Once approved by CoC, withdrawal of a successful Resolution Plan not permitted under IBC: NCLAT

The National Company Law Appellate Tribunal has held that once a Resolution Plan has been approved by Committee of Creditors, the successful Resolution Applicant cannot be permitted to withdraw it. (Kundan Care vs Amit Gupta).The order was passed by a three-member bench of Justice Bansi Lal Bhat, Acting Chairperson; Anant B Singh, Member (Judicial) and Alok K Mishra Member (Technical)..The Appellant, Kundan Care Products Ltd, was the successful Resolution Applicant in insolvency resolution process of M/s Astonfield Solar (Gujarat) Pvt. Ltd, the Corporate Debtor. .The Appellant had moved an application before the Adjudicating Authority for withdrawal of its Resolution Plan and cancellation/ revocation/ return/ refund of the Performance Bank Guarantee. .The application was rejected by the Adjudicating Authority on the ground that there was no legal basis for an application for withdrawal of a Resolution Plan after it is approval. .Aggrieved by the order, the Appellant came before the NCLAT. .In appeal, the Appellant inter alia raised the following contentions, .- IBC does not contain any provisions to compel specific performance of a Resolution Plan by an unwilling Resolution Applicant. - If a resolution plan is found to be unviable, unfit for implementation, as in the present case, or is either lacking provisions for its successful implementation or is based on incorrect assumptions, the plea for withdrawal ought to be allowed.. The Resolution Professional contended as follows:.- There is no provision in IBC which allows the withdrawal of an approved Resolution Plan. - The purpose of seeking Performance Bank Guarantee from a Resolution Applicant is to discourage them from withdrawing the Resolution Plan later.- The business decision of the CoC is not open to judicial review before the Adjudicating Authority or the Appellate Tribunal. - Permitting withdrawal of Resolution Plan would scuttle the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor and push it into liquidation..The Committee of Creditors submitted as follows:.- IBC does not prescribe any provision for withdrawal of Resolution Plan by the Resolution Applicant. - Adjudicating Authority has no power or jurisdiction to allow withdrawal of the Resolution Plan. Allowing such prayer would be without jurisdiction.- It is further submitted that once the Resolution Plan is approved, it becomes a binding contract between the parties..Findings:.The NCLAT reiterated that IBC provided for insolvency resolution in a time bound manner and aimed that maximization of value of assets and balancing the interests of all stakeholders. .Primacy is given to the Committee of Creditors when it comes to taking a view with regards the feasibility and viability of a Resolution Plan, NCLAT added. .It further stated that the CIRP process involved the filing of Expression of Interest and the subsequent filing of Resolution Plans, out of which one is approved by the Committee of Creditors. .Keeping in view the scheme and the object of IBC, the NCLAT held that although a Resolution Plan becomes binding on stakeholders only after an order is passed by the Adjudicating Authority under Section 31 IBC, a Resolution Applicant cannot be permitted to withdraw its Resolution Plan after it is approved by the Committee of Creditors. .A Resolution Applicant whose Resolution Plan stands approved by Committee of Creditors cannot be permitted to alter his position to the detriment of various stake holders after pushing out all potential rivals during the bidding process. This is fraught with disastrous consequences for the Corporate Debtor which may be pushed into liquidation as the CIRP period may by then be over thereby setting at naught all possibilities of insolvency resolution and protection of a Corporate Debtor, moreso when it is a going concern.NCLAT said. .The NCLAT clarified that there was no express provision in IBC to allow a Successful Resolution Applicant to stage a U-turn and it was estopped from wriggling out of the liabilities incurred under the approved Resolution Plan. .Provision for submission of a Performance Bank Guarantee by a Resolution Applicant while submitting its Resolution Plan, as required under the amended provisions of IBBI (Insolvency Resolution Process of Corporate Persons) Regulations, 2016 is a step in this direction, the NCLAT added. .In view of the above, NCLAT thus held, .We are of the considered opinion that the sanctity of resolution process has to be maintained and the Resolution Applicant whose Resolution Plan has been approved by Committee of Creditors cannot be permitted to withdraw its Resolution Plan..NCLAT opined that there was no merit in the appeal and the same was dismissed. .Advocates Prithu Garg, Siddharth Mehta appeared for the Appellant. .Advocates Pooja Mahajan, Mahima Singh appeared for the REsolution Professional. .CoC was represented by Advocate Ashish Rana..Read the Order: