatesh (2020) 11 SCC467 : [2020] 2 SCR 1157; Innoventive Industries Ltd v.ICICI Bank (2018) 1 SCC 407 : [2017] 8 SCR 33;Lokhandwala Kataria Construction (P) Ltd v. NisusFinance and Investment Managers LLP (2018) 15 SCC589; Uttara Foods and Feeds (P) Ltd v. MonaPharmachem (2018) 15 SCC 587; Brilliant Alloys (P)Ltd v. S Rajagopal (2018) SCC OnLine SC 3154 –referred to.

Allied Domecq (Holdings) Ltd v. Allied Domecq FirstPension Trust Ltd. [2008] Pens. L.R. 425; Reinwood EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OFEDUCOMP SOLUTIONS LTD.

Ltd v. L Brown & Sons Ltd. [2008] 1 W.L.R. 696;Doleman v. Shaw [2009] Bus. L.R. 1175; Standard LifeAssurance Ltd v. Oak Dedicated Ltd. [2008] EWHC222 (Comm); Oakley-Smith v. Greenberg [2004]B.C.C. 81; Tucker v. Gold Fields Mining LCC [2010]B.C.C. 544; Heis v. Financial Services CompensationScheme Ltd. [2018] EWCA Civ 1327; Re RhinoEnterprises Properties Ltd. Schofield v. Smith [2020]EWHC 2370; Daewoo Singapore Pte Ltd. v. CELTractors Private Limited [2001] 4 SLR 35; Kempe andAnother v. Ambassador Insurance Co. [1998] 1 W.L.R.271; Caratti v. Hillman [1974] WAR 92; ReShenandoah Realty Partners, L.P. v. Ascend HealthCare, Inc 287 BR 867 – referred to.

B

C

H

From the Judgment and Order dated 29.07.2020 of the NationalDCompany Law Appellate Tribunal at New Delhi in Company Appeal(AT) (Insolvency) No.203 of 2020.

With

Civil Appeal No. 3560 of 2020 and Civil Appeal No. 295 of 2021.

E

K. V. Vishwanathan, Ritin Rai, Ramji Srinivasan, Sr. Advs., RajatSehgal, Gautam Swarup, Mrs. Vandana Anand, Mandavya Kapoor,Karthikeya Jaiswal, Ms. Gunjan Jindal, Prithu Garg, Shailendra Singh,Ms. Harimohana N, Ankush Bhardwaj, Shivkrit Raj, Vinam Gupta, Advs.for the appellant.F

Shyam Divan, Nakul Dewan, V. Giri, Jayant Mehta, Sr. Advs.,Ms. Misha, Siddhant Kant, Ms. Moulshree Shukla, S. S. Shroff, AtulSharma, Abhishek Sharma, Ms. Ashly Cherian, Ms. Anisha Mahajan,Ms. Harshita Agarwal, Gautam Talukdar, Ms. Pooja Mahajan,Ms. Mahima Singh, S. Mahajan, Avinash B. Amarnath, Ashish Rana,GAnurag Singh, Ms. Sonia Dube, Shatadru Chakraborty, Ms. KanchanYadav, Ms. Surbhi Anand, Surya Kapoor for M/s Legal Options, Advs.for the respondents.

EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OFEDUCOMP SOLUTIONS LTD.

The Judgment of the Court was delivered by A

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 throughoutthe judgment has also been provided. The sections* in the judgment areas follows:

B

*Ed. Note : The Page Nos. mentioned alongside the respective sections are as per theOriginal Judgment.

H

[2021] 14 S.C.R.

Glossary

A

B

C

D

E

F

G

H

A

BCDEFGH

EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OFEDUCOMP SOLUTIONS LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]

G

A Civil Appeal No 3224 of 2020 – the Ebix Appeal A.1 The appeal

1. This judgment arises out of an appeal from a judgment dated29 July 2020 of the NCLAT. The NCLAT allowed the Withdrawal AAppeal[1] instituted by the first respondent, E-CoC, under Section 61 ofthe IBC against a judgment dated 2 January 2020 of the NCLT at itsPrincipal Bench in New Delhi.

2. The NCLT allowed the Third Withdrawal Application[2] filed byEbix under Section 60(5) of the IBC to withdraw its Resolution PlanBsubmitted for Educomp. While reversing that order, the NCLAT heldthat the application to withdraw from the Resolution Plan could not havebeen allowed since: (i) it was barred by res judicata; and (ii) the NCLTdoes not have jurisdiction to permit such a withdrawal. The correctnessof the view of the NCLAT comes up for determination in the presentappeal.C

A.2 Initiation of CIRP

3. On 5 May 2017, Educomp filed a petition[3] under Section 10 ofthe IBC seeking to initiate voluntary CIRP. The NCLT admitted thispetition on 30 May 2017, and appointed an IRP. Hence, 30 May 2017Dwould be taken as the ‘Insolvency Commencement Date’ for the purposesof Section 5(12) of the IBC.

4. E-CoC was then constituted on 28 June 2017, following whichit appointed Mr Mahender Kumar Khandelwal as the RP for Educompon 27 July 2017. This was confirmed by the NCLT on 12 SeptemberE2017. On 18 September 2017, the E-RP took over information, documents,reports and records pertaining to Educomp from the IRP.

5. On an application[4] of the E-RP, the NCLT by its order dated 13November 2017 extended the period of the CIRP by 90 days, beginningfrom 26 November 2017 till 24 February 2018.FA.3 Invitation, submission and approval of Resolution Plan

6. In terms of Section 25(2)(h) of the IBC, the E-RP invited EOIon 18 October 2017 from prospective bidders, investors and lenders.

7. On 10 November 2017, the last date for submission of EOIswas extended to 17 November 2017. Commencing from 5 DecemberG2017, the E-RP provided access to the Virtual Data Room of Educomp H

1 Company Appeal (AT) (Insolvency) No 203 of 2020

2 CA No 1816 (PB) of 2019 in CP (IB) No 101 (PB) of 2017

3 CP (IB) No 101 (PB) of 2017

4 CA No 405(PB) of 2017

to prospective Resolution Applicants who had submitted a confidentialityundertaking and made an upfront payment of Rs 5,00,000.

8. On 5 December 2017, the final RFRP was issued in accordancewith Section 25(2)(h) of the IBC. The last date for submission of theResolution Plans was 8 January 2018. The RFRP was amended on 17January 2018 and 20 January 2018 to extend the last date for submissionto 20 January 2018. On 25 January 2018[5], the NCLT again extended thelast date for submission of the Resolution Plans until 27 January 2018.

9. By the last date for submission, Resolutions Plans were receivedby the E-RP from Ebix and another entity. These were shared with theE-CoC on 29 January 2018. Following this, both the Applicants wereinvited to give their presentations to the E-CoC on 2 February 2018.

10. Ebix was declared as the successful Resolution Applicant bythe E-CoC on 9 February 2018. Ebix had discussions about its ResolutionPlan with the E-CoC, and submitted a revised Resolution Plan on19 February 2018, with an addendum on 21 February 2018.

11. Upon the directions of the E-RP, the E-CoC commencede-voting on the Ebix’s Resolution Plan at 7.00 pm on 21 February 2018.The voting lines were kept open till 7.00 pm on 22 February 2018.According to the results of the e-voting, in terms of the voting sharepercentage: (i) 74.16 per cent members of the E-CoC voted to approvethe Resolution Plan; (ii) 17.29 per cent members voted to reject theResolution Plan; and (iii) the remaining members, having cumulatively8.55 per cent share, abstained from voting on the Resolution Plan. TheResolution Plan thus failed to achieve the minimum percentage of 75per 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 theE-CoC (CSEB) informed the E-RP by an email that due to a technicalerror, they could not participate in the e-voting process. CSEB had avoting share of 1.195 per cent in the E-CoC, and wanted its affirmativevote to be recorded on the Resolution Plan. CSEB’s vote would enhancethe 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[6] under Section 60(5) toseek the directions of the NCLT in regard to CSEB’s late vote. NCLT

5 In applications CA No 30 of 2018 and CA No 42 of 2018

6 CA No 160 (PB) of 2018

AB

C

D

E

F

G

H

Aby its order dated 28 February 2018, directed the E-RP to file anapplication 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 uptogether with the application. On 7 March 2018, the E-RP filed theApproval Application[7] seeking NCLT’s approval to Ebix’s ResolutionPlan under Section 30(6).B

14. On 2 July 2018, Ebix issued a letter to the E-RP to expeditethe CIRP for Educomp. The relevant portions of the letter are extractedbelow:

“…we would like to submit that the resolution plan for the CompanyCwas submitted with an expectation that the resolution processshall be completed in a time bound manner, and the ResolutionApplicant shall get the management control of the Company beforethe start of new academic session in India i.e. April 2018, subjectto being selected as the successful applicant (as per the termsand conditions provided in the resolution plan), and the approvalDof the plan by the NCLT. This would have provided the ResolutionApplicant with sufficient time to restructure the operations of theCompany.

As you are aware, the operations of the Company are alreadyunder stress and it would be safe to assume that no new contracts/Ecustomers are coming up. Further, the competitors of the Companymay be trying to take undue advantage of the situation, whichmay further erode the business value of the Company and maymake the revival process more difficult.

The above negatively impacts the commercial considerationFprovided by the Resolution Applicant in the resolution plan submittedfor the Company.

As per the clause 7 of the Resolution Plan dated February 19,2018 submitted by the Resolution Applicant, the terms of theresolution plan is valid for six months from the date of the submissionGof the plan i.e. August 19th, 2018.

In light the above and fact that delay in completion of the resolutionprocess is negatively impacting the commercial considerationoffered by the Resolution Applicant in the resolution plan, we H7 CA No 195 (PB) of 2018

request you to ensure that the resolution process is completed in atime bound manner. Otherwise, the Resolution Applicant will beforced to re- consider or withdraw the resolution plan on expiryof the term of the plan in order to protect the interest of all itsstakeholders.”

A.4 Investigations into financial transactions of Educomp

15. On 3 April 2018, an Indian online news publication, The Wire,published an article titled “How Educomp May Have Subverted the Spiritof India’s Insolvency and Bankruptcy Process”[8]. Another article titled“Educomp’s Insolvency Process Becomes Murkier as Ebix BuysSmartclass Educational Services” was published by The Wire on 26 April2018[9].

16. The E-RP has stated before this Court that based on thesereports, IFC, a financial creditor of Educomp, filed the IFC Application[10]under Section 60(5) of the IBC seeking investigation of the affairs/transactions of Educomp. On 4 May 2018, when the IFC Applicationcame up before the NCLT, along with the CSEB Application and theApproval Application, it directed the E-RP to file its reply and also directedIFC to serve a notice on Ebix.

17. Similar applications- Axis Application[11 ]and SBI Application[12],under Section 60(5) of the IBC read with Section 213 of the 2013 Actwere filed by other financial creditors of Educomp, Axis Bank and SBI,seeking ‘appropriate directions’ from the NCLT in view of the allegedirregularities in the conduct of the affairs of Educomp.

18. In the meantime, on 1 August 2018, due to allegations offinancial mismanagement of Educomp between 2014-2018, the MCAdirected an SFIO investigation[13] into its affairs.

8 Manoj Gairola, “How Educomp May Have Subverted the Spirit of India’s Insolvencyand Bankruptcy Process” (The Wire, 3 April 2018) available at <https://thewire.in/business/how-educomp-may-have-subverted-the-spirit-of-indias-insolvency-and-bankruptcy-process> accessed on 26 July 2021

9 Manoj Gairola, “Educomp’s Insolvency Process Becomes Murkier as Ebix BuysSmartclass Educational Services” (The Wire, 26 April 2018) available at <https://thewire.in/business/educomps-insolvency-process-becomes-murkier-as-ebix-buys-smartclass-educational-services> accessed on 26 July 202110 CA No 358 of 201811 IA No 448 (PB) of 201812 CA No 639 (PB) of 201813 Order No 32/2018/SFIO/CL-II

A

B

C

D

E

F

G

H

A19. The NCLT, by its order dated 9 August 2018, dismissed theapplications filed by IFC, Axis and SBI and directed that: (i) the E-RPshall convene a meeting of the E-CoC within three days to discuss thesubject matter of the applications; and (ii) the E-RP and E-CoC couldmove an application before NCLT according to law, if advised to do soby E-CoC.B

A

20. Pursuant to NCLT’s order dated 9 August 2018, the E-CoChosted its 13[th] meeting on 13 August 2018, and a resolution was passedwith a 77.85 per cent vote to appoint an independent agency to conducta Special Investigation Audit into the affairs of Educomp. The relevantterms of the resolution are as follows:C

“RESOLVED THAT a special investigation audit on the affairsof the Company be conducted by an independent agency, whichshall be appointed by the Committee of Creditors, for periodbeginning from [1st January 2014] to [30th January 2018] havingfollowing scope of work:

D

(i) All the matters/issues (approximate 21 in number) raisedin the Annual Audit Report of the Company for the FinancialYear 2016-17 issued by Haribhakti & Co, basis which adverseopinion has been issued;

(ii) Transactions involving alleged deliberate transfer ofbusiness between the Company and SmartClass EducationalServices Private Limited (“SESPL”) prior to the commencementof the insolvency process of the Company; E

(iii) Transactions regarding genuineness of receivables fromFEdusmart Services Private Limited including cross-verificationwith payables to Educomp Solutions Limited in the books ofEdusmart Services Private Limited;

(iv) Transactions involving settlement between the Company,Educomp Learning Hour Private Limited, Vidya MandirClasses Limited and ICICI Bank Limited; G

(v) Transactions relating to impairment with respect toinvestment made by the Company in 4 of its subsidiaries;

(vi) Transaction relating to advance received by the Companyfrom Educomp Raffles Higher Education Limited; H

(vii) Distribution agreement with Digital Learning SolutionSDN BHD;

(viii) Transactions referred to in the applications filed byInternational Finance Corporation, Axis Bank Limited andState Bank of India with the Hon’ble National Company LawTribunal; and

(ix) Review of provisions against receivables done by EducompSolutions Limited;

(x) All other transactions/points raised in the applicationsfiled by Axis Bank, IFC and SBI with Hon’ble NCLT;

(xi) Any other issue, which the Committee of Creditors maydeem fit RESOLVED FURTHER THAT the Resolution Professional,be and is hereby authorized by the Committee of Creditors anddirected to file appropriate application/petition with the Hon’bleNational Company Law Tribunal, inter alia, seeking consent/orderof the Hon’ble NCLT on the proposed special investigation auditto be conducted by the independent agency.

RESOLVED FURTHER THAT given the limitations inherentin the previous audits conducted on the Company, and in order forthe said investigation to be comprehensive, the ResolutionProfessional, while filing such application/ petition, shall also, asan additional prayer, seek consent/ order of the Hon’ble NCLTthat SESPL, other group companies of the Company and theerstwhile customers of the Company, be directed to cooperatewith the independent agency so appointed, or in the alternative, torefer the matter to the Central Government to appoint an Inspectorunder the Companies Act, 2013 to conduct said investigation.

RESOLVED FURTHER THAT the entire cost of the proposedinvestigation (special investigation audit), shall be included in CIRPCost and accordingly be paid in terms of the provisions of theInsolvency and Bankruptcy Code, 2016 and the relevantRegulations.

RESOLVED FURTHER THAT, the independent agency toconduct the special investigation audit, shall be appointed by the A

B

C

D

E

F

G

H

[2021] 14 S.C.R.

ACore Committee, comprising of SBI, IDBI Bank, Axis Bank, IFC,Yes Bank and J&K Bank”

21. The resolution was placed before the NCLT on 20 August2018, when it was hearing the CSEB Application and the ApprovalApplication. The NCLT directed the E-RP to file an appropriateBapplication. In accordance with the resolution dated 13 August 2018 andNCLT’s order dated 20 August 2018, the E-RP filed the InvestigationAudit Application[14] under Section 60(5) of the IBC seeking directionsfrom NCLT to carry out the Special Investigation Audit of Educomp.

22. It is stated before us that the Investigation Audit ApplicationCwas heard on 11 September 2018, 20 September 2018, 27 September2018 and 4 October 2018. On 4 October 2018, while reserving its orderin the Investigation Audit Application, the NCLT also directed the E-RPto file an affidavit in relation to the transactions carried out by Educompunder Sections 43, 45, 50 and 66 of the IBC.

D23. The E-RP states that such an affidavit was filed, stating thaton the basis of the books of account and other relevant material pertainingto Educomp, no transactions which needed to be avoided under Sections43, 45, 50 and 66 of the IBC were found. The E-RP also stated thatsince the NLCT had not issued specific directions for the conduct of aSpecial Investigation Audit, no such audit was conducted.

E24. This affidavit was listed before the NCLT on 7 December2018, along with the Approval Application. On 10 January 2019, theNCLT reserved its orders on the Approval Application.

25. On 12 June 2019, Educomp made a regulatory disclosure toFthe BSE and NSE in relation to the ongoing investigations being conductedby agencies such as SFIO and CBI. The material parts of the disclosureread thus:

“This is with reference to your mail dated June 10, 2019, relatedto news appeared in the “Business Standard” captioned“Transactions of debt-ridden Educomp Solutions come under SFIOGscanner”.

[…]

3. It is pertinent to note that BDO India LLP carried out transactionaudit in order to ascertain if there was any preferential,undervalued, extortionate or fraudulent transactions falling withinthe ambit of Section 43, 45, 50 and 66 of the Code. The Transactionreview report was prepared by BDO India LLP in February 2018which was further circulated and discussed with the CoC. Onexamination of the BDO Report and other relevant materialavailable with the Resolution Professional during the CIRP period,no transaction was found by the Resolution Professional whichwas required to be avoided in terms of the said Sections. Further,the two land transactions as alleged in the Media Report have notbeen reported by BDO in their Report and hence, the ResolutionProfessional is not in a position to comment on the same.

As regards allegation in the Media Report that “Suspecttransactions of debt-ridden Educomp Solutions have come underthe lens of Serious Fraud Investigation (SFIO), which is probingthe company for alleged fund-diversion and inflated land deals,we would like to clarify that SFIO Investigation into the affairs ofEducomp Solutions Limited is currently ongoing wherein theResolution Professional has been supplying the data/ information/documents to them as and when required however, no suchinformation has been brought to the notice of the ResolutionProfessional as yet. Moreover, the article appears to be based ona false, motivated, fabricated data.”

A.5 Applications for withdrawal of the Resolution Plan

A.5 Applications for withdrawal of the Resolution Plan

26. On 5 July 2019, Ebix filed the First Withdrawal Application[15]under Section 60(5) of the IBC, for the following reliefs:

“i. Direct that the Ld. Resolution Professional supply a copy ofthe Special Investigation Audit to the Resolution Applicantforthwith;

ii. Direct that the Ld. Resolution Professional supply a copy ofthe Certificates under Sections 43, 45, SO and 66 of the Insolvencyand Bankruptcy Code, 2016 to the Resolution Professionalforthwith; 15 CA 1252 (PB) of 2019 in CP (IB) No 101 (PB) of 2017

A

B

C

D

E

F

G

H

Aiii. Withhold approval of the Resolution Plan sanctioned by theCommittee of Creditors of the Corporate Debtor, as filed beforethis Hon’ble Tribunal on 11.04.2018, pending detailed considerationof the same by the Resolution Applicant;

iv. Grant the Resolution Applicant sufficient time to re-Bevaluate its proposals contained in the Resolution Plan, andalso to suitably revise/modify and/or withdraw its ResolutionPlan;”

Ebix contends that the application was necessitated because: (i)Cthe Approval Application had been pending before the NCLT for 17months, much beyond the period envisaged in the RFRP and its ResolutionPlan; (ii) Educomp’s CIRP had been pending for 26 months, beyond thestatutory period under the IBC; (iii) the tenure of the governmentcontracts awarded to Educomp, which was crucial to its functioning,Dmay have ended, leading to an erosion of its substratum; and (iv) due torecent media reports, it had misgivings about the management and affairsof Educomp.

27. On 10 July 2019, the NCLT dismissed the First WithdrawalApplication with the following order:

E“C.A. No. 1252(PB)/2019

This is an application filed by one Ebix Singapore Ptd. Limitedseeking re-valuation of the Resolution Plan submitted by it beforethe Resolution Professional.

No ground for considering the prayer sought in the application isFmade out.

The application is dismissed as such.”

28. Thereafter, Ebix filed the Second Withdrawal Application[16]under Section 60(5) of the IBC, seeking the following reliefs:G“i. Allow the Resolution Applicant to withdraw the Resolution Plandated 19.02.2018 (along with the Addendum/Financial Proposaldated 21.02.2019) submitted by it, and as approved by theCommittee of Creditors;

ii. Direct the Ld. Resolution Professional and/or Educomp SolutionsLimited and the Committee of Creditors to refund the EarnestMoney Deposit of Rs. 2,00,00,000/- furnished by the ResolutionApplicant in respect of the Resolution Plan;

iii. Withhold approval of the Resolution Plan sanctioned by theCommittee of Creditors of the Corporate Debtor, as filed beforethis Hon’ble Tribunal on 07.03.2018 and recorded vide order dated1.1.04.2018, pending detailed consideration of the same by theResolution Applicant;”

While repeating the reasons mentioned in the First WithdrawalApplication, it provided a reason for filing the Second WithdrawalApplication in the following terms:

“xii. That the present Applicant had also filed an Application dated05.07.2019 bearing PB/IA/1252/2019 under Section 60(5) of theCode, seeking revision/revaluation of the Resolution Plan.However, the same was dismissed by this Hon’ble Tribunal, andduring the course of hearing in the said Application, this Hon’bleCourt put it to the Resolution Applicant to withdraw the ResolutionPlan by way of a separate Application. The present Applicationfor withdrawal of the Resolution Plan is being made in pursuanceof the same.”

29. On 5 September 2019, the NCLT dismissed the SecondWithdrawal Application with the following order:

“C.A. No. 1310(PB)/2019

In para ‘B (xii)’ under the caption ‘facts of the case’, the followingaverments have been made […]

The italic portion of the aforesaid para shows that the prayer forwithdrawal of the Resolution Plan has been made inter alia on thesuggestion of the Court which is neither reflected in the order noris born out from any record. Such an averments imputing to theCourt something which has never been said is condemnable. Thecause of action cannot be based on any such things.

Accordingly, we dismiss this application with liberty to the applicantto file fresh one on the same cause of action, if so advised.”

A

B

C

D

E

F

G

H

A30. Thereafter, Ebix filed the Third Withdrawal Application, seekingthe following reliefs:

“i. Allow the Resolution Applicant to withdraw the Resolution Plandated 19.02.2018 (along with the Addendum/Financial Proposaldated 21.02.2019) submitted by it, and as approved by theBCommittee of Creditors;

ii. Direct the Ld. Resolution Professional and/or Educomp SolutionsLimited and the Committee of Creditors to refund the EarnestMoney Deposit of Rs. 2,00,00,000/- furnished by the ResolutionApplicant in respect of the Resolution Plan; C

iii. Withhold approval of the Resolution Plan sanctioned by theCommittee of Creditors of the Corporate Debtor, as filed beforethis Hon’ble Tribunal on 07.03.2018 and recorded vid order dated11.04.2018, pending detailed consideration of the same by theResolution Applicant;”

DThe earlier applications for withdrawal were referred to:

“xiv. It may be noted that, the present Applicant had also filed anApplication dated 05.07.2019 bearing PB/IA/1252/2019 underSection 60(5) of the Code, seeking revision/revaluation and/orwithdrawal of the Resolution Plan. The said application wasEdismissed by this Hon’ble Tribunal on the basis that modification/revaluation of the Resolution Plan could not be permitted. TheApplicant thereafter filed an Application bearing PB/IA/1310/2019seeking withdrawal of the Resolution Plan simpliciter, which wasdismissed by the Hon’ble Tribunal vide order dated 07.09.2019,Fwhile granting liberty to file a fresh application seeking withdrawalof the Resolution Plan.”

The reasons for withdrawal were the same as those in the previousapplications for withdrawal.

31. On 18 September 2019, the NCLT issued notice in the ThirdGWithdrawal Application and directed the E-RP to place it before theE-CoC. The E-RP placed the application before the E-CoC at the14[th] meeting on 26 September 2019. The E-CoC resolved not to allowthe application for withdrawal.

A.6 Orders of NCLT and NCLATH

32. By its order dated 2 January 2020, NCLT allowed the ThirdWithdrawal Application. The NCLT held that the application forwithdrawal was not barred by res judicata since in the previousproceeding relating to the First Withdrawal Application, it had notconsciously adjudicated on whether the Resolution Plan could bewithdrawn. The rationale for the order is indicated in the following extract:

“11. No doubt there was a prayer for withdrawal of resolutionplan amongst others in CA No.1252 (PB)/2019, the prayer forrevaluation was specifically declined dismissal order dated10.07.2019. While dismissing CA No.1252(PB)/2019 theprayer for withdrawal of resolution plan was neitherconsidered nor was ever dealt with. The issue of withdrawalof the resolution plan by the Applicant has never beenconsidered consciously on merit and/or adjudicated uponin CA No.1252(PB)/2019.

12. Doctrine of Constructive Res Judicata does not applyto the issues/points, or any “lis’ between parties that hasnot been decided previously, and despite being pleaded,has not been considered by a court/tribunal and expresslydealt with in the order so passed.

13. Even a bare perusal of the Order dated 10.07.2019 wouldindicate that the issue of withdrawal of the Resolution Plan by theResolution Applicant was not dealt with on merit and that nodecision has either been passed or attained finality as regardsallowing the party to withdraw the Resolution Plan.

14. It is also pertinent to note here that the Resolution Applicanthad subsequently taken up the prayer for withdrawal of theResolution Plan in the Application bearing CA No.1310 (PB)/2019.While dealing with the said Application, liberty was givento the Applicant vide order dated 01.09.2019 to re-file anapplication for withdrawal of the Resolution Plan. Thisdirection further confirms that there was no consciousadjudication in CA No.1252(PB)/2019 on the issue ofwithdrawal of the resolution plan by the Applicant.”

The NCLT held that: (i) a Resolution Plan becomes binding afterit is approved by it as the Adjudicating Authority; (ii) under Section 30(2)

A

B

C

D

E

F

G

H

Aof the IBC, the Adjudicating Authority has the power to examine whetherthe Resolution Plan can be effectively enforced and implemented; and(iii) in the ‘present circumstances’, an unwilling successful ResolutionApplicant would be unable to effectively implement the Resolution Plan.The relevant parts of the order are extracted below:

“20. In the instant case the Resolution Plan is still pending beforethe Adjudicating Authority for approval. Under the provisionsof Section 31 of the Code, a Resolution Plan becomesbinding only after acceptance of a plan by the AdjudicatingAuthority.

B

C[…]

23. Section 30(2)(d) of the Code mandates the AdjudicatingAuthority to ensure that there are effective means of enforcementand implementation of the Resolution Plan. Similarly, the provisoto sub-section (1) of Section 31 of the Code mandates AdjudicatingDAuthority to ensure effective implementation of the resolution plan.The object. in approval of the resolution plan is to save thecorporate debtor and to put it back on its feet. An unwilling andreluctant resolution applicant, who has withdrawn hisresolution plan, neither can put the corporate debtor backto its feet nor the effective implementation of its resolutionEplan can be ensured.

D

24. No doubt the withdrawal of the resolution plan at this advancestage has caused great prejudice to the creditors/stake holdersand legal consequences on the withdrawal of the resolution planshall follow as per law. The Resolution Professional and CoC areFfree to take action as per law consequent upon withdrawal of theresolution plan by the resolution applicant including on the issue ofrefund of the earnest money deposited by the applicant.

25. Be that as it may compelling an unwilling and reluctantresolution applicant to implement the plan may lead touncertainty. The object of the Code is to ensure that the CorporateDebtor keep working as a going concern and to safeguard theinterest of all the stake holders. The provisions of the Code mandatethe Adjudicating Authority to ensure that the successful resolutionapplicant starts running the business of the Corporate Debtorafresh. Besides Court ought not restrict a litigant’s fundamental G

H

right to carry on business in its way under Article 19(1)(g) of theConstitution. Once the applicant is unwilling and reluctantand itself has chosen to withdraw its resolution plan, a doubtarises as to whether the resolution applicant has thecapability to implement the said plan. Uncertainty in theimplementation of the resolution plan cannot also be ruledout.”

(emphasis supplied)

The NCLT also directed that Educomp’s CIRP be extended by aperiod of 90 days, commencing from 16 November 2019.

33. As a consequence of its order allowing the Third WithdrawalApplication, the NCLT also dismissed the Approval Application on3 January 2020 as being infructuous.

34. E-CoC filed the Withdrawal Appeal assailing NCLT’s orderdated 2 January 2020. On 3 February 2020, the NCLAT stayed theorder dated 2 January 2020. The Approval Appeal[17] was also filed bythe E-CoC under Section 61 of the IBC, assailing NCLT’s order dated 3January 2020.

35. By its order dated 29 July 2020, NCLAT set aside the order ofthe NCLT allowing the withdrawal of the resolution plan. On the issueof res judicata, the NCLAT held that there being no appeal against theorder of the Adjudicating Authority rejecting the First WithdrawalApplication, the issue had attained finality. The NCLAT held:

“82…in view of the dismissal of said CA 1252(PB)/2019 by theAdjudicating Authority and the said order which had attainedfinality and more so in the absence of any ‘Appeal’ being filedagainst the said order, then the dismissal order of CA 1252 of2019 order dated 10.7.2019 binds the 1st Respondent/’ResolutionApplicant’ as an ‘Inter-se’ party.

[…]

84. …the Adjudicating Authority in the particular circumstancesof the present case has no power to grant /reserve liberty to bringa fresh application and hence, the subsequent application filed by A

B

C

DE

F

G

H

374SUPREME COURT REPORTS

Athe 1st Respondent /’Resolution Applicant is barred by the principleof ‘Res Judicata’ notwithstanding the liberty to file fresh one.”

On the merits of the application for withdrawal, the NCLAT heldthat: (i) once the Resolution Plan was approved by the CoC, the NCLTdid not have jurisdiction to permit its withdrawal; (ii) the AdjudicatingBAuthority could not enter upon the wisdom of the decision of the CoC toapprove the Resolution Plan; (iii) the Resolution Applicant had acceptedthe 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 ofthe IBC grants full immunity to the Resolution Applicant from any offencesCcommitted before the commencement of the CIRP; and (vii) Ebix hadparticipated in the process from August 2018 to January 2019 whenorders had been reserved on the Approval Application, and hence itcould not claim any right based on delay.

A.7 Present status of SFIO and CBI investigationD

36. In an email dated 17 February 2020, the E-RP informed theE-CoC that the CBI conducted a search of the premises of Educomp on11 February 2020 and seized numerous documents (a list was enclosedwith the email). By another email dated 19 February 2020, the E-RPinformed the E-CoC that CBI had resumed its search for documents atEEducomp’s office.

37. In the 16[th] meeting of the E-CoC on 30 March 2020, the E-RPprovided the following updates in relation to the CBI and SFIOinvestigations:

F(i) The CBI search at the premises of Educomp on 11 February2020, was conducted upon a complaint by SBI on behalf of aconsortium of banks;

(ii) Since the initiation of an enquiry by the MCA on 1 August2018, the SFIO has requisitioned documents/information, whichhave been provided; G

(iii) The last communication from the SFIO was received on 27February 2020; and

(iv) In response to the grievance of some members of the E-CoCthat the E-RP had only informed them of the investigations at a H

belatedly, the Chairperson of the E-CoC justified it by stating thatthe communication could only take place once the relevantinvestigation was completed. However, for future references, theChairperson took note of the suggestion that the E-RP would addall members of the E-CoC to a WhatsApp group, where real-timeupdates could be shared.

At the meeting, the E-CoC also passed a resolution with 77.05per cent majority vote directing the E-RP to invoke and forfeit the EMDof Rs 2 crores furnished by Ebix in accordance with Clause 1.9.1 ofRFRP. The E-RP issued a letter to IDBI on 1 April 2020 for encashmentof the EMD.

38. In the 17[th] meeting of the E-CoC on 8 May 2020, the E-RPprovided further updates in relation to the CBI and SFIO investigations,noting that they were still ongoing and no further action was required tobe taken.

39. The E-RP has informed this Court that the last communicationreceived from the SFIO was on 4 September 2020. The investigationsby the CBI and SFIO are continuing.

B Civil Appeal No 3560 of 2020 – the Kundan Care Appeal B.1 The appeal

40. This appeal arises under Section 62 of the IBC from a judgmentdated 30 September 2020 of the NCLAT. The NCLAT dismissed anappeal[18] instituted by the appellant, Kundan Care, under Section 61 ofthe IBC against an order dated 3 July 2020 of the NCLT.

41. The NCLT had dismissed an application[19] filed by KundanCare under Section 60(5) of the IBC to withdraw its Resolution Plansubmitted for the fourth respondent – Corporate Debtor, Astonfield. Inappeal, the NCLAT upheld the NCLT’s decision, relying on its judgmentimpugned in the Ebix Appeal. It held that an application filed by aResolution Applicant to withdraw from the Resolution Plan approved bythe CoC could not be allowed since: (i) there was no provision in theIBC for it; (ii) the Resolution Plan is enforceable as a contract againstthe Resolution Applicant; and (iii) the Resolution Applicant was estoppedfrom withdrawing.

18 Company Appeal (AT) (Insolvency) No 653 of 202019 IA No 1679 of 2019 in CP No (IB)-940 (ND) of 2018

A

B

C

D

E

F

G

H

A42. The correctness of this view of the NCLAT now comes upfor determination in the present appeal. While issuing notice on16 November 2020, this Court had directed for an ad-interim stay onthe judgment of the NCLAT, which continues till date.

B.2 Initiation of CIRPB

43. On 20 November 2018, Astonfield filed a petition[20] underSection 10 of the IBC seeking to initiate voluntary CIRP. The NCLTadmitted this petition on 27 November 2018 and appointed an IRP.

44. A CoC was then constituted, which consisted of the secondand third respondents, EXIM Bank and PFCL. The A-CoC appointedCthe first respondent, Mr Amit Gupta, as the RP and his appointment wasconfirmed by the NCLT on 1 February 2019.

B.3 Invitation, submission and approval of Resolution Plan

45. On 20 February 2019, A-RP invited prospective resolutionDapplicants to submit their EOIs in accordance with Regulation 36 of theCIRP Regulations and Form G was also published. Form G was amendedby the A-RP, with due approval from the A-CoC, on 2 May 2019 and17 May 2019.

46. A-RP received nine EOIs, out of which seven were found tobe eligible. However, Kundan Care did not submit its EOI within theEtime prescribed by the A-RP, and its belated submission was rejected bythe A-RP.

47. Thereafter, A-RP issued the RFRP on 6 March 2019 to theprospective Resolution Applicants who had been selected. Further, theIM was issued on 13 March 2019. Based on this, two Resolution PlansFwere received by the A-RP on 31 May 2019, which were then discussedwith the A-CoC.

48. In the interim, Kundan Care filed an application[21] before theNCLT challenging the A-RP’s rejection of its belated EOI. A-RPreceived the notice of this application on 30 August 2019. By order datedG6 September 2019, the NCLT allowed Kundan Care’s application.Thereafter, it was provided access to the RFRP, IM and other documentspertaining to Astonfield in the data room.

20 CP No (IB)-940 (ND) of 2018H21 CA No 1119 of 2019

49. Kundan Care submitted its Resolution Plan for considerationon 16 September 2019. The Resolution Plan was placed before theA-CoC, which requested Kundan Care to submit a revised proposal.Kundan Care then submitted an updated draft of its Resolution Plan on29 October 2019.

50. A-RP then conducted the 17[th] meeting of the A-CoC on11 November 2019, to discuss the Resolution Plans submitted by KundanCare and one more prospective Resolution Applicant (who had alsosubmitted a revised Resolution Plan after negotiations with the A-CoC).Thereafter, Kundan Care submitted a revised version of its ResolutionPlan on 12 November 2019, along with an addendum on 13 November2019.

51. The A-CoC voted on the Resolution Plans on 14 November2019, where the Resolution Plan submitted by Kundan Care was approvedwith a majority of 99.28 per cent, with 0.72 per cent abstaining. On15 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[22] for approval of the ResolutionPlan under Section 31 of the IBC before the NCLT, along with Form H,as mandated under the CIRP Regulations. This application is currentlypending adjudication before the NCLT.

B.4 Astonfield’s dispute with GUVNL

53. Before proceeding further, it is important to discuss the disputearising out of Astonfield’s PPA with GUVNL. The PPA was signed on30 April 2010, came into force in December 2012. and was valid for aperiod of 25 years. Crucially, this PPA was the only agreement enteredinto by Astonfield and formed the entirety of its business.

54. When CIRP was initiated against Astonfield, GUVNL issueda notice of default under Article 9.2.1(e) of the PPA, stating that theinitiation of insolvency was an “event of default”. This was challengedbefore the NCLT by A-RP[23] and EXIM Bank[24] through applicationsunder Section 60(5) of the IBC.

22 CA No 1526 of 201923 CA No 700 of 201924 CA No 701 of 2019

A

BC

DE

F

G

H

A55. It is important to note that Kundan Care was aware of thisdispute, and made specific references to it in its Resolution Plan. Underthe heading of “PPA Risk”, it noted:

“GUVNL had served notices to terminate the Agreement sincethe Company is undergoing the process of Insolvency. HoweverBas per the Order of the Hon’ble NCLT dated 29 August 2019(CA) 700/ND/2019 & CA 701/ND/2019) it is concluded that thePower Purchase Agreement (PPA) is an “instrument” for theapplicability of Section 238 of the IBC, 2016 and clauses 9.2.1 eread with 9.3.1 of the PPA under reference are inconsistent withinthe ambit of Section 238 of/BC, 2016, provisions of/BC, 2016 andCprocess initiated under /BC shall have an overriding effect overthe PPA.

Further, the Hon’ble NCLAT vide order dated 15 October 2019has clearly stated that even in the event of Liquidation of theCorporate Debtor the appellant, Gujarat Urja Vikas Nigam Limited,Dcannot terminate the Power Purchase Agreement under the Code.Also, the Liquidator shall ensure that the Corporate Debtor remainsa going concern. It is therefore very evident and clear that thePower Purchase Agreement cannot be terminated and has tocontinue even after the Resolution Plan has been approved by theHon’ble NCLT.”E

56. On 29 August 2019, the NCLT allowed the applications andset aside the notice of default issued by GUVNL. It held that allowingthe termination of the PPA would adversely affect the ‘going concern’status of Astonfield. However, it held that if Astonfield was to undergoliquidation subsequently, the termination would be permitted.F

57. The NCLT’s judgment was challenged by GUVNL in anappeal[25] before the NCLAT. By judgment dated 15 October 2019, theNCLAT dismissed the appeal and partly upheld the decision of the NCLT,in as much as it disallowed the termination of the PPA during the CIRP.However, it reversed the NCLT’s findings and held that even if AstonfieldGwere to undergo liquidation, the termination of the PPA would not beallowed.

58. GUVNL challenged NCLAT’s judgment in the GUVNLAppeal[26] before this Court. When the present appeal was filed by Kundan 25 Company Appeal (AT) Insolvency No 1045 of 2019H26 Civil Appeal No 9241 of 2019

26 Civil Appeal No 9241 of 2019

Care, the GUVNL Appeal was pending before this Court. However, ithas been disposed by a judgment dated 8 March 2021, in the followingterms:

“165 Given that the terms used in Section 60(5)(c) are of wideimport, as recognized in a consistent line of authority, we hold thatthe NCLT was empowered to restrain the appellant fromterminating the PPA. However, our decision is premised upon arecognition of the centrality of the PPA in the present case to thesuccess of the CIRP, in the factual matrix of this case, since it isthe sole contract for the sale of electricity which was entered intoby the Corporate Debtor. In doing so, we reiterate that the NCLTwould have been empowered to set aside the termination of thePPA in this case because the termination took place solely on theground of insolvency. The jurisdiction of the NCLT under Section60(5)(c) of the IBC cannot be invoked in matters where atermination may take place on grounds unrelated to the insolvencyof the corporate debtor. Even more crucially, it cannot even beinvoked in the event of a legitimate termination of a contract basedon an ipso facto clause like Article 9.2.1(e) herein, if suchtermination will not have the effect of making certain the death ofthe corporate debtor. As such, in all future cases, NCLT wouldhave to be wary of setting aside valid contractual terminationswhich would merely dilute the value of the corporate debtor, andnot push it to its corporate death by virtue of it being the corporatedebtor‘s sole contract (as was the case in this matter‘s uniquefactual matrix).”

Hence, this Court held that GUVNL would not be allowed toterminate its PPA with Astonfield since: (i) the termination was solelyon account of Astonfield entering into insolvency proceedings; and (ii)being its sole contract, the PPA’s termination would necessarily result inthe corporate death of Astonfield, which would derail the entire CIRP.

B.5 Withdrawal of the Resolution Plan

59. On 17 December 2019, Kundan Care filed an application underSection 60(5) of the IBC seeking permission of the NCLT to withdrawits Resolution Plan, which had been previously approved by the A-CoCand was pending confirmation by the NCLT under Section 31 of theIBC. In its application, it prayed for the following reliefs:

A

BC

DE

F

G

H

[2021] 14 S.C.R.

A“a) Allow the present application and permit the Applicant towithdraw its Resolution Plan as submitted and approved by theCoC on 14.11.2019;

b) Direct that the Performance Bank Guarantee submitted by theApplicant be cancelled/revoked/returned/refunded to theBApplicant;”

In its application, Kundan Care stated that there was no bar underthe IBC on it withdrawing its Resolution Plan before it was confirmedby the NCLT. It sought to withdraw its Resolution Plan on account offour reasons:

C

(i) That there was uncertainty in relation to the PPA withGUVNL, since the GUVNL Appeal was pending beforethis Court. It noted that the PPA was central to the CIRP,and its termination would affect its Resolution Plan. Further,it noted that GUVNL had unilaterally refused permission toDAstonfield to change the solar panels which had beendamaged in the floods of 2017, and had not made anypayments to Astonfield for the electricity being suppliedcurrently;

(ii) That due to heavy floods in the State of Gujarat during 2019,Ethe solar panels and other equipment at the Project Site ofAstonfield had been damaged. Further, it alleged that therewas stagnant water at the Project Site, which continued todeteriorate them;

(iii) That Astonfield’s insurance claim of Rs 46.40 crores inFrelation to floods in 2017 had been repudiated by the insurer.Further, it also noted that this may also adversely affect theclaim for the floods in 2019; and

(iv) That the IM issued by A-RP represented that since Astonfieldhad not availed the benefit of “Accelerated Depreciation”under the PPA, hence, it was entitled to a sum of Rs 6.614Gcrores from GUVNL, which was a “Trade Receivable”.However, it noted that Kundan Care had subsequentlydiscovered a previous judgment of this Court upon identicalfacts, where it was noted that the Project Developer shallnot be entitled to a higher/revised tariff in case of not availingH“Accelerated Depreciation”.

60. On 6 January 2020, Kundan Care filed an additional affidavitoutlining the additional costs it would face on account of: (i) deteriorationof the solar panels due to GUVNL unilaterally not permitting theirreplacement, thereby leading to additional cost of Rs 30 crores (againstan initial expected cost of Rs 9 crore); (ii) Astonfield’s Plant notproducing electricity at its optimum level, thereby leading to a loss ofrevenue up to Rs 150 lacs per month; and (iii) CIRP costs on account ofdelay in CIRP, thereby leading to a loss of Rs 12 lacs per month (approx.).It noted:

“5. I say and submit that after submission of the Resolution plan,the Applicant’s representatives had visited the site again and foundthat almost all the solar panels installed at the Project site arerequired to be changed/replaced at a total cost of over INR 30crores instead of INR 9 crores ascertained by the Applicant atthe time of submission of the Plan.

[…]

17. I say and submit that the plant is capable of generating 18133200KWH/Units of Electricity per annum (11.5 MW * 365 days * 24hours* 1000 (from MW to KW) * 18% CUF = 18133200 KWH/Units), when operating at the optimum capacity which would onlybe possible after change/replacement of solar panels, invertersetc. as contemplated in the Resolution Plan. This translates togeneration revenue of roughly INR 1800 lacs per annum or roughlyINR 150 lacs per month which is being incurred by the Project.

18. I say and submit that in addition to the aforesaid generationloss, a sum of INR 12 lacs (approx.) is being incurred towardsmonthly CIRP cost on account of the delay in the CIR process.”

61. Thereafter, Kundan Care also filed an application forimpleadment[27] in the GUNVL Appeal pending before this Court, alongwith an application for directions[28] praying, in exercise of this Court’sjurisdiction under Article 142 of the Constitution of India, for the followingreliefs:

“a) Set aside/quash the Notice dated 28.03.2019 issued by GujaratUrja Vikas Nigam Limited to Astonfield Solar (Gujarat) Private 27 IA No 9679 of 2020

28 IA No 9682 of 2020

A

B

C

D

E

F

G

H

ALimited and declare that the Applicant/Corporate Debtor shall befree to change/replace the solar panels/modules and otherequipment of the Project, as may be deemed fit by the Applicant/Corporate Debtor;

b) Declare that the Power Purchase Agreement dated 30.04.2010Bexecuted between Gujarat Urja Vikas Nigam Limited andAstonfield Solar (Gujarat) Private Limited shall stand extendedby the period of moratorium declared under IBC during the CIRProcess;

c) In alternate to prayers a) and b), permit the Applicant to withdrawCits Resolution Plan dated 12.11.2019 and direct that thePerformance Bank Guarantee submitted by the Applicant to theCommittee of Creditors shall stand cancelled/revoked and/orreturned/refunded to the Applicant;”

62. While the GUVNL appeal and its application remained pending,Don 14 May 2020, Kundan Care requested the NCLT to take up itsapplication for an early hearing. Following this, the application was listedon 15 June 2020.

63. On 12 June 2020, A-RP filed its reply to Kundan Care’sapplication and additional affidavit, where it opposed the withdrawal ofEthe Resolution Plan after its approval by the A-CoC and stated that:

(i) In relation to the ongoing dispute with GUVNL, KundanCare was aware of the same when it submitted theResolution Plan;

(ii) In relation to the damage to the solar panels, it pointed outFthat the A-RP had informed Kundan Care about the floodsin 2019 and an Operation and Management Agency hadbeen hired to clear the water at the Project Site, which hadbeen done;

(iii) In relation to the repudiation of the insurance claim, theGRFRP or IM never guaranteed that the claim would besuccessful. In any case, the A-RP was actively pursuingthe challenge to its repudiation;

(iv) In relation to the “Accelerated Depreciation”, that the samehad been listed as a “doubtful debt” by the A-RP in the IM.H

Further, in any case, Kundan Care would have done theirown due diligence surrounding it; and

(v) In relation to Astonfield’s Plant not operating at full capacity,the IM issued by A-RP noted that the floods in 2017 hadaffected the Plant and it may not be able to operate at fullcapacity.

64. Kundan Care filed its rejoinder to the A-RP’s reply on 29June 2020, in which they argued that the Resolution Plan proposed bythem and approved by the A-CoC, was no longer “feasible” and “viable”commercially, in accordance with Section 30(2)(d) read with proviso toSection 31(1) of the IBC, due to the intervening circumstances beforeits confirmation by the NCLT which had materially altered the financialprojections. Hence, the NCLT should allow it to withdraw the ResolutionPlan. In the alternative, Kundan Care proposed re-negotiation of theResolution Plan by stating the following:

“55. That Para 78 of the Reply is the Prayer Clause, which iswrong and denied. The Prayer Clause of C.A. No. 16798/2019 isreiterated and reaffirmed. Alternatively, and without prejudice tothe above, it is prayed that the Applicant may be permitted to re-negotiate the financial proposal with the CoC”

65. The A-CoC also filed its reply to Kundan Care’s applicationon 30 June 2020, where it stated that: (i) NCLT could not adjudicateupon the application since Kundan Care had filed another applicationbefore this Court in the GUVNL Appeal; and (ii) in any case, KundanCare knew of the risks while entering the CIRP and should not be allowedto withdraw at such a belated stage.

66. The NLCT passed an order dated 3 July 2020, by which itrejected Kundan Care’s application by noting that: (i) it did not havejurisdiction to permit withdrawal; and (ii) the matter was also sub judicebefore this Court by the virtue of Kundan Care’s application in theGUVNL Appeal. The order stated:

“IA 1679/2019

Counsels for the Resolution Applicant, COC and IRP are present.

The Resolution Applicant has prayed to withdraw the resolutionplan which was submitted before this Tribunal after approval ofthe COC. After careful consideration of the matter, we are of the A

B

C

D

E

F

G

H

Aview that the NCLT has no jurisdiction to permit withdrawal ofthe resolution plan which has been placed before the authoritywith due approval of the COC. Notwithstanding this fact, it hasbeen pointed out by the Counsel for the COC that another matteris subjudiced before the Hon’ble Supreme Court in which inter-alia a similar request has been made. This has been submitted byBthe Cotinsel for the COC on page 31 of the reply filed by COC inresponse to the application.

A

Keeping this in view, it will not be appropriate for this Tribunal todeal with an issue which is already subjudiced before the Hon’bleSupreme Court. The Application is hereby rejected.”

C67. In view of the NCLT’s order, Kundan Care made an oralrequest for withdrawal of its application to this Court when the GUVNLAppeal was listed on 20 July 2020. This request was allowed by thisCourt.

D68. Thereafter, the appellant filed an appeal before the NCLAT,challenging the order dated 3 July 2020 passed by the NCLT. NCLATdid not issue notice in the appeal, but heard the submissions of all partiesat the stage of admission and directed them to file their writtensubmissions.

E69. By the impugned judgment dated 30 September 2020, theNCLAT dismissed the appeal by Kundan Care, relying on the judgmentimpugned in the Ebix Appeal. It noted:

“7. Be it seen that the CIRP process undertaken involves filing ofExpression of Interest by the prospective Resolution ApplicantsFwhich may ultimately manifest in the form of prospectiveResolution Plan after negotiations as regards improvement orrevision in terms of the proposed Resolution Plan. This process isin the nature of a bidding process where, based on considerationof the provisions of a Resolution Plan with regard to financialmatrix, capacity of the Resolution Applicant to generate funds,Ginfusion of funds, upfront payment, the distribution mechanismand the period over which the claims of various stake holders areto be satisfied besides the feasibility and viability of the ResolutionPlan, a Resolution Applicant emerges as the highest bidder (Hl)eliminating the Resolution Plans of Resolution Applicants, whichare ranked H2 and H3. The approval of a Resolution Plan by theH

Committee of Creditors with requisite majority has the effect ofeliminating H2 and H3 from the arena. Though, such approvedResolution Plan would be binding on the Corporate Debtor and allstake holders only after the Adjudicating Authority passes an orderunder Section 31 of the I&B Code approving the Resolution Plansubmitted by Resolution Professional with the approval ofCommittee of Creditors in terms of provisions of Section 30(6) ofthe I&B Code, it does not follow that the Successful ResolutionApplicant would be at liberty to withdraw the Resolution Planduly approved by the Committee of Creditors and laid before theAdjudicating Authority for approval thereby sabotaging the entireCorporate Insolvency Resolution Process, which is designed toachieve an object. A Resolution Applicant whose Resolution Planstands approved by Committee of Creditors cannot be permittedto alter his position to the detriment of various stake holders afterpushing out all potential rivals during the bidding process. This isfraught with disastrous consequences for the Corporate Debtorwhich may be pushed into liquidation as the CIRP period may bythen be over thereby setting at naught all possibilities of insolvencyresolution and protection of a Corporate Debtor, more so when itis a going concern. That apart, there is no express provision in theI&B Code allowing a Successful Resolution Applicant to stage aU-tum and frustrate the entire exercise of Corporate InsolvencyResolution Process. The argument advanced on behalf of theAppellant that there is no provision in the I&B Code compellingspecific performance of Resolution Plan by the SuccessfulResolution Applicant has to be repelled on four major grounds:-

(i) There is no provision in the l&B Code entitling the SuccessfulResolution Applicant to seek withdrawal after its Resolution Plai1stands approved by the Committee of Creditors with requisitemajority;

(ii) The successful Resolution Plan incorporates contractual termsbinding the Resolution Applicant but it is not a contract of personalservice which may be legally unenforceable;

(iii) The Resolution Applicant in such case is estopped fromwriggling out of the liabilities incurred under the approvedResolution Plan and the principle of estoppel by conduct wouldapply to it; ABC

DE

F

G

H

A(iv) The value of the assets of the Corporate Debtor is bound tohave depleted because of passage of time consumed in CorporateInsolvency Resolution Process and in the event of SuccessfulResolution Applicant being permitted to walk out with impunity,the Corporate Debtor’s depleting value would leave all stakeholders in a state of devastation.”B

The NCLAT held that withdrawal of a Resolution Plan by theResolution Application after its approval by the CoC cannot be permittedsince: (i) it contravenes the principles of IBC, which require the CIRP tobe conducted in a time-bound manner in order to maximise the value ofthe assets of the Corporate Debtor; (ii) permitting Kundan Care toCwithdraw would sabotage the CIRP, where the A-CoC had previouslyrejected other prospective Resolution Applicants in favor of KundanCare; (iii) there is no specific provision in the IBC for allowingwithdrawal; (iv) the Resolution Plan incorporated contractual termsbinding the Resolution Applicant, and it is not akin to a contract of personalDservice which is legally unenforceable; (v) by the virtue of principle ofestoppel of conduct, Kundan Care is estopped from withdrawing; and(vi) the withdrawal may lead to the Astonfield’s liquidation, and the valueof its assets were bound to have depleted in the interim.

C Civil Appeal No 295 of 2021 – the Seroco AppealEC.1 The appeal

70. This is an appeal under Section 62 of the IBC from an orderdated 10 December 2020 of the NCLAT. By its judgment, the NCLATdismissed an appeal[29] instituted by Seroco, under Section 61 of the IBCagainst an order dated 23 October 2020 of the NCLT.F

71. The NCLT dismissed an application[30] by Seroco under Section60(5) seeking permission to modify its Resolution Plan submitted for theCorporate Debtor – Arya Filaments. NCLT relied on the impugnedjudgment in the Kundan Care Appeal. Further, it noted that while theapplication prayed for a modification of the Resolution Plan, its title wasG“Application for withdrawal under section 60(5) of the Insolvency andBankruptcy Code, 2016”.

72. In appeal, the NCLAT partly upheld the NCLT’s decision andheld that Seroco could not be allowed to modify or withdraw the 29 Company Appeal (AT) (Insolvency) No 1054 of 2020H30 IA No 96 of 2020 in CP (IB) No 29 of 2018

Resolution Plan approved by the Arya-CoC since: (i) it was the soleResolution Applicant in the CIRP; (ii) Arya Filaments was an MSME;and (iii) it was aware of Arya Filaments’ financial condition when itsubmitted the Resolution Plan. However, it set aside the NCLT’s decisionin relation to the costs imposed on Seroco.

C.2 Initiation of CIRP

73. The second respondent, Kotak, being a financial creditor ofArya Filaments, filed a petition[31] under Section 7 of the IBC seeking toinitiate CIRP.

74. By an order dated 17 August 2018, the NCLT initiated CIRPagainst Arya Filaments and appointed the first respondent, Mr RaviKapoor, as the IRP. Thereafter, a CoC was constituted, which consistedof Kotak Mahindra and the third respondent, UBIL. The Arya-CoCthen appointed Mr Ravi Kapoor as the RP.

C.3 Submission and Approval of Resolution Plan

75. The Arya-RP thereafter invited Resolutions Plans for AryaFilaments. Seroco, being a company formed by the former employeesof 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 onlyResolution Plan which was received.

76. At its 4[th] meeting held on 16 April 2019, the Arya-CoC notedthat Seroco’s Resolution Plan needed some improvements and directedit to submit a revised Plan. Seroco’s revised Resolution Plan was thenapproved by the Arya-CoC in its 5[th] meeting held on 10 May 2019, with100 per cent approval.

77. On or about 15 May 2019, the Arya-RP filed an application[32]under Section 30(6) before NCLT for confirmation of the ResolutionPlan. Form H under the CIRP Regulations was filed by way of anaffidavit on 5 June 2020.

C.4 Modification of the Resolution Plan

78. On 9 June 2020, Seroco addressed a letter to the Arya-RPand Arya-CoC highlighting that their Resolution Plan was based on theeconomic conditions which prevailed at that time, which had been 31 CP (IB) No 29 of 2018

32 IA No 280 of 2019 in CP (IB) No 29 of 2018

A

B

C

D

E

F

G

H

Asignificantly altered due to the onset of the COVID-19 pandemic. Inparticular, it highlighted that:

(i) The physical condition of Arya Filament’s machinery wouldhave deteriorated;

(ii) Financial losses must have been suffered by Arya FilamentsBduring the COVID-19 pandemic;

(iii) Demand/sale of Arya Filaments’ products must have sufferedduring pandemic; and

(iv) Due to the pandemic, the funds of Seroco have also beenCdrastically reduced.

It submitted a revised Resolution Plan to be considered by theArya-CoC. In the revised Resolution Plan, Seroco offered to pay, interalia, an amount of Rs 5,29,22,000. It also requested the Arya-RP andArya-CoC to file the revised Resolution Plan before the NCLT, andDkeep the proceedings on the confirmation of the previous ResolutionPlan in abeyance.79. Thereafter, on 10 July 2020, Seroco filed an application beforethe NCLT praying for the following reliefs:

“a) permit the Applicant to revise the Resolution Plan datedE13.3.2020 in terms of letter dated 09/06/2020 at Annexure C hereto;

b) direct the Respondent No. 2 to consider the modified resolutionplan as per Letter at Annexure C and vote afresh on the same;

c) direct the Respondent No.1 to provide an updated InformationMemorandum providing financial condition of the CorporateFDebtor as on 1/07/2020;

d) during the hearing of this Application, stay the implementation,operation and execution of the Resolution Plan dated 13.3.2020of the Applicant;”

GIt noted that its Resolution Plan was filed eighteen months agoand was based on an IM published two years previously, following whichthe conditions had materially altered. Hence, Seroco stated that while itwas genuinely interested in Arya Filaments, its changed circumstancesmeant that it could not pay the entire consideration envisaged in theResolution Plan approved by the Arya-CoC earlier.H

80. Seroco’s application was listed before the bench of the NCLTwhich was hearing the Arya-RP’s application for confirmation of theResolution Plan. By a common order on 23 October 2020, the NCLTallowed the Arya-RP’s application and confirmed Seroco’s ResolutionPlan which had been approved by the Arya-CoC. In relation to Seroco’sapplication for modification, it noted:

“18. It is the matter of record that the instant application was filedsubsequent to the filling of the above stated IA ie. IA 280 of 2019filed under Section 30(6) of the IB Code. It is stated by theApplicant that the Resolution Plan, so submitted by the Applicant,is based on the Information Memorandum which was publishedtwo years ago. Considering the time of two years and outbreak ofCovid-19, the Applicant is not aware of the current financialcondition of the Corporate Debtor and is now not in a position tobear the costs/losses of the Corporate Debtor and hence, is seekingfor withdrawal of the Resolution Plan. This story is not believableas the Corporate Debtor, being a MSME, has filed the planconsidering the financial ‘condition of the Corporate Debtor andhave shown his interest to take the Company. Hence, having noknowledge of the financial condition does not arise at all.

19. It is pertinent to mention herein that in view of the judgementpassed by Hon’ble NCLAT in Kundan Care Products Ltd vs. Mr.Amit Gupta Resolution Professional and-Ors (Company Appeal(AT) (Insolvency) No. 653 of 2020), the Resolution Plan, oncesubmitted, cannot be withdrawn as there is no provision in the IBCode which allows withdrawal of an approved Resolution Plan &the successful Resolution Plan incorporates contractual termsbinding the Resolution Applicant but it is not a contract of personalservice which may be legally unenforceable.

20. Moreover, there is an ambiguity in the instant application withregard to the relief sought for, as the title of the application states“Application for withdrawal under section 60(5) of the Insolvencyand Bankruptcy Code, 2016” whereas the prayer, as stated above,has no whisper regarding the withdrawal of the Resolution Plan.”

Hence, it rejected Seroco’s application and imposed costs of Rs50,000.

ABC

D

EF

G

H

A81. Seroco filed an appeal against the NCLT’s judgment, whichcame to be dismissed by the NCLAT by its impugned order dated10 December 2020, where it noted:

“2. After hearing learned counsel for the Appellant and havingregard to the Judgments rendered by this Appellate Tribunal holdingBthat the Successful Resolution Applicant cannot be permitted towithdraw the approved Resolution Plan coupled with the fact thatthe Appellant in the instant case being the sole Resolution Applicantin the Corporate Insolvency Resolution Process (CIRP) of theCorporate Debtor which has been classified as an MSME andadmittedly having knowledge of the financial health of theCCorporate Debtor as a promoter or a connected person cannot bepermitted to seek revision of the approved Resolution Plan onthat ground which would not be a material irregularity within theambit of Section 61(3) of the Insolvency and Bankruptcy Code,2016. We are of the considered opinion that there is no merit inDthis appeal and the same is liable to be dismissed.”

Considering Arya Filament’s position as an MSME, Seroco beinga company formed by its former employees (who would have been awareof its financial condition) and also being the sole Resolution Applicant,the NCLAT refused to permit modification/withdrawal of the ResolutionEPlan.

D Submissions of counsel in the Ebix Appeal D.1 Submissions for the appellant

82. Mr K V Vishwanathan, learned Senior Counsel appearing onFbehalf of Ebix submitted that a successful Resolution Applicant may bepermitted to withdraw the resolution plan (pending approval of theAdjudicating Authority), on account of: (a) subsequent developments inrelation to Educomp (which in this case relate to investigations of fraudand mismanagement during the pre-CIRP period); and (b) due to aninordinate lapse of time, which has resulted in the complete erosion ofGthe fundamental commercial substratum underlying the Resolution Plan.Further, he argues that the NCLAT did not correctly apply the doctrineof constructive res judicata. He has made the following submissions:

(i) Ebix is not bound by the Resolution Plan prior to the approvalof the Adjudicating Authority, in terms of the CIRP documents read withHthe scheme of IBC. In this regard, our attention was drawn to:

(a) Section 31(1) of the IBC, which provides that the ResolutionPlan is “binding…on all stakeholders” only upon approval bythe Adjudicating Authority; (b) Section 74(3) of the IBC, which provides that a person canbe prosecuted or punished for contravening the ResolutionPlan only after its approval by the Adjudicating Authority;

(c) The documents underlying the CIRP, i.e., invitation of EOI,the RFRP, sanction letter and Resolution Plan take effect ofa binding contract only upon the approval of the AdjudicatingAuthority and the execution of definitive agreementsthereafter; (d) Clause 1.1.6 of the RFRP provides that the Plan submittedby Ebix will have to be approved by the Adjudicating Authorityand will be binding on all the stakeholders in relation to theCorporate Debtor and Ebix, only after it has been approvedby the Adjudicating Authority; (e) Clause 1.10(1) of the RFRP provides that Ebix shall beresponsible for the implementation and supervision of theResolution Plan from the date of approval by the AdjudicatingAuthority; and (f) Clause 2.2.9 of the RFRP provides that Ebix shall, pursuantto approval by the Adjudicating Authority, execute definitiveagreements;

(ii) The Resolution Plan constitutes an offer qualified by time andcannot be enforced against the parties after such a long period of timehas elapsed. In this regard, the following terms of the documentsunderlying the CIRP were highlighted:

(a) Clause 1.1.5 of the RFRP, which invites Resolution Plansfrom prospective Resolution Applicants. Further, Clause 1of the covering letter for submission of the Resolution Planprovides that Ebix is setting out the offer in relation to theinsolvency resolution of Educomp; (b)The Resolution Plan was valid only for six months, sinceClause 1.8.3 of the RFRP invites resolution plans/offerswith a validity of six months; A

B

C

D

E

F

G

H

A(c)In accordance with the RFRP, Clause 7 of the ResolutionPlan provides that it is valid for a period of six months fromthe date of submission. The appellant is a liberty to withdrawthe resolution plan if there is delay of several months beyondthe period of six months. It was emphasized that theResolution Plan is a qualified offer which is not open toBacceptance for an indefinite period. Reliance was placedon the decision of this Court in Riya Travel & Tours(India) (P) Ltd. v. C.U. Chengappa[33] to support thisproposition; (d)The CSEB Application for the approval of the resolutionCplan continues to be pending before the AdjudicatingAuthority, while the Approval Appeal is pending before theAppellate Authority. A period of eighteen months has passedfrom the date of submission of the resolution plan (i.e., 19February 2018) and twenty-seven months from the CIRPDcommencement date. Such severe and inordinate delay isimpermissible under Section 12 of the IBC and justifies thewithdrawal of the Plan; (e)The delay in the approval was on account of the actions ofmembers of the E-CoC, who had sought a special audit ofEEducomp due to the concerns relating to mismanagementof its affairs. Several members had filed applications (IFC,Axis Bank and SBI) before the Adjudicating Authority inthis regard. The Adjudicating Authority by orders dated 13August 2018, 20 August 2018 and 31 August 2018 tookcognizance of these applications and directed them to beFplaced before the E-CoC. The E-CoC approved theInvestigation Audit Application filed on its behalf beforethe Adjudicating Authority for conducting a special audit by77.85 per cent votes; (f)SFIO initiated investigation against Educomp. Ebix becameGaware of the investigation only through disclosures madeto 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 H33 (2001) 9 SCC 512

prejudiced the commercial considerations underlying theResolution Plan and, in any case, the Resolution Plan wasvalid only for six months. It urged the E-CoC/E-RP toexpedite the process for obtaining the AdjudicatingAuthority’s approval. Thereafter, Ebix filed the FirstWithdrawal Application for seeking information relating tothe financial position and other commercial aspects ofEducomp. After the dismissal of the First WithdrawalApplication, the appellant filed the Second and ThirdWithdrawal Applications for withdrawal of its ResolutionPlan; and (h)The above sequence of events shows that Ebix had no roleto play in the delays plaguing the CIRP of Educomp. Section12 of the IBC stipulates that the insolvency resolutionprocess should be completed in 270 days with an outer limitof 330 days. This Court in CoC of Essar Steel India Ltd.v. Satish Kumar Gupta & Ors.[34] has held that “[i]t isonly in such exceptional cases that time can be extended,the general rule being that 330 days is the outer limit withinwhich resolution of the stressed assets of the corporatedebtor must take place beyond which the corporate debtoris to be driven into liquidation”;

(iii) The events that have taken place subsequent to the submissionof Resolution Plan justify its withdrawal. In this regard, it was urged onbehalf of Ebix that:

(a) The Resolution Plan was based on certain considerationsthat were fundamental to the Ebix’s bid for the business ofEducomp, and were crucial for keeping the business ofEducomp as a going concern. These were the governmentcontracts and IP driven solutions in the education and healthindustries. However, due to the inordinate delay in thecompletion of the CIRP, many of the government contractsmay have ended. Further, various technology driven solutionsand intellectual property owned and operated by Educomp,which Ebix had sought to acquire, were no longer valid; A

B

C

D

E

F

G

A(b)The E-CoC passed a resolution with 77.85 per cent votesto conduct a special audit into the affairs of Educomp, whichshows that evidence is available to conclude that the affairsof the company were mismanaged, which materially affectthe economic considerations underlying the Resolution Plan; B(c)The affairs of Educomp are also being investigated by theSFIO and CBI, which provides further evidence that theaffairs of Educomp were severally mismanaged and aresusceptible to criminal investigations; (d)There has been a lapse of over three years resulting in anCerosion of vital business prospects of Educomp; and (e)The implementation and viability of a Resolution Plan is tobe assessed at the time of consideration of such plan by thecompetent Court/Tribunal, and not at the time of submissionof the Plan. The subsequent events that have transpiredafter the submission of the Resolution Plan are relevant forDevaluating the commercial viability and the capability toimplement the plan. In the present case, the substratumforming the basis of the resolution plan has been eroded bythe occurrence of the abovementioned events. Thus, thesuccessful Resolution Applicant has the right to withdrawEthe Resolution Plan in such circumstances;

(iv) Material information relating to the financial position and affairsof Ebix was not provided to Ebix after the submission of the ResolutionPlan, as a consequence of which, there is an impairment of a fair processin the conduct of a commercial transaction. In this context:F

(a) Section 29(2) of the IBC, provides that all relevantinformation should be provided to the Resolution Applicant; (b)Regulation 36 of the CIRP Regulations provides that theIM prepared under Section 29 of the IBC should containinformation relating to, inter alia: (1) “assets andGliabilities…”; (2) “the latest annual financial statement”;and (3) details of “…ongoing investigations or proceedingsinitiated by Government and statutory authorities”. Whilethis information is relevant for the preparation of theResolution Plan, there is a continuing obligation to discloseHsuch information if there is a substantial delay in the CIRP

(beyond the period prescribed under Section 12 of the IBC)Aqua the Corporate Debtor;

(c) The Resolution Applicant’s right to complete and accurateinformation relating to the Corporate Debtor has beenrecognized under the UNCITRAL Guide. The principle of“equality of information” to all stakeholders, including theBresolution applicant, has been underlined in the BLRCReport; and (d)The E-CoC/E-RP withheld information relating tomismanagement of affairs of Educomp between 2014-2018,and also in relation to the investigation into the affairs ofEducomp by governmental authorities; C

(v) The Adjudicating Authority has the power to permit thewithdrawal of the Resolution Plan. Under Section 31 of the IBC, it hasthe power to independently satisfy itself that the “Resolution Plan asapproved by the CoC… meets the requirements as referred to in sub-section (2) of Section 30”. Section 30(2)(d) of the IBC provides that theAdjudicating Authority can assess whether adequate provisions havebeen made for the “implementation and supervision of the resolutionplan”. This Court in K Sashidhar v. IOC[35] has emphasized that theAdjudicating Authority has the discretion to reject the Resolution Plan ifit does not conform to the stated requirements of Section 30(2)(d). Theproviso to Section 31(1) of the IBC expressly prohibits the AdjudicatingAuthority from approving a plan that is incapable of being effectivelyimplemented. The NCLAT, in the impugned judgement, has not consideredwhether the exercise of the jurisdiction by the Adjudicating Authorityunder Section 31(1) read with Section 30(2)(d) was valid. In the presentcircumstances, the Resolution Plan is no longer capable of beingimplemented due to the erosion of the commercial basis of the ResolutionPlan and an inordinate lapse of time; DEF

(vi) The NCLT had good and valid reasons allowing for thewithdrawal of the resolution plan since:

G

(a) There was no approval by the E-CoC with the requisite majorityof 75 per cent. When the voting took place on the resolution plansubmitted by the Appellant on 22 February 2018, there was a Ashortage in the votes required to achieve the statutory requirementof 75 per cent of votes in the E-CoC. On 23 February 2018, oneof the financial creditors who was not present at the meeting ofthe E-CoC intimated its agreement with the resolution plan andaccordingly the Approval Application was filed on 7 March 2018.Orders have been reserved on the Approval Application on 10BJanuary 2018; and (b) Fulfilment of the Plan cannot be foisted on an unwillingApplicant. This view of the NCLT is consistent with the legalposition which vests it with the power to permit a withdrawalfrom a resolution plan for good and substantial reasons; andC

(vii) The doctrine of res judicata does not bar the relief that Ebixhad sought in its Third Withdrawal Application of its Resolution Plan.The First Withdrawal Application arose from a different cause of action,namely seeking information and re-evaluation of the financial position ofEducomp due to a lapse of time. The order dated 10 July 2019 passed byDthe Adjudicating Authority in the First Withdrawal Application had onlyadjudicated the issue relating to the non-disclosure of information andmaterial sought by Ebix, and had not considered the relief of withdrawalof Resolution Plan. This was also confirmed in the express finding of theAdjudicating Authority in its order dated 2 January 2020, which wasEappealed before the NCLAT.

D.2 Submissions for the first respondent

83. Mr Shyam Divan, learned Senior Counsel appearing on behalfof E-CoC, has urged the following submissions:

F(i)Ebix submitted its Resolution Plan on 27 January 2018, aftermonth-long negotiations. Meetings between the E-CoC andEbix were conducted on 17 February 2018, 19 February2018 and 21 February 2018. Addendums were submittedon 21 February 2018. The mutually approved and negotiatedplan was put to vote, and approved by 75.36 per cent of theGE-CoC. This constituted a binding contract between Ebixand the E-CoC;

(ii) The IBC is a complete code as held by this Court in M/sEmbassy Property Developments Pvt. Ltd. v. State ofKarnataka & Ors.[36] and M/s Innoventive IndustriesH36 (2020) 13 SCC 308

Ltd. v. ICICI Bank & Anr.[37]. It does not envisagewithdrawals of Resolution Plans after mutual negotiationsbetween the Resolution Applicant and the CoC, whichculminates into a binding agreement. The AdjudicatingAuthority cannot contravene the text to invoke the spirit/object of the IBC without a conscious statutory prescription,as held by this Court in Gujarat Urja Vikas NigamLimited v. Amit Gupta[38]; A

B

(iii) The basic tenets of any insolvency law are to ensure thesanctity of the prescribed processes and timelines.Maximization of the value of assets and resolution of theCCorporate Debtor are the core objectives of the IBC, asheld by this Court in Swiss Ribbons (P) Ltd v. Union ofIndia[39]. Enabling withdrawals, especially at the tail end ofthe process, would push financially distressed CorporateDebtors into liquidation; D

(iv) The Specific Relief (Amendment) Act 2018, as is evincedfrom the speech of the Union Minister of Law & Justicebefore the Rajya Sabha while introducing the amendments,shifted the paradigm on contract enforcement in India wherespecific performance is now the norm, rather than theexception; E

(v) The resolution process involves significant public money,resources and time. Enabling withdrawals would underminethe goals of predictability and finality, which the legislaturehad recognized as the need of the hour in the Rajya Sabhadebates on the IBC; F

(vi) Non-implementation of Resolution Plans after approval fromthe Adjudicatory Authority under Section 31 of the IBC,pertinently on a narrow scope of judicial review, is liable tocriminal prosecution under Section 74(3) of the IBC. ThisCourt should not allow a successful Resolution Applicantto withdraw from a duly concluded contract; G

A(vii)The consequences of permitting a withdrawal by Ebix wouldpush Educomp towards liquidation, which would riskthousands of crores of public monies owed to public sectorbanks during the economic crisis caused by the COVID-19pandemic; B(viii) Permitting withdrawal of an approved Resolution Planwould tread on the exclusive domain of the CoC, whichhas the power to determine the feasibility and viability of aResolution Plan. The mandate of Section 30(2)(d) of theIBC, which envisages ‘implementation and supervision ofthe resolution plan’, would be breached if the Court wouldCallow withdrawals by holding that an unwilling ResolutionApplicant would make a Resolution Plan itself un-implementable;

(ix) The scope of judicial review with the Adjudicatory Authority,under Section 31 of the IBC, is confined to parametersDdelineated in Section 30(2), which does not envisage thewithdrawal or unwillingness of the Resolution Applicant tocontinue with a CoC-approved Resolution Plan. TheAdjudicating Authority, as a creature of the statute, cannotexercise jurisdiction beyond the scope of the IBC or second-Eguess the commercial wisdom of the CoC, as held by thisCourt in Essar Steel (supra), after noting the observationsof this Court in K Sashidhar (supra);

(x) The Supreme Court, in Essar Steel (supra) and KSashidhar (supra), has held that the Adjudicating AuthorityFcannot trespass upon the majority decision of the CoC,except on the grounds enumerated under Section 30(2)(a)to (e) of the IBC;

(xi) The provisions of the RFRP were designed to ensurepredictability and finality. The provisions which elucidatedthis aim were:G

(a) Clause 1.13.5, which did not envisage any change orsupplemental information to the Resolution Plan, after thesubmission date;

(b) Clause 1.8.4, which stated that a submitted ResolutionHPlan shall be irrevocable; and

(c) Clause 1.10(l), which stipulated that the ResolutionApplicant will not be permitted to withdraw the ResolutionPlan;

(xii) The RFRP did not envisage six months to be the validity ofthe Resolution Plan. Clause 1.8.3, which stipulated aminimum six-month validity of the Resolution Plan, isrelatable to the acceptance of the plan by the E-CoC andnot the Adjudicating Authority. This is evident from theclauses of the RFRP which stipulate that the submitted planis irrevocable;

(xiii) The resolution process belies the claim that withdrawalswere permissible after the six-month period. The processwas delineated in the following terms:

(a) Clause 1.3.1 and 1.3.2 empowers the E-RP to issue aninvitation to prospective resolution applicants, subjectto, inter alia, non-disclosure agreements andparticipation fees; (b) Clause 1.3.6, read with Clause 1.9.1, enables a party tosubmit a Resolution Plan upon payment of an earnestmoney deposit of Rs 2 crore. Along with the ResolutionPlan, the Resolution Applicant was required to submitan undertaking accepting the terms of the RFRP,including the minimum six-month period of ResolutionPlan validity;

(c) Clause 1.9.3, read with Clause 1.9.5, ensures that aCoC approved Resolution Plan becomes a bindingcontract between the E-CoC and Ebix, since the earnestmoney deposit needs to be replaced with a performanceguarantee, which is 10 per cent of the Resolution Planvalue. Any violation of the concluded contract, whichwould be the approved Resolution Plan in this case,would give the E-CoC the right to invoke theperformance guarantee; (d) The above clauses, in addition to clause 1.8.3, read with1.9.5, evince that the six-month validity is with respectof the EMD alone, and is hence only related to a perioduntil acceptance by the E-CoC; A

B

C

D

E

F

G

H

A(e) The consequence of approval by the AdjudicatingAuthority under Section 31 of the IBC is that the partiesenter into definitive binding agreements, theimplementation of the Resolution Plan commences andthe performance guarantee is returned. A Section 31-approval binds all stakeholders to a concluded contractBbetween the Ebix and the E-CoC; A

(f) The CoC or the RP do not have the authority to imposea time limit on the Adjudicating Authority. Therefore, itwould not be plausible to construe Clause 1.8.3 toimpose a maximum validity period on a Resolution Plan;and C

(g) In any event, Ebix had waived the term of validity ofthe plan being six months by pursuing the plan after sixmonths, i.e., from August 2018 till reserving of ordersby the Adjudicating Authority in January 2019, and notraising any claims till July 2019. Therefore, Ebix isestopped from raising the plea, after the purported expiryof the validity period; D

(xiv) Clause 1.1.6 of the RFRP, which reiterated Section 31 ofthe IBC and states that the Resolution Plan will be bindingon all stakeholders only after the approval of the AdjudicatingAuthority, does not militate against E-CoC’s proposition thatthe CoC-approved Resolution Plan is a concluded contract.This is because:

E

(a) Section 30(4) of the IBC does not contemplate anystatutory exit after the approval of the Resolution Planby the CoC, which determines its feasibility and viability; F

(b) Clause 1.1.6 paraphrases Section 31(1) of the IBC,which merely makes the Resolution Plan binding on allother stakeholders. The Adjudicating Authority’sapproval under Section 31(1) amounts to a ‘super-addedimprimatur’ to the concluded terms between the CoCand the Successful Resolution Applicant; and G

(c) A conjoint reading of Clause 1.1.6, along with Clause1.8.4, which declares a submitted Resolution Plan to beirrevocable, and Clause 1.10(l), which prohibits H

withdrawal of a submitted Resolution Plan, belies theclaim that the Resolution Plan is binding on theSuccessful Resolution Applicant only after approval ofthe Adjudicating Authority; A

(xv) The delay in the resolution process is not attributable to theE-CoC. It cannot be cited to allow Ebix to withdraw from alegally binding plan; B

(a) The E-CoC approved the submitted Resolution Planwithin 270 days, and it was promptly filed before theAdjudicating Authority in March 2018. The orders onthe plan approval were reserved in January 2019 andpronounced only in January 2020. The delay cannot beattributable to the E-CoC or used to withdraw from aplan which provided a 90 per cent haircut; and C

(b) actus curiae neminem gravabit, i.e., the act of Courtshall harm no man, is a settled principle in law; D

(xvi) Ebix’s argument that the substratum or commercial viabilityhas eroded due to the subsequent circumstances is facetioussince:

(a) Ebix had conducted its own due diligence, in accordancewith the RFRP. Section 29 of the IBC also enabled theEappellant to access to an IM on Educomp, which wouldinclude all relevant information, including financialposition and pending disputes. Clause 1.13.7 of theRFRP also stipulates that failure to conduct adequatedue diligence is not a ground to relieve the ResolutionFApplicant from its obligations under a submittedResolution Plan; (b) Ebix continued to be interested in Educomp as late as 1June 2020, when it addressed a letter stating that thesoftware licenses for online education, issued byEducomp, have become even more relevant in thecircumstances of the pandemic; G

(c) The Investigation Audit Application for investigationsinto the affairs of Educomp was filed in May 2018 anddisposed of by August 2018, which was prior to the H

A

B

C

D

E

F

G

H

Adjudicating Authority reserving its orders on theResolution Plan. In any event, no such audit by theSpecial Investigation Team was undertaken; (d) According to the information available with the E-CoC,the E-RP had provided all the information available withEducomp regarding the CBI and SFIO investigations,on a best effort basis. Additionally, Ebix was alsoappearing before the NCLT when the E-CoC soughtan investigation into the affairs of Educomp, as recordedin the order of the NCLT dated 9 August 2018; (e) Ebix had evaluated the business and business conductof Educomp, before submitting a Resolution Plan worthRs 314 crores, against an admitted financial debt worthRs 3003 crores. This 90 per cent haircut indicates thatthe appellant was aware of the conditions of Educomp;and (f) In any event, Section 32A of the IBC grants immunityto a Resolution Applicant from any offences committedby the Corporate Debtor, prior to the commencementof the CIRP, and provides certainty that the assets ofthe Corporate Debtor, as represented, would be availablein the same manner as at the time of submission of aResolution Plan. Section 25(2)(j) of the IBC empowersand obligates the RP to file applications for avoidanceof certain transactions, to protect the interests of theResolution Applicant; and

(xvii) The Third Withdrawal Application is barred by res judicatasince the grounds raised by Ebix were rejected by the NCLTin the First Withdrawal Application on 10 July 2019. Theliberty granted by the NCLT to file a fresh application on 5September 2019 was with respect to filing a proper pleadingwithout defects, and not on merits. This conditional libertycannot be construed as a waiver of the objection of resjudicata. In any event, the issue of limited validity of theapproved Resolution Plan and delay of seventeen months,is barred by the principles of constructive res judicata.

84. In the alternative, if Ebix were to succeed before this Court,the learned Senior Counsel on behalf of the E-CoC has prayed that thisCourt exercise its powers under Article 142 of the Constitution of India,and extend the limitation period for conducting the insolvency processby three to four months for a fresh process to be initiated, subject to theconsent of the E-CoC.

D.3 Submissions for the second respondent

85. Supporting the submissions of the E-CoC, Mr Nakul Dewan,learned Senior Counsel, has appeared on behalf of the E-RP. He hassubmitted that:

(i) Upon the approval of a Resolution Plan by the CoC, aconcluded contract comes into existence between theResolution Applicant and CoC. Any withdrawal of theResolution Plan would violate the concluded contract;

(ii) In the present case, Clauses 1.9.3 and 1.9.5, give the right tothe E-CoC to invoke the PBG submitted by Ebix if it attemptsto renege from its contractual obligation to implement theResolution Plan;

(iii) The withdrawal would also be in violation of the objective ofthe IBC, as noted by this Court in Swiss Ribbons (supra),which is to ensure the revival and continuation of the CorporateDebtor. The withdrawal of the Resolution Plan at a belatedstage, would lead to the Corporate Debtor going intoliquidation;

(iv) The withdrawal of a Resolution Plan after its approval by theCoC is not contemplated by:

(a) The UNCITRAL Guide, according to which the role ofjudicial authorities is limited to approving the ResolutionPlan after ensuring that it was approved by the CoCproperly. It does not envisage that the role of the judicialauthorities would extend to questioning the commercialwisdom of the CoC, much less allow for the withdrawalof the Resolution Plan at the behest of the ResolutionApplicant; (b)The BLRC Report: (1) notes that the UNCITRAL Guidewas used as a benchmark by Parliament while enacting A

B

C

D

E

F

G

H

the IBC; (2) opined that the CoC should be the drivingforce behind the resolution of the Corporate Debtor; and(3) does not discuss the withdrawal of a Resolution Plan; A

(c) The UK Act does not allow for the withdrawal of aResolution Plan and limits the grounds of challenge. InBSingapore, the Singapore Act allows challenges to theResolution Plan, without envisaging withdrawal; (d)The Resolution Plan is a contract executed under theaegis of the IBC and hence the statute must beinterpreted so as to further its objectives. Reliance forCthis proposition is placed on the following Englishdecisions: (1) Allied Domecq (Holdings) Ltd v. AlliedDomecq First Pension Trust Ltd[40]; (2) ReinwoodLtd v. L Brown & Sons Ltd[41]; (3) Doleman v. Shaw[42];and (4) Standard Life Assurance Ltd v. OakDedicated Ltd[43]; and D

(e) If the Parliament while enacting the IBC intended topermit the withdrawal of the Resolution Plan after itsapproval by the CoC or NCLT, it would have providedfor such an eventuality. Section 12A was inserted byamendment for situations involving a withdrawal fromEthe CIRP. On the contrary, Section 74 provides forpenalties in case the Resolution Applicant does notcomply with the Resolution Plan;

(v) Ebix’s argument, that the RFRP which provides that theResolution Plan must be approved within six months wouldFalso include its approval by the Adjudicating Authority, iscontrary to the IBC since the parties, through an agreement,cannot impose a restriction/condition on a judicial authority;

(vi) In any case, Ebix has actively pursued the Resolution Planeven after the period of six months by communicating withGthe E-CoC/E-RP, arguing in its favor in the ApprovalApplication and by extending the EMD. The First Withdrawal 40 [2008] Pens. L.R. 425, paras 24 and 3841 [2008] 1 W.L.R. 696, paras 5 and 1142 [2009] Bus. L.R. 1175, paras 40 and 56H43 [2008] EWHC 222 (Comm), para 16

Application was filed only on 5 July 2019, after the expiry ofnearly one year from the expiry of the period of six monthson 19 August 2018; A

(vii) The investigations by the SFIO and CBI were initiated afterthe filing of the Approval Application before the NCLT. Sincethe E-RP was not aware of any discrepancies or illegalitiesBcommitted by the former management of Educomp,information about such activities could not have been providedto intending Resolution Applicants under Section 29 of theIBC. Section 29 only envisages that the RP will provideinformation to prospective Resolution Applicants on a best-Ceffort basis;

(viii) Ebix is a professional corporate entity, and through theexpress provisions of its own Resolution Plan, has statedthat it has significant previous experience in the revival ofstressed assets. Before submitting its Resolution Plan forEducomp, Ebix was provided access to the Virtual Data Roomby the E-RP and conducted its due diligence. Hence, it shouldnot be allowed to seek a withdrawal, by arguing that certainfacts were not within its knowledge; and D

(ix) In view of the decision of this court in NagabhushanammalEv. C Chandikeswaralingam[44], the Third WithdrawalApplication was barred by the principles of res judicata sinceit sought the same prayer which was raised in the FirstWithdrawal Application, and rejected by the NCLT in its orderdated 10 July 2019.

F

E Submissions of counsel in the Kundan Care Appeal E.1 Submissions for the appellant

86. Mr Ramji Srinivasan, learned Senior Counsel appearing onbehalf of Kundan Care, has urged the following submissions:

(i) The IBC vests the Adjudicating Authority with inherentpowers to direct withdrawal:

G

(a) Section 60(5)(c) of the IBC vests the AdjudicatingAuthority with wide powers and jurisdiction to “entertain 406SUPREME COURT REPORTS

Aand dispose of any question of law or facts, arising outof or in relation to” the CIRP. Rule 11 of the NCLTRules 2016 also endows the NCLT with inherent powers.This Court, in Gujarat Urja (supra), has held thatdisputes arising in relation to insolvency can beadjudicated under Section 60(5)(c). Accordingly, theBdismissal of Kundan Care’s application on “lack ofjurisdiction” is impermissible. Declining to go into meritsof its application amounts to an impermissible refusal toexercise jurisdiction, as noted by this Court in NationalThermal Power Corporation Ltd. v. SiemensCAtkeingesellschaft[45]; A

A

(b) The NCLT erred in rejecting Kundan Care’s contentionby confining its jurisdiction to Section 31(1) of the IBCwhich specifically deals with approval or rejection ofResolution Plans; D

(c) The NCLAT incorrectly proceeded on the assumptionthat its powers in disposing off Kundan Care’s applicationseeking withdrawal were circumscribed by Section 61(3)of the IBC, which concerns appeals against approval ofa Resolution Plan. Kundan Care sought to invokejurisdiction under Section 61(1) of the IBC whichprovides a right of appeal against any order of the NCLT; E

(d) The facts and circumstances, on the basis of which the‘feasibility and viability’ of the Resolution Plan wereapproved by the A-CoC in its commercial wisdom, haveFchanged. Since the edifice of the A-CoC’s satisfactionhad altered, the NCLT has power to look into the factswhich warrant withdrawal or modification of theResolution Plan; (e)The legislative background of Section 31 of the IBCdoes not contemplate circumstances that could arise aftersubmission of the Resolution Plan to the AdjudicatingAuthority. The UNCITRAL Guide and the BLRC Reportplace the viability of the Corporate Debtor at the heartof the insolvency process. The CIRP mandates interests G

H45 AIR 2007 SC 1491, para 5

of stakeholders to be better preserved by reorganizationthan liquidation. The BLRC Report was relied upon bythis Court in K Sashidhar (supra) to propound theprinciple of “commercial wisdom of the CoC” whichthe Adjudicating Authority cannot interfere with as thecreditors, as the loss-making party in the insolvency, arebest placed to determine the terms of the resolution.However, this principle does not touch upon instanceswhere there is a conflict between the CoC and theResolution Applicant where the latter will prima faciesuffer a loss. The Resolution Applicant has no stake inthe process until their Plan is approved by the NCLTand the probability of a complete loss, prior to theapproval of the Plan, is justiciable; (f)The IBC contemplates strict timelines, and therefore didnot envisage a scenario of withdrawal, prior to approvalof 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 KundanCare’s Plan remaining pending before the NCLT forover a year, resulting in unviability and losses. Therefore,Section 31 cannot be asserted while adjudicating a pleafor withdrawal or modification of a plan due tointervening factors having a material adverse effect inthis case; (g)Kundan Care’s Resolution Plan was contingent on thecontinuance of the PPA with GUVNL. If thecontingency does not arise, the Plan would becomeimpossible. This Plan was accepted by the A-CoC onthis contingency. Therefore, disabling withdrawals ormodifications would in fact violate the commercialwisdom of the A-CoC; (h)The Resolution Plan has become unviable and impossibleto implement. If mandatorily implemented, Astonfield isbound to suffer losses and eventually declare itselfinsolvent. These events hinder its effectiveimplementation and warrant the Plan’s rejection by theA-CoC since the first proviso of Section 31(1), read with A

B

C

D

E

F

G

H

408SUPREME COURT REPORTS

Sub-section (2)(d) warrants a determination by theAdjudicating Authority of the Resolution Plan’s effectiveimplementation. The determination by the AdjudicatingAuthority under Section 31(1) cannot be equated to thatof a rubberstamp where a holistic analysis is precluded; A

B(i)BLRC’s Interim Report of February 2015 mentions that‘viability’ is determined by providing that the cost offinancial arrangement (resolution amount invested by theResolution Application) should be lower than the NetPresent Value of future cash flows of the CorporateDebtor. In Kundan Care’s calculation, the computed NetCPresent Value for future cash flow of Astonfielddemonstrates loss and a potential repeated CIRP; and

(j) The proposition that a Resolution Plan approved by theCoC cannot be withdrawn or modified under anycircumstance, no matter the extent of impossibility orDunviability that may have arisen subsequently, is seriouslyflawed and is likely to lead to draconian and absurdconsequences. In the event that the basis of theResolution Plan is completely eroded, a ResolutionApplicant’s failure to implement the Plan would inviteEpenal prosecution under Section 74 of the IBC and arepeated CIRP. This will discourage prospectiveResolution Applicants from coming forward with theirPlans in the future, thus defeating the very purpose andobject behind the IBC; F(ii)There is no concluded and binding contract between theResolution Applicant and the CoC, prior to approval by theAdjudicating Authority:

(a) There is no concluded contract between the ResolutionApplicant and the CoC until the NCLT approves of theGsame. Section 7 of the Contract Act requires theacceptance of offer to be absolute, unconditional andunqualified. Clauses 1.1.9, 1.2, 1.9.4 and 2.2.6 of theRFRP record the fact that the Plan would be bindingonly after the approval of the Adjudicating Authority; H

(b) The RFRP is in the nature of an invitation to offer.Kundan Care’s Resolution Plan is an offer that is madein pursuance of the RFRP. A contract is concluded andbecomes binding between the parties, only upon thecommunication of its acceptance under Regulation 39(5)of the CIRP Regulation, after the approval of theAdjudicating Authority under Section 31 of the IBC. Itwould 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 anoffer prior to acceptance is a settled principle in contractlaw and the Adjudicating Authority can give effect tothis under Section 60(5) of the IBC; (d)Arguendo, if there is a concluded contract, it has becomevoid under Sections 32 and 35 of the Contract Act.Clause 1.8.3 of the RFRP provided that the Plan mustbe valid for not less than six months. On thisrepresentation, Kundan Care prepared financialprojections on the assumption that they would take overthe project on 1 January 2020 and make it operationalby 1 April 2020. The projections were based on thecontinuation of GUVNL’s PPA with Astonfield till 2037.Kundan Care even furnished revised projections basedon the assumption that they would be able to take overthe project by 30 September 2020 and make it operationalby 1 January 2021. Owing to this delay, Kundan Carehad noted that its original projections for the year 2038went from a cumulative profit of Rs 886.53 lakhs to acumulative loss of Rs 760.71 lakhs. The A-RP’sstatement was recorded by the NCLT on 20 February2020 that Astonfield is incurring a daily loss of Rs 5lakhs. This takes the cumulative loss of Astonfield to Rs1647.24 lakhs; (e)Sl.No. 5.1 of Kundan Care’s Resolution Plan also clearlystated that they would be at liberty to withdraw theResolution Plan in the event that there is any change inthe information provided in the IM or new information isavailable, which constitutes a ‘material adverse change’.

A

B

C

D

E

F

G

H

A

B

C

D

E

F

G

H

Kundan Care contends that this was specificallyintroduced due to GUVNL’s attempts to terminate thePPA. The A-CoC was not obligated to accept thisprovision in the Plan, but since it has, the provision mustbe enforced;

(f) Withdrawal was necessitated because of uncertaintyover the continuation of the sole contract of Astonfield,deterioration of the assets of Astonfield owing to thefloods in Gujarat, repudiation of Astonfield’s insuranceclaim due to the alleged failure of the A-RP to providesupporting documents and misrepresentation in respectof trade receivables towards non-availing the benefit ofaccelerated depreciation; and (g)Kundan Care had also demonstrated good faith since itsought to withdraw the Resolution Plan on 17 December2019, soon after GUVNL Appeal was listed before thisCourt. This interim application for withdrawal was filedwithin a month of the A-RP submitting the plan to theAdjudicating Authority. The NCLAT erred in noting thatthis was a ploy on behalf of Kundan Care to frustratethe CIRP after pushing out all rivals during the biddingprocess;

(iii) Alternatively, the CoC-approved Resolution Plan is acontingent contract under Section 32 of the IndianContract Act:

(a) The contract has become void since the contingencyof certainty of PPA with GUVNL within a specifiedtime through approval of the NCLT has becomeimpossible; (b)GUVNL’s Appeal against the continuation of thePPA, resolved by this Court in Gujarat Urja(supra), compounded by the COVID-19 pandemicand the lockdown, is primarily responsible for thedelay in the conclusion of the CIRP. The delay, asof 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 haveconsidered the alternative prayer of permission tore-negotiate the financial proposal with the CIRP; A

(c) The A-CoC’s approval through voting constitutes‘provisional acceptance of offer’, as was heldanalogously by this Court in Haridwar Singh v.Bagun Sumbrui[46]which held that the contractwas not concluded in the absence of theconfirmation by the Government of the conditionalacceptance by the Divisional Forest Officer. Astatutory reading of Resolution Plans as contingentcontracts under Section 7 and 32 of the ContractAct would align with the intention of the IBC inattracting investors to make offers as conditionalacceptance of the Plan, until it becomes bindingupon approval under Section 31(1) of the IBC; and B

DE

(d) Only section 31(1) of the IBC makes the ResolutionPlan binding on all stakeholders, including theResolution Applicant and the CoC. This view isbolstered by the fact that criminal sanctions fornon-implementation on a Resolution Applicant underSection 74(2) of the IBC are applicable only afterEapproval of the Resolution Plan under Section 31(1).Regulation 36-A(7)(f) of the CIRP Regulations alsostates that the refundable deposit can be forfeitedonly in case of discovery of any false informationor record by the prospective Resolution Applicant.FRegulation 36-B(4A) also states that the non-refundable deposit shall be forfeited only on failureto perform after approval of the Plan under Section31 of the IBC. The impugned judgement’s effectis to make it binding prior to the AdjudicatingAuthority’s approval which does violence to theGunambiguous language of S.31(1). This is furthersupported by the provisions of the IBC as noted bythis Court in ArcelorMittal India Private 412SUPREME COURT REPORTS

ALimited v. Satish Kumar Gupta[47], thatdisapproval by the CoC of a Plan on the groundsof Section 29A of the IBC is still appealable by theResolution Applicant before the NCLT, andtherefore an approved Plan by CoC can still bereplaced by another Plan which has been able toBsatisfy the criteria under section 29A before theNCLT. In other words, a Plan approved by theCoC does not result in a concluded contract becauseit is replaceable by another party.

A

87. In the course of the final stage of the hearings, Kundan CareCsubmitted that it had mutually negotiated a settlement with A-RP/A-CoC and requested the exercise of this Court’s powers under Article142 of the Constitution of India for a one-time relief of modification,which would enable them to arrive at a mutually acceptable modificationto the Resolution Plan.DE. 2 Submissions for the first respondent

88. Mr Nakul Dewan, learned Senior Counsel appeared on behalfof the A-RP in the Kundan Care Appeal. He has also appeared on behalfof the E-RP in the Ebix Appeal, both being collectively disposed of bythis judgement. He has made the following submissions, in addition toEthe arguments recorded above in the Ebix Appeal:

(i) There is no direct provision with respect to withdrawal of aResolution Plan under the IBC by a Resolution Applicant,once approved by the CoC. Consequently, the Adjudicatingor Appellate Authority has no jurisdiction to directFwithdrawals or modification of Resolution Plans;

(ii) Section 12 of the IBC provides for a time bound period of180 days extendable up to 330 days for the completion ofthe CIRP. Permitting the Resolution Applicant to withdrawthe Resolution Plan after the approval of the CoC sets atGnaught the entire time period subsumed in negotiating andvoting upon a Resolution Plan;

(iii) Kundan Care was permitted to submit its Resolution Planin spite of a failure to submit an EOI in time. Kundan Care was aware of the pending litigation regarding thecontinuance of the PPA with GUVNL and had negotiatedwith the A-CoC on that basis. Yet, Kundan Care filed anapplication to withdraw its Plan within a month of itsapproval and filing before the Adjudicating Authority. Theplea of withdrawal is an opportunistic tactic for re-negotiation; A

B

(iv) Clause 1.8.4 of the RFRP stated that a submitted ResolutionPlan shall be irrevocable. The format of the cover letterannexed to the RFRP also makes statements on the bindingeffect of the submission and its irrevocability. The LOI issuedCby Kundan Care also states that the Resolution Applicantwill not be permitted to withdraw;

(v) Clause 1.6.2 of the RFRP explicitly stated that any‘Condition Precedents’ to the Plan had to be set out, for theCoC to specifically consider. Any walk-away conditions alsohad to be conspicuously set out with a heading, and under aconsolidated paragraph. Sl. No.5.1 of the Resolution Planwas not set out in this format, which clearly evinces that itis being deployed as an afterthought to evade theconsequences of a submitted Resolution Plan. In any event,none of the claims of Kundan Care constitute a materialadverse change that they did not account for, after perusingthe IM; D

E

(vi) Sl.No. 5.1 of Kundan Care’s Resolution Plan was notintroduced as a condition precedent to the Resolution Plan.Sl.No. 12 of the Form H, that is required to be mandatorilysubmitted by the RP to the Adjudicating Authority, as perRegulation 39(4) of the CIRP Regulations expresslystipulates ‘Conditionalities’ that need to be specified, forthe benefit of the Adjudicating Authority. Attempts atsubsequent modification and withdrawal are not supportedby the Resolution Plan, the RFRP or the provisions of theIBC; F

G

(vii) The CIRP costs currently stand at Rs 2.5 crore whichKundan Care had committed to paying in full. As of 26 July2021, the unpaid CIRP cost is Rs 1.66 crores which would H

probably be payable from the pending insurance claim. Atable detailing the financial health of Astonfield for the lastthree years was also annexed, to bolster the claim thatfinancial health has improved and profits can still begenerated; and A

(viii) The delay in approval of the Resolution Plan by theAdjudicating Authority is an imponderable which cannot beused to resile from a binding contract. The delay is also notattributable to the A-RP or the A-CoC.

