11th October, 2023 Approval of Resolution Plan - Educomp Solutions Limited [IA. No. 195-ND-2018, CA-160(PB)-2018 & IA No. 4845-2023 in Company Petition No. (IB)-101-(PB)-2017] (1.28 MB)

IA-195/2018, CA-160(PB)/2018 & IA-4845/2023 in (IB)-101/(PB)/2017 Educomp Solutions Limited

Page 1 of 197 NATIONAL COMPANY LAW TRIBUNAL: NEW DELHI
SPECIAL BENCH (COURT-II)

IA. No. 195/ND/2018, CA-160(PB)/2018 & IA No. 4845/2023 IN Company Petition No. (IB)-101/(PB)/2017

IN THE MATTER OF:

       ... Corporate Debtor 

AND IN THE MATTER OF IA. NO. 195/ND/2018: Mr. Mahendar Singh Khandelwal, Resolution Professional, The Palm Springs Plaza, Office No. 1501-8, 15th Floor Sector-54, Golf Course Road Gurgaon-122001

  … Applicant 

SECTION: Section 30(6) of IBC 2016

AND IN THE MATTER OF IA. NO. 4845/ND/2023: EBIX Singapore Pte. Limited Through its Authorised Signatory, Having its officers at 143, Cecil Street, No. 22-01 GB Building, Singapore 069542

  … Applicant  

Versus

Mr. Mahendar Singh Khandelwal, Resolution Professional, The Palm Springs Plaza, Office No. 1501-8, 15th Floor Sector-54, Golf Course Road Gurgaon-122001

… Respondent

SECTION: Section 60(5) of IBC 2016

ofessional, The Palm Springs Plaza, Office No. 1501-8, 15th Floor Sector-54, Golf Course Road Gurgaon-122001

… Respondent

SECTION: Section 60(5) of IBC 2016

Page 2 of 197 Order Delivered on: 09.10.2023 CORAM: SH. ASHOK KUMAR BHARDWAJ, HON’BLE MEMBER (J) SH. L. N. GUPTA, HON’BLE MEMBER (T)

PRESENT:

For the Applicant
: Sr. Adv. Arvind Nayyar, Adv. Aditya Swarup, Adv. Akshay Joshi, Adv. Shubham Pandey, Adv. Mehaq Rao in IA. No. 4845/2023, Adv. Rajat Sehjal, Adv. Mehaq Rao for SRA For the Respondent : Sr. Adv. Neeraj Malhotra, Adv. Abhishek Sharma, Adv. Gaurav Arora, Adv. Kritya Sinha, Adv. Nimish Kumar, Adv. Himanshu Kohli on behalf of R-1 (RP) For the CoC : Adv. Siddhant Kant, Adv. Moulshree, Adv. Gayatri For SBI Singapore : Adv. Ankur Mittal, Adv. Bhaskar

ORDER PER: SH. ASHOK KUMAR BHARDWAJ, MEMBER (J) The captioned application has been preferred by Mr. Mahender Kumar Khandelwal (IP) registration number IBBI/IPA-001/IP-P00033/2016- 17/10086), Resolution Professional qua the Corporate Debtor viz. Educomp Solutions Limited for approval of the Resolution Plan submitted by Ebix Singapore Pte. Ltd.
2. The Educomp Solutions Limited (hereinafter referred to as CD) was incorporated on 07.09.1994 in terms of the provisions of the Companies Act, 2013 as, “Educomp Datamatics Private Limited” and was so included in the register of companies maintained by RoC, NCT of Delhi in Haryana. Upon being converted to a public company, it changed its name to “Educomp Datamatics

s Private Limited” and was so included in the register of companies maintained by RoC, NCT of Delhi in Haryana. Upon being converted to a public company, it changed its name to “Educomp Datamatics

Page 3 of 197 Limited” w.e.f. 18.09.2000. Subsequently on 22.08.2005 its name was changed to “Educomp Solutions Limited”.
3. The Authorised Capital of the CD, as on the date of filing of (IB)- 101(PB)/2017 was INR 40,00,00,000/- divided into twenty thousand Equity Shares of Rs.2 each. The issued, paid-up and subscribed capital of the CD as on said date was INR 24,49,34,336 divided into 12,24,67,168 Equity Shares of Rs.2 each. In December, 2005 the CD came out with Initial Public Offer (IPO) and its shares got listed in Bombay Stock Exchange (BSE). The CD expanded its business and allied with leading education providers to provide educational services beyond India.
4. Due to economic slowdown, the CD opted for loan restructuring and in July, 2013 it initiated the process under Corporate Debt Restructuring mechanism. The Corporate Debt Restructuring (CDR) was approved vide LOA dated 17.02.2014. The CD then prepared a revival plan to mitigate the challenges faced in the CDR package for the meeting of the joint lenders held on 29.07.2015. On 10.05.2017, the Board qua the CD passed a resolution for filing application under Section 10 of IBC, 2016 for initiation of Corporate Insolvency Resolution Process.

lenders held on 29.07.2015. On 10.05.2017, the Board qua the CD passed a resolution for filing application under Section 10 of IBC, 2016 for initiation of Corporate Insolvency Resolution Process. The factual matrix qua the matter could be captioned by the Hon’ble Supreme Court in its judgment dated 13.09.2021 passed in Civil Appeal No.3324 of 2020, decided along with Civil Appeal Nos. 3560 of 2020 and 295 of 2021 (hereinafter referred to as “Judgement”). Such conspectus of the case given by the Hon’ble Supreme Court (ibid) reads thus:
“A.2 Initiation of CIRP 3. On 5 May 2017, Educomp filed a petition under Section 10 of

Page 4 of 197 the IBC seeking to initiate voluntary CIRP. The NCLT admitted this petition on 30 May 2017, and appointed an IRP. Hence, 30 May 2017 would be taken as the ‘Insolvency Commencement Date’ for the purposes of Section 5(12) of the IBC.

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

On an application of the E-RP, the NCLT by its order dated 13 November 2017 extended the period of the CIRP by 90 days, beginning from 26 November 2017 till 24 February 2018.

A.3 Invitation, submission and approval of Resolution Plan

rder dated 13 November 2017 extended the period of the CIRP by 90 days, beginning from 26 November 2017 till 24 February 2018.

A.3 Invitation, submission and approval of Resolution Plan

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

On 10 November 2017, the last date for submission of EOIs was extended to 17 November 2017. Commencing from 5 December 2017, the E-RP provided access to the Virtual Data Room of Educomp to prospective Resolution Applicants who had submitted a confidentiality undertaking and made an upfront payment of Rs 5,00,000.

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

By the last date for submission, Resolutions Plans were received by the E-RP from Ebix and another entity. These were shared

e for submission of the Resolution Plans until 27 January 2018.

By the last date for submission, Resolutions Plans were received by the E-RP from Ebix and another entity. These were shared

Page 5 of 197 with the E-CoC on 29 January 2018. Following this, both the Applicants were invited to give their presentations to the E-CoC on 2 February 2018.

Ebix was declared as the successful Resolution Applicant by the E-CoC on 9 February 2018. Ebix had discussions about its Resolution Plan with the E-CoC, and submitted a revised Resolution Plan on 19 February 2018, with an addendum on 21 February 2018.

Upon the directions of the E-RP, the E-CoC commenced e-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 share percentage: (i) 74.16 per cent members of the E-CoC voted to approve the Resolution Plan; (ii) 17.29 per cent members voted to reject the Resolution Plan; and (iii) the remaining members, having cumulatively 8.55 per cent share, abstained from voting on the Resolution Plan. The Resolution Plan thus failed to achieve the minimum percentage of 75 per cent, in accordance with Section 30(4) of the IBC (as it stood then).

A day later on 23 February 2018, one of the members of the E- CoC (CSEB) informed the E-RP by an email that due to a technical error, they could not participate in the e-voting process.

n).

A day later on 23 February 2018, one of the members of the E- CoC (CSEB) informed the E-RP by an email that due to a technical error, they could not participate in the e-voting process. CSEB had a voting share of 1.195 per cent in the E-CoC, and wanted its affirmative vote to be recorded on the Resolution Plan. CSEB’s vote would enhance the voting share in favour of Ebix’s resolution plan to 75.35 per cent, thus meeting the threshold under Section 30(4).

The E-RP filed the CSEB Application under Section 60(5) to seek the directions of the NCLT in regard to CSEB’s late vote. NCLT by its order dated 28 February 2018, directed the E-RP to file an application for approval of Ebix’s Resolution Plan under Section 30(6) of the IBC, clarifying that the issue of CSEB’s vote would be taken up together with the application. On 7 March 2018, the E-RP filed the Approval

Page 6 of 197 Application seeking NCLT’s approval to Ebix’s Resolution Plan under Section 30(6).

On 2 July 2018, Ebix issued a letter to the E-RP to expedite the CIRP for Educomp. The relevant portions of the letter are extracted below: “…we would like to submit that the resolution plan for the Company was submitted with an expectation that the resolution process shall be completed in a time bound manner, and the Resolution Applicant shall get the management control of the Company before the start of new academic session in India i.e.

e resolution process shall be completed in a time bound manner, and the Resolution Applicant shall get the management control of the Company before the start of new academic session in India i.e. April 2018, subject to being selected as the successful applicant (as per the terms and conditions provided in the resolution plan), and the approval of the plan by the NCLT. This would have provided the Resolution Applicant with sufficient time to restructure the operations of the Company.

As you are aware, the operations of the Company are already under stress and it would be safe to assume that no new contracts / customers are coming up. Further, the competitors of the Company may be trying to take undue advantage of the situation, which may further erode the business value of the Company and may make the revival process more difficult.

The above negatively impacts the commercial consideration provided by the Resolution Applicant in the resolution plan submitted for the Company.

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

In light the above and fact that delay in completion of the resolution process is negatively impacting the commercial consideration offered by the Resolution Applicant in the resolution plan, we request you to ensure that the resolution process is completed in a time bound manner.

atively impacting the commercial consideration offered by the Resolution Applicant in the resolution plan, we request you to ensure that the resolution process is completed in a time bound manner. Otherwise, the Resolution Applicant will be forced to re- consider or withdraw the resolution plan on expiry of the term of the plan in order to protect the interest of all its stakeholders.”

A.4 Investigations into financial transactions of Educomp

Page 7 of 197

On 3 April 2018, an Indian online news publication, The Wire, published an article titled “How Educomp May Have Subverted the Spirit of India’s Insolvency and Bankruptcy Process”. Another article titled “Educomp’s Insolvency Process Becomes Murkier as Ebix Buys Smartclass Educational Services” was published by The Wire on 26 April 2018.

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

C Application came up before the NCLT, along with the CSEB Application and the Approval Application, it directed the E-RP to file its reply and also directed IFC to serve a notice on Ebix.

Similar applications- Axis Application and SBI Application, under Section 60(5) of the IBC read with Section 213 of the 2013 Act were filed by other financial creditors of Educomp, Axis Bank and SBI, seeking ‘appropriate directions’ from the NCLT in view of the alleged irregularities in the conduct of the affairs of Educomp.

In the meantime, on 1 August 2018, due to allegations of financial mismanagement of Educomp between 2014-2018, the MCA directed an SFIO investigation into its affairs.

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

Pursuant to NCLT’s order dated 9 August 2018, the E-CoC hosted its 13th meeting on 13 August 2018, and a resolution was passed with a 77.85 per cent vote to appoint an independent agency

.

Pursuant to NCLT’s order dated 9 August 2018, the E-CoC hosted its 13th meeting on 13 August 2018, and a resolution was passed with a 77.85 per cent vote to appoint an independent agency

Page 8 of 197 to conduct a Special Investigation Audit into the affairs of Educomp. The relevant terms of the resolution are as follows: “RESOLVED THAT a special investigation audit on the affairs of the Company be conducted by an independent agency, which shall be appointed by the Committee of Creditors, for period beginning from [1st January 2014] to [30th January 2018] having following scope of work:
(i) All the matters/issues (approximate 21 in number) raised in the Annual Audit Report of the Company for the Financial Year 2016-17 issued by Haribhakti & Co, basis which adverse opinion has been issued;

(ii) Transactions involving alleged deliberate transfer of business between the Company and SmartClass Educational Services Private Limited (“SESPL”) prior to the commencement of the insolvency process of the Company;

(iii) Transactions regarding genuineness of receivables from Edusmart Services Private Limited including cross-verification with payables to Educomp Solutions Limited in the books of Edusmart Services Private Limited;

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

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

ning Hour Private Limited, Vidya Mandir Classes Limited and ICICI Bank Limited;

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

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

(vii) Distribution agreement with Digital Learning Solution SDN BHD;

(viii) Transactions referred to in the applications filed by International Finance Corporation, Axis Bank Limited and State Bank of India with the Hon’ble National Company Law Tribunal; and

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

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

Page 9 of 197 (xi) Any other issue, which the Committee of Creditors may deem fit
RESOLVED FURTHER THAT the Resolution Professional, be and is hereby authorized by the Committee of Creditors and directed to file appropriate application/petition with the Hon’ble National Company Law Tribunal, inter alia, seeking consent/order of the Hon’ble NCLT on the proposed special investigation audit to be conducted by the independent agency.

tition with the Hon’ble National Company Law Tribunal, inter alia, seeking consent/order of the Hon’ble NCLT on the proposed special investigation audit to be conducted by the independent agency.
RESOLVED FURTHER THAT given the limitations inherent in the previous audits conducted on the Company, and in order for the said investigation to be comprehensive, the Resolution Professional, while filing such application/ petition, shall also, as an additional prayer, seek consent/ order of the Hon’ble NCLT that SESPL, other group companies of the Company and the erstwhile customers of the Company, be directed to cooperate with the independent agency so appointed, or in the alternative, to refer the matter to the Central Government to appoint an Inspector under the Companies Act, 2013 to conduct said investigation.
RESOLVED FURTHER THAT the entire cost of the proposed investigation (special investigation audit), shall be included in CIRP Cost and accordingly be paid in terms of the provisions of the Insolvency and Bankruptcy Code, 2016 and the relevant Regulations.
RESOLVED FURTHER THAT, the independent agency to conduct the special investigation audit, shall be appointed by the Core Committee, comprising of SBI, IDBI Bank, Axis Bank, IFC, Yes Bank and J&K Bank”

The resolution was placed before the NCLT on 20 August 2018, when it was hearing the CSEB Application and the Approval Application. The NCLT directed the E-RP to file an appropriate application.

The resolution was placed before the NCLT on 20 August 2018, when it was hearing the CSEB Application and the Approval Application. The NCLT directed the E-RP to file an appropriate application. In accordance with the resolution dated 13 August 2018 and NCLT’s order dated 20 August 2018, the ERP filed the Investigation Audit Application under Section 60(5) of the IBC seeking directions from NCLT to carry out the Special Investigation Audit of Educomp.

Page 10 of 197 22. It is stated before us that the Investigation Audit Application was heard on 11 September 2018, 20 September 2018, 27 September 2018 and 4 October 2018. On 4 October 2018, while reserving its order in the Investigation Audit Application, the NCLT also directed the E-RP to file an affidavit in relation to the transactions carried out by Educomp under Sections 43, 45, 50 and 66 of the IBC.

The E-RP states that such an affidavit was filed, stating that on the basis of the books of account and other relevant material pertaining to Educomp, no transactions which needed to be avoided under Sections 43, 45, 50 and 66 of the IBC were found. The E-RP also stated that since the NLCT had not issued specific directions for the conduct of a Special Investigation Audit, no such audit was conducted.

This affidavit was listed before the NCLT on 7 December 2018, along with the Approval Application. On 10 January 2019, the NCLT reserved its orders on the Approval Application.

ed.

This affidavit was listed before the NCLT on 7 December 2018, along with the Approval Application. On 10 January 2019, the NCLT reserved its orders on the Approval Application.

On 12 June 2019, Educomp made a regulatory disclosure to the BSE and NSE in relation to the ongoing investigations being conducted by agencies such as SFIO and CBI. The material parts of the disclosure read thus: “This is with reference to your mail dated June 10, 2019, related to news appeared in the "Business Standard" captioned "Transactions of debt-ridden Educomp Solutions come under SFIO scanner".
[…]
3. It is pertinent to note that BDO India LLP carried out transaction audit in order to ascertain if there was any preferential, undervalued, extortionate or fraudulent transactions falling within the ambit of Section 43, 45, 50 and 66 of the Code. The Transaction review report was prepared by BDO India LLP in February 2018 which was further circulated and discussed with the CoC. On examination of the BDO Report and other relevant material available with the Resolution Professional during the CIRP period, no transaction was found by the Resolution Professional which was required

ination of the BDO Report and other relevant material available with the Resolution Professional during the CIRP period, no transaction was found by the Resolution Professional which was required

Page 11 of 197 to be avoided in terms of the said Sections. Further, the two land transactions as alleged in the Media Report have not been reported by BDO in their Report and hence, the Resolution Professional is not in a position to comment on the same.
As regards allegation in the Media Report that "Suspect transactions of debt-ridden Educomp Solutions have come under the lens of Serious Fraud Investigation (SFIO), which is probing the company for alleged fund-diversion and inflated land deals, we would like to clarify that SFIO Investigation into the affairs of Educomp Solutions Limited is currently ongoing wherein the Resolution Professional has been supplying the data/ information/ documents to them as and when required however, no such information has been brought to the notice of the Resolution Professional as yet. Moreover, the article appears to be based on a false, motivated, fabricated data.”

A.5 Applications for withdrawal of the Resolution Plan

On 5 July 2019, Ebix filed the First Withdrawal Application under Section 60(5) of the IBC, for the following reliefs: “i. Direct that the Ld. Resolution Professional supply a copy of the Special Investigation Audit to the Resolution Applicant forthwith;

ii. Direct that the Ld.

IBC, for the following reliefs: “i. Direct that the Ld. Resolution Professional supply a copy of the Special Investigation Audit to the Resolution Applicant forthwith;

ii. Direct that the Ld. Resolution Professional supply a copy of the Certificates under Sections 43, 45, SO and 66 of the Insolvency and Bankruptcy Code, 2016 to the Resolution Professional forthwith;

iii. Withhold approval of the Resolution Plan sanctioned by the Committee of Creditors of the Corporate Debtor, as filed before this Hon'ble Tribunal on 11.04.2018, pending detailed consideration of the same by the Resolution Applicant;

iv. Grant the Resolution Applicant sufficient time to re- evaluate its proposals contained in the Resolution Plan, and also to suitably revise/modify and/or withdraw its Resolution Plan;”
(emphasis supplied)

Page 12 of 197 Ebix contends that the application was necessitated because: (i) the Approval Application had been pending before the NCLT for 17 months, much beyond the period envisaged in the RFRP and its Resolution Plan; (ii) Educomp’s CIRP had been pending for 26 months, beyond the statutory period under the IBC; (iii) the tenure of the government contracts awarded to Educomp, which was crucial to its functioning, may have ended, leading to an erosion of its substratum; and (iv) due to recent media reports, it had misgivings about the management and affairs of Educomp.

On 10 July 2019, the NCLT dismissed the First Withdrawal Application with the following order: “C.A. No.

ecent media reports, it had misgivings about the management and affairs of Educomp.

On 10 July 2019, the NCLT dismissed the First Withdrawal Application with the following order: “C.A. No. 1252(PB)/2019

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

No ground for considering the prayer sought in the application is made out.

The application is dismissed as such.”

Thereafter, Ebix filed the Second Withdrawal Application under Section 60(5) of the IBC, seeking the following reliefs: “i. Allow the Resolution Applicant to withdraw the Resolution Plan dated 19.02.2018 (along with the Addendum/Financial Proposal dated 21.02.2019) submitted by it, and as approved by the Committee of Creditors;

ii. Direct the Ld. Resolution Professional and/or Educomp Solutions Limited and the Committee of Creditors to refund the Earnest Money Deposit of Rs. 2,00,00,000/- furnished by the Resolution Applicant in respect of the Resolution Plan;

iii. Withhold approval of the Resolution Plan sanctioned by the Committee of Creditors of the Corporate Debtor, as filed before this Hon'ble Tribunal on 07.03.2018 and recorded vide order dated 1.1.04.2018, pending detailed consideration of the same by the Resolution Applicant;

ors of the Corporate Debtor, as filed before this Hon'ble Tribunal on 07.03.2018 and recorded vide order dated 1.1.04.2018, pending detailed consideration of the same by the Resolution Applicant;

Page 13 of 197 While repeating the reasons mentioned in the First Withdrawal Application, it provided a reason for filing the Second Withdrawal Application in the following terms:
“xii. That the present Applicant had also filed an Application dated 05.07.2019 bearing PB/IA/1252/2019 under Section 60(5) of the Code, seeking revision/revaluation of the Resolution Plan. However, the same was dismissed by this Hon'ble Tribunal, and during the course of hearing in the said Application, this Hon'ble Court put it to the Resolution Applicant to withdraw the Resolution Plan by way of a separate Application. The present Application for withdrawal of the Resolution Plan is being made in pursuance of the same.”

On 5 September 2019, the NCLT dismissed the Second Withdrawal Application with the following order: C.A. No. 1310(PB)/2019
In para 'B (xii)' under the caption 'facts of the case', the following averments have been made

[…]

The italic portion of the aforesaid para shows that the prayer for withdrawal of the Resolution Plan has been made inter alia on the suggestion of the Court which is neither reflected in the order nor is born out from any record. Such an averments imputing to the Court something which has never been said is condemnable. The cause of action cannot be based on any such things.

d in the order nor is born out from any record. Such an averments imputing to the Court something which has never been said is condemnable. The cause of action cannot be based on any such things.

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

Thereafter, Ebix filed the Third Withdrawal Application, seeking the following reliefs: “i. Allow the Resolution Applicant to withdraw the Resolution Plan dated 19.02.2018 (along with the Addendum/Financial Proposal dated 21.02.2019) submitted by it, and as approved by the Committee of Creditors;

ii. Direct the Ld. Resolution Professional and/or Educomp Solutions Limited and the Committee of Creditors to refund the

Page 14 of 197 Earnest Money Deposit of Rs. 2,00,00,000/- furnished by the Resolution Applicant in respect of the Resolution Plan;

iii. Withhold approval of the Resolution Plan sanctioned by the Committee of Creditors of the Corporate Debtor, as filed before this Hon'ble Tribunal on 07.03.2018 and recorded vid order dated 11.04.2018, pending detailed consideration of the same by the Resolution Applicant;”

The earlier applications for withdrawal were referred to:

“xiv. It may be noted that, the present Applicant had also filed an Application dated 05.07.2019 bearing PB/IA/1252/2019 under Section 60(5) of the Code, seeking revision/revaluation and/or withdrawal of the Resolution Plan.

the present Applicant had also filed an Application dated 05.07.2019 bearing PB/IA/1252/2019 under Section 60(5) of the Code, seeking revision/revaluation and/or withdrawal of the Resolution Plan. The said application was dismissed by this Hon'ble Tribunal on the basis that modification/revaluation of the Resolution Plan could not be permitted. The Applicant thereafter filed an Application bearing PB/IA/1310/2019 seeking withdrawal of the Resolution Plan simpliciter, which was dismissed by the Hon'ble Tribunal vide order dated 07.09.2019, while granting liberty to file a fresh application seeking withdrawal of the Resolution Plan.”

The reasons for withdrawal were the same as those in the previous applications for withdrawal.

On 18 September 2019, the NCLT issued notice in the Third Withdrawal Application and directed the E-RP to place it before the E- CoC. The E-RP placed the application before the E-CoC at the 14th meeting on 26 September 2019. The E-CoC resolved not to allow the application for withdrawal.

A.6 Orders of NCLT and NCLAT

By its order dated 2 January 2020, NCLT allowed the Third Withdrawal Application. The NCLT held that the application for withdrawal was not barred by res judicata since in the previous proceeding relating to the First Withdrawal Application, it had not consciously adjudicated on whether the Resolution Plan could be

withdrawal was not barred by res judicata since in the previous proceeding relating to the First Withdrawal Application, it had not consciously adjudicated on whether the Resolution Plan could be

Page 15 of 197 withdrawn. The rationale for the order is indicated in the following extract: “11. No doubt there was a prayer for withdrawal of resolution plan amongst others in CA No.1252 (PB)/2019, the prayer for revaluation was specifically declined dismissal order dated 10.07.2019. While dismissing CA No.1252(PB)/2019 the prayer for withdrawal of resolution plan was neither considered nor was ever dealt with. The issue of withdrawal of the resolution plan by the Applicant has never been considered consciously on merit and/or adjudicated upon in CA No.1252(PB)/2019.

12. Doctrine of Constructive Res Judicata does not apply to the issues/points, or any "lis' between parties that has not been decided previously, and despite being pleaded, has not been considered by a court/tribunal and expressly dealt with in the order so passed.

13. Even a bare perusal of the Order dated 10.07.2019 would indicate that the issue of withdrawal of the Resolution Plan by the Resolution Applicant was not dealt with on merit and that no decision has either been passed or attained finality as regards allowing the party to withdraw the Resolution Plan.

14. It is also pertinent to note here that the Resolution Applicant had subsequently taken up the prayer for withdrawal of the Resolution Plan in the Application bearing CA No.1310 (PB)/2019.

15. It is also pertinent to note here that the Resolution Applicant had subsequently taken up the prayer for withdrawal of the Resolution Plan in the Application bearing CA No.1310 (PB)/2019. While dealing with the said Application, liberty was given to the Applicant vide order dated 01.09.2019 to re-file an application for withdrawal of the Resolution Plan. This direction further confirms that there was no conscious adjudication in CA No.1252(PB)/2019 on the issue of withdrawal of the resolution plan by the Applicant.”
    (emphasis supplied)

The NCLT held that: (i) a Resolution Plan becomes binding after it is approved by it as the Adjudicating Authority; (ii) under Section 30(2) of the IBC, the Adjudicating Authority has the power to examine whether the Resolution Plan can be effectively enforced and implemented; and (iii) in the ‘present circumstances’, an unwilling successful Resolution Applicant would be unable to effectively

mine whether the Resolution Plan can be effectively enforced and implemented; and (iii) in the ‘present circumstances’, an unwilling successful Resolution Applicant would be unable to effectively

Page 16 of 197 implement the Resolution Plan. The relevant parts of the order are extracted below:
“20. In the instant case the Resolution Plan is still pending before the Adjudicating Authority for approval. Under the provisions of Section 31 of the Code, a Resolution Plan becomes binding only after acceptance of a plan by the Adjudicating Authority.

[…]

23. Section 30(2)(d) of the Code mandates the Adjudicating Authority to ensure that there are effective means of enforcement and implementation of the Resolution Plan. Similarly, the proviso to sub-section (1) of Section 31 of the Code mandates Adjudicating Authority to ensure effective implementation of the resolution plan. The object. in approval of the resolution plan is to save the corporate debtor and to put it back on its feet. An unwilling and reluctant resolution applicant, who has withdrawn his resolution plan, neither can put the corporate debtor back to its feet nor the effective implementation of its resolution plan can be ensured.

24. No doubt the withdrawal of the resolution plan at this advance stage has caused great prejudice to the creditors/stake holders and legal consequences on the withdrawal of the resolution plan shall follow as per law.

the resolution plan at this advance stage has caused great prejudice to the creditors/stake holders and legal consequences on the withdrawal of the resolution plan shall follow as per law. The Resolution Professional and CoC are free to take action as per law consequent upon withdrawal of the resolution plan by the resolution applicant including on the issue of refund of the earnest money deposited by the applicant.

25. Be that as it may compelling an unwilling and reluctant resolution applicant to implement the plan may lead to uncertainty. The object of the Code is to ensure that the Corporate Debtor keep working as a going concern and to safeguard the interest of all the stake holders. The provisions of the Code mandate the Adjudicating Authority to ensure that the successful resolution applicant starts running the business of the Corporate Debtor afresh. Besides Court ought not restrict a litigant's fundamental right to carry on business in its way under Article 19(1)(g) of the Constitution. Once the applicant is unwilling and reluctant and itself has chosen to withdraw its resolution plan, a doubt

ntal right to carry on business in its way under Article 19(1)(g) of the Constitution. Once the applicant is unwilling and reluctant and itself has chosen to withdraw its resolution plan, a doubt

Page 17 of 197 arises as to whether the resolution applicant has the capability to implement the said plan. Uncertainty in the implementation of the resolution plan cannot also be ruled out.”
(emphasis supplied)

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

As a consequence of its order allowing the Third Withdrawal Application, the NCLT also dismissed the Approval Application on 3 January 2020 as being infructuous.

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

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

On the issue of res judicata, the NCLAT held that there being no appeal against the order of the Adjudicating Authority rejecting the First Withdrawal Application, the issue had attained finality. The NCLAT held: “82…in view of the dismissal of said CA 1252(PB)/2019 by the Adjudicating Authority and the said order which had attained finality and more so in the absence of any 'Appeal' being filed against the said order, then the dismissal order of CA 1252 of 2019 order dated 10.7.2019 binds the 1st Respondent/'Resolution Applicant' as an 'Inter-se' party.

[…]

84.…the Adjudicating Authority in the particular circumstances of the present case has no power to grant /reserve liberty to bring a fresh application and hence, the subsequent application filed by the 1st Respondent /'Resolution Applicant is barred by the principle of 'Res Judicata' notwithstanding the liberty to file fresh one.”

Page 18 of 197

On the merits of the application for withdrawal, the NCLAT held that: (i) once the Resolution Plan was approved by the CoC, the NCLT did not have jurisdiction to permit its withdrawal; (ii) the Adjudicating Authority could not enter upon the wisdom of the decision of the CoC to approve the Resolution Plan; (iii) the Resolution Applicant had accepted the conditions of the Resolution Plan and no change could be permitted; (iv) orders have already been reserved in the Approval Application; (v) no Special Investigation Audit had been conducted;

ed the conditions of the Resolution Plan and no change could be permitted; (iv) orders have already been reserved in the Approval Application; (v) no Special Investigation Audit had been conducted; (vi) Section 32A of the IBC grants full immunity to the Resolution Applicant from any offences committed before the commencement of the CIRP; and (vii) Ebix had participated in the process from August 2018 to January 2019 when orders had been reserved on the Approval Application, and hence it could not claim any right based on delay.

A.7 Present status of SFIO and CBI investigation

In an email dated 17 February 2020, the E-RP informed the E- CoC that the CBI conducted a search of the premises of Educomp on 11 February 2020 and seized numerous documents (a list was enclosed with the email). By another email dated 19 February 2020, the E-RP informed the E-CoC that CBI had resumed its search for documents at Educomp’s office.

In the 16th meeting of the E-CoC on 30 March 2020, the E-RP provided the following updates in relation to the CBI and SFIO investigations: (i) The CBI search at the premises of Educomp on 11 February 2020, was conducted upon a complaint by SBI on behalf of a consortium of banks;
(ii) Since the initiation of an enquiry by the MCA on 1 August 2018, the SFIO has requisitioned documents/information, which have been provided;

laint by SBI on behalf of a consortium of banks;
(ii) Since the initiation of an enquiry by the MCA on 1 August 2018, the SFIO has requisitioned documents/information, which have been provided;

Page 19 of 197 (iii) The last communication from the SFIO was received on 27 February 2020; and
(iv) In response to the grievance of some members of the E-CoC that the E-RP had only informed them of the investigations at a belatedly, the Chairperson of the E-CoC justified it by stating that the communication could only take place once the relevant investigation was completed. However, for future references, the Chairperson took note of the suggestion that the E-RP would add all members of the E-CoC to a WhatsApp group, where real-time updates could be shared. At the meeting, the E-CoC also passed a resolution with 77.05 per cent majority vote directing the E-RP to invoke and forfeit the EMD of Rs 2 crores furnished by Ebix in accordance with Clause 1.9.1 of RFRP. The E-RP issued a letter to IDBI on 1 April 2020 for encashment of the EMD.

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

The E-RP has informed this Court that the last communication received from the SFIO was on 4 September 2020. The investigations by the CBI and SFIO are continuing.

B Civil Appeal No 3560 of 2020 – the Kundan Care Appeal

B.1 The appeal

ceived from the SFIO was on 4 September 2020. The investigations by the CBI and SFIO are continuing.

B Civil Appeal No 3560 of 2020 – the Kundan Care Appeal

B.1 The appeal

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

Page 20 of 197 41. The NCLT had dismissed an application filed by Kundan Care under Section 60(5) of the IBC to withdraw its Resolution Plan submitted for the fourth respondent – Corporate Debtor, Astonfield. In appeal, the NCLAT upheld the NCLT’s decision, relying on its judgment impugned in the Ebix Appeal. It held that an application filed by a Resolution Applicant to withdraw from the Resolution Plan approved by the CoC could not be allowed since: (i) there was no provision in the IBC for it; (ii) the Resolution Plan is enforceable as a contract against the Resolution Applicant; and (iii) the Resolution Applicant was estopped from withdrawing.

The correctness of this view of the NCLAT now comes up for determination in the present appeal. While issuing notice on 16 November 2020, this Court had directed for an ad-interim stay on the judgment of the NCLAT, which continues till date.

B.2 Initiation of CIRP

On 20 November 2018, Astonfield filed a petition under Section 10 of the IBC seeking to initiate voluntary CIRP.

dgment of the NCLAT, which continues till date.

B.2 Initiation of CIRP

On 20 November 2018, Astonfield filed a petition under Section 10 of the IBC seeking to initiate voluntary CIRP. The NCLT admitted this petition on 27 November 2018 and appointed an IRP.

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

B.3 Invitation, submission and approval of Resolution Plan

On 20 February 2019, A-RP invited prospective resolution applicants to submit their EOIs in accordance with Regulation 36 of the CIRP Regulations and Form G was also published. Form G was amended by the A-RP, with due approval from the A-CoC, on 2 May 2019 and 17 May 2019.

Page 21 of 197 46. A-RP received nine EOIs, out of which seven were found to be eligible. However, Kundan Care did not submit its EOI within the time prescribed by the ARP, and its belated submission was rejected by the A-RP.

Thereafter, A-RP issued the RFRP on 6 March 2019 to the prospective Resolution Applicants who had been selected. Further, the IM was issued on 13 March 2019. Based on this, two Resolution Plans were received by the A-RP on 31 May 2019, which were then discussed with the A-CoC.

In the interim, Kundan Care filed an application before the NCLT challenging the A-RP’s rejection of its belated EOI. A-RP received the notice of this application on 30 August 2019.

A-CoC.

In the interim, Kundan Care filed an application before the NCLT challenging the A-RP’s rejection of its belated EOI. A-RP received the notice of this application on 30 August 2019. By order dated 6 September 2019, the NCLT allowed Kundan Care’s application. Thereafter, it was provided access to the RFRP, IM and other documents pertaining to Astonfield in the data room.

Kundan Care submitted its Resolution Plan for consideration on 16 September 2019. The Resolution Plan was placed before the A- CoC, which requested Kundan Care to submit a revised proposal. Kundan Care then submitted an updated draft of its Resolution Plan on 29 October 2019.