B

E.3 Submissions for the second respondent C

89. Mr V Giri, learned Senior Counsel appearing for EXIM Bankon behalf of the A-CoC, has made the following submissions:

(i) A Resolution Plan approved by the CoC is submitted by theRP to the NCLT under Section 30(6) of the IBC. Once theNCLT is satisfied that the Resolution Plan complies withDthe requirements of Section 30(2), it grants its approval tothe Plan, which becomes binding on all the stakeholdersinvolved in the Resolution Plan. Thus, in the above schemeof things, IBC does not contemplate withdrawal ofResolution Plan once it has been approved by the CoC; E(ii)The penal provision under Section 74(3) is applicable to asuccessful Resolution Applicant as it is a stakeholder in theCIRP. The existence of a penal provision indicates that thelegislature intended to deter and discourage withdrawals ofResolution Plans; F(iii)CIRP is a time bound process of 180 days, which can befurther extended up to 330 days. If a successful ResolutionApplicant is allowed to withdraw its Resolution Plan, it willset the clock back on the time spent on receiving theResolution Plan, evaluating it under Section 30(2) of theIBC, putting it to vote before the CoC and finally obtainingGits approval from the Adjudicating Authority;

(iv) Withdrawal of the Resolution Plan at this stage would resultin the failure of the CIRP and Astonfield will go intoliquidation. IBC envisages liquidation as the last resort; H

(v) The process of issuing the RFRP and proposal of aAResolution Plan, and its subsequent approval by the CoC isstatutorily mandated. The formats of the documentsunderlying the CIRP process are also provided by the statuteand the Regulations made thereunder. There is some roomfor maneuverability provided to the parties to negotiate theBterms of the documents, however, that does not make anydifference to the statutorily prescribed nature of thedocuments; and A

(vi) The approval of the Resolution Plan under Section 30(3) ofthe IBC by the CoC creates a binding contract betweenthe CoC and the successful Resolution Applicant because:

C

(a) The proposed Resolution Plan has been approved bythe CoC and has been further submitted before theNCLT by the RP; (b) A Resolution Applicant is aware of the conditionsstipulated under the IM and conducts its own duediligence. It is given an opportunity to raise queries onthe information that is provided in the IM. Thus, oncethe Resolution Applicant decides to submit a ResolutionPlan and a substantial time and effort is spent by theRP and the CoC in the process of finalizing andapproving a Resolution Plan, it cannot simply withdrawthe Resolution Plan without being subjected tonecessary consequences; D

E

(c) The approval of the plan by the CoC indicates the adidem between the parties to enter into a contract. Theresulting contract is conditional only upon the approvalby the NCLT; F

(d) Pursuant to the approval of the Resolution Plan by theCoC, the CoC issues an unconditional LOI to thesuccessful Resolution Applicant stating that it has beenselected as the successful Resolution Applicant subjectto the approval of the NCLT. The successful ResolutionApplicant accepts the LOI and submits a PBG. Thesuccessful Resolution Applicant is required to state thatthe LOI is “accepted unconditionally”. It is only after G

H

416SUPREME COURT REPORTS

the LOI is unconditionally accepted by the successfulResolution Applicant and the PBG is furnished, thatthe RP makes an application to the NCLT for approvalof the Resolution Plan; and A

(e) Contracting parties cannot renege on their promise toBperform the contract without facing any consequences.

F Submissions of counsel in the Seroco Appeal F.1 Submissions for the appellant

90. Mr Tirth Nayak has made the following submissions on behalfof Seroco:C

(i) The Resolution Plan was submitted on the basis ofinformation that was provided under the IM issued by theArya-RP in August 2018. Over 18 months have passed sincethe Resolution Plan was submitted. The inordinate delay inDthe approval of the Resolution Plan by the NCLT, alongwith the outbreak of COVID-19 pandemic, has substantiallyaffected the valuation of Arya Filaments, apart fromimpacting its business operations and financial position.Thus, Seroco is entitled to re-evaluate and modify theResolution Plan based on such considerations; E

(ii) The delay cannot be attributed to Seroco;

(iii) The value of assets and the working capital funds of AryaFilaments have plummeted due to the losses that haveoccurred in the past eighteen months rendering theimplementation of the current Resolution Plan impossible,Fthereby making it necessary to modify the Plan to suit thecurrent circumstances;

(iv) Seroco was not made aware of the updated financial statusof Arya Filaments. It will be unjust if it is made to abide bya Resolution Plan that was submitted eighteen months agoGbased on the IM that was issued over twenty-four monthsago;

(v) Clause 5.3.2. of the BLRC Report provides that the “RPmust provide the most updated information about the entityas accurate as is reasonably possible to this range of solution H

providers. In order to do this, the RP has to be able to verifyclaims to liabilities as well as the assets disclosed by theentity. The RP has the power to appoint whatever outsideresources that she may require in order to carry out thistask including accounting and consulting services…”.Seroco cannot be expected to make a huge investment inArya Filaments without being given information on its currentfinancial status; A

B

(vi) Seroco is genuinely interested in investing in Arya Filaments,however, due to the change in circumstances, it is incapableof paying the entire consideration as was stipulated underCthe current Resolution Plan; and

(vii) A Resolution Plan is an offer under Section 2(a) of theContract Act. The Resolution Applicant becomes bound bythe offer only if the Resolution Plan is approved by theNCLT. At present, the Plan is still under the considerationof the NCLT. Thus, Seroco can withdraw or seekmodification of the Plan.

D

F.2 Submissions for the second and third respondents

91. Mr Jayant Mehta appearing on behalf of the Arya-CoC,consisting of Kotak and UBIL, has supported the arguments of the E-CoC and A-CoC. He has urged the following additional submissions:

E

(i) There is no scope for modification of a Resolution Plan,once it has been submitted by the RP to the AdjudicatingAuthority, after voting by the CoC. The only ground soughtby Seroco for modification of the submitted Resolution Planhere is the exigency that has arisen due to the pandemic.This is evinced from the fact that the application formodification was made within 2 months of the outbreak ofthe pandemic; F

(ii) The Resolution Plan of Seroco was approved by the Arya-CoC on 10 May 2019 and submitted to the AdjudicatingAuthority for approval on 14 May 2019. When Seroco filedtheir application before the NCLT for modification of theResolution Plan, Kotak and UBIL, by their emails dated 13July 2020 and 17 July 2020 respectively, had informed theArya-RP that they record their disapproval for any such G

H

attempts at modification of the Resolution Plan which soughtto reduce the resolution amount payable to secured creditorsby Rs 1.5 crore; A

(iii) There has been no material change in the assets or valuationof Arya Filaments. Seventy-five per cent of the funds wereBto be generated by Seroco by the sale of the Arya Filament’sassets; and

(iv) The following authorities were cited to elucidate on thepower of the Adjudicating Authority, which is tightlycircumscribed by the IBC, and designed to uphold theCcommercial wisdom of the CoC: K Sashidhar[48](supra),Essar Steel[49] (supra), Committee of Creditors AMTEKAuto Limited Through Corporation Bank v. DinkarT Venkatasubramanian & Ors.[50], Kalparaj Dharamshiv. Kotak Investment Advisors Ltd.[51], JaypeeKensington Boulevard Apartments WelfareDAssociation & Ors. v. NBCC (India) Ltd. & Ors.[52]and Ghanashyam Mishra and Sons Private Limitedthrough the Authorized Signatory v. Edelweiss AssetReconstruction Company Limited through theDirector & Ors.[53] An appeal under Section 61(3) of IBC,Eis therefore not maintainable for a Resolution Applicantseeking modification of its approved Resolution Plan.

The Adjudicating Authority in allowing any such modification,cannot do indirectly, what the statute does not permit it to do directly.

92. The rival submissions in the three appeals shall now beFconsidered.

G Purpose of a law on insolvency

93. An examination of the raison d’etre of the IBC mustnecessarily precede its analytical interpretation. A purposive interpretationof the statute, as is argued by the contesting parties, cannot be evinced G

48 Paras 52-58, 62, 68, 6549 Paras 65, 67, 69 and 8850 (2021) 4 SCC 45751 2021 SCC OnLine SC 204, para 14352 2020 SCC OnLine SC 1192, para 170H53 2021 SCC OnLine SC 313, paras 55-57, 67, 77

without examining the aims and objectives of the legislation. The IBCwas introduced as a water-shed moment for insolvency law in India thatconsolidated processes under several disparate statutes such as the 2013Act, SICA, SARFAESI, Recovery of Debts Act, Presidency TownsInsolvency Act 1909 and the Provincial Insolvency Act 1920, into a singlecode. A comprehensive and time-bound framework was introduced withsmooth transitions between reorganization and liquidation, with an aimto inter alia maximize the value of assets of all persons and balance theinterest of all stakeholders[54].

94. Before we analyse the framework of the statute, theUNCITRAL Guide, which was instructive for the Indian experience ondrafting the IBC[55], provides some critical guidance on what an insolvencylaw represents. Notably, the UNCITRAL Guide explicitly refrains fromprescribing mandates for the specific choices (procedural or substantive)that an insolvency law should provide. Instead, it clarifies that eachjurisdiction evolves its own insolvency regime based on its social, politicaland economic goals. It notes[56]:

“15. Since an insolvency regime cannot fully protect the interestsof all parties, some of the key policy choices to be made whendesigning an insolvency law relate to defining the broad goals ofthe law (rescuing businesses in financial difficulty, protectingemployment, protecting the interests of creditors, encouraging thedevelopment of an entrepreneurial class) and achieving the desiredbalance between the specific objectives identified above.Insolvency laws achieve that balance by reapportioning therisks of insolvency in a way that suits a State’s economic,social and political goals. As such, an insolvency law canhave widespread effects in the broader economy…..

[…]

17. There is no universal solution to the design of aninsolvency law because States vary significantly in their 54 Statement of Objects and Reasons, IBC, 2016

55 3.3.1, The report of the Bankruptcy Law Reforms Committee Volume I: Rationaleand Design (November 2015), available at < https://ibbi.gov.in/BLRCReport Vol1_04112015.pdf > accessed on 20 August 2021

56 Pgs 14-16 of the UNCITRAL Legislative Guide to an Insolvency Law, available at <https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/05-80722_ebook.pdf > accessed on 20 August 2021

A

B

C

D

E

F

G

H

Aneeds, as do their laws on other issues of key importanceto insolvency, such as security interests, property andcontract rights, remedies and enforcement procedures.Although there may be no universal solution, most insolvency lawsaddress the range of issues raised by the key objectives discussedabove, albeit with different emphasis and focus. Some laws favourBstronger recognition and enforcement of creditor rights andcommercial bargains in insolvency and give creditors more controlover the conduct of insolvency proceedings than the debtor(sometimes referred to as “creditor-friendly” regimes). Other lawslean towards giving the debtor more control over the proceedingsC(referred to as “debtor-friendly” regimes), while yet others seekto strike a balance in the middle…..” (emphasis supplied)

95. With this legislative guidance from international law, the BLRCwas commissioned by the Government of India for submitting a reportwith recommendations of reforms for the existing regime and a draft ofDthe proposed Insolvency and Bankruptcy Code. In November 2015, theBLRC Report published its report in two volumes, with the first volume[57]delineating the rationale and the second volume providing the design ofthe proposed legislation.

96. The BLRC report noted that the insolvency regime was dueEfor a major overhaul as the recovery rates in India were among thelowest in the world[58] and a revamped, coherent code was envisagedwith speed and predictability woven into its underlying design to ensurehigher recovery rates and immediate liquidation, in the event of a failedresolution. As noted by this Court in Essar Steel (supra), the insolvencyregime in India was overhauled after the provisions of SICA, SARFAESIFand Recovery of Debts Act, in spite of providing for expeditiousdetermination, were used by defaulting companies to enjoy extendedmoratorium periods and failure to enforce timelines meant legalproceedings would drag on for years and not result in recovery of stressedassets[59]. Similarly, in its observation on “Speed is of Essence”, the BLRCGreport elaborated the commercial purpose of a revamped insolvencyregime in the following terms[60]:

57 supra note 55

58 Executive Summary, BLRC Report, supra note 55

59 Para 118, Essar Steel (supra)

H60 Executive Summary, BLRC Report, supra note 55

“Speed is of essence for the working of the bankruptcy code, fortwo reasons. First, while the “calm period” can help keep anorganisation afloat, without the full clarity of ownership and control,significant decisions cannot be made. Without effective leadership,the firm will tend to atrophy and fail. The longer the delay, themore likely it is that liquidation will be the only answer. Second,the liquidation value tends to go down with time as many assetssuffer from a high economic rate of depreciation.

From the viewpoint of creditors, a good realisation can generallybe obtained if the firm is sold as a going concern. Hence, whendelays induce liquidation, there is value destruction. Further, evenin liquidation, the realisation is lower when there are delays. Hence,delays cause value destruction. Thus, achieving a high recoveryrate is primarily about identifying and combating the sources ofdelay.”

In identifying the sources of delay, adjudicating mechanisms wereidentified as one of the two important sources of delay which need to beequipped with the right resources. In order to respond to the rapid changesin the economy, the BLRC report recommended the formation of anIBBI which would function as a regulator and formulate regulations thatdynamically detail the procedural norms of the working of the IBC withthe necessary immediacy. It is also important for this Court, as aconstitutional authority which determines questions of law concerningthe IBC framework, to note that a rapid liquidation may sometimes bepreferable to a protracted CIRP. This sentiment was stressed in theBLRC Report, in its concluding statement in the Executive Summary,which noted:

“Conclusion

The failure of some business plans is integral to the process of themarket economy. When business failure takes place, the bestoutcome for society is to have a rapid re-negotiation between thefinanciers, to finance the going concern using a new arrangementof liabilities and with a new management team. If this cannot bedone, the best outcome for society is a rapid liquidation. Whensuch arrangements can be put into place, the market process ofcreative destruction will work smoothly, with greater competitivevigor and greater competition.

AB

C

D

E

F

G

H

AIndia is in the process of laying the foundations of a mature marketeconomy. This involves well drafted modern laws, that replacethe laws of the preceding 100 years, and high performanceorganisations which enforce these new laws. The Committee hasendeavored to provide one critical building block of this process,with a modern insolvency and bankruptcy code, and the design ofBassociated institutional infrastructure which reduces delays andtransaction costs.

We hope that the implementation of this report will increase GDPgrowth in India by fostering the emergence of a modern creditmarket, and particularly the corporate bond market. GDP growthCwill accelerate when more credit is available to new firms includingfirms which lack tangible capital. While many other things needto be done in achieving a sound system of finance and firms, thisis one critical building block of that edifice.”

97. A reading together of the UNCITRAL Guide and the BLRCDReport clarifies, in no uncertain terms, that the procedure designed forthe insolvency process is critical for allocating economic coordinationbetween the parties who partake in, or are bound by the process. Thisprocedure produces substantive rights and obligations. For instance, thecomposition of the CoC, the method and percentage of its voting, theEtimelines for CIRP, the obligation on the RP to file specific forms afterevery stage of the process and the obligation to explain to the AdjudicatingAuthority reasons for any deviations from the timeline while submittinga Resolution Plan, and other such procedural requirements create amechanism which tightly structures the conduct of all participants in theinsolvency process. This process invariably has an impact on the conductFof the Resolution Applicant who participates in the process and consentsto be bound by the RFRP and the broader insolvency framework. Ananalysis of the framework of the statute and regulations provides aninsight into the dynamic and comprehensive nature of the statute.Upholding the procedural design and sanctity of the process is critical toGits functioning. The interpretative task of the Adjudicating Authority,Appellate Authority, and even this Court, must be cognizant of, and alliedwith that objective. The UNCITRAL Guide has echoed this position bynoting the interplay between the procedural design of the insolvency lawand the corresponding institutional infrastructure by observing[61]:H61 page 20, UNCITRAL Guide, supra note 56

“27. While the institutional framework is not discussed in any detailin the Legislative Guide, some of the issues are touched uponbelow. Notwithstanding the variety of substantive issues that mustbe resolved, insolvency laws are highly procedural in nature. Thedesign of the procedural rules plays a critical role in determininghow roles are to be allocated between the various participants, inparticular in terms of decision-making. To the extent that theinsolvency law places considerable responsibility upon theinstitutional infrastructure to make key decisions, it is essentialthat that infrastructure be sufficiently developed to enable therequired decisions to be made.”

98. Any claim seeking an exercise of the Adjudicating Authority’sresiduary powers under Section 60(5)(c) of the IBC, the NCLT’s inherentpowers under Rule 11 of the NCLT Rules 2016 or even the powers ofthis Court under Article 142 of the Constitution must be closely scrutinizedfor broader compliance with the insolvency framework and its underlyingobjective. The adjudicating mechanisms which have been specificallycreated by the statute, have a narrowly defined role in the process andmust be circumspect in granting reliefs that may run counter to thetimeliness and predictability that is central to the IBC. Any judicial creationof a procedural or substantive remedy that is not envisaged by the statutewould not only violate the principle of separation of powers, but also runthe risk of altering the delicate coordination that is designed by the IBCframework and have grave implications on the outcome of the CIRP,the economy of the country and the lives of the workers and other alliedparties who are statutorily bound by the impact of a resolution orliquidation of a Corporate Debtor.

H Nature of a Resolution Plan

H Nature of a Resolution Plan

99. Before we advert to whether withdrawals or modifications bysuccessful Resolution Applicants are permissible under the IBC, we mustbegin by understanding the nature of a Resolution Plan. “Resolution Plan”has been defined in Section 5(26) of the IBC in the following terms:

“(26) “resolution plan” means a plan proposed by resolutionapplicant for insolvency resolution of the corporate debtor as agoing concern in accordance with Part II; Explanation.—For the removal of doubts, it is hereby clarifiedthat a resolution plan may include provisions for the restructuring A

B

C

D

E

F

G

H

Aof the corporate debtor, including by way of merger, amalgamationand demerger;”

The Explanation to the provision was added by the Insolvencyand Bankruptcy Code (Amendment) Act 2019. Further, the term“Resolution Applicant” was substituted for “any person” by theBInsolvency and Bankruptcy Code (Amendment) Act 2018.

100. The term “Resolution Applicant” has been defined in Section5(25) of the IBC as follows:

“(25) “resolution applicant” means a person, who individually orjointly with any other person, submits a resolution plan to theCresolution professional pursuant to the invitation made under clause(h) of sub-section (2) of Section 25 or pursuant to Section 54-K,as the case may be”

101. The IBC provides a roadmap for the entire CIRP in ChapterII of Part II. This process is tightly regulated to include, inter alia,Dtimelines of the CIRP specified by Section 12, duties of the RP to provideadequate information to propose a Resolution Plan in Section 29 andrestrictions 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:

E“30. Submission of resolution plan.—(1) A resolution applicantmay submit a resolution plan along with an affidavit stating thathe is eligible under Section 29-A to the resolution professionalprepared on the basis of the information memorandum.

(2) The resolution professional shall examine each resolution planFreceived by him to confirm that each resolution plan—

(a) provides for the payment of insolvency resolution process costsin a manner specified by the Board in priority to the payment ofother debts of the corporate debtor; (b) provides for the payment of debts of operational creditors inGsuch manner as may be specified by the Board which shall not beless than—

(i) the amount to be paid to such creditors in the event of a liquidationof the corporate debtor under Section 53; or H

(ii) the amount that would have been paid to such creditors, if theamount to be distributed under the resolution plan had beendistributed in accordance with the order of priority in sub-section(1) of Section 53, whichever is higher, and provides for the payment of debts offinancial creditors, who do not vote in favour of the resolutionplan, in such manner as may be specified by the Board, whichshall not be less than the amount to be paid to such creditors inaccordance with sub-section (1) of Section 53 in the event of aliquidation of the corporate debtor.

Explanation 1.—For the removal of doubts, it is hereby clarifiedthat a distribution in accordance with the provisions of this clauseshall be fair and equitable to such creditors.

Explanation 2.—For the purposes of this clause, it is herebydeclared that on and from the date of commencement of theInsolvency and Bankruptcy Code (Amendment) Act, 2019, theprovisions of this clause shall also apply to the corporate insolvencyresolution process of a corporate debtor—

(i) where a resolution plan has not been approved or rejected bythe Adjudicating Authority;

(ii) where an appeal has been preferred under Section 61 or Section62 or such an appeal is not time barred under any provision of lawfor the time being in force; or

(iii) where a legal proceeding has been initiated in any court againstthe decision of the Adjudicating Authority in respect of a resolutionplan;

(c) provides for the management of the affairs of the corporatedebtor after approval of the resolution plan; (d) the implementation and supervision of the resolution plan; (e) does not contravene any of the provisions of the law for thetime being in force; (f) conforms to such other requirements as may be specified bythe Board.

Explanation.—For the purposes of clause (e), if any approval ofshareholders is required under the Companies Act, 2013 (18 of A

B

C

D

E

F

G

H

A

B

C

D

E

F

G

H

2013) or any other law for the time being in force for theimplementation of actions under the resolution plan, such approvalshall be deemed to have been given and it shall not be acontravention of that Act or law.

(3) The resolution professional shall present to the committee ofcreditors for its approval such resolution plans which confirm theconditions referred to in sub-section (2).

(4) The committee of creditors may approve a resolution plan bya vote of not less than sixty-six per cent of voting share of thefinancial creditors, after considering its feasibility and viability themanner of distribution proposed, which may take into account theorder of priority amongst creditors as laid down in sub-section (1)of Section 53, including the priority and value of the security interestof a secured creditor, and such other requirements as may bespecified by the Board:

Provided that the committee of creditors shall not approve aresolution plan, submitted before the commencement of theInsolvency and Bankruptcy Code (Amendment) Ordinance, 2017,where the resolution applicant is ineligible under Section 29-Aand may require the resolution professional to invite a freshresolution plan where no other resolution plan is available with it:

Provided further that where the resolution applicant referred to inthe first proviso is ineligible under clause (c) of Section 29-A, theresolution applicant shall be allowed by the committee of creditorssuch period, not exceeding thirty days, to make payment of overdueamounts in accordance with the proviso to clause (c) of Section29-A:

Provided also that nothing in the second proviso shall be construedas extension of period for the purposes of the proviso to sub-section (3) of Section 12, and the corporate insolvency resolutionprocess shall be completed within the period specified in that sub-section.

Provided also that the eligibility criteria in Section 29-A as amendedby the Insolvency and Bankruptcy Code (Amendment) Ordinance,2018 (Ord. 6 of 2018) shall apply to the resolution applicant whohas not submitted resolution plan as on the date of commencement

of the Insolvency and Bankruptcy Code (Amendment) Ordinance,2018.

(5) The resolution applicant may attend the meeting of thecommittee of creditors in which the resolution plan of the applicantis considered:

Provided that the resolution applicant shall not have a right to voteat the meeting of the committee of creditors unless such resolutionapplicant is also a financial creditor.

(6) The resolution professional shall submit the resolution plan asapproved by the committee of creditors to the AdjudicatingAuthority.”

Once a Resolution Applicant submits a Resolution Plan under sub-Section (1) of Section 30, the RP must assess whether it conforms withall the requirements of sub-Section (2). Having satisfied itself, the RPunder sub-Section (3) must then present those Resolution Plans to theCoC which fulfill the criteria under sub-Section (2). The CoC will thenproceed to decide on the approval of the Resolution Plan, with a majorityvote of sixty-six percent, after satisfying itself that the requirementsunder sub-Section (4) have been met, including testing the ResolutionPlan for its feasibility and viability. A Resolution Applicant may attendthis meeting of the CoC under sub-Section (5), but it does not have aright to vote unless it is also a financial creditor. The Resolution Planapproved by the CoC under sub-Section (4) is then placed by the RPbefore the Adjudicating Authority for its approval under sub-Section (6).

102. Other than the IBC, the process is also regulated by theCIRP Regulations created under the IBC. Regulation 37 provides anillustration of the solutions which can be proposed in a Resolution Plan.Regulation 38 provides for the mandatory contents of a Resolution Plan,which are similar to the pre-conditions mentioned in Section 30(2) of theIBC. Regulation 39 provides for the process of approval of a ResolutionPlan by the CoC, and under sub-Regulation (3), the CoC has to evaluateevery Resolution Plan based on an “evaluation matrix” it has come upwith under Regulation 5(ha).

103. Having briefly taken an overview of the process, we nowunderstand that there are broadly three stages: (i) the first stage is priorto and ends with the approval of the Resolution Plan by the CoC; (ii) the A

B

C

D

E

F

G

H

Asecond stage is the interim period between the Resolution Plan’s approvalby the CoC and before its confirmation by the Adjudicating Authority;and (iii) the third stage is after the approval of the Resolution Plan by theAdjudicating Authority. In the first stage, the relationship between theparties is explicitly governed by the provisions of the IBC – such as theright of a prospective Resolution Applicant to seek the IM and RFRPBupon 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 sameholds true since Section 31(1) makes the Resolution Plan binding uponall the stakeholders and its violation will attract a penalty under Section74 of the IBC. However, what we are assessing right now is the interimCsecond stage between both of those. To understand the relationship ofthe parties therein, it becomes important to understand the exact “nature”of the Resolution Plan after it has been submitted to the AdjudicatingAuthority and before it has been approved under Section 31(1).

104. To summarize the arguments of the parties, the appellantsDhave argued that Resolution Plans are in the nature of an offer, whichbecomes binding as a concluded contract only once the AdjudicatingAuthority has approved the Resolution Plan. Section 7 of the ContractAct requires the acceptance of offer to be absolute, unconditional andunqualified. Since the approval by the CoC is effectively conditionalupon the confirmation of the Plan by the Adjudicating Authority, it cannotEbe said that there is absolute acceptance of the Resolution Plan.Alternatively, it has been argued that Resolution Plans approved by theCoC are contingent contracts, whose enforceability is conditional uponthe approval of the Adjudicating Authority in accordance with Section32 of the Contract Act. The Respondents (RPs and the CoCs) haveFargued that a concluded contract comes into being when the ResolutionPlan is approved by the CoC and a successful Resolution Applicantcannot renege from their contractual obligation to implement theResolution Plan. In furtherance of this argument, Mr Shyam Divanappearing for the E-CoC made a reference to the Specific Relief(Amendment) Act 2018, which has brought a change to the regime onGcontract enforcement in India by making specific performance the normrather than the exception.

105. The determination of the nature of the Resolution Plan wouldhelp us establish the source of the legal force of the Resolution Plan –whether it is the statute, i.e., the IBC or the law of contract. TheH

insolvency process, as governed by the IBC, does not merely structurethe conduct of all the participants in the process after finalization andapproval of a Resolution Plan by a CoC, but also the conduct stemmingfrom the very first steps of inviting prospective Resolution Applicants.The RP, with the approval of the CoC[62], invites prospective ResolutionApplicants through an RFRP. Once an unconditional EOI has beenreceived from prospective Resolution Applicants who are otherwiseeligible under Section 29A, the RP prepares an IM as per the provisionsof Section 29 which furnishes all relevant information of the CorporateDebtor to enable prospective Resolution Applicants to make an informeddecision, before proposing a Resolution Plan. As a consequence of theIBC and its regulations, prospective Resolution Applicants, who are notdisqualified under Section 29A, propose drafts of their Resolution Plans.The RP examines the Resolution Plan against the contours of Section30(2) and submits only the eligible plans to the CoC[63]. Prior to the IBBI(CIRP) (Fourth Amendment) Regulations 2020, which now requires theCoC to vote on all Plans simultaneously after recording its deliberationson the feasibility and viability of each Plan, Regulation 39(3) earlierenabled the CoC to approve a Resolution Plan with “such modificationsas it deems fit”. This meant that the prospective Resolution Applicantsand the CoC would indulge in several rounds of negotiations, within astrict time-frame, to arrive at a mutually agreeable Resolution Plan whichwas then subject to voting by the CoC. Subsequent to the voting, the RPwould submit the plan to the Adjudicating Authority along with receipt ofthe PBG and a compliance certificate in the form of Form H. Each ofthe stages detailed above correspond to several rights and obligations onall parties that are specifically created by the statute.

106. Since the interpretation of the IBBI (CIRP)(FourthAmendment) Regulations 2020 and the impact on the ResolutionApplicants and the CoC to negotiate the terms of the Resolution Plan isnot before this Court and the present appeal essentially seeks to determinethe nature of the Resolution Plan after its approval by the CoC and priorto its approval by the Adjudicating Authority, this Court will proceed todetermine of the nature of such a Plan, on the assumption of the law asit stood then, i.e., Regulation 39(3) which directed that “[t]he committeeshall evaluate the resolution plans received under sub-regulation (1) strictlyas per the evaluation matrix to identify the best resolution plan and may 62 Section 25(2)(h), IBC

63 Regulation 39(2), CIRP Regulations

ABC

DE

F

G

H

Aapprove it with such modifications as it deems fit”[64]. This power of theCoC to suggest modifications invariably entailed an element of negotiationwith the Resolution Applicants, who would make suitable revisions andre-submit their Resolution Plans. The scope of a commercial bargainwith the Resolution Applicants evinces a sense of a negotiated agreementthat is arrived between the parties, which resembles an exercise ofBcontractual freedom by the CoC and the Resolution Applicant.

107. If this court were to hold that CoC-approved Resolution Plansare indeed contracts, their provisions would still have to conform to thestatutory provisions of the IBC. However, such an interpretation wouldentail that CoC-approved Resolution Plans are at the intersection of theCIBC and the Contract Act. This would mean that certain principles ofcontract law, for example those relating to discharge, penalties, remediesand damages would become applicable to CoC-approved ResolutionPlans. For instance, in the United States, plans confirmed by courts havebeen characterized as contracts, whose breach can even give rise toDcontractual remedies. In In re Hoffinger Indus, Inc[65], a bankruptcycourt in Arkansas has held that “a confirmed plan should be enforceableand amenable to damages between contractually bound parties.” Indeed,it has been argued before us that Resolution Plans should be enforcedthrough the contractual remedy of specific performance. Further, adetermination that Resolution Plans are contracts in the period betweenEapproval by the CoC and the approval of the Adjudicating Authoritywould require us to analyse whether all elements of contract formationhave been satisfied, including the question of whether the acceptance ofthe Resolution Plan by the CoC fulfils the criteria laid down under Section7 of the Contract Act or whether the conditionality of seeking approvalFfrom the Adjudicating Authority makes the Resolution Plan a contingentcontract. Our intent of laying down the consequences of our determinationof Resolution Plans as contracts is to highlight the importance ofascertaining the nature of a CoC-approved Resolution Plan, prior to itsapproval by the Adjudicating Authority.

G108. The text of the IBC does not specify whether ResolutionPlans at the second stage of the process, i.e., in the intervening period of 64 As substituted by the Notification No. IBBI/2018-19/GN/REG031, dated 3rd July,2018 (w.e.f. 04-07-2018). Prior to this substitution, Regulation 39(3) stated “thecommittee may approve any resolution plan with such modifications as it deems fit.”H65 327 B.R. 389 (Bankr. E.D. Ark. 2005), United States Bankruptcy Court, E.D. Arkansas

submission to and approval by the Adjudicating Authority, are purecontracts. As noted previously, by specifications such as eligibility forresolution applicants, the contents of the IM and duties of the RP toprospective Resolution Applicants and statutory procedures on timelinesand voting, strictly govern the insolvency process even prior to thesubmission of the Plan to the Adjudicating Authority. The CoC, who theappellants allege is in the nature of a free contracting party, is governedby the binding principles of the statute with regard to the contents andnature of the statutory plan that it approves under Section 30(4) andeven its own composition.