A-RP then conducted the 17th meeting of the A-CoC on 11 November 2019, to discuss the Resolution Plans submitted by Kundan Care and one more prospective Resolution Applicant (who had also submitted a revised Resolution Plan after negotiations with the A- CoC). Thereafter, Kundan Care submitted a revised version of its Resolution Plan on 12 November 2019, along with an addendum on 13 November 2019.

The A-CoC voted on the Resolution Plans on 14 November 2019, where the Resolution Plan submitted by Kundan Care was approved with a majority of 99.28 per cent, with 0.72 per cent abstaining. On

. The A-CoC voted on the Resolution Plans on 14 November 2019, where the Resolution Plan submitted by Kundan Care was approved with a majority of 99.28 per cent, with 0.72 per cent abstaining. On

Page 22 of 197 15 November 2019, the A-RP issued a Letter of Award to Kundan Care. Kundan Care also deposited a PBG of Rs 5 Crores with the A- RP/A-CoC.

A-RP then filed an application for approval of the Resolution Plan under Section 31 of the IBC before the NCLT, along with Form H, as mandated under the CIRP Regulations. This application is currently pending adjudication before the NCLT.

B.4 Astonfield’s dispute with GUVNL

Before proceeding further, it is important to discuss the dispute arising out of Astonfield’s PPA with GUVNL. The PPA was signed on 30 April 2010, came into force in December 2012. and was valid for a period of 25 years. Crucially, this PPA was the only agreement entered into by Astonfield and formed the entirety of its business.

When CIRP was initiated against Astonfield, GUVNL issued a notice of default under Article 9.2.1(e) of the PPA, stating that the initiation of insolvency was an “event of default”. This was challenged before the NCLT by A-RP and EXIM Bank through applications under Section 60(5) of the IBC.

It is important to note that Kundan Care was aware of this dispute, and made specific references to it in its Resolution Plan. Under the heading of “PPA Risk”, it noted: “GUVNL had served notices to terminate the Agreement since the Company is undergoing the process of Insolvency.

references to it in its Resolution Plan. Under the heading of “PPA Risk”, it noted: “GUVNL had served notices to terminate the Agreement since the Company is undergoing the process of Insolvency. However as per the Order of the Hon'ble NCLT dated 29 August 2019 (CA) 700/ND/2019 & CA 701/ND/2019) it is concluded that the Power Purchase Agreement (PPA) is an "instrument" for the applicability of Section 238 of the IBC, 2016 and clauses 9.2.1 e read with 9.3.1 of the PPA under reference are inconsistent within the ambit of Section 238 of/BC, 2016, provisions of/BC, 2016 and process initiated under /BC shall have an overriding effect over the PPA.

Page 23 of 197 Further, the Hon'ble NCLAT vide order dated 15 October 2019 has clearly stated that even in the event of Liquidation of the Corporate Debtor the appellant, Gujarat Urja Vikas Nigam Limited, cannot terminate the Power Purchase Agreement under the Code. Also, the Liquidator shall ensure that the Corporate Debtor remains a going concern. It is therefore very evident and clear that the Power Purchase Agreement cannot be terminated and has to continue even after the Resolution Plan has been approved by the Hon'ble NCLT.”

On 29 August 2019, the NCLT allowed the applications and set aside the notice of default issued by GUVNL. It held that allowing the termination of the PPA would adversely affect the ‘going concern’ status of Astonfield. However, it held that if Astonfield was to undergo liquidation subsequently, the termination would be permitted.

n of the PPA would adversely affect the ‘going concern’ status of Astonfield. However, it held that if Astonfield was to undergo liquidation subsequently, the termination would be permitted.

The NCLT’s judgment was challenged by GUVNL in an appeal before the NCLAT. By judgment dated 15 October 2019, the NCLAT 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 Astonfield were to undergo liquidation, the termination of the PPA would not be allowed.

GUVNL challenged NCLAT’s judgment in the GUVNL Appeal before this Court. When the present appeal was filed by Kundan Care, the GUVNL Appeal was pending before this Court. However, it has been disposed by a judgment dated 8 March 2021, in the following terms: “165 Given that the terms used in Section 60(5)(c) are of wide import, as recognized in a consistent line of authority, we hold that the NCLT was empowered to restrain the appellant from terminating the PPA. However, our decision is premised upon a recognition of the centrality of the PPA in the present case to the success of the CIRP, in the factual matrix of this case, since it is the sole contract for the sale of electricity which was entered into by the Corporate Debtor. In doing so,

present case to the success of the CIRP, in the factual matrix of this case, since it is the sole contract for the sale of electricity which was entered into by the Corporate Debtor. In doing so,

Page 24 of 197 we reiterate that the NCLT would have been empowered to set aside the termination of the PPA in this case because the termination took place solely on the ground of insolvency. The jurisdiction of the NCLT under Section 60(5)(c) of the IBC cannot be invoked in matters where a termination may take place on grounds unrelated to the insolvency of the corporate debtor. Even more crucially, it cannot even be invoked in the event of a legitimate termination of a contract based on an ipso facto clause like Article 9.2.1(e) herein, if such termination will not have the effect of making certain the death of the corporate debtor. As such, in all future cases, NCLT would have to be wary of setting aside valid contractual terminations which would merely dilute the value of the corporate debtor, and not push it to its corporate death by virtue of it being the corporate debtor‘s sole contract (as was the case in this matter‘s unique factual matrix).”

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

B.5 Withdrawal of the Resolution Plan

eing its sole contract, the PPA’s termination would necessarily result in the corporate death of Astonfield, which would derail the entire CIRP.