109. Section 30(4) provides that the consent of all the membersof the CoC, though a unanimous vote is not required and a sixty-six percent vote is sufficient for approval of a resolution plan. The constitutionof the CoC is based on specific scenarios envisaged in the statute andaccounts for varying compositions, based on factors such as the natureand quantum of debt owed. For example, if it comprises of operationalcreditors alone, the percentage of debt owed between the operationaland financial creditors and other such variables impact voting thresholdsinter se members of the CoC. A sixty-six per cent vote of the CoC isrequired to approve a Resolution Plan. The dissenting creditors aredeemed to have given their approval and are bound by the decision ofthe majority of the CoC. The dissenting creditors are bound as a resultof the statutory provision and not because they have actually consentedto be parties to such an arrangement. Other elements governing theResolution Plan indicate that the entire process from initiation and leadingup to its acceptance by the CoC takes place within the framework ofthe IBC. In addition, the IBC provides penalties for non-compliancewith the Resolution Plan after its approval under Section 31 and forfeitureof the PBG for failing to implement the Resolution Plan or contributingto the failure of its implementation. The violation of the terms of theResolution Plan does not give rise to a claim of damages, rather it leadsto prosecution and imposition of punishment under Section 74 of theIBC. On the contrary, a CoC’s withdrawal of the CIRP under Section12A is coupled with a requirement of payment of CIRP costs, but nodamages are statutorily payable to the Resolution Applicant, irrespectiveof the stage of the withdrawal.

110. The CoC even with the requisite majority, while approvingthe Resolution Plan must consider the feasibility and viability of the Plan AB

C

D

E

F

G

H

Aand the manner of distribution proposed, which may take into accountthe order of priority amongst creditors as laid down in sub-section (1) ofsection 53 of the IBC. The CoC cannot approve a Resolution Planproposed by an applicant barred under Section 29A of the IBC. Regulation37 and 38 of the CIRP Regulations govern the contents of a ResolutionPlan. Furthermore, a Resolution Plan, if in compliance with the mandateBof the IBC, cannot be rejected by the Adjudicating Authority and becomesbinding on its approval upon all stakeholders – including the Central andState Government, local authorities to whom statutory dues are owed,operational creditors who were not a part of the CoC and the workforceof the Corporate Debtor who would now be governed by a newCmanagement. Such features of a Resolution Plan, where a statuteextensively governs the form, mode, manner and effect of approvaldistinguishes it from a traditional contract, specifically in its ability tobind those who have not consented to it. In the pure contractual realm,an agreement binds parties who are privy to the contract. In the contextof a resolution Plan governed by the IBC, the element of privity becomesDinapplicable once the Adjudicating Authority confirms the Resolution Planunder Section 31(1) and declares it to be binding on all stakeholders,who are not a part of the negotiation stage or parties to the ResolutionPlan. In fact, a commentator has noted that the purpose of bankruptcylaw is to actually solve a specific ‘contracting failure’ that accompaniesEfinancial distress. Such a contracting failure arises because “financialdistress involves too many parties with strategic bargaining incentivesand too many contingencies for the firm and its creditors to define a setof rules of every scenario.” Thus, insolvency law recognizes that partiescan take benefit of such ‘incomplete contract’ to hold each other up fortheir individual gain. In an attempt to solve the issue of incompletenessFand the hold-up threat, the insolvency law provides procedural protectionsi.e., “the law puts in place guardrails that give the parties room to bargainwhile keeping them from taking position that veer toward extreme holdup”[66].

111. It may be useful to refer to how this Court has analyzedGinstruments that are analogous to a Resolution Plan. In SK Gupta v. KPJain[67], this Court while discussing the nature of compromise or 66 Anthony J. Casey, ‘Chapter 11’s Renegotiation Framework and the Purpose ofCorporate Bankruptcy’, Columbia Law Review Vol 120 No 7, available at <https://columbialawreview.org/content/chapter-11s-renegotiation-framework-and-the-purpose-of-corporate-bankruptcy/> accessed on 5 September 2021H67 (1979) 3 SCC 54

arrangements entered between a company and its creditors or membersobserved that such a compromise or arrangement once sanctioned bythe court is not merely an agreement between parties because it bindseven dissenting creditors or members through statutory force. This Courtmade the following observations:

“12…The scheme when sanctioned does not merely operateas an agreement between the parties but has statutory forceand is binding not only on the company but even dissenting creditorsor members, as the case may be. The effect of the sanctionedscheme is “to supply by recourse to the procedure therebyprescribed the absence of that individual agreement by everymember of the class to be bound by the scheme which wouldotherwise be necessary to give it validity” [see J.K. (Bombay)Pvt. Ltd. v. New Kaiser-i-Hind Spg. & Wvg. Co. Ltd. [AIR 1970SC 1041 : (1969) 2 SCR 866, 891 : (1970) 40 Com Cas 689] ]..”

112. While the above observations were made in the context of ascheme that has been sanctioned by the Court, the Resolution Plan evenprior to the approval of the Adjudicating Authority is binding inter se theCoC and the successful Resolution Applicant. The Resolution Plan cannotbe construed purely as a ‘contract’ governed by the Contract Act, in theperiod intervening its acceptance by the CoC and the approval of theAdjudicating Authority. Even at that stage, its binding effects are producedby 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 allthe remaining creditors”[68]. The BLRC Report also mentions that, “theRP submits a binding agreement to the Adjudicator before the defaultmaximum date”[69]. We have further discussed the statutory scheme ofthe IBC in Sections I and J of this judgement to establish that a ResolutionPlan is binding inter se the CoC and the successful Resolution Applicant.Thus, the ability of the Resolution Plan to bind those who have notconsented to it, by way a statutory procedure, indicates that it is not atypical contract.

113. The BLRC Report, which furnished the first draft of theIBC and elaborated on the aims behind the overhaul of the insolvency 68 Page 13, BLRC Report, supra note 55

69 Page 92, BLRC Report, supra note 55

A

BC

D

E

F

G

H

Aregime, refers to a CoC-approved Resolution Plan as a ‘binding contract’in one instance and refers to it as a ‘binding agreement’ in other instances.The report also refers to a CoC-approved Resolution Plan as a ‘financialarrangement’[70], ‘revival plan’[71] or a ‘solution’[72]. The interchangeabilityof the terms – ‘agreement’, ‘contract’, ‘financial arrangement’, ‘revivalplan’ and ‘solution’ indicates that there is no clear intention of the BLRCBin characterizing the nature of the Resolution Plan as a contract. Thebinding effect of the Resolution Plan has the consequence of preventingthe CoC or the Resolution Applicant to renege from its terms after theplan has been approved by the CoC through a voting mechanism. Thefleeting mention of a ‘binding contract’ on one occasion in the BLRCCReport (which was a pre-legislative text that underwent subsequentmodifications by the Legislature) to indicate the binding nature of theResolution Plan and the finality of negotiations once it is approved by theCoC, does not establish the legal nature of the document, especiallywhen it is not complemented by the text and design of the IBC.

D114. Certain stages of the CIRP resemble the stages involved inthe formation of a contract. Echoes of the process involved in theformation of a contract resonate in the steps antecedent to the approvalof a Resolution Plan such as: (i) the issuance of an RFRP may be equatedto an invitation to offer; (ii) a Resolution Plan can be considered as aproposal or offer; and (iii) the approval by the CoC may be similar to anEacceptance of offer. The terms of the Resolution Plan contain acommercial bargain between the CoC and Resolution Applicant. Thereis also an intention to create legal relations with binding effect. However,it is the structure of the IBC which confers legal force on the CoC-approved Resolution Plan. The validity of the Resolution Plan is not Fpremised upon the agreement or consent of those bound (although as aprocedural 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 contractexecuted in furtherance of a statutory regime under the IBC. A questionGarises whether a Resolution Plan can be classified as a ‘statutorycontract’. This Court has defined a statutory contract in India ThermalPower Ltd. v. State of MP[73] in the following terms:

70 Page 21, BLRC Report, supra note 55

71 Page 13, BLRC Report, supra note 55

72 Pages 21, 75 and 126, BLRC Report, supra note 55H73 (2000) 3 SCC 379

“11. Section 43 empowers the Electricity Board to enter into anarrangement for purchase of electricity on such terms as may beagreed. Section 43-A(1) provides that a generating companymay enter into a contract for the sale of electricity generatedby it with the Electricity Board. As regards the determinationof tariff for the sale of electricity by a generating company to theBoard, Section 43(1)(2) provides that the tariff shall be determinedin accordance with the norms regarding operation and plant-loadfactor as may be laid down by the authority and in accordancewith the rates of depreciation and reasonable return and suchother factors as may be determined from time to time by theCentral Government by a notification in the Official Gazette. Theseprovisions clearly indicate that the agreement can be on such termsas may be agreed by the parties except that the tariff is to bedetermined in accordance with the provision contained in Section43-A(2) and notifications issued thereunder. Merely because acontract is entered into in exercise of an enabling powerconferred by a statute that by itself cannot render thecontract a statutory contract. If entering into a contractcontaining the prescribed terms and conditions is a mustunder the statute then that contract becomes a statutorycontract. If a contract incorporates certain terms andconditions in it which are statutory then the said contractto that extent is statutory. A contract may contain certainother terms and conditions which may not be of a statutorycharacter and which have been incorporated therein as aresult of mutual agreement between the parties. Therefore,the PPAs can be regarded as statutory only to the extent thatthey contain provisions regarding determination of tariff and otherstatutory requirements of Section 43-A(2)…”

116. The above observations were in the context of a PPA enteredinto under the provisions of Electricity Supply Act 1948. Section 43-A(1) of the Act stipulated that the generating company may enter into acontract with the Electricity Board. Thus, the judgement pre-supposesthe existence of a subsisting contract. The controversy in the case waswhether the PPA could be characterized as a statutory contract. To saythat a Resolution Plan is a statutory contract, we must first consider ABC

DE

F

G

H

Awhether the IBC envisages the CoC-approved Resolution Plan as acontract. There is no provision under the IBC referring to a ResolutionPlan as a contract, unlike Section 43-A(1) of the Electricity Supply Act1948 which mentions that a contract may be entered into between theconcerned parties. The legal force of a Resolution Plan arises due to theframework provided under the IBC. The mechanisms of the IBC provideBsufficient guidance on the conduct of all participants in the process andthe binding effect of the CoC-approved Resolution Plan is evidenced bythe execution of a PBG furnished by the successful Resolution Applicant,in compliance with the CIRP Regulations. This PBG is returnable oncethe Adjudicating Authority approves the Resolution Plan under SectionC31 and makes it binding on all stakeholders. Therefore, the IBC and itsregulations institute sufficient safeguards to ensure the binding effect ofa CoC-approved Resolution Plan. In our discussion in Sections I and Jbelow, we further elaborate on the nature of a CoC-approved ResolutionPlan and the code of conduct that is permissible by the statutoryframework.D117. While insolvency regimes are specific to each jurisdiction, itmay be useful to analyze how Resolution Plans or similar instrumentsare characterized in foreign jurisdictions.

118. Certain precedents from other jurisdictions have been citedEby Mr Nakul Devan for the E-RP, to argue that contracts entered into, infurtherance of a statutory regime have to be interpreted in accordancewith the objective and intent of the concerned statute. It has beensubmitted that the Resolution Plan is one variety of such a statutorycontract. However, since we have arrived at the decision that ResolutionPlans are not statutory contracts, it is not required for us to analyzeFwhether terms of the Resolution Plan can be given effect to, as terms ofa contract, as long as they further the statutory objective. It is alsoimportant to note that India adopts a unique insolvency framework wherethird-parties have the right to participate in an insolvency regime andacquire the Corporate Debtor as a going concern. In several jurisdictions,Gthe insolvency arrangements are between the debtor and the creditors,which has a closer resemblance to ‘repayment plans’ by corporate debtors,as envisaged by the IBC under Section 105 and broadly prescribed underChapter III as opposed to ‘resolution plans’ that are not proposed bydebtors. In any event, an analysis of such arrangements is detailed below.

H

H

119. In the United Kingdom, the UK Act allows the directors,administrator or liquidator of a company to propose a company voluntaryarrangement or a ‘CVA’ (similar to Section 10 of the IBC), which has tobe approved by creditors having seventy-five per cent of the vote share.Section 5(2)(b)[74 ]of the UK Act provides that once the CVA is approved,the company and the creditors are bound by it. Professor Roy Goode inhis authoritative treatise Principles of Corporate Insolvency Law[75]observes that, “[t]he wording of s.5(2)(b), discussed below, has led thecourts to characterise the relationship between the parties to a CVA asessentially contractual in nature and its scope and effect are determinedby its terms, which fall to be interpreted by application of the ordinaryprinciples of contractual interpretation.” In some judgements of the Courtof Appeal, English Courts have held that a CVA creates a contractualobligation[76], is a statutory contract[77], or has a contractual effect and issubject to ordinary principles of interpretation applying to contracts[78].However, the position on this issue is not completely settled. In a recentdecision of the High Court of Justice[79], it was held that the CVA is not acontract. Crucially the court made the following observations:

“83. Further, and as noted by Mr Pymont QC in SHB RealisationsLtd, a voluntary arrangement is not formed or analysed as acontract. Certain legal principles applicable to contracts, forexample their interpretation, are applied to voluntaryarrangements; that is no less true of other instrumentswhich are not contracts. Other principles of contract law,for example those relating to penalties, are not applicableto voluntary arrangements. Mr Pymont QC concluded that avoluntary arrangement is not a contract. Characterising a CVA

as a hypothetical agreement or by reference to a statutory74 5 …(2) The voluntary arrangement— (b) binds every person who in accordance withthe rules — (i) was entitled to vote in the qualifying decision procedure by which thecreditors’ decision to approve the voluntary arrangement was made, or (ii) would havebeen so entitled if he had had notice of it — as if he were a party to the voluntaryarrangement.”

75 Roy Goode, Principles of Corporate Insolvency Law (5th edn., Sweet and Maxwell,2018)

76 Re TBL Realisations Plc, Oakley-Smith v Greenberg, [2004] B.C.C. 81 (Court ofAppeal)

77 Tucker v Gold Fields Mining LCC, [2010] B.C.C. 544 (Court of Appeal)78 Heis v Financial Services Compensation Scheme Ltd, [2018] EWCA Civ 1327 (Courtof Appeal)

79 Re Rhino Enterprises Properties Ltd. Schofield v Smith [2020] EWHC 2370 (Ch).

AB

C

D

E

F

G

H

438SUPREME COURT REPORTS

[2021] 14 S.C.R.

Ahypothesis neatly and accurately makes clear that a CVA isdifferent 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 companyBand its creditors becomes binding when the requisite majority of creditorsagree to it and it is approved by the court. The Singapore Court of Appealhas referred to such a scheme of arrangement as a ‘contractualscheme’[80]. Subsequently, a controversy arose before the Singapore Courtof Appeal on whether a scheme can be substantially amended after itChas been approved by the court. The court observed that the answer tothis question depends upon the nature of schemes of arrangement;whether the schemes derived their efficacy from the order of the courtor the statute. The court observed that under the English approach[81], ascheme approved by the majority of the creditors derives its efficacyfrom the statute and is a statutory contract. Thus, the court has a limitedDjurisdiction and cannot make substantial alterations to such a scheme.However, the court noted that in Australia, the scheme operates as anorder of the court. The court held that its previous decision which referredto a scheme of arrangement as a ‘contractual scheme’ does not meanthat in Singapore such schemes are considered as statutory contracts.EThe court chose to follow the Australian approach holding that a schemetakes effect as an order of the court and like any other court order, it canbe altered, in certain circumstances. The court observed:

“66. ….We would also add, in respect of the latter concern, that acourt order is in no way less binding than a statutory contract onFthe parties to a scheme of arrangement, and it is trite law as wellas common sense that a court order cannot be altered at will bythe parties who are subject to the order….”

121. In Australia, as noted above, the scheme of arrangementoperates as a court order[82]. The Supreme Court of New South Wales,Grejecting the English approach of characterizing schemes (different fromCVAs) as statutory contracts, observed:

80 Daewoo Singapore Pte Ltd v CEL Tractors Private Limited, [2001] 4 SLR 35 (Courtof Appeal)

81 Kempe and Another v. Ambassador Insurance Co., [1998] 1 W.L.R. 271H82 Caratti v Hillman [1974] WAR 92 (Supreme Court of Wester Australia)

“46..

[….]

(b) In Australia, [the] authorities [namely, Hill v Anderson MeatIndustries Ltd [1971] 1 NSWLR 868, Caratti and Bond CorpHoldings Ltd v Western Australia (1992) 7 ACSR 472] establishthat an approved scheme does indeed derive its force from thecourt order, [and] not from the antecedent resolutions of membersand creditors.”

122. Under the United States Bankruptcy Code, a restructuringplan becomes binding once it is confirmed by the court in terms of Section1141. There are decisions of the bankruptcy courts in the United Stateswhich indicate that such restructuring plans are characterized ascontracts[83].It has been held that a confirmed plan is binding on the debtorand the plan proponent and has the same effect as contract[84]. However,commentators have noted that the United States Bankruptcy Code’s,“embrace of a contractual paradigm is somewhat inconsistent…Bothbankruptcy courts and the Code itself are far more sympathetic to expost than to ex ante contracting”[85]. 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 the Code explicitlyoverrides ex ante contracts”, these include provisions of the Codeoverriding ipso facto clauses in pre-bankruptcy contracts which stipulatethat a necessary condition of default is filing of an insolvency orbankruptcy petition[86].

123. The above discussion indicates the law in other jurisdictions,irrespective of differing frameworks, is not completely settled on whetherinstruments akin to Resolution Plans are pure contracts. To recapitulate,in the United Kingdom, while schemes of arrangement are characterizedas statutory contracts, the law on CVAs, which are similar to theinsolvency process initiated under Section 10 of the IBC, is not clear 83 In re Hoffinger Indus, Inc, 327 B.R. 389 (Bankr. E.D. Ark. 2005), United StatesBankruptcy Court, E.D. Arkansas 84 In Re Shenandoah Realty Partners, L.P. v. Ascend Health Care, Inc, 287 BR 867 (USBankruptcy Court, WD)

85 David Skeel and George Triantis, ‘Bankruptcy’s Uneasy Shift to a ContractualParadigm’, Faculty Scholarship at Penn Law, (2018), available at <https://scholarship.law.upenn.edu/cgi/viewcontent.cgi? article = 2993 & context = faculty _scholarship > accessed on 5 September 202186 Ibid.

A

BC

DE

F

G

H

Awith the High Court of Justice noting that it is not a contract[87], eventhough principles of interpretation applicable to contracts may be usedfor constructing the language of such CVAs. In Singapore, the Englishapproach of denoting schemes as statutory contracts was rejected andit was held that the schemes operate as orders of court. A similar positionwas taken under the Australian law. The Singapore and Australian courtsBspecifically indicate that schemes are more than mere contracts with a“super-added imprimatur” by a court, rather they envisage an activerole to be played by court in supervising the schemes to the extent ofmaking substantial alterations to it, if required. In the United States,restructuring plans have been equated to contracts, but as noted aboveCthere has been some inconsistency in relation to upholding the contractualbargain.

124. The lack of an apparent international consensus on the issueof whether instruments like CoC-approved Resolution Plans arecontracts, prior to the Court’s sanction, is also attributable to the peculiarityDof the insolvency regime in each jurisdiction. This Court will have to bewary of transplanting international doctrines that are evolved as responsesto the specific features of a jurisdiction’s insolvency regime, withoutidentifying an analogous framework in our insolvency regime.

125. The absence of any specific provision in the IBC or theEregulations referring to a CoC-approved Resolution Plan as a contractand the lack of clarity in the BLRC report regarding the nature of sucha Resolution Plan, constrains us from arriving at the conclusion thatCoC-approved Resolution Plans will be governed by the Contract Actand common law principles governing contracts, save and except forthe specific prohibitions and deeming fictions under the IBC. RegulationF39(3) of CIRP regulations, as it stood before the IBBI (CIRP) (FourthAmendment) Regulations 2020 and applicable to the three appellantsbefore us, enabled a framework where a draft Resolution Plan wouldinvolve several rounds of negotiations and revisions between theResolution Applicant and the CoC, before it is approved by the latter andGsubmitted to the Adjudicating Authority[88]. However, this statutorily- 87 Rhino supra note 78

88 “(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 mayapprove it with such modifications as it deems fit:Provided that the committee shall record its deliberations on the feasibility and viabilityHof the resolution plans’’

enabled room for commercial negotiation is not enough to over-powerthe 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, area function and product of the IBC’s mechanisms. Their validity, nature,legal force and content is regulated by the procedure laid down underthe IBC, and not the Contract Act. The voting by the CoC also occursonly after the RP has verified the contents of the Resolution Plan andconfirmed that it meets the conditions of the IBC and the regulationstherein. The amended Regulation 39(3)[89] further regulates the conductof the CoC on voting on Resolution Plans and has introduced therequirement of simultaneous voting. The IBBI’s Discussion Paper issuedon 27 August 2021 has invited comments on regulating the process onrevisions that can be made to resolution plans submitted to the CoC[90].These developments bolster the conclusion that the mechanism prior tosubmission of a CoC-approved resolution plan is subject to continuousprocedural scrutiny by the IBC and cannot be considered as a simplecontractual negotiation between two parties. Section J below details howa common law remedies of withdrawal or modification on account offrustration or force majeure are not applicable to CoC-approvedResolution Plans owing to the nature of the IBC. Similarly, the wholehost of remedies such as liquidated and unliquidated damages, restitution,novation and frustration, unless specifically provided by the IBC, are notavailable to a successful Resolution Applicant whose Plan has beenapproved by the CoC and is awaiting the approval of the AdjudicatingAuthority. The Insolvency Law Committee Report of February 2020

89 “39….(3)The committee shall-(a) evaluate the resolution plans received under sub-regulation (2) as per evaluation matrix; (b) record its deliberations on the feasibility andviability of each resolution plan; and (c) vote on all such resolution plans simultaneously.(3A) Where only one resolution plan is put to vote, it shall be considered approved ifit receives requisite votes.

(3B) Where two or more resolution plans are put to vote simultaneously, the resolutionplan, which receives the highest votes, but not less than requisite votes, shall beconsidered as approved:

Provided that where two or more resolution plans receive equal votes, but not less thanrequisite votes, the committee shall approve any one of them, as per the tie-breakerformula announced before voting:

Provided further that where none of the resolution plans receives requisite votes, thecommittee shall again vote on the resolution plan that received the highest votes,subject to the timelines under the Code……….”90 available at < https://www.ibbi.gov.in/uploads/whatsnew/fbe59358a8c440d001f3b950be4a1c67.pdf > accessed on 5 September 2021

AB

C

D

E

F

G

H

Ahas recommended the CIRP process to mandate Resolution Plans toprovide for the apportionment of the profit or loss accrued by theCorporate Debtor during the CIRP[91]. These reports are periodicallycommissioned by the parliament to review the functioning of the Codeand suggest amendments. However, if the intention was to view a CoC-approved Resolution Plan as a contract, the principles of unjust enrichmentBwould have been sufficient to address the issue and an amendment maynot be considered necessary. A Resolution Applicant, as a third partypartaking in the insolvency regime, seeks to acquire the business of theCorporate Debtor without the entirety of its debts, statutory liabilitiesand avoiding certain transactions with third parties. These benefits are aCfunction of the coercive mechanisms of the IBC which enable a thirdparty to acquire the assets of a Corporate Debtor without its liabilities,for a negotiated amount of the debt that is owed by the Corporate Debtor.Typically, resolution amounts envisage payment of a fraction of debtthat is owed to the creditors and the business is acquired as a goingconcern with its employees. The Resolution Plan is drafted in a way thatDit is implementable in the future and brings about a quietus to the CIRP.Enabling Resolution Applicants to seek remedies that are not specifiedby the IBC, by seeking recourse to the Contract Act would be antitheticalto the IBC’s insolvency regime. The elements of contractual interpretationcan be relied upon to construe the language of the terms of the ResolutionEPlan, in the event of a dispute, but not to re-fashion and distort themechanism of the IBC altogether. This Court in Laxmi Pat Surana v.Union Bank of India[92]has held that the IBC is a self-contained Code.Thus, importing principles of any other law or a statute like the ContractAct into the IBC regime would introduce unnecessary complexity intothe working of the IBC and may lead to protracted litigation onFconsiderations that are alien to the IBC. To give an example, the CoCcan forfeit the PBG furnished by the successful Resolution Applicantunder certain circumstances in terms of the RFRP and Resolution Planincluding, inter alia, on the ground that the Resolution Applicant hasfailed to implement the resolution or has contributed to its failure.GRegulation 36B (4A) of CIRP regulations provides for the furnishing ofsuch performance security once the plan is approved by creditors. The 91 Pages 55-56, Report of the Insolvency Law Committee (February 2020), Ministryof Corporate Affairs, available at <https://www.mca.gov.in/Ministry/pdf/ICLReport_05032020.pdf> accessed on 20 August 2021H92 (2020) SCC OnLine SC 1187

Regulations do not provide that the performance security has to be areasonable estimate of loss as is expected of penalty clauses undercontract law, rather the explanation provides that the performance securityshould be of “such nature, value, duration and source, as may be specifiedin the request for resolution plans with the approval of the committee,having regard to the nature of resolution plan and business of the corporatedebtor”. Further, in the event that the CoC enters into a settlement withthe Corporate Debtor and withdraws from the CIRP under Section 12A,Regulation 30A provides for only payment of insolvency costs and notcompensation or damages to Resolution Applicant for investing time andmoney in the process. The parties may resort to invoking principles offrustration or force majeure to evade implementation of the ResolutionPlan leading to unnecessary litigation. This Court in Amtek Auto (supra),had curbed a similar attempt by a successful Resolution Applicant whohad relied on a force majeure clause in its Resolution Plan to seek adirection compelling the CoC to negotiate a modification to its ResolutionPlan. The Court held that there was no scope for negotiations betweenthe parties once the Resolution Plan has been approved by the CoC.Thus, contractual principles and common law remedies, which do notfind a tether in the wording or the intent of the IBC, cannot be importedin the intervening period between the acceptance of the CoC and theapproval by the Adjudicating Authority. Principles of contractualconstruction and interpretation may serve as interpretive aids, in theevent of ambiguity over the terms of a Resolution Plan. However, remediesthat are specific to the Contract Act cannot be applied, de hors theover-riding principles of the IBC.

I Statutory framework governing the CIRP

126. The CIRP is a time bound process with a specific aim ofmaximizing the value of assets. IBC and the regulations made under itlay down strict timelines which need to be adhered to by all the parties,at all stages of the CIRP. The CIRP is expected to be completed within180 days under Section 12(1) of the IBC. In terms of sub-Section (2)and (3) of Section 12, an extension can be sought from the AdjudicatingAuthority for extending this period up to 90 days. The first proviso toSection 12(3) clarifies that such an extension can only be granted once.In Arcelor Mittal (India) (P) Ltd. v. Satish Kumar Gupta[93], thisCourt had held that the time taken in legal proceedings in relation to the ABC

DE

FG

H

ABC

DE

FG

H

ACIRP must be excluded from the timeline mentioned in Section 12. Sincethis could extend the CIRP indefinitely, the Insolvency and BankruptcyCode (Amendment) Act 2019, inserted a second proviso to Section 12(3)with effect from 16 August 2019 to state that the CIRP in its entiretymust be mandatorily completed within 330 days from the insolvencycommencement date, including the time taken in legal proceedings. ABlegislative amendment that takes away the basis of a judicial finding isindicative of the strong emphasis of the IBC on its timelines and itsattempt to thwart the prospect of stakeholders engaging in multiplelitigations, solely with the intent of causing undue delay. Delays are alsoa cause of concern because the liquidation value depletes rapidly,Cirrespective of the imposition of a moratorium, and a delayed liquidationis harmful to the value of the Corporate Debtor, the recovery rate of theCoC and consequentially, the economy at large. In Essar Steel (supra)a three judge Bench of this Court, emphasized the rationale of theInsolvency and Bankruptcy Code (Amendment) Act 2019, whichintroduced the second proviso to Section 12(3). The court adverted toDthe BLRC report which underscored delays in legal proceedings as thecause of the failure of the previous insolvency regime under the SICAand the recovery mechanism in SARFAESI. It also extracted a Speechof the Union Minister in the Rajya Sabha to explain the proposal for theamendment in 2019, which was to avoid the same pitfalls in the IBC.EThe Court, speaking through Justice R F Nariman, noted:

“119. The speech of the Hon’ble Minister on the floor of the Houseof the Rajya Sabha also reflected the fact that with the passageof time the original intent of quick resolution of stressed assets isgetting diluted. It is therefore essential to have time-boundFdecisions to reinstate this legislative intent. It was also pointed outon the floor of the House that the experience in the working ofthe Code has not been encouraging. The Minister in her speechto the Rajya Sabha gives the following facts and figures:

“Now, regarding the Corporate Insolvency Resolution ProcessG(CIRP), under the Code, I want to give you data again as of30-6-2019. First, I will talk about the status of CIRPs. Number ofadmitted cases is 2162; number of cases closed on appeal, whichI read out about, is 174; number of cases closed by withdrawalunder Section 12-A, is 101, I have given you a slightly later data;number of cases closed by resolution is 120; closed by liquidation,H

475; and ongoing CIRPs are 1292. So, now, I would like to mentionthe number of days of waiting. I would like to mention here thedetails of the ongoing CIRPs, along with the timelines. OngoingCIRPs are 1292, the figure just now I gave you. Over 330 days,335 cases; over 270 days, 445 cases; over 180 days and less than270 days, 221 cases; over 90 days but less than 180 days, 349cases; less than 90 days, 277 cases. The number of days pendingincludes time, if any, excluded by the tribunals. So, that gives youa picture on what is the kind of wait and, therefore, why we wantto bring the amendments for this speeding up.”

[…]

123. As the speech of the Hon’ble Minister on the floor of theHouse only indicates the object for which the amendment wasmade and as it contains certain data which it is useful to advert to,we take aid from the speech not in order to construe the amendedSection 12, but only in order to explain why the Amending Act of2019 was brought about.”

127. The decision in Essar Steel (supra) while reiterating therationale of the IBC for ensuring timely resolution of stressed assets asa key factor, had to defer to the principles of actus curiae neminemgravabit, i.e., no person should suffer because of the fault of the courtor the delay in the procedure. In spite of this Court’s precedents whichotherwise strike down provisions which interfere with a litigant’sfundamental right to non-arbitrary treatment under Article 14 bymandatory conclusion of proceedings without providing for any exceptions,this Court refused to strike down the second proviso to Section 12(3) inits entirety. It noted that the previous statutory experiments for insolvencyhad failed because of delay as a result of extended legal proceedingsand chose to only strike down the word ‘mandatorily’, keeping the restof the provision intact. Therefore, the law as it stands, mandates theconclusion of the CIRP – including time taken in legal proceedings, within330 days with a short extension to be granted only in exceptional cases.However, the Court has warned that this discretion must be exercisedsparingly and only in the following situations:

“127…Thus, while leaving the provision otherwise intact, we strikedown the word “mandatorily” as being manifestly arbitrary underArticle 14 of the Constitution of India and as being an excessive AB

C

D

E

F

G

H

Aand unreasonable restriction on the litigant’s right to carry onbusiness under Article 19(1)(g) of the Constitution. The effect ofthis declaration is that ordinarily the time taken in relation to thecorporate resolution process of the corporate debtor must becompleted within the outer limit of 330 days from the insolvencycommencement date, including extensions and the time taken inBlegal proceedings. However, on the facts of a given case, if it canbe shown to the Adjudicating Authority and/or Appellate Tribunalunder the Code that only a short period is left for completion ofthe insolvency resolution process beyond 330 days, and that itwould be in the interest of all stakeholders that the corporate debtorCbe put back on its feet instead of being sent into liquidation andthat the time taken in legal proceedings is largely due to factorsowing to which the fault cannot be ascribed to the litigants beforethe Adjudicating Authority and/or Appellate Tribunal, the delay ora large part thereof being attributable to the tardy process of theAdjudicating Authority and/or the Appellate Tribunal itself, it mayDbe open in such cases for the Adjudicating Authority and/orAppellate Tribunal to extend time beyond 330 days. Likewise,even under the newly added proviso to Section 12, if by reason ofall the aforesaid factors the grace period of 90 days from the dateof commencement of the Amending Act of 2019 is exceeded,Ethere again a discretion can be exercised by the AdjudicatingAuthority and/or Appellate Tribunal to further extend time keepingthe aforesaid parameters in mind. It is only in such exceptionalcases that time can be extended, the general rule being that 330days is the outer limit within which resolution of the stressed assetsof the corporate debtor must take place beyond which the corporateFdebtor is to be driven into liquidation.”

128. The evolution of the IBC framework, through an interplay oflegislative amendments, regulations and judicial interpretation, consistentlyemphasizes the predictability and timeliness of the IBC. The legislatureand the IBBI have been proactive to introduce amendments to theGprocedural framework, that respond to changes in the economy. Forinstance, Regulation 40(c), which came into effect on 20 April 2020,was inserted in the CIRP Regulations to take into account the delay thatmay be caused to the CIRP on account of the lockdown being imposedby the Central Government due to the COVID-19 pandemic. RegulationH40(c) provides that the delay in completing any activity related to the CIRP because of imposition of lockdown will not be counted for thepurposes of the timeline that has been stipulated under the statutoryframework. If the CIRP is not completed within the prescribed timeline,the Corporator Debtor is sent into liquidation. This understanding of theevolution of the law is critical to our task of judicial interpretation. Wecannot afford to be swayed by abstract conceptions of equity and‘contractual freedom’ of the parties to freely negotiate terms of theResolution Plan with unfettered discretion, that are not grounded in theintent of the IBC.

129. The IBC and the regulations provide a detailed procedurefor the completion of CIRP. An application for initiation of CIRP is filedeither by the financial creditor, operational creditor or the CorporateDebtor itself under Sections 7, 9 and 10 of the IBC, respectively. Oncethe application is admitted by the Adjudicating Authority, it passes thefollowing orders under Section 13(1) of the IBC: (i) declaration of amoratorium for the purposes referred to in Section 14 of the IBC; (ii)causing a public announcement to be made for the initiation of CIRP andissuing a call for submissions of claims as may be specified under Section15 of the IBC; and (iii) appointing an IRP in accordance with Section 16of the IBC.

130. Section 13(2) provides that the public announcement is to bemade immediately after the appointment of an IRP. The word‘immediately’ here means not later than three days from the date ofappointment as provided in the explanation to Regulation 6(1) of theCIRP Regulations. Section 15 of the IBC lists down the information thatshould be included in the public announcement of CIRP. It should specifythe last date up to which the claims, i.e., a right of payment or right toremedy as defined under Section 3(6) of the IBC, can be made bycreditors, workmen and employees. Regulation 6(2)(c) provides that thelast date of submission of claims shall be fourteen days from the date ofappointment of the IRP. The public announcement also specifies thedate on which the CIRP shall close, which is the one hundred and eightiethday from the date of the admission of the application under Sections 7, 9or 10, as may be applicable. Regulation 6 of the CIRP Regulationsstipulates additional requirements relating to how the public announcementis to made.

131. On receipt of claims from the operational creditors, financialcreditors, workmen and employees, the IRP prepares a list of creditors AB

C

D

EF

G

H

Aafter verifying the claims. Regulation 13(1) provides that the verificationof all the claims is to be done within seven days from the last date ofreceipt of the claims. Thereafter, the IRP constitutes a CoC in accordancewith Section 21(1) of the IBC. Regulation 17 of the CIRP Regulationsstipulates that the IRP must submit a report certifying the constitution ofthe CoC within two days of the claims being verified. The IRP is requiredBto hold the first meeting of the CoC within seven days of filing of thereport under the said regulation. If the appointment of the RP by theCoC is delayed, the IRP is to perform the functions of the RP from thefortieth day of the insolvency commencement date till the RP is appointedunder Section 22 of the IBC.

C

C

132. The CoC, in its first meeting, appoints the RP in terms ofSection 22(2) of the IBC. Section 23(1) provides that the RP is responsiblefor conducting the entire CIRP and managing the operations of theCorporate Debtor during the CIRP period. The RP continues to managethe operations of the Corporate Debtor after the expiry of CIRP periodDuntil an order approving the resolution is passed by the AdjudicatingAuthority under Section 31(1) of the IBC or a liquidator is appointedunder Section 34 of the IBC. The intent of this Section is to ensure thatthe Corporate Debtor remains a going concern until the Resolution Planis approved by the Adjudicating Authority. The powers and duties of theRP are listed under Section 23(2) of the IBC.E

133. The significant, if not the most important, duty of the RP is tosolicit Resolution Plans. The RP is empowered to invite prospectiveResolution Applicants who fulfil the criteria as laid down by the RP andapproved by the CoC, considering the complexity and the scale of thebusiness operations of the Corporate Debtor and other such conditionsFspecified by the IBBI, to submit a Resolution Plan or Plans under Section25(2)(h) of the IBC. Further, a person should not be ineligible to be aResolution Applicant under Section 29A of the IBC. Section 5(25) definesa Resolution Applicant in the following terms:

“resolution applicant” means a person, who individually or jointlyGwith any other person, submits a resolution plan to the resolutionprofessional pursuant to the invitation made under clause (h) ofsub-section (2) of section 25; or pursuant to section 54K, as thecase may be.”

H

134. The first step in the process of soliciting a Resolution Plan isthe preparation of an IM containing relevant information as specified bythe IBBI for formulating a Resolution Plan in accordance with Section29(1) of the IBC. The contents of the IM are specified under Regulation36(2) of the CIRP Regulations. Regulation 36(1) of the CIRP Regulationsspecifies the timelines within which the RP must submit the IM to membersof the CoC, which is within two weeks of his appointment but not laterthan the fifty-fourth day from the insolvency commencement date,whichever is earlier. Thereafter, the RP issues an invitation of EOI notlater than the seventy-fifth day from the insolvency commencement dateto seek expressions of interest from eligible prospective ResolutionApplicants in terms of Regulation 36A of the CIRP Regulations. Aprospective Resolution Applicant is required to submit an unconditionalEOI within the time stipulated under the invitation, which shall not beless than fifteen days from the date of the issue of invitation. The RPconducts a due diligence of the Resolution Applicant based on materialavailable on record in terms of Regulation 36A(8) of the CIRPRegulations. Thereafter, the RP issues a provisional list of eligibleprospective Resolution Applicants within ten days of the last date forsubmission of EOIs to the CoC and to all the prospective ResolutionApplicants who had submitted the EOI. Regulation 36A also specifiesthe timeline within which any objection can be made against the inclusionor exclusion of a prospective Resolution Applicant on the list, which isfive days from the issue of the list. The RP is required to publish a finallist of prospective Resolution Applicants within ten days of the last datefor the receipt of objections by the CoC.

135. Under Regulation 36B of the CIRP Regulations, the RP hasto issue the IM, evaluation matrix for consideration of the ResolutionPlan and an RFRP within five days of the date of issue of the provisionallist of Resolution Applicants to every prospective Resolution Applicanton the list and any other prospective Resolution Applicants who havecontested their non-inclusion in the list. Regulation 36B stipulates thatthe RFRP shall contain detailed steps of each process and the mannerand purposes of interaction between the RP and the prospective resolutionapplicant along with the corresponding timelines. A minimum of thirtydays is given to the prospective Resolution Applicant to submit a ResolutionPlan. A Resolution Plan is defined under Section 5(26) of the IBC:

AB

C

D

E

F

G

A“resolution plan” means a plan proposed by resolution applicantfor insolvency resolution of the corporate debtor as a going concernin accordance with Part II; Explanation.—For the removal of doubts, it is hereby clarifiedthat a resolution plan may include provisions for the restructuringBof the corporate debtor, including by way of merger, amalgamationand demerger;”

136. The timeline for the submission of Resolution Plans can beextended by an RP with the approval of the CoC. The RFRP must requirethe resolution applicant to furnish a performance security in case theirCResolution Plan is approved by the CoC under Regulation 36B(4A).The performance security shall stand forfeited if, after the approval ofthe Resolution Plan by the Adjudicating Authority, the Resolution Applicantfails to implement or contributes to the failure of implementation of theplan. Under the regulation, a performance security is defined as “securityof such nature, value, duration and source, as may be specified in theDrequest for resolution plans with the approval of the committee, havingregard to the nature of resolution plan and business of the corporatedebtor”. Regulations 37 and 38 list down the mandatory contents of theResolution Plan.

137. The RP is required to review the Resolution Plan submittedEin 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 planFreceived by him to confirm that each resolution plan—

(a) provides for the payment of insolvency resolution process costsin a manner specified by the Board in priority to the payment ofother debts of the corporate debtor; (b) provides for the payment of debts of operational creditors inGsuch manner as may be specified by the Board which shall not beless than—

(i) the amount to be paid to such creditors in the event of a liquidationof the corporate debtor under section 53; or H

(ii) the amount that would have been paid to such creditors, if theamount to be distributed under the resolution plan had beendistributed in accordance with the order of priority in sub-section(1) of section 53, whichever is higher and provides for the paymentof debts of financial creditors, who do not vote in favour of theresolution plan, in such manner as may be specified by the Board,which shall not be less than the amount to be paid to such creditorsin accordance with sub-section (1) of section 53 in the event of aliquidation of the corporate debtor.

Explanation 1.—For the removal of doubts, it is hereby clarifiedthat a distribution in accordance with the provisions of this clauseshall be fair and equitable to such creditors.

Explanation 2.—For the purposes of this clause, it is herebydeclared that on and from the date of commencement of theInsolvency and Bankruptcy Code (Amendment) Act, 2019, theprovisions of this clause shall also apply to the corporate insolvencyresolution process of a corporate debtor—

(i) where a resolution plan has not been approved or rejected bythe Adjudicating Authority;

(ii) where an appeal has been preferred under section 61 or section62 or such an appeal is not time barred under any provision of lawfor the time being in force; or

(iii) where a legal proceeding has been initiated in any court againstthe decision of the Adjudicating Authority in respect of a resolutionplan;

(c) provides for the management of the affairs of theCorporate debtor after approval of the resolution plan; (d) the implementation and supervision of the resolutionplan; (e) does not contravene any of the provisions of the law forthe time being in force; (f) conforms to such other requirements as may be specifiedby the Board.

Explanation.— For the purposes of clause (e), if any approval ofshareholders is required under the Companies Act, 2013 (18 of A

B

C

D

E

F

G

H

A2013) or any other law for the time being in force for theimplementation of actions under the resolution plan, such approvalshall be deemed to have been given and it shall not be acontravention of that Act or law.”

B

Sub-Section (3) of Section 30 of the IBC provides that the RPshall present Resolution Plans which conform to the above requirementsbefore the CoC for approval. Sub-Section (4) of Section 30 stipulatesthat the CoC may approve a Resolution Plan by a vote of not less thansixty-six per cent after considering the feasibility and viability of the planCand any such requirements specified by the IBBI.

138. The CoC has been given wide powers under the IBC. It candirect the Corporate Debtor into liquidation any time before the approvalby the Adjudicating Authority, under Section 33(2) of the IBC. Further,under Section 12A of the IBC the Adjudicating Authority may allowDwithdrawal of the application submitted under Sections 7, 9 or 10 of theIBC for initiation of the CIRP (i.e., initiation of the CIRP by the financialcreditor, operational creditor and the corporate applicant, respectively)if the withdrawal is approved by ninety per cent of the voting share ofthe CoC. Dealing with the question whether a successful ResolutionApplicant can retreat through the route provided under Section 12A ofEthe IBC, a three-judge Bench of this Court in Maharashtra Seamlessv. Padmanabhan Venkatesh[94] observed that, “[t]he exit routeprescribed in Section 12A is not applicable to a Resolution Applicant.The procedure envisaged in the said provision only applies to applicantsinvoking Sections 7, 9 and 10 of the code”. However, this Court left theFquestion whether a successful Resolution Applicant “altogether forfeitstheir right to withdraw from such process [CIRP] or not”, open forsubsequent judicial determination[95].

139. In terms of Regulation 39(4), the RP shall endeavour to submitthe Resolution Plan approved by the CoC before the Adjudicating AuthorityGfor its approval under Section 31 of the IBC, at least fifteen days beforethe maximum period for completion of CIRP. Section 31(1) providesthat the Adjudicating Authority shall approve the Resolution Plan if it issatisfied that it complies with the requirements set out under Section30(2) of the IBC. Essentially, the Adjudicating Authority functions as a 94 (2020) 11 SCC 467H95 Para 29, Ibid.

check on the role of the RP to ensure compliance with Section 30(2) ofthe IBC and satisfies itself that the plan approved by the CoC can beeffectively implemented as provided under the proviso to Section 31(1)of the IBC. Once the Resolution Plan is approved by the AdjudicatingAuthority, it becomes binding on the Corporate Debtor and its employees,members, creditors, guarantors and other stakeholders involved in theResolution Plan. Section 31(1) of the IBC is extracted below:

“Section 31 - Approval of resolution plan

(1) If the Adjudicating Authority is satisfied that the resolutionplan as approved by the committee of creditors under sub-section(4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolutionplan which shall be binding on the corporate debtor and itsemployees, members, creditors, including the Central Government,any State Government or any local authority to whom a debt inrespect of the payment of dues arising under any law for the timebeing in force, such as authorities to whom statutory dues areowed, guarantors and other stakeholders involved in the resolutionplan.

Provided that the Adjudicating Authority shall, before passing anorder for approval of resolution plan under this sub-section, satisfythat the resolution plan has provisions for its effectiveimplementation.”

A contravention of a Resolution Plan binding under Section 31 ispunishable under Section 74 (3) of the IBC. Section 74 (3) of the IBCprovides thus:

“Section 74 - Punishment for contravention of moratorium or theresolution plan [….]

(3) Where the corporate debtor, any of its officers or creditors orany person on whom the approved resolution plan is binding undersection 31, knowingly and wilfully contravenes any of the termsof such resolution plan or abets such contravention, such corporatedebtor, officer, creditor or person shall be punishable withimprisonment of not less than one year, but may extend to five A

B

C

D

E

F

G

H

Ayears, 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 AdjudicatingAuthority, the Corporate Debtor goes into liquidation in accordance withSection 33(1) of the IBC. The order of the Adjudicating Authority rejectingBa Resolution Plan and directing liquidation under Section 33 of the IBCcan be appealed only on the grounds of material irregularity or fraud, asstipulated under Section 61(4) of the IBC. The order of the AdjudicatingAuthority approvinga Resolution Plan can be appealed before the NCLATunder Section 61(3) of the IBC onlyon the grounds specified in thatsection. The grounds of appeal are as follows:C

“Section 61 - Appeals and Appellate Authority [….]

(3) An appeal against an order approving a resolution plan undersection 31 may be filed on the following grounds, namely:—D(i) the approved resolution plan is in contravention of the provisionsof any law for the time being in force;

(ii) there has been material irregularity in exercise of the powersby the resolution professional during the corporate insolvencyresolution period;E

(iii) the debts owed to operational creditors of the corporate debtorhave not been provided for in the resolution plan in the mannerspecified by the Board;

(iv) the insolvency resolution process costs have not been providedFfor repayment in priority to all other debts; or(v) the resolution plan does not comply with any other criteriaspecified by the Board.

(4) An appeal against a liquidation order passed under section 33,or sub-section (4) of section 54L, or sub-section (4) of sectionG54N, may be filed on grounds of material irregularity or fraudcommitted in relation to such a liquidation order.”

141. Under Regulation 39(5) of the CIRP Regulations, the RP isrequired to send a copy of the order of the Adjudicating Authority accepting H

or rejecting the Resolution Plan on a ‘forthwith basis’. Regulation 39(5A)specifies that within fifteen days of the date of the order of AdjudicatingAuthority approving the Resolution Plan, the RP must inform eachclaimant about the principle or formulae for the payment of debts underthe Resolution Plan.

142. As noted above, Section 12 of the IBC stipulates the timelinewithin which the CIRP is to be completed. The RP on the instructions ofthe CoC may make an application for extension of the CIRP. Regulation40A of the CIRP Regulations provides a detailed model timeline forCIRP which accounts for all the procedural eventualities that arepermitted by the statute and the regulations. Regulation 40A is extractedbelow:

A

B

C

“40-A. Model time-line for corporate insolvency resolutionprocess.—The following Table presents a model timeline ofcorporate insolvency resolution process on the assumption thatthe interim resolution professional is appointed on the date ofDcommencement of the process and the time available is hundredand eighty days:

E

F

G

H

456SUPREME COURT REPORTS[2021] 14 S.C.R.ABCDEFGH

457ABCDEFGH

458SUPREME COURT REPORTS[2021] 14 S.C.R.AProvisional List Within 10 days T+100 of RAs by RP from the last day of receipt of EoI Submission of For 5 days T+105 objections to from the date provisional list of provisional BlistFinal List of Within 10 days T+115 RAs by RP of the receipt of objectionsRegulation 36-B Issue of RFRP, Within 5 days T+105 including of the issue of CEvaluation the provisional Matrix and IMlistReceipt of At least 30 T+135 Resolution days from issue Plans of RFRP (Assume 30 days)DRegulation 39(4) Submission of As soon as T+165 CoC approved approved by Resolution Plan the CoC to AASection 31(1) Approval of T=180 resolution plan by AA E

AA: Adjudicating Authority; AR: Authorised Representative;CIRP: Corporate Insolvency Resolution Process; CoC: Committeeof Creditors; EoI: Expression of Interest; IM: InformationMemorandum; IRP: Interim Resolution Professional; RA:Resolution Applicant; RP: Resolution Professional; RFRP: RequestFfor Resolution Plan.”

143. The statutory framework governing the CIRP seeks to createa mechanism for resolving insolvency in an efficient, comprehensiveand timely manner. The IBC provides a detailed linear process forundertaking CIRP of the Corporate Debtor to minimize any delays,Guncertainty in procedure and disputes. The roles and responsibilities ofthe important actors in the CIRP are clearly defined under the IBC andits regulations. In Innoventive Industries Ltd v. ICICI Bank[96] athree judge Bench of this Court observed that “one of the importantobjectives of the Code is to bring the insolvency law in India under aH96 (2018) 1 SCC 407, para 13.

single unified umbrella with the object of speeding up of the insolvencyprocess”. Recently, in Gujarat Urja[97](supra) a three judge Bench ofthis Court observed that a “delay in completion of the insolvencyproceedings would diminish the value of the debtor’s assets and hamperthe prospects of a successful reorganization or liquidation. For the successof an insolvency regime, it is necessary that insolvency proceedings aredealt with in a timely, effective and efficient manner”. The stipulationof timelines and a detailed procedure under the IBC ensures a timelycompletion of CIRP and introduces transparency, certainty andpredictability in the insolvency resolution process. The UNCITRAL Guidealso states that the insolvency law of a jurisdiction should be transparentand predictable. It notes the value of such predictability in the followingterms[98]:

“11. An insolvency law should be transparent and predictable.This will enable potential lenders and creditors to understand howinsolvency proceedings operate and to assess the risk associatedwith their position as a creditor in the event of insolvency. Thiswill promote stability in commercial relations and foster lendingand investment at lower risk premiums. Transparency andpredictability will also enable creditors to clarify priorities, preventdisputes by providing a backdrop against which relative rights andrisks can be assessed and help define the limits of any discretion.Unpredictable application of the insolvency law has the potentialto undermine not only the confidence of all participants ininsolvency proceedings, but also their willingness to make creditand other investment decisions prior to insolvency. As far aspossible, an insolvency law should clearly indicate all provisionsof other laws that may affect the conduct of the insolvencyproceedings (e.g. labour law; commercial and contract law; taxlaw; laws affecting foreign exchange, netting and set-off and debtfor equity swaps; and even family and matrimonial law).”

This Court should proceed with caution in introducing any elementin the insolvency process that may lead to unpredictability, delay andcomplexity not contemplated by the legislature. With this birds’-eye viewof the framework of insolvency through the CIRP, we proceed to answerthe question of law raised in this judgement - whether a Resolution 97 (2021) SCC OnLine 194, para 71.

98 Page 13, UNCITRAL Guide, supra 56

ABC

DE

F

G

H

AApplicant is entitled to withdraw or modify its Resolution Plan, once ithas been submitted by the Resolution Professional to the AdjudicatingAuthority and before it is approved by the latter under Section 31(1) ofthe IBC.

JWithdrawal of the Resolution Plan by a successfulBResolution Applicant under the IBC

J.1 The absence of a legislative hook or a regulatory tetherto enable a withdrawal

144. The analysis of the statutory framework governing the CIRPand periodic reports of the Insolvency Law Committee indicates that itCis a creditor-driven process. The aim of the process, in preferential order,is to: first, enable resolution of the debt by maintaining the corporatedebtor as a going concern, in order to preserve the business andemployment of the personnel; second, maximize the value of the assetsof the corporate debtor and enable a higher pay-back to its creditorsDthan under liquidation; and third, enable a smoother and faster transitionto liquidation in the event that a time bound CIRP fails, in a bid to avertfurther deterioration of value.

145. Since the aim of the statute is to preserve the interests of thecorporate debtor and the CoC, it was recognized that settlementsEbetween the corporate debtor and the CoC may be in the best interestsof all stakeholders since insolvency is averted. Two decisions of twojudge Benches of this Court, in Lokhandwala Kataria Construction(P) Ltd v. Nisus Finance and Investment Managers LLP[99]andUttara Foods and Feeds (P) Ltd v. Mona Pharmachem[100], (prior tothe insertion of Section 12A which enabled withdrawal of the CIRP onFaccount of settlement between the parties), had refused to effectuatethis remedy by exercising inherent powers of the Adjudicating Authorityunder Rule 11 of the NCLT Rules 2016 or the power of parties to makeapplications to the Adjudicating Authority under Rule 8 of the Insolvencyand Bankruptcy (Application to Adjudicating Authority) Rules 2016. InGUttara Foods (supra) this Court had granted a one-time relief underArticle 142 of the Constitution since all the parties were present beforeit and had presented it with signed consent terms. This course of action,in refraining from the exercise of inherent powers to effect procedures 99 (2018) 15 SCC 589H100 (2018) 15 SCC 587

and remedies that were not specifically envisaged by the statute, wasexplicitly affirmed by the Insolvency Law Committee Report dated March2018[101] which proceeded to suggest amendments to the IBC andrecommended a ninety per cent voting threshold by the CoC forwithdrawals of a CIRP and a specific amendment to Rule 8 of the thenexisting CIRP Rules to enable parties to file such applications. This reportled to the insertion of Section 12A which vested the CoC with the powerto withdraw the CIRP or vote on such withdrawal, if sought by theCorporate Debtor. This provision was introduced with retrospectiveeffect on 6 June 2018. Significantly, no such exit routes have beencontemplated for the Resolution Applicant. It is relevant to note that thenewly inserted and then unamended Regulation 30A (w.e.f. 4 July 2018)of the CIRP Regulations stipulated that withdrawal under Section 12Acan be allowed through submitting an application to the IRP or RP (asthe case maybe) before the invitation for EOI is issued to the public.The CoC was to consider the application within seven days of itsconstitution and an approval for such application required approval ofthe ninety per cent of the voting share of the CoC. However, on 14December 2018, a two judge Bench of this Court, held in Brilliant Alloys(P) Ltd v. S Rajagopal[102]that Regulation 30A is directory, and notmandatory in nature since Section 12A of the IBC does not stipulate adeadline by which a withdrawal from the CIRP can be made. Thus, inexceptional cases withdrawals from the CIRP under Section 12A ofIBC could be permitted even after the invitation of EOI has been issued.Regulation 30A of the CIRP Regulations was then amended by the IBBI(Insolvency Resolution Process for Corporate Persons) (SecondAmendment) Regulations 2019, w.e.f. 25 July 2019 to reiterate the decisionof this Court. The newly amended provision allows for withdrawals evenafter the invitation for expression of interest has been issued, providedthat 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 ifthe CoC is not yet constituted, a party can approach the AdjudicatingAuthority, which may in exercise of its inherent powers under Rule 11 ofthe NCLT Rules 2016, allow or reject an application for withdrawal or 101 Pages 5 and 101, Report of the Insolvency Law Committee, Ministry of CorporateAffairs (March 2018) available at < https://ibbi.gov.in/uploads/resources/ILRReport2603_03042018.pdf > accessed on 20 August 2021102 (2018) SCC OnLine SC 3154

ABCDEFG

H

Asettlement. On 25 July 2019, the IBBI (Insolvency Resolution Processfor Corporate Persons) (Second Amendment) Regulations, 2019 amendedRegulation 30A in terms of this decision in interpreting Section 12A andnow specifically provides the procedure under the IBC that relates toaffecting a withdrawal under Section 12A before the constitution of theCoC. The applicant submits an application for withdrawal through theBIRP, directly before the Adjudicating Authority, since the CoC is not yetconstituted to consider such an application. To ensure that the processfor withdrawal is timely and efficient, the present Regulation 30A providesthat the IRP shall submit an application for withdrawal of the CIRP priorto the constitution of the CoC to the Adjudicating Authority on behalf ofCthe applicant within three days of the receipt. Alternatively, if theapplication for withdrawal is made after the constitution of the CoC,such application will be considered by the CoC within seven days of itsreceipt. If the CoC approves such an application with ninety per centvoting share, it is to be submitted to the Adjudicating Authority withinthree days of approval. Further, the application for withdrawal has to beDaccompanied by a bank guarantee towards estimated expenses relatingto costs of the IRP (in case of a withdrawal prior to constitution of theCoC) or insolvency resolution process costs (where withdrawal is afterconstitution of the CoC). It is clear that withdrawal of the CIRP is allowedonly if it upholds the interests of the CoC, is time-bound, and takes intoEconsideration how the expenses relating to the insolvency process up towithdrawal shall be borne. Thus, even the exit under Section 12A of theCoC, which is not available to the Resolution Applicant, is regulated byprocedural provisions indicating that the legislature has applied its mindto the timelines and costs involved in the CIRP. Pertinently, the regulationsdo not provide for any costs that are payable to the prospective ResolutionFApplicants or a successful Resolution Applicant, who must have incurreda significant expense in participating in the process. This Court, inMaharashtra Seamless (supra) had denied relief to a ResolutionApplicant who had sought to invoke Section 12A to resile from itsResolution Plan. The nature of the statute indicates the clarity of itsGpurpose – primacy of the interests of the creditors who are seeking tocut their losses through a CIRP. Traditional models and understandingsof equity or fairness that seek reliefs which are misaligned with thegoals of the statute and upset the economic coordination envisagedbetween the parties, cannot be read into the statute through judicialinterpretation. While parties have the freedom to negotiate certainH

commercial terms of the Resolution Plan to gain wide support, theirability to negotiate is circumscribed by the governing statute. A courtcannot interpret the negotiated arrangements that are represented in theResolution Plan in a manner that hampers the objectives of the IBCwhich is a speedy, predictable and timely resolution. The ResolutionApplicant is deemed to be aware of the IBC and its mechanisms beforeit steps into the fray and consents to be bound by its underlying objectives.A Resolution Applicant, after obtaining the financial information of theCorporate Debtor through the informational utilities and perusing theIM, is assumed to have analyzed the risks in the business of the CorporateDebtor and submitted a considered proposal. It cannot demand vestingof certain powers and rights which have been conspicuously omitted bythe legislature under the statute, in furtherance of the policy objectivesof the IBC. A court may not be able to lay down such detailed guidanceon how a mechanism for withdrawal, if any, may be provided to asuccessful Resolution Applicant without disturbing the statutory timelinesand adequately evaluating the interests of creditors and otherstakeholders, which is ultimately a matter of legislative policy. In EssarSteel (supra), a three judge Bench of this Court, affirmed a two judgeBench decision in K Sashidhar[103 ](supra), prohibiting the AdjudicatingAuthority from second-guessing the commercial wisdom of the partiesor directing unilateral modification to the Resolution Plans[104]. These arebinding precedents. Absent a clear legislative provision, this court willnot, by a process of interpretation, confer on the Adjudicating Authoritya power to direct an unwilling CoC to re-negotiate a submitted ResolutionPlan or agree to its withdrawal, at the behest of the Resolution Applicant.The Adjudicating Authority can only direct the CoC to re-consider certainelements of the Resolution Plan to ensure compliance under Section30(2) of the IBC, before exercising its powers of approval or rejection,as the case may be, under Section 31[105]. In Government of AndhraPradesh v. P Laxmi Devi[106], while determining the constitutionality ofa statute, this Court observed that it should be wary of transgressing intothe domain of the legislature, especially in matters relating to economicand regulatory legislation. This Court observed:

103 Para 62, supra note 35

104 Paras 64-73, supra note 35

105 Para 73, Essar Steel supra note 34

106 (2008) 4 SCC 720

ABC

DEFG

H

A“80. As regards economic and other regulatory legislation judicialrestraint must be observed by the court and greater latitude mustbe given to the legislature while adjudging the constitutionality ofthe statute because the court does not consist of economic oradministrative experts. It has no expertise in these matters,and in this age of specialisation when policies have to beBlaid down with great care after consulting the specialists inthe field, it will be wholly unwise for the court to encroachinto the domain of the executive or legislative (siclegislature) and try to enforce its own views andperceptions.”

A

C

A

C

(emphasis supplied)

146. Judicial restraint must not only be exercised while adjudicatingupon the constitutionality of the statute relating to economic policy butalso in matters of interpretation of economic statutes, where theinterpretative maneuvers of the Court have an effect of transgressingDinto the law-making power of the legislature and disturbing the delicatebalance of separation of powers between the legislature and the judiciary.Judicial restraint must be exercised in such cases as a matter of prudence,since the court neither has the necessary expertise nor the power tohold consultations with stakeholders or experts to decide the direction ofEeconomic policy. A court may be inept in laying down a detailed procedurefor exercise of the power of withdrawal or modification by a successfulResolution Applicant without impacting the other procedural steps andthe timelines under the IBC which are sacrosanct. Thus, judicial restraintmust be exercised while intervening in a law governing substantiveoutcomes through procedure, such as the IBC. In this case, if ResolutionFApplicants are permitted to seek modifications after subsequentnegotiations or a withdrawal after a submission of a Resolution Plan tothe Adjudicating Authority as a matter of law, it would dictate thecommercial wisdom and bargaining strategies of all prospectiveResolution Applicants who are seeking to participate in the process andGthe successful Resolution Applicants who may wish to negotiate a betterdeal, owing to myriad factors that are peculiar to their own case. Thebroader legitimacy of this course of action can be decided by the legislaturealone, since any other course of action would result in a flurry of litigationwhich would cause the delay that the IBC seeks to disavow.

H

147. The IBC is silent on whether a successful ResolutionApplicant can withdraw its Resolution Plan. However, the statutoryframework laid down under the IBC and the CIRP Regulations providea step-by-step procedure which is to be followed from the initiation ofCIRP to the approval by the Adjudicating Authority. Regulation 40Adescribes a model-timeline for the CIRP that accounts for everyeventuality that may arise between the commencement of the CIRPand approval of the Resolution Plan by the Adjudicating Authority,including the different stages for pressing a withdrawal of the CIRPunder Section 12A. Even a modification to the RFRP is envisaged bythe CIRP Rules and is subject to a timeline. The absence of any exitroutes being stipulated under the statute for a successful ResolutionApplicant is indicative of the IBC’s proscription of any attempts atwithdrawal at its behest. The rule of casus omissus is an establishedrule of interpretation, which provides that an omission in a statute cannotbe supplied by judicial construction. Justice GP Singh in his authoritativetreatise, Principles of Statutory Interpretation[107], defines the rule ofcasus omissus as:

“It is an application of the same principle that a matter whichshould have been, but has not been provided for in a statutecannot be supplied by courts, as to do so will be legislationand not construction. But there is no presumption that a casusomissus exists and language permitting the court should avoidcreating a casus omissus where there is none.”

The treatise further discusses that a departure from this rule isonly allowed in cases where words have been accidently omitted or theomission has an effect of making any part of the statute meaningless.Further, only such words can be supplied to the statute which wouldhave certainly been inserted by the Parliament, had the omission cometo its notice. The relevant paragraph is extracted below:

“As already noticed it is not allowable to read words in a statutewhich are not there, but “where the alternative lies between eithersupplying by implication words which appear to have beenaccidentally omitted, or adopting a construction which deprivescertain existing words of all meaning, it is permissible to supply ABCD

E

F

G

H

Athe words”. A departure from the rule of literal construction maybe legitimate so as to avoid any part of the statute becomingmeaningless. Words may also be read to give effect to the intentionof the Legislature which is apparent from the Act read as a whole.Application of the mischief rule or purposive construction mayalso enable reading of words by implication when there is no doubtBabout the purpose which the Parliament intended to achieve. Butbefore any words are read to repair an omission in the Act, itshould be possible to state with certainty that these or similarwords would have been inserted by the draftsman and approvedby Parliament had their attention been drawn to the omission beforeCthe Bill passed into law.”

In the wake of the COVID-19 pandemic, several Resolution Plansremained pending before Adjudicating Authorities due to the lockdownand significant barriers to securing a hearing. An Ordinance was swiftlypromulgated on 5 June 2020 which imposed a temporary suspension ofDinitiation of CIRP under Sections 7, 9 and 10 of the IBC for defaultsarising for six months from 25 March 2020 (extendable by one year).This was followed by an amendment through the IBC (SecondAmendment) Act 2020 on 23 September 2020 which provided for acarve-out for the purpose of defaults arising during the suspended period.The delays on account of the lockdown were also mitigated by the IBBIE(Insolvency Resolution Process for Corporate Persons) (ThirdAmendment) Regulations 2020, which inserted Regulation 40C on 20April 2020, with effect from 29 March 2020, and excluded such delaysfor the purposes of adherence to the otherwise strict timeline. Recently,the IBC (Amendment) Ordinance 2021 was promulgated with effectFfrom 04 April 2021 providing certain directions to preserve businessesof MSMEs and a fast-track insolvency process. There has been a clamoron behalf of successful Resolution Applicants who no longer wish toabide by the terms of their submitted Resolution Plans that are pendingapproval under Section 31, on account of the economic slowdown that impacted every business in the country. However, no legislative reliefGfor enabling withdrawals or re-negotiations has been provided, in thelast eighteen months. In the absence of any provision under the IBCallowing for withdrawal of the Resolution Plan by a successful ResolutionApplicant, vesting the Resolution Applicant with such a relief through aprocess of judicial interpretation would be impermissible. Such a judicialH

exercise would bring in the evils which the IBC sought to obviate throughthe back-door.