B.5 Withdrawal of the Resolution Plan

On 17 December 2019, Kundan Care filed an application under Section 60(5) of the IBC seeking permission of the NCLT to withdraw its Resolution Plan, which had been previously approved by the A-CoC and was pending confirmation by the NCLT under Section 31 of the IBC. In its application, it prayed for the following reliefs:
“a) Allow the present application and permit the Applicant to withdraw its Resolution Plan as submitted and approved by the CoC on 14.11.2019;

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

In its application, Kundan Care stated that there was no bar under the IBC on it withdrawing its Resolution Plan before it was confirmed

Page 25 of 197 by the NCLT. It sought to withdraw its Resolution Plan on account of four reasons: (i) That there was uncertainty in relation to the PPA with GUVNL, since the GUVNL Appeal was pending before this Court. It noted that the PPA was central to the CIRP, and its termination would affect its Resolution Plan.

tainty in relation to the PPA with GUVNL, since the GUVNL Appeal was pending before this 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 to Astonfield to change the solar panels which had been damaged in the floods of 2017, and had not made any payments to Astonfield for the electricity being supplied currently;
(ii) That due to heavy floods in the State of Gujarat during 2019, the solar panels and other equipment at the Project Site of Astonfield had been damaged. Further, it alleged that there was stagnant water at the Project Site, which continued to deteriorate them;
(iii) That Astonfield’s insurance claim of Rs 46.40 crores in relation to floods in 2017 had been repudiated by the insurer. Further, it also noted that this may also adversely affect the claim for the floods in 2019; and
(iv) That the IM issued by A-RP represented that since Astonfield had not availed the benefit of “Accelerated Depreciation” under the PPA, hence, it was entitled to a sum of Rs 6.614 crores from GUVNL, which was a “Trade Receivable”. However, it noted that Kundan Care had subsequently discovered a previous judgment of this Court upon identical facts, where it was noted that the Project Developer shall not be entitled to a higher/revised tariff in case of not availing “Accelerated Depreciation”.

dgment of this Court upon identical facts, where it was noted that the Project Developer shall not be entitled to a higher/revised tariff in case of not availing “Accelerated Depreciation”.

On 6 January 2020, Kundan Care filed an additional affidavit outlining the additional costs it would face on account of: (i) deterioration of the solar panels due to GUVNL unilaterally not permitting their replacement, thereby leading to additional cost of Rs

Page 26 of 197 30 crores (against an initial expected cost of Rs 9 crore); (ii) Astonfield’s Plant not producing electricity at its optimum level, thereby leading to a loss of revenue up to Rs 150 lacs per month; and (iii) CIRP costs on account of delay 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 found that almost all the solar panels installed at the Project site are required to be changed/replaced at a total cost of over INR 30 crores instead of INR 9 crores ascertained by the Applicant at the time of submission of the Plan.

[…]

17. I say and submit that the plant is capable of generating 18133200 KWH/Units of Electricity per annum (11.5 MW * 365 days * 24 hours* 1000 (from MW to KW) * 18% CUF = 18133200 KWH/Units), when operating at the optimum capacity which would only be possible after change/replacement of solar panels, inverters etc. as contemplated in the Resolution Plan.

F = 18133200 KWH/Units), when operating at the optimum capacity which would only be possible after change/replacement of solar panels, inverters etc. as contemplated in the Resolution Plan. This translates to generation revenue of roughly INR 1800 lacs per annum or roughly INR 150 lacs per month which is being incurred by the Project.

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

Thereafter, Kundan Care also filed an application for impleadment in the GUNVL Appeal pending before this Court, along with an application for directions praying, in exercise of this Court’s jurisdiction under Article 142 of the Constitution of India, for the following reliefs: “a) Set aside/quash the Notice dated 28.03.2019 issued by Gujarat Urja Vikas Nigam Limited to Astonfield Solar (Gujarat) Private Limited and declare that the Applicant/Corporate Debtor shall be free to change/replace the solar panels/modules and other equipment of the Project, as may be deemed fit by the Applicant/Corporate Debtor;

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

Page 27 of 197 b) Declare that the Power Purchase Agreement dated 30.04.2010 executed between Gujarat Urja Vikas Nigam Limited and Astonfield Solar (Gujarat) Private Limited shall stand extended by the period of moratorium declared under IBC during the CIR Process;

c) In alternate to prayers a) and b), permit the Applicant to withdraw its Resolution Plan dated 12.11.2019 and direct that the Performance Bank Guarantee submitted by the Applicant to the Committee of Creditors shall stand cancelled/revoked and/or returned/refunded to the Applicant;”

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

its application remained pending, on 14 May 2020, Kundan Care requested the NCLT to take up its application for an early hearing. Following this, the application was listed on 15 June 2020.

On 12 June 2020, A-RP filed its reply to Kundan Care’s application and additional affidavit, where it opposed the withdrawal of the Resolution Plan after its approval by the A-CoC and stated that: (i) In relation to the ongoing dispute with GUVNL, Kundan Care was aware of the same when it submitted the Resolution Plan; (ii) In relation to the damage to the solar panels, it pointed out that the A-RP had informed Kundan Care about the floods in 2019 and an Operation and Management Agency had been hired to clear the water at the Project Site, which had been done;
(iii) In relation to the repudiation of the insurance claim, the RFRP or IM never guaranteed that the claim would be successful. In any case, the A-RP was actively pursuing the challenge to its repudiation;
(iv) In relation to the “Accelerated Depreciation”, that the same had been listed as a “doubtful debt” by the A-RP in the IM. Further, in any case, Kundan Care would have done their own due diligence surrounding it; and

“Accelerated Depreciation”, that the same had been listed as a “doubtful debt” by the A-RP in the IM. Further, in any case, Kundan Care would have done their own due diligence surrounding it; and

Page 28 of 197 (v) In relation to Astonfield’s Plant not operating at full capacity, the IM issued by A-RP noted that the floods in 2017 had affected the Plant and it may not be able to operate at full capacity.

Kundan Care filed its rejoinder to the A-RP’s reply on 29 June 2020, in which they argued that the Resolution Plan proposed by them and approved by the A-CoC, was no longer “feasible” and “viable” commercially, in accordance with Section 30(2)(d) read with proviso to Section 31(1) of the IBC