148. It is pertinent to note that even the UNCITRAL Guide doesnot contain any provisions for withdrawal of a submitted Plan. It onlydiscusses the possibilities of amending a Resolution Plan. TheUNCITRAL Guide indicates that it contemplates that the Legislatureshould choose if it wants to allow any amendments to a submittedResolution Plan. In the event, it does, it should lay down the detailedsteps of proposing amendments to a submitted resolution plan[108]. In fact,even the scope of negotiations between the Resolution Applicant andthe CoC has to be specifically envisaged by the statute[109]. Further, theUNCITRAL Guide envisages that amendments can be made to theResolution Plan after it is approved by the creditors only in limitedcircumstances. It mentions that, “[a]n insolvency law may include limitedprovision for a plan to be modified after it has been approved by creditors(and both before and after confirmation) if its implementation breaksdown or it is found to be incapable of performance, whether in whole orin part, and the specific problem can be remedied”[110]. If permitted bythe statute, the recommendations strongly urge the establishment of amechanism for amendment after approval by creditors which detailsrequirements of, inter alia, approval by creditors of the modificationand consequences of failure to secure approval to the amendments[111].The BLRC Report has relied on the UNCITRAL Guide while designingthe IBC[112] and it is a critical tool for ascertaining legislative choice andintent. Parliament has not introduced an explicit provision under the IBC

108 IV.A.52., page 225, and Recommendation 155: “155. The insolvency law shouldpermit amendment of a plan and specify the parties that may propose amendments andthe time at which the plan may be amended, including between submission and approval,approval and confirmation, after confirmation and during implementation, where theproceedings remain open.” of the UNCITRAL Guide, supra note 56109 Ibid.

110 IV. A. 66, page 230 of the UNCITRAL Guide, supra note 56

111 Recommendation 156: “The insolvency law should establish the mechanism forapproval of amendments to a plan that has been approved by creditors. That mechanismshould require notice to be given to the creditors and other parties affected by theproposed modification; specify the party required to give notice; require the approvalof creditors and other parties affected by the modification; and require the rules forconfirmation (where confirmation is required) to be satisfied. The insolvency lawshould also specify the consequences of failure to secure approval of proposedamendments.”, UNCITRAL Guide, supra note 56112 3.3.1, supra note 55

AB

C

D

E

F

G

H

Afor allowing any amendment of the Resolution Plan after approval ofcreditors, let alone a power to withdraw the Resolution Plan at thatstage. At the same time, the Corporate Debtor and the CoC have beenempowered to withdraw from the CIRP. If it intended to permit partiesto amend the Resolution Plan after submission to the AdjudicatingAuthority, based on its specific terms of the Resolution Plan, it wouldBhave adopted the critical safeguards highlighted by the UNCITRAL.

J.2Terms of the Resolution Plan are not sufficient toeffect withdrawals or modifications after its submissionto the Adjudicating Authority

C149. It has been contended by the three appellants that a ResolutionPlan only becomes binding when it is approved by the AdjudicatingAuthority under Section 31(1) of the IBC. Further, since Section 74(3)of the IBC, provides that a person can be prosecuted or punished forcontravening the Resolution Plan only after its approval by theAdjudicating Authority, the successful Resolution Applicant is entitled toDwithdraw the Plan, on the terms of its contractual provisions, as long asit is not made binding under Section 31(1) of the IBC. We have held inSection H that a CoC-approved Resolution Plan is a creature of the IBCand cannot be construed as a pure contract between two consentingparties, prior to its approval under Section 31 of the IBC. In this section,Eindependent of the above finding, we proceed to examine the contentionthat the terms of a Resolution Plan can reserve the right to modify orwithdraw its contents after submission to the Adjudicating Authority.

150. The approval of the Adjudicating Authority under Section31(1) of the IBC has the effect of making the Resolution Plan binding onFall stakeholders. These stakeholders include the employees of thecorporate debtor whose terms of employment would be governed by theResolution Plan, the Central and State Governments who would receivetheir tax dues on the basis of the terms of the Resolution Plan and localauthorities to whom dues are owed. These stakeholders are not directparticipants in the CIRP but are bound by its consequence by virtue ofGthe approval of the Resolution Plan, under Section 31(1) of the IBC.Section 31(1) ensures that the Resolution Plan becomes binding on allstakeholders after it is approved by the Adjudicating Authority. Thelanguage of Section 31(1) cannot be construed to mean that a ResolutionPlan is indeterminate or open to withdrawal or modification until it is H

approved by the Adjudicating Authority or that it is not binding betweenthe CoC and the successful Resolution Applicant. Regulation 39(4) ofCIRP Regulations mandates that the RP should endeavour to submit thePlan at least fifteen days before the statutory period of the CIRP underSection 12 is due to expire along with a receipt of a PBG and a compliancecertificate as Form H. It is pertinent to note that sub-Section (3) toSection 12 mandates that the CIRP process, including legal proceedings,must be concluded within 330 days. This three-hundred-and-thirty-dayperiod can be extended only in exceptional circumstances, if the processis at near conclusion and serves the object of the IBC, as held by a threejudge Bench of this Court in Essar Steel (supra). Therefore, afteraccounting for all statutorily envisaged delays which the RP has to explainin its Form H and otherwise through Regulation 40B, the procedureenvisages a fifteen-day window between submission of Resolution Planand its approval or rejection by the Adjudicating Authority. This clearlyindicates that the statute envisages a certain level of finality before theResolution Plan is submitted for approval to the Adjudicating Authority.Even the CoC is not permitted to approve multiple Resolution Plans orsolicit EOIs after submission of a Resolution Plan to the AdjudicatingAuthority, which would possibly be in contemplation if the ResolutionApplicant was permitted to withdraw from, or modify, the Plan afteracceptance by the CoC. Regulation 36B(4A) requires the furnishing ofa performance security which will be forfeited if a Resolution Applicantfails to implement the Plan. This is collected before the AdjudicatingAuthority approves the Plan. Notably, the regulations also direct forfeitureof the performance security in case the Resolution Applicant “contributesto the failure of implementation”, which could potentially include anyattempts at withdrawal of the Plan.

151. The report of the BLRC also notes that the negotiations inthe CIRP must be time bound and it envisages that one of the ways inwhich the CIRP comes to a close is that the RP is able to obtain abinding agreement from the CoC[113]. Such a binding agreement is placedbefore the Adjudicating Authority, which orders the closure of the CIRP.If the Adjudicating Authority does not receive a binding agreement, itcan send the Corporate Debtor into liquidation. The relevant paragraphsare extracted below:

AB

C

DE

F

G

H

A“5.3.4 Rules to close the IRP

The Committee agrees that it is critical for the Code to preservethe time value of the entity by ensuring that negotiations in theIRP are time bound. The Code states that the IRP has a defaultmaximum time limit that is strictly adhered to, regardless of whetherBthe creditors committee has identified a solution. On the otherside, the Committee is also of the view that, if a solution can beidentified within a shorter time frame, the process mustaccommodate closing the IRP in a shorter time period also. TheCommittee proposes that the IRP can come to a close ineither of two ways. Either the RP is able to get a bindingCagreement from the majority of the creditors committee orthe calm period reaches the default maximum date set by theAdjudicator at the start of the IRP. If either condition is met, theAdjudicator will issue an order to close the IRP. However, theorders will vary depending upon the condition. If the RP submitsDa binding agreement to the Adjudicator before the defaultmaximum date, then the Adjudicator orders the IRP caseto be closed. If the Adjudicator does not receive a bindingagreement by this date, the Adjudicator issues an order toclose the IRP case along with an order to liquidate theentity.”E

152. The binding nature, as between the CoC and the successfulResolution Applicant, of the Resolution Plan submitted for approval bythe Adjudicating Authority is further evidenced from the fact that theFCoC issues a LOI to a successful Resolution Applicant stating that it hasbeen selected as the successful Resolution Applicant and its Plan wouldbe submitted to the Adjudicating Authority for its approval. The successfulResolution Applicant is typically required to accept the LOI unconditionallyand submit a PBG. Sequentially, the issuance of an LOI is followed byits unconditional acceptance by the successful Resolution Applicant. InGAmtek Auto (supra), this court thwarted a similar attempt by a successfulResolution Applicant who had relied on certain open-ended clauses in itsResolution Plan to seek a direction compelling the CoC to negotiate amodification to its Resolution Plan. The Resolution Plan had beenapproved by the Adjudicating Authority and the Resolution Applicant’sHIA was not entertained. The Resolution Applicant had then sought to challenge the approval of the Resolution Plan under Section 61(3) of theIBC by seeking the same relief. This Court rejected the claim andobserved that, “[t]o assert that there was any scope for negotiationsand discussions after the approval of the resolution plan by the CoCwould be plainly contrary to the terms of the IBC”.

153. Regulation 38(3) mandates that a Resolution Plan be feasible,viable and implementable with specific timelines. A Resolution Plan whoseimplementation can be withdrawn at the behest of the successfulResolution Applicant, is inherently unviable, since open-ended clauseson modifications/withdrawal would mean that the Plan could fail at anundefined stage, be uncertain, including after approval by the AdjudicatingAuthority. It is inconsistent to postulate, on the one hand, that nowithdrawal or modification is permitted after the approval by theAdjudicating Authority under Section 31, irrespective of the terms of theResolution Plan; and on the other hand, to argue that the terms of theResolution Plan relating to withdrawal or modification must be respected,in spite of the CoC’s approval, but prior to the approval by the AdjudicatingAuthority. The former position follows from the intent, object and purposeof the IBC and from Section 31, and the latter is disavowed by theIBC’s structure and objective. The IBC does not envisage a dichotomyin the binding character of the Resolution Plan in relation to a ResolutionApplicant between the stage of approval by the CoC and the approvalof the Adjudicating Authority. The binding nature of a Resolution Planon a Resolution Applicant, who is the proponent of the Plan which hasbeen accepted by the CoC cannot remain indeterminate at the discretionof the Resolution Applicant. The negotiations between the ResolutionApplicant and the CoC are brought to an end after the CoC’s approval.The only conditionality that remains is the approval of the AdjudicatingAuthority, which has a limited jurisdiction to confirm or deny the legalvalidity of the Resolution Plan in terms of Section 30 (2) of the IBC. Ifthe requirements of Section 30(2) are satisfied, the Adjudicating Authorityshallconfirm the Plan approved by the CoC under Section 31(1) of theIBC.

154. If the appellants’ claim were to succeed, a clause enabling aResolution Applicant to withdraw/seek modification for reasons such asa ‘Material Adverse Event’ could also be set up by a Resolution Applicantwhen it is being prosecuted under Section 74 (3). It was contendedbefore us that Form H, which is a compliance certificate that is to be A

BC

D

E

F

G

H

Asubmitted by the RP to the Adjudicating Authority along with theResolution Plan, mentions that the RP can enter details as to whetherthe Resolution Plan is subject to any conditionalities under Clause 12.Thus, the argument goes that this permits the Resolution Applicant tostipulate in the Resolution Plan certain contingencies under which it canwithdraw the Plan, for instance if there is an occurrence of an ‘MaterialBAdverse Event’. A form is subservient to the statute. The conditionalitiescontemplated in Form H could be those which do not strike at the root ofthe IBC. They can include commercial conditions and businessarrangements with the CoC. However, conditions for withdrawal or re-negotiation of the Resolution Plan cannot pass the test of ‘viability’ andC‘implementability’ as they would make the resolution processindeterminate and unpredictable. A two judge Bench of this Court inK Sashidhar (supra), while discussing the jurisdiction of the AdjudicatingAuthority under Section 31 to evaluate a Resolution Plan, has observedthat the Resolution Plan should “be an overall credible plan, capable ofachieving timelines specified in the Code generally, assuring successfulD”[114]revival of the corporate debtor and disavowing endless speculation.Section 30(2)(d) of the IBC and Regulation 38 of the CIRP Regulationsalso provide that the Resolution Plan should be implementable. In theabsence of specific statutory language allowing for withdrawals or evenmodifications by the successful Resolution Applicant, it would be difficultEto imply the existence of such an option based on the terms of theResolution Plan, irrespective of, and especially when they do not form apart of Clause 12 in Form H, as is the case in all the three ResolutionPlans that are in dispute in this present appeal.

155. The Insolvency and Bankruptcy Law Committee in its reportFreleased in March 2018[115] noted that many conditional Resolution Planswere being approved by the Adjudicating Authority on account of theuncertainty on statutory clearances, such as by the CompetitionCommission of India, and the approval by the Adjudicating Authoritywas being regarded as a “single window approval”. This was incontravention of the intent of the IBC. The relevant extracts of theGreport are reproduced below:

“16.1 Regulation 37(l) of the CIRP Regulations states that aresolution plan shall provide for obtaining necessary approvals 114 Para 60 supra note 35H115 supra note 100

from the Central and State Governments and other authorities.However, the timeline within which such approvals are requiredto be obtained, once a resolution plan has been approved by theNCLT, has not been provided in the Code or the CIRP Regulations.The Committee deliberated that as the onus to obtain the finalapproval would be on the successful resolution applicant as perthe resolution plan itself, the Code should specify that the timelinewill be as specified in the relevant law, and if the timeline forapproval under the relevant law is less than one year from theapproval of the resolution plan, then a maximum of one year willbe provided for obtaining the relevant approvals, and section 31shall be amended to reflect this.

16.2 Further, the Committee noted that there is no provisionin the Code on the requirement to obtain an indication onthe stance of the concerned regulators or authorities, ifrequired, on the resolution plan prior to the resolution planbeing approved by the NCLT. It was brought to theattention of the Committee that this was resulting in severalconditional resolution plans being approved by the NCLT,and that the approval by the NCLT was being regarded asa ‘single window approval.’ This not being the intent of theCode, the Committee deliberated on introduction of amechanism for obtaining preliminary observations from theconcerned regulators and authorities in relation to aresolution plan approved by the CoC and submitted to theNCLT for its approval, but prior to the NCLT’s approval.”

The Insolvency and Bankruptcy Law Committee in its report datedFebruary 2020[116] stated that the current practice of obtaininggovernmental approvals after the approval of the Resolution Plan hascreated an uncertainty about the implementation of the Resolution Plan.The committee suggested that this uncertainty can be mitigated ifamendments are made to the IBC to provide that once the ResolutionPlan is approved by the CoC, it will be shared with the governmentaland regulatory authorities, for approvals that are necessary for runningthe business of the Corporate Debtor. If no objections are raised withinforty-five days, it would be deemed that they have granted an approval.

116 supra note 90

AB

C

D

E

F

G

H

AIf objections are raised or conditional approvals are granted, theResolution Applicant should attempt to clear the objections or meet theconditions before placing the Resolution Plan before the AdjudicatingAuthority. This Plan would thereafter be placed before the AdjudicatingAuthority for its approval. The committee further suggested that thistimeline of forty-five days should be excluded from calculating theBtimelines under Section 12 of the IBC. The relevant extract is reproducedbelow:

“14.8. To enable approvals or no-objections to be taken within thescheme of the Code, the Committee decided that amendmentsshould be made to the Code such that once a resolution plan isCapproved by the CoC, it should be sent to all concernedgovernment and regulatory authorities whose approvals arecore to the continued running of the business of thecorporate debtor, for their approvals or objections. If theydo not raise their objections within forty-five days, they willDbe deemed to have no objections. This plan would then beplaced before the Adjudicating Authority for its approval.If the government and regulatory agencies raise anyobjections or grant conditional approvals, the resolutionapplicant can attempt to clear the objections or meet theconditions for approval before placing the plan for theEapproval of the Adjudicating Authority, where this can bedone within the time limit provided under Section 12.However, where this is not possible, the plan may still be placedbefore the Adjudicating Authority for its approval, and thesuccessful resolution applicant should clear the objections or complyFwith the conditions for approval within a period of one year fromthe approval of the resolution plan.

14.9. To ensure that this aligns with the time-line forresolution provided in the Code, the Committeerecommended that the window of forty-five days given toGgovernment and regulatory agencies should be excludedfrom the computation of the time limit under Section 12 ofthe Code. Although some members of the Committee were ofthe view that this time-line should ideally run concurrently withthe CIRP period, the Committee felt that this exclusion would bejustified since it would streamline the process of gaining governmentH

approvals considerably, which would lead to more value maximisingresolutions, offsetting value lost, if any, in this forty-five day periodin which the corporate debtor will be run as a going concern.”

The aim to tighten timelines for receiving regulatory approvalsthrough the provision of in-principal approvals, prior to the approval ofthe Adjudicating Authority, indicates that the statutory framework underthe IBC has consistently attempted to avoid situations which mayintroduce unpredictability in the insolvency resolution process and hassought to make the process as linear as it can be. Further, therecommendations made in the Insolvency Law Committee Report ofFebruary 2020[117] discussed above indicate that the aim is to ensure thatthe Resolution Plan placed before the Adjudicating Authority should reacha certain finality, even in the context of governmental approvals. Aconditionality which allows for further negotiations, modification orwithdrawal, once the Resolution Plan is approved by the CoC wouldonly derail the time-bound process envisaged under the IBC.

156. Regulation 40A envisages a model-time line for the CIRP.Any deviation from this timeline needs to be specifically explained bythe RP in Clause 10 of Form H. Regulation 40B imposes a time-limit onthe RP for filing the requisite forms at different stages of the CIRP,including forms seeking extensions on account of delays at any stage.The failure to fill these forms within the stipulated deadline results indisciplinary action against the RP by the IBBI. Further, as discussed inSection I of the judgement, various mandatory timelines have beenimposed for undertaking specific actions under the CIRP. If the legislatureintended to allow withdrawals or subsequent negotiations by successfulResolution Applicants, it would have prescribed specific timelines forthe exercise of such an option. The recognition of a power of withdrawalor modification after submission of a CoC-approved Resolution Plan, byjudicial interpretation, will have the effect of disturbing the statutorytimelines and delaying the CIRP, leading to a depletion in the value of theassets of a Corporate Debtor in the event of a potential liquidation. Hence,it is best left to the wisdom of the legislature, based on the experiencesgained from the working of the enactment, to decide whether the optionof modification or withdrawal at the behest of the Resolution Applicantshould be permitted after submission to the Adjudicating Authority; if so,117 supra note 90

A

B

C

D

E

F

G

H

Athe conditions and the safeguards subject in which it can be allowed andthe statutory procedure to be adopted for its exercise.

157. Based on the plain terms of the statute, the AdjudicatingAuthority lacks the authority to allow the withdrawal or modification ofthe Resolution Plan by a successful Resolution Applicant or to give effectBto any such clauses in the Resolution Plan. Unlike Section 18(3)(b) ofthe erstwhile SICA which vested the Board for Industrial and FinancialReconstruction with the power to make modifications to a draft schemefor sick industrial companies, the Adjudicating Authority under Section31(2) of the IBC can only examine the validity of the plan on the anvil ofthe grounds stipulated in Section 30(2) and either approve or reject theCplan. The Adjudicating Authority cannot compel a CoC to negotiatefurther with a successful Resolution Applicant. A rejection by theAdjudicating Authority is followed by a direction of mandatory liquidationunder Section 33. Section 30(2) does not envisage setting aside of theResolution Plan because the Resolution Applicant is unwilling to executeDit, based on terms of its own Resolution Plan.

158. Further, no such power can be vested with the AdjudicatingAuthority under its residuary jurisdiction in terms of Section 60 (5)(c). Ina decision of a three judge Bench of this Court in Gujarat Urja (supra),it was held that, “the NCLT’s residuary jurisdiction [under SectionE60(5)(c)] though wide, is nonetheless defined by the text of the IBC.Specifically, the NCLT cannot do what the IBC consciously did notprovide it the power to do”. Further, the court observed that “this Courtmust adopt an interpretation of the NCLT’s residuary jurisdiction whichcomports with the broader goals of the IBC”[118]. The effect of allowingthe Adjudicating Authority to permit withdrawals of resolution plans thatFare submitted to it, would be to confer it with a power that is not envisagedby the IBC and defeat the objectives of the statute, which seeks a timelyand predictable insolvency resolution of Corporate Debtors.

159. After the amendment to Section 12 in 2019 which mandate a330 days outer-limit for conclusion of the CIRP (which can be breachedGonly under exceptional circumstances as held in Essar Steel (supra)), itwould be antithetical to the purpose of the IBC to allow the AdjudicatingAuthority to use its plenary powers under Section 60(5)(c) to potentiallyextend these timelines to enable the CoC to either issue a fresh RFRP if the Resolution Plan is withdrawn by a successful Resolution Applicantor direct further negotiations with the Resolution Applicant who is seekinga modification of the plan, whose failure could result in withdrawal aswell. The likely consequence of a withdrawal by a successful ResolutionApplicant after going through the stages of the CIRP for nearly 180days (provided all statutory timelines have been strictly followed) wouldinevitably be a delayed liquidation after the value of the assets has furtherdepreciated. In the event of intervening delays on account of litigation orotherwise, the delay would be even more severe. If a CoC, could becompelled by the Adjudicating Authority to negotiate with the successfulResolution Applicant, it would have to resign itself to a commercial bargainat a much lower value. If Parliament intended to permit such withdrawals/modifications sought by successful Resolution Applicants as beingbeneficial to the economic policy, which it has sought to pursue whileenacting the IBC, it would have prescribed timelines for setting the clock-back or directing immediate liquidation if the withdrawals occur after acertain period. For instance, under Regulation 36B (5) any modificationto the RFRP or the evaluation matrix is deemed as a fresh issue of theRFRP and the timeline for submission of Resolution Plan starts afresh.Parliament has not legislated to provide for the eventuality argued by theappellants.

160. Permitting the Adjudicating Authority to exercise its residuarypowers under Section 60(5) to allow for further modifications orwithdrawals at the behest of the successful Resolution Applicant, wouldbe in the teeth of the decision of this Court in Essar Steel (supra) whichheld that “[s]ection 60(5)(c) cannot be used to whittle down Section31(1) of the IBC, by the investment of some discretionary or equityjurisdiction in the Adjudicating Authority outside Section 30(2) of theCode, when it comes to a resolution plan being adjudicated upon by theAdjudicating Authority”[119].

K Factual Analysis

161. We have held in Section H of this judgement that ResolutionPlans are not in a nature of a traditional contract per se, and the processleading up to their formulation and acceptance by the CoC iscomprehensively regulated by the insolvency framework. In Section J,we have further held that the IBC framework, does not enablewithdrawals or modifications of Resolution Plans, once they have been 119 Para 68-69, supra note 34

AB

C

D

EF

G

H

Asubmitted by the RP to the Adjudicating Authority after their approval bythe CoC. In any event, and without affecting the legal position formulatedabove, we will also deal with the submissions of the parties that thecontractual terms of their respective Resolution Plans enabled withdrawalor re-negotiation of terms. We will be undertaking an analysis on whetherthe individual Resolution Applicants before us had specifically negotiatedBwith the respective CoCs for a right of modification or withdrawal andare contractually entitled to the same in the present case.

K.1 The Ebix Appeal

162. Before we begin our analysis on the factual matrix pertainingCto Ebix’s Appeal, we must deal with the preliminary issue alleged by therespondents during the course of the Ebix Appeal- whether the ThirdWithdrawal Application by Ebix was barred by res judicata; while thiswill not have a bearing on the final outcome of the appeal, we shallanalyze it briefly.

K.1.1 Res JudicataD

163. To begin our inquiry, it is important to first consider thecontours of the principle of res judicata. In Indian law, the principle hasbeen recognized in Section 11 of the Code of Civil Procedure 1908.Section 11, in so far as is relevant, reads as follows:

E

E“11. Res judicata.—No Court shall try any suit or issue in whichthe matter directly and substantially in issue has been directly andsubstantially in issue in a former suit between the same parties, orbetween parties under whom they or any of them claim, litigatingunder the same title, in a Court competent to try such subsequentFsuit or the suit in which such issue has been subsequently raised,and has been heard and finally decided by such Court.

[…]

Explanation IV.—Any matter which might and ought to have beenmade ground of defence or attack in such former suit shall beGdeemed to have been a matter directly and substantially in issuein such suit.

Explanation V.—Any relief claimed in the plaint, which is notexpressly granted by the decree, shall, for the purposes of thissection, be deemed to have been refused.

H

[…]”

164. In Satyadhyan Ghosal v. Deorajin Debi[120], a three judgeBench of this Court, speaking through Justice KC Das Gupta, explainedthe doctrine of res judicata in the following terms:

“7. The principle of res judicata is based on the need of giving afinality to judicial decisions. What it says is that once a res isjudicata, it shall not be adjudged again. Primarily it applies asbetween past litigation and future litigation. When a matter —whether on a question of fact or a question of law — has beendecided between two parties in one suit or proceeding and thedecision is final, either because no appeal was taken to a highercourt or because the appeal was dismissed, or no appeal lies,neither party will be allowed in a future suit or proceeding betweenthe same parties to canvass the matter again. This principle of resjudicata is embodied in relation to suits in Section 11 of the Codeof Civil Procedure; but even where Section 11 does not apply, theprinciple of res judicata has been applied by courts for the purposeof achieving finality in litigation. The result of this is that the originalcourt as well as any higher court must in any future litigationproceed on the basis that the previous decision was correct.”

From the above extract, it is clear that while res judicata mayhave been codified in Section 11, that does not bar its application to otherjudicial proceedings, such as the one in the present case.

165. Before proceeding further, it is important to compare thereliefs sought by Ebix in the First, Second and Third WithdrawalApplications. They have been tabulated below, for an easy comparison:

A

BC

D

E

F

G

H

CFrom the above table, it is clear that the prayers in the Secondand Third Withdrawal Applications were identical. Further, prayer (iii)of both corresponds to prayer (iii) of the First Withdrawal Application, inalmost identical terms, while prayer (ii) was not present in the FirstWithdrawal Application at all. At the same time, prayers (i) and (ii) in theFirst Withdrawal Application have not been repeated in the Second andDThird Withdrawal Applications. However, what is at issue is prayer (iv)of the First Withdrawal Application and prayer (i) of the Second andThird Withdrawal Applications. Through the former, Ebix soughtpermission to re-evaluate its Resolution Plan and to suitably “revise/modify and/or withdraw” it, while through the latter, Ebix sought permissionEto withdraw its Resolution Plan. Now we must analyse whether thiswould attract the principle of res judicata.

166. In a judgment of this Court in Sheodan Singh v. DaryaoKunwar[121], a four judge Bench of this Court elaborated on the variousconditions which must be satisfied before the doctrine of res judicataFcan apply in a given case. Justice KN Wanchoo, speaking for the Court,held:

“9. A plain reading of Section 11 shows that to constitute a matterres judicata, the following conditions must be satisfied, namely—

(i) The matter directly and substantially in issue in theGsubsequent suit or issue must be the same matter whichwas directly and substantially in issue in the former suit;

(ii) The former suit must have been a suit between the sameparties or between parties under whom they or any of themclaim;

(iii) The parties must have litigated under the same title in theformer suit;

(iv) The court which decided the former suit must be a courtcompetent to try the subsequent suit or the suit in which suchissue is subsequently raised; and

(v) The matter directly and substantially in issue in thesubsequent suit must have been heard and finally decidedby the court in the first suit…”

(emphasis supplied)

167. In the present case, conditions (i) is not in dispute since theparties were the same. As regards (ii), in the First Withdrawal Application,the prayer was to enable Ebix to re-evaluate its proposals and to revise/modify and also withdraw its Resolution Plan. A prayer for withdrawalof the Resolution Plan was raised in the Second and Third WithdrawalApplications. Conditions (iii) and (iv) are also not in issue. What remainsto be assessed is compliance with condition (v), i.e., whether Ebix’sprayer in the First Withdrawal was in fact “heard and decided finally”.While dismissing the First Withdrawal Application, the NCLT had held:

“This is an application filed by one Ebix Singapore Ptd. Limitedseeking re-valuation of the Resolution Plan submitted by it beforethe Resolution Professional.

No ground for considering the prayer sought in the application ismade out.

The application is dismissed as such.”

NCLT dismissed the First Withdrawal Application in a summarymanner. Further, the order does not make mention of the prayer to “revise/modify and/or withdraw” of the Resolution Plan, but only refers to itsre-evaluation.

168. The meaning of the phrase “heard and finally decided” wasconsidered by a judgment of a two judge Bench of this Court in KrishanLal v. State of J&K[122], where it was held that the matter must havebeen heard on merits to have been “heard and finally decided”. JusticeBL Hansaria, speaking for the Court, held:

A

B

C

D

E

F

G

H

A“12. Insofar as the second ground given by the High Court— the same being bar of res judicata — it is clear fromwhat has been noted above, that there was no decision onmerits as regards the grievance of the appellant; and so,the principle of res judicata had no application. The merefact that the learned Single Judge while disposing of the WritBPetition No. 23 of 78 had observed that:

A

“This syndrome of errors, omissions and oddities, cannot beexplained on any hypothesis other than the one that there issomething fishy in the petitioner’s version….”

Cwhich observations have been relied upon by the High Court inholding that the suit was barred by res judicata do not at all makeout a case of applicability of the principle of res judicata. Theconclusion of the High Court on this score is indeed bafflingto us, because, for res judicata to operate the involved issuemust have been “heard and finally decided”. There was noDdecision at all on the merit of the grievance of the petitionerin the aforesaid writ petition and, therefore, to take a viewthat the decision in earlier proceeding operated as resjudicata was absolutely erroneous, not to speak of its beinguncharitable.”

E

169. In Daryao v. State of U.P.[123], a Constitution Bench of thisCourt held that orders dismissing writ petitions in limine will not constituteres judicata. It was noted that while a summary dismissal may beconsidered as a dismissal on merits, it would be difficult to determineFwhat weighed with the Court without a speaking order. Justice PBGajendragadkar, speaking for the Court, held:

“26...If the petition is dismissed in limine without passing a speakingorder then such dismissal cannot be treated as creating a bar ofres judicata. It is true that, prima facie, dismissal in limine evenGwithout passing a speaking order in that behalf may stronglysuggest that the Court took the view that there was no substancein the petition at all; but in the absence of a speaking order itwould not be easy to decide what factors weighed in the mind ofthe Court and that makes it difficult and unsafe to hold that such a summary dismissal is a dismissal on merits and as such constitutesa bar of res judicata against a similar petition filed under Article32…”

170. Another two judge Bench of this Court, in its judgment inErach Boman Khavar v. Tukaram Shridhar Bhat[124], has held thatthe doctrine of res judicata can only apply when there has been aconscious adjudication of the issue on merits. Justice Dipak Misra,speaking for the Court, held:

“39. From the aforesaid authorities it is clear as crystal that toattract the doctrine of res judicata it must be manifest thatthere has been a conscious adjudication of an issue. A pleaof res judicata cannot be taken aid of unless there is anexpression of an opinion on the merits. It is well settled inlaw that principle of res judicata is applicable between the twostages of the same litigation but the question or issue involvedmust have been decided at earlier stage of the same litigation.”

171. Res judicata cannot apply solely because the issue haspreviously come up before the court. The doctrine will apply where theissue has been “heard and finally decided” on merits through a consciousadjudication by the court. In the present case, the NLCT’s orderdismissing the First Withdrawal Application makes it clear that it hadonly considered only that part of prayer (iv) which related to re-evaluationof the Resolution Plan, possibly because Ebix had hoped to re-evaluatethe Resolution Plan on the basis of the information received as aconsequence of prayers (i) and (ii) and those prayers were rejectedsince such information was not available.

172. In the impugned judgment, the NCLAT has relied uponExplanation (V) to Section 11 to state that since withdrawal was alsoprayed for as a relief in prayer (iv) of the First Withdrawal Application,it would have also been assumed to have been rejected. Mulla’s TheCode of Civil Procedure states that Explanation V can only apply uponthe fulfilment of two conditions: (i) the relief claimed must have beensubstantial, and not merely auxiliary; and (ii) the relief claimed must A

B

C

D

E

F

G

Ahave been one which the Court is bound to grant, and not one which it isdiscretionary for the Court to grant[125].

173. In Jaswant Singh v. Custodian of Evacuee Property[126],a two judge Bench of this Court held that res judicata will only apply ifthe cause of action the same and that the party also had an earlierBopportunity to apply for the relief it is now seeking. Justice ESVenkataramiah held:

“14…It is well-settled that in order to decide the question whethera subsequent proceeding is barred by res judicata it is necessaryto examine the question with reference to the (i) forum or theCcompetence of the Court, (ii) parties and their representatives,(iii) matters in issue, (iv) matters which ought to have been madeground for defence or attack in the former suit, and (v) the finaldecision…A cause of action for a proceeding has no relationwhatever to the defence which may be set up, nor does it dependupon the character of the relief prayed for by the plaintiff or theDapplicant. It refers entirely to the grounds set forth in the plaint orthe application as the case may be as the cause of action or inother words to the media upon which the plaintiff or the applicantasks the court to arrive at a conclusion in his favour. In orderthat a defence of res judicata may succeed it is necessaryEto show that not only the cause of action was the same butalso that the plaintiff had an opportunity of getting the reliefwhich he is now seeking in the former proceedings. Thetest is whether the claim in the subsequent suit or proceedings isin fact founded upon the same cause of action which was thefoundation of the former suit or proceedings…”F

174. The prayer for withdrawal of the Resolution Plan in the FirstWithdrawal Application was not substantial and one that the Court wasbound to grant, since it was contingent upon a re-evaluation, which inGitself was contingent upon receiving the information sought in prayers (i)and (ii). Since the latter two contingencies never arose, the NCLT didnot apply its mind to the prayer for withdrawal independently. When itfiled the Second Withdrawal Application, it was dismissed on a technical 125 Sir Dinshaw Fardunji Mulla, The Code of Civil Procedure (18th edn, LexisNexis)H126 (1985) 3 SCC 648

ground and not on its merits. When a revised Third Withdrawal Applicationwas filed, the NCLT then adjudicated it on its merits and allowed it.Hence, since the NCLT did not adjudicate Ebix’s prayer for withdrawalof their Resolution Plan on its merits while dismissing the First WithdrawalApplication, the opportunity to seek the relief was not available to Ebixin a real sense. Therefore, we reverse the finding of the NCLAT on thisissue and hold that Ebix’s Third Withdrawal Application was not barredby res judicata.

K.1.2 Analysis of the Resolution Plan of Ebix

K.1.2 Analysis of the Resolution Plan of Ebix

175. To briefly recount the relevant facts for determination of thedispute over the terms of the resolution plan – the CIRP of Educompcommenced on 30 May 2017. After consultation with the E-CoC, theE-RP invited EOIs on 18 October 2017. The RFRP was issued on 5December 2017, and was revised on 17 January 2018 and 20 January2018. Ebix submitted its draft Resolution Plan after the last date of27 January 2018, and after securing an extension from the AdjudicatingAuthority, on 29 January 2018. Ebix took the benefit of an extension oftime which was granted to it to submit its Resolution Plan. In the absenceof an extension of time, it would not have been permitted to enter thefray. After multiple rounds of negotiations, on 9 February 2018, Ebixwas declared the successful Resolution Applicant and a LOI was issuedby the E-CoC. On 17 February 2018, Ebix’s Resolution Plan wasapproved by a 74.16 per cent voting share of the E-CoC, which wassubsequently upgraded to 75.35 per cent by CSEB’s vote being addedbelatedly on 23 February 2018. While it is true that the votes of CSEBwere received in favour of the Resolution Plan on a later date, all theparties including Ebix proceeded on the notion that the Resolution Planhas been approved by the requisite majority of seventy-five per cent ofthe voting share of the E-CoC as was required then (now the requisitepercentage has been reduced to sixty-six per cent pursuant to anamendment). Thus, the CSEB Application filed before the NCLT seekinga clearance of its delayed vote was a mere formality and there was nocontroversy raised in relation to that application at that stage. In fact, theApproval Application for the approval of the Resolution Plan was filedbefore the NCLT on the basis that the Plan has been duly approved bythe requisite majority of the CoC. No objections were raised against theApproval Application on the ground that the threshold of seventy-fiveper cent of votes was not met. The Resolution Plan dated 19 February AB

C

DEF

G

H

A2018 and the addendum dated 21 February 2018 for a total bid amountof Rs 400 crores were then submitted by the E-RP to the AdjudicatingAuthority for approval on 7 March 2018.

176. Owing to the intervening applications for investigation intothe accounts of Educomp (pertinently, no internal special audit has beenBconducted till date), Ebix filed the First Withdrawal Application on 5 July2019, on account of a delay in approval of seventeen months. Thereafter,it filed the Second and Third Withdrawal Applications.

177. Ebix has alleged before this Court that it is entitled to withdrawits Resolution Plan by relying on: (i) the terms of the RFRP, which indicatesCthat the Resolution Plan is binding on the Resolution Applicant only afterapproval by the Adjudicating Authority under Section 31; (ii) the termsof the Resolution Plan which indicate that the Plan was valid for sixmonths; and (iii) the principles of contract law to urge frustration onaccount of fraud and an erosion of the commercial substratum.

D178. Clause 1.8.3 of the RFRP, produced below, invited ResolutionPlans with a validity of not less than six months:

“1.8.3 A Resolution Plan once made/submitted must be valid for aperiod not less than 6 (six) months from the Resolution PlanSubmission Date including any revisions to such Resolution planESubmission Date (“Resolution Plan Validity Period”). In case ofextension of the Resolution Plan Submission Date by the ResolutionProfessional, the validity period of the Resolution Plan shall alsobe deemed to be valid for a period of 6 (six) months from suchrevised Resolution Plan Submission date.

FIf any Resolution Plan as approved by the CoC and submitted tothe Adjudicating Authority is rejected by the Adjudicating Authority,then the Resolution Professional and the CoC shall act inaccordance with the instructions/directions issued by theAdjudicating Authority.”

Ebix urges that in compliance with the above clause of the RFRP,GClause 7 of its Resolution Plan specified that it shall be valid for a termof six months from the date of submission:

“7. Term of the Resolution Plan

This Resolution Plan proposed by the Resolution Applicant is validHfor 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 andthe 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 termsof the RFRP or the Resolution Plan relate to the validity of the ResolutionPlan for the period of negotiation with the E-CoC and not for a periodafter the Resolution Plan is submitted for the approval of the AdjudicatingAuthority. The time which may be taken before the Adjudicating Authorityis an imponderable which none of the parties can predict. In fact, this isemphasized by Clause 1.3.7 of the RFPF which contains a schedule ofthe Resolution Plan submission process. As regards the approval of theAdjudicating Authority, it provides clearly that there is no time-line:

“1.3.7 Schedule of Resolution Plan Submission Process […]

11. Approval of NCLT regarding the Resolution Plan of SuccessfulResolution Applicant – As per NCLT.”

Parties cannot indirectly impose a condition on a judicial authorityto accept or reject its Plan within a specified time period, failing whichthe CIRP process will inevitably come to an end. In this case, the draftResolution Plan of Ebix was submitted on 29 January 2018 and remainedvalid for the term of the multiple rounds of negotiations with the E-CoC,until its submission to the Adjudicating Authority on 7 March 2018, whichwas within the six-month period envisaged in the Plan.

180. Even if it were to be assumed, for the sake of argument, thatthe term in the submitted Resolution Plan was in the nature of a qualifiedoffer which would expire after six months of its submission, failing theimprimatur of the Adjudicating Authority under Section 31 which wouldmake it binding on all parties, the surrounding terms of the RFRP and thesubsequent legal materials including the LOI and the ComplianceCertificate (Form H) under CIRP Regulations make it clear that therewas no scope to resile from the implementation of the Resolution Plan,once it had been submitted to the Adjudicating Authority, except in theevent of a rejection. Clause 1.9.3 of the RFRP required Ebix to replaceits EMD with a PBG equivalent to ten per cent of the Resolution Planvalue, if it were to be declared as the ‘successful Resolution Applicant’.

A

BC

DE

F

G

H

AThis PBG can be invoked under Clause 1.9.5 of the RFRP if theResolution Applicant fails to implement the Resolution Plan. Further,Clause 1.8.4 of the RFRP states that “[a] Resolution Plan submitted bya Resolution Respondent shall be irrevocable”. Clause 1.10(l) of theRFRP also provides that a successful Resolution Applicant is not permittedto withdraw an approved Resolution Plan:B

“Clause 1.10 of the RFRP

“By procuring this RFRP and obtaining access to the Data roomand Information Memorandum, in accordance with the terms ofthis RFRP, the Resolution Respondent is deemed to have madeCthe following acknowledgements and representations:

[...]

(l) The Resolution Respondent upon declaration asSuccessful Resolution Respondent shall remain responsiblefor the implementation and supervision of the ResolutionDPlan from the date of approval by the Adjudicating Authority,and will not be permitted to withdraw the Resolution Planand the Resolution Professional, PwC or the CoC assume noresponsibility or liability in this respect.”

E

Ebix’s submission that Clause 1.10(l) is applicable only uponapproval of the Adjudicating Authority is not plausible since the ResolutionPlan becomes binding on all stakeholders as a consequence of theapproval under Section 31. The E-RP’s argument holds much weightwhen it is argued that Clause 1.10(l) cannot be construed to infer thatFthe Adjudicating Authority would declare Ebix as the ‘SuccessfulResolution Applicant’ once again, which would then impose the obligationof barring withdrawals for the first time. Mr Nakul Dewan, learnedSenior Counsel for the E-RP, has also submitted before us that the validityof the Resolution Plan being six months was not mentioned as a specificconditionality in Form H that was submitted by the E-RP along with theGResolution Plan to the Adjudicating Authority, which evinces that thesix-month validity was only vis-à-vis the acceptance by the E-CoC.

181. Ebix has also tried to argue that its position has changedmanifestly because of new allegations which have come up in relation tothe financial conduct of Educomp. However, in this regard, it is pertinentH

to note Clause 1.3.2 of the RFRP which directs prospective ResolutionApplicants to conduct their own due diligence. In so far as is relevant, itreads:

“1.3.2 The Resolution Applicant(s) shall be provided access tothe electronic as well as physical data room (“Data Room”)established and maintained by the Company acting through theResolution Professional and coordinated by PwC in order toconduct a due diligence of the business and operations of theCompany”

Similarly, Clause 1.13.6 also requires prospective ResolutionApplicants to conduct independent investigations:

“1.13.6 This RFRP does not purport to contain all the informationrequired by the Resolution Applicant. The Resolution Applicantshould conduct independent investigations and analysis and shouldcheck the accuracy, reliability and completeness of the informationin this RFRP and obtain independent advice from appropriatesources, prior to making an assessment of the Company.”

Ebix was responsible for conducting their own due diligence ofEducomp and could not use that as a reason to revise/modify theirapproved Resolution Plan. In any event, Section 32A of the IBC grantsimmunity to the Corporate Debtor for offences committed prior to thecommencement of CRIP and it cannot be prosecuted for such offencesfrom the date the Resolution Plan has been approved by the AdjudicatingAuthority under Section 31, if the Resolution Plan results in a change ofmanagement or control of the Corporate Debtor subject to certainconditions. Section 32A reads as follows:

“32A. (1) Notwithstanding anything to the contrary contained inthis Code or any other law for the time being in force, the liabilityof a corporate debtor for an offence committed prior to thecommencement of the corporate insolvency resolution processshall cease, and the corporate debtor shall not be prosecuted forsuch an offence from the date the resolution plan has beenapproved by the Adjudicating Authority under section 31, if theresolution plan results in the change in the management or controlof the corporate debtor to a person who was not- (a) a promoter or in the management or control of the corporatedebtor or a related party of such a person; or AB

C

DE

F

G

H

(b) a person with regard to whom the relevant investigatingauthority has, on the basis of material in its possession, reason tobelieve that he had abetted or conspired for the commission ofthe offence, and has submitted or filed a report or a complaint tothe relevant statutory authority or Court:

A

B[…]

(2) No action shall be taken against the property of the corporatedebtor in relation to an offence committed prior to thecommencement of the corporate insolvency resolution process ofthe corporate debtor, where such property is covered under aCresolution plan approved by the Adjudicating Authority undersection 31, which results in the change in control of the corporatedebtor to a person, or sale of liquidation assets under the provisionsof Chapter III of Part II of this Code to a person, who was not –

(i) a promoter or in the management or control of the corporatedebtor or a related party of such a person; or D

(ii) a person with regard to whom the relevant investigating authorityhas, on the basis of material in its possession, reason to believethat he had abetted or conspired for the commission of the offence,and has submitted or filed a report or a complaint to the relevantEstatutory authority or Court.

[…]

(3) Subject to the provisions contained in sub-sections (1) and (2),and notwithstanding the immunity given in this section, the corporatedebtor and any person, who may be required to provide assistanceFunder such law as may be applicable to such corporate debtor orperson, shall extend all assistance and co-operation to any authorityinvestigating an offence committed prior to the commencementof the corporate insolvency resolution process.”

Thus, in any case even if it is found that there was any misconduct Gin the affairs of Educomp prior the commencement of the CIRP, Ebixwill be immune from any prosecution or punishment in relation to thesame. The submission that Ebix has been placed in a prejudicial positiondue to the initiation of investigation into the affairs of Educomp by theCBI and SFIO is nothing but a red herring since such investigationshave no bearing on Ebix.H

182. Finally, it is also important to note that no clause of Ebix’sown Resolution Plans provides them with a right to revise/withdrawtheir Resolution Plan after its approval by the E-CoC, but before itsconfirmation by the Adjudication Authority. Clause 9.1 permits withdrawalin the event the Resolution Plan is not approved in its entirety by theNCLT, while Clause 9.7 allows for an amendment for the purposes ofimplementation of the Resolution Plan but only when the E-CoC approvesit with a seventy-five per cent vote. Hence, Ebix did not have any rightunder their own Resolution Plan to revise/withdraw it.

183. It is also pertinent to note that Ebix did not stop pursuing theirResolution Plan after the expiry of six months, if the true import of thecommercial bargain was a withdrawal of the Resolution Plan after sixmonths of its submission. The First Withdrawal Application was filed on10 September 2019, which was after one year of the alleged expiry ofthe six-month period. Therefore, even if the submitted Resolution Planwas considered as a conditional offer the terms did not enable awithdrawal of the Resolution Plan in the event that the AdjudicatingAuthority does not approve it under Section 31 within six months of itssubmission.

184. Before we conclude our analysis on the substantive argumentsraised by Ebix, we will be briefly dealing with its arguments that the RPhad failed in its obligation to provide information under Section 29 of theIBC.

K.1.3 Duties of the RP

185. Appearing on behalf of Ebix, Mr KV Vishwanathan hasargued before this Court that the E-RP failed in its duties under Section29 of the IBC when it failed to inform Ebix about the ongoing investigationsagainst Educomp. While this argument was made in order to justify Ebix’swithdrawal of its Resolution Plan, which we have already rejected, weshall assess it nonetheless. On behalf of the E-RP, Mr Nakul Dewanhas appeared and argued that the obligation on an RP to provideinformation under Section 29 has to be understood on a “best effortbasis”.

186. Section 29 of the IBC places a duty upon the RP to providean IM to the Resolution Applicant, containing such information whichmay be relevant to the Resolution Applicant to draft its Resolution Plan.It states:

ABC

DE

F

G

H

“29. Preparation of information memorandum.—(1) The resolutionprofessional shall prepare an information memorandum in suchform and manner containing such relevant information as may bespecified by the Board for formulating a resolution plan.

A

(2) The resolution professional shall provide to the resolutionBapplicant access to all relevant information in physical andelectronic form, provided such resolution applicant undertakes—

(a) to comply with provisions of law for the time being in forcerelating to confidentiality and insider trading; (b) to protect any intellectual property of the corporate debtor itCmay have access to; and

(c) not to share relevant information with third parties unlessclauses (a) and (b) of this sub-section are complied with.

Explanation.—For the purposes of this section, “relevantDinformation” means the information required by the resolutionapplicant to make the resolution plan for the corporate debtor,which shall include the financial position of the corporate debtor,all information related to disputes by or against the corporate debtorand any other matter pertaining to the corporate debtor as may bespecified.”

E

187. The BLRC Report elucidates the duties of the RP:

“1. The RP must provide the most updated information aboutthe entity as accurately as is reasonably possible to thisrange of solution providers. In order to do this, the RP has tobe able to verify claims to liabilities as well as the assets disclosedFby the entity. The RP has the power to appoint whatever outsideresources that she may require in order to carry out this task,including accounting and consulting services.

2. The information collected on the entity is used to compilean information memorandum, which is signed off by theGdebtor and the creditors committee, based on whichsolutions can be offered to resolve the insolvency. In orderfor the market to provide solutions to keep the entity as a goingconcern, the information memorandum must be made available topotential financiers within a reasonable period of time from herHappointment to the IRP. If the information is not comprehensive, the RP must put out the informationmemorandum with a degree of completeness of theinformation that she is willing to certify.

For example, as part of the information memorandum, the RPmust clearly state the expected shortfall in the coverage of theliabilities and assets of the entity presented in the informationmemorandum. Here, the asset and liabilities include those that theRP can ascertain and verify from the accounts of the entity, therecords in the information system, the liabilities submitted at thestart of the IRP, or any other source as may be specified by theRegulator.

3. Once the information memorandum is created, the RP mustmake sure that it is readily available to whoever is interested tobid a solution for the IRP. She has to inform the market (a) thatshe is the RP in charge of this case, (b) about a transparentmechanism through which interested third parties can access theinformation memorandum, (c) about the time frame within whichpossible solutions must be presented and (d) with a channel throughwhich solutions can be submitted for evaluation. The Code doesnot specify details of the manner or the mechanism in which thisshould be done, but rather emphasises that it must be done in atime-bound manner and that it is accessible to all possible interestedparties.”

188. Similarly, the UNCITRAL Guide notes:

“5. Duties and functions of the insolvency representative […]

(e) Obtaining information concerning the debtor, its assets, liabilitiesand past transactions (especially those taking place during thesuspect period), including examining the debtor and any thirdperson having had dealings with the debtor…”

189. Under the IBC, there is a duty upon the RP to collect asmuch information about the Corporate Debtor as is accurately possibleto do. When such information is communicated through an IM to theResolution Applicant, the RP must be careful to clarify when itsinformation is not comprehensive and what factors may cause a change.

A

B

C

DE

F

G

H

A190. In the present case, Ebix has alleged that the E-RP did notinform it of the financial investigations into the conduct of Educomp in atimely fashion. To assess this claim, it is important to underline a fewdates:

(i) 5 December 2017– E-RP provided Virtual Data Room accessBto Ebix and other prospective Resolution Applicants in relation toEducomp, and the final RFRP was issued;

(ii) 7 March 2018– E-RP filed the Approval Application beforeNCLT in relation to Ebix’s Resolution Plan, after its approval bythe E-CoC;C(iii) 3 April 2018 and 26 April 2018– two articles are published inThe Wire in relation to financial mismanagement of Educomp;

(iv) 4 May 2018 – the IFC Application came up before NCLT,having been filed by a financial creditor of Educomp seekinginvestigation of the affairs/transactions, in which the E-RP wasDdirected file its reply and IFC was directed to serve a notice onEbix;

(v) 12 June 2019 – Educomp made regulatory disclosures to theBSE and NSE in relation to the ongoing investigations by SFIOand CBI; andE

(vi) 5 July 2019 – Ebix filed the First Withdrawal Application.

191. Ebix cannot dispute that E-RP had provided it the relevantinformation required under Section 29 to formulate its Resolution Plan.The issues in relation to financial investigations into the conduct ofEducomp arose when the two articles were published by The Wire, bothFof which were after the Approval Application had been filed by theE-RP. Further, Ebix was aware of all the proceedings before the NCLTsince the various applications were often listed along with the ApprovalApplication, in which it continued to appear. Finally, Ebix has broughtnothing on record to prove that E-RP knew of the SFIO and CBIGinvestigations before a regulatory disclosure was made by Educomp.Hence, it cannot be stated that the E-RP had faltered in its duty to providerelevant information to Ebix.

K.2 The Kundan Care Appeal

192. The CIRP of Astonfield commenced on 27 November 2018.HOn 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 forthe termination of the PPA. The validity of the default notice wasadjudicated upon by the NCLT in a judgment dated 29 August 2019. TheNCLT set aside the default notice on the ground that the termination ofthe 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 forbeing considered by the A-CoC, which was followed by a final versionon 12 November 2019. On 14 November 2019, the Resolution Plansubmitted by Kundan Care was approved by the A-CoC with a vote of99.28 per cent. On 15 November 2019, a Letter of Award was issued bythe A-RP to Kundan Care, and the Resolution Plan was submitted to theNCLT for approval to under Section 31 of the IBC.

193. On 27 November 2019, GUVNL moved this Court in appealagainst the order of the NCLAT dated 15 October 2019 (this Courteventually dismissed the appeal). During the pendency of the appeal,the appellant moved an application before the NCLT for withdrawal ofits Resolution Plan and for return of its PBG. In view of the pendency ofthe appeal before this Court, NCLT deferred consideration of theResolution Plan till the disposal of the appeal. On the request of KundanCare, their application was listed for hearing and dismissed on 3 July2020 for want of jurisdiction to enable withdrawals. This decision of theNCLT was confirmed by the NCLAT on 30 September 2020. WhileKundan Care’s appeal against this decision of the NCLAT was pendingbefore this Court, Gujarat Urja (supra) was decided by this Court on 8March 2021.

194. Kundan Care had initially sought to rely on Clause 5.1 oftheir Resolution Plan to argue that it had reserved the right to modify orwithdraw its submitted Resolution Plan in the event of a ‘material adversechange’ which affects Astonfield. Clause 5.1 reads as follows:

“5.1 Basis of Preparation

The preparation of the Resolution Plan is based on the InformationMemorandum provided to the Resolution Applicant by theResolution Professional. If at any time before or after submissionof this Resolution Plan, should the information on the basis ofwhich this Resolution Plan has been prepared, change, or newinformation becomes available, or if there is a material adverse ABCD

E

F

G

H

Achange i.e. shall there have occurred any fact, matter, event,circumstance, condition or change which materially and adverselyaffects, or could reasonably be expected to materially and adverselyaffect: individually or in aggregate, the business, operations, assets,liabilities, conditions (whether financial, trading or otherwise),prospects or operating results of the Corporate Debtor, theBResolution Applicant shall have the right to reconsider, revise and/or withdraw the Resolution Plan on assessment of such additionalinformation and/or make a fresh submission of resolution plan atits sole discretion”

However, the A-RP has pointed out to the court that the LOICawarded to Kundan Care clearly stipulated that the submitted ResolutionPlan is irrevocable and there were no conditionalities mentioned in theForm H that was submitted to the Adjudicating Authority. Clause 9 ofKundan Care’s Resolution Plan confirms this position, since it states:

“9 Condition PrecedentD

THERE ARE NO CONDITION PRECEDENT FORAPPROVAL OF THIS RESOLUTION PLAN”

This is also reaffirmed by the fact that Clause 1.6.2 of the RFRPissued by the A-RP, specifically indicated that the A-CoC may reject aEResolution Plan if it did not agree with any of the conditions precedent inthe nature of “walk away conditions”. Clause 1.6.2 states:

“1.61 The CoC reserves the right to reject the Resolution Plan, ifany of the Conditions Precedent (as defined in Format VA -Resolution Plan), are not acceptable to the CoC. The ConditionsFPrecedent, if any, in a Resolution Plan would mean the ‘walk-away conditions’ and shall be required to be specifically mentionedas such in the said Plan, with a conspicuous heading and placementof a paragraph in the Plan, and all such conditions shall be placedin a consolidated manner in the said paragraph.”

This indicates that the condition of a material adverse event couldGbe exercised only until the A-CoC was considering the Resolution Plan,and not after it had been submitted to the Adjudicating Authority.

195. During the course of the hearing of the present appeal, thecompilation of additional documents has been filed by Kundan Care. On5 July 2021, Kundan Care had addressed a communication to EXIMH

Bank and PFCL “seeking a revision/renegotiation of the resolutionamount/financial proposal” of Kundan Care for the resolution ofAstonfield. Responding to the above communication, EXIM Bank hasaddressed a letter dated 12 July 2021 stating that a meeting was held by“the lenders” (EXIM Bank and PFCL) on 9 July 2021, on a withoutprejudice basis to deal with the issues raised by Kundan Care in theirletter dated 5 July 2021. Responding to the request of Kundan Care, ithas been stated that:

“4… lenders were prima facie agreeable to deliberate the financialproposal seeking revision in resolution plan amount in the COCconvened by the RP post the directions of the Hon’ble SupremeCourt in accordance with the processes laid down by the IBC”.

Pursuant to the above exchange of communications, a joint requesthas been made by Mr Ramji Srinivasan, learned Senior Counsel appearingon behalf of Kundan Care and Mr V Giri, learned Senior Counselappearing on behalf of the A-CoC in the following terms:

“In view of the letter dated 12 July 2021 issued by the lenderswho are members of the CoC, the appellant may be permitted towithdraw Civil Appeal 3560/2020 with liberty to the RA and theCoC to file the revised plan (in terms of the letter dated 12 July2021) before the NCLT (through the RP) for approval. The CoCshall convene and take a call on the revised plan within one weekand the NCLT shall dispose of the matter within two weeks uponreceiving IA from RP for approval of revised plan.”

196. This Court had been informed that EXIM Bank and PFCLrepresent 98 per cent of the financial creditors of Astonfeld. In view ofthe above agreement which has been arrived at, we deem it appropriateto exercise our jurisdiction under Article 142 of the Constitution of Indiafor a one-time relief and direct that:

(i) The A-CoC shall convene and take a decision on theproposal submitted by Kundan Care on 5 July 2021, andthe response by EXIM Bank and PFCL dated 12 July 2021;

(ii) In the event, that a revised Resolution Plan is agreed uponby the A-CoC, it shall be submitted through the A-RP forthe approval of the NCLT within a week thereafter. In theevent that a revised Resolution Plan is not agreed upon, the A

B

C

D

E

F

G

H

original Resolution Plan, as submitted before the NCLT on15 November 2019, shall prevail; and A

(iii) The NCLT shall dispose of the application with the revisedResolution Plan expeditiously, and preferably within a periodof two weeks from the date of receipt of an applicationBfrom the A-RP for the approval of the revised ResolutionPlan.

197. We clarify that the above directions have been issued inview of the submission which has been urged as noted, and shall notamount to any finding by this Court on the issues raised with regard toCmodification or withdrawal of Resolution Plans at the behest of theResolution Applicant.

K.3 The Seroco Appeal

198. The CIRP of Arya Filaments, an MSME, was instituted on17 August 2018. Seroco submitted a draft Resolution Plan on 13 MarchD2019 for an amount of Rs 6.79 crores (approx.). Subsequent to meetingswith the Arya-CoC and revisions to the Resolution Plan, Seroco’s planwas approved by the Arya-CoC on 10 May 2019. On 15 May 2019, theArya-RP filed the Resolution Plan for approval before the NCLT. FormH was filed by Arya-RP on 5 June 2020.

E

E199. Seroco addressed a letter to Arya-RP and Arya-CoC on9 June 2020 seeking a modification of the Resolution Plan and theresolution amount to Rs 5.29 crores (approx.) on account of the economicslowdown caused by the COVID-19 pandemic, and subsequently filedapplications before the NCLT and an appeal before the NCLAT seekingFa modification of the Resolution Plan on account of the original beingfiled over eighteen months ago.

200. Seroco has relied on the terms of its Resolution Plan whichenvisage payment to the Arya-CoC by sale of land and building, and old/unusable/spare plant and machineries to urge that there has been afrustration of the contract because of the economic slowdown whichGmust have impacted the value of these assets. The proposed revisedsolution envisages a further haircut to the Arya-CoC where Rs 1.5 croresless would be paid, over an extended timeline. There are no terms in theResolution Plan or the Form H submitted by Arya-RP that could providesuch a benefit to Seroco. To the contrary, Clause 19(vii) of the Resolution H

Plan provides that the preliminary approval of the Resolution Plan by theArya-CoC is binding on Seroco:

“19. Others:

[…]

(vii) We understand that the preliminary approval of the resolutionpian is the prerogative of the Committee of Creditors and the finalapproval of the same lies with the Hon’ble Adjudicating authorityi.e. NCLT and we undertake that the decision of the Committeeof Creditors and NCLT will be final and binding on us.”

Therefore, there is no scope to grant reliefs even on the terms ofthe Resolution Plan. As held in Section H of this judgement, commonlaw remedies available under the Contract Act are not available to theparties since a submitted Resolution Plan is not a contract which can beotherwise voidable on account of frustration, force majeure or othersuch instances. Hence, parties can only seek reliefs that are specificallyenvisaged in the IBC.

L Conclusion

201. This Court is cognizant that the extraordinary circumstanceof the COVID-19 pandemic would have had a significant impact on thebusinesses of Corporate Debtors and upon successful ResolutionApplicants whose Plans may not have been sanctioned by theAdjudicating Authority in time, for myriad reasons. But the legislativeintent of the statute cannot be overridden by the Court to render outcomesthat can have grave economic implications which will impact the viabilityof the IBC.

202. The residual powers of the Adjudicating Authority under theIBC cannot be exercised to createprocedural remedies which havesubstantive outcomes on the process of insolvency. The framework, asit stands, only enables withdrawals from the CIRP process by followingthe procedure detailed in Section 12A of the IBC and Regulation 30A ofthe CIRP Regulations and in the situations recognized in those provisions.Enabling withdrawals or modifications of the Resolution Plan at the behestof the successful Resolution Applicant, once it has been submitted to theAdjudicating Authority after due compliance with the proceduralrequirements and timelines, would create another tier of negotiationswhich will be wholly unregulated by the statute. Since the 330 days A

BCD

E

F

G

H

Aouter limit of the CIRP under Section 12(3) of the IBC, including judicialproceedings, can be extended only in exceptional circumstances, thisopen-ended process for further negotiations or a withdrawal, would havea deleterious impact on the Corporate Debtor, its creditors, and theeconomy at large as the liquidation value depletes with the passage oftime. A failed negotiation for modification after submission, or aBwithdrawal after approval by the CoC and submission to the AdjudicatingAuthority, irrespective of the content of the terms envisaged by theResolution Plan, when unregulated by statutory timelines could occurafter a lapse of time, as is the case in the present three appeals beforeus. Permitting such a course of action would either result in a down-Cgraded resolution amount of the Corporate Debtor and/or a delayedliquidation with depreciated assets which frustrates the core aim of theIBC.

203. If the legislature in its wisdom, were to recognize the conceptof withdrawals or modifications to a Resolution Plan after it has beenDsubmitted to the Adjudicating Authority, it must specifically provide for atether under the IBC and/or the Regulations. This tether must be coupledwith directions on narrowly defined grounds on which such actions arepermissible and procedural directions, which may include the timelinesin which they can be proposed, voting requirements and threshold forapproval by the CoC (as the case may be). They must also contemplateEat which stage the Corporate Debtor may be sent into liquidation by theAdjudicating Authority or otherwise, in the event of a failed negotiationfor modification and/or withdrawal. These are matters for legislativepolicy.

204. n the present framework, even if an impermissibleFunderstanding of equity is imported through the route of residual powersor the terms of the Resolution Plan are interpreted in a manner thatenables the appellants’ desired course of action, it is wholly unclear onwhether a withdrawal of a CoC-approved Resolution Plan at a laterstage of the process would result in the Adjudicating Authority directingGmandatory liquidation of the Corporate Debtor. Pertinently, this directionhas been otherwise provided in Section 33(1)(b) of the IBC when anAdjudicating Authority rejects a Resolution Plan under Section 31. Inthis context, we hold that the existing insolvency framework in Indiaprovides no scope for effecting further modifications or withdrawals ofCoC-approved Resolution Plans, at the behest of the successfulH

Resolution Applicant, once the plan has been submitted to the AdjudicatingAuthority. A Resolution Applicant, after obtaining the financial informationof the Corporate Debtor through the informational utilities and perusingthe IM, is assumed to have analyzed the risks in the business of theCorporate Debtor and submitted a considered proposal. A submittedResolution Plan is binding and irrevocable as between the CoC and thesuccessful Resolution Applicant in terms of the provisions of the IBCand the CIRP Regulations. In the case of Kundan Care, since both, theResolution Applicant and the CoC, have requested for modification ofthe Resolution Plan because of the uncertainty over the PPA, clearedby the ruling of this Court in Gujarat Urja (supra), a one-time reliefunder Article 142 of the Constitution is provided with the conditionsprescribed in Section K.2.

205. It would also be sobering for us to recognize that whilst thisCourt has declared the position in law to not enable a withdrawal ormodification to a successful Resolution Applicant after its submission tothe Adjudicating Authority, long delays in approving the Resolution Planby the Adjudicating Authority affect the subsequent implementation ofthe plan. These delays, if systemic and frequent, will have an undeniableimpact on the commercial assessment that the parties undertake duringthe course of the negotiation. The thirty-second report of the Ministry ofCorporate Affairs’ Standing Committee on Finance (2020-2021) on the‘Implementation of Insolvency and Bankruptcy Code- Pitfalls andSolutions’[127] represented a despondent state of affairs with regard topendency of applications before the Adjudicating Authority. It noted[128]:

15. The age-wise pending cases in NCLT under IBC as on31 May, 2021 are as under:

127 Standing Committee on Finance, Seventeenth Lok Sabha, Ministry of CorporateAffairs, ‘Implementation of Insolvency and Bankruptcy Code- Pitfalls and Solutions:Thirty-second Report’ (August 2021) <available at https://www.ibbi.gov.in/uploads/whatsnew/fc8fd95f0816acc5b6ab9e64c0a892ac.pdf> accessed on 20 August 2021128 Ibid., page 6

A

B

C

DE

F

G

H

AIn its observations, the Report noted that a delay in the resolutionprocess with more than seventy-one per cent cases pending for morethan 180 days is in deviation of the original objective and timeline forCIRP that was envisaged by the IBC[129]. The delays were attributableto: (i) the NCLT taking considerable time in admitting CIRPs; (ii) lateand unsolicited bids by Resolution Applicants after the original bidderBbecomes public upon passage of the deadline for submission of the Plan;and (iii) multiplicity of litigation and the appellate process to the NCLATand the Supreme Court[130]. Such inordinate delays cause commercialuncertainty, degradation in the value of the Corporate Debtor and makesthe insolvency process inefficient and expensive. We urge the NCLTCand NCLAT to be sensitive to the effect of such delays on the insolvencyresolution process and be cognizant that adjournments hamper the efficacyof the judicial process. The NCLT and the NCLAT should endeavor, ona best effort basis, to strictly adhere to the timelines stipulated under theIBC and clear pending resolution plans forthwith. Judicial delay was oneof the major reasons for the failure of the insolvency regime that was inDeffect prior to the IBC. We cannot let the present insolvency regimemeet the same fate.

206. In light of the above, the appeals preferred by Ebix (CivilAppeal 3224 of 2020) and Seroco (Civil Appeal 295 of 2021) standdismissed. The parties to the appeal preferred by Kundan Care (CivilEAppeal 3560 of 2020) shall abide by the directions issued by this Court inexercise of its Article 142 powers as a one-time relief, as specified inparagraph 196 (Section K.2) of this judgement.

207. Pending application(s), if any, shall stand disposed of.

F

Ankit Gyan

Appeals disposed of.

G

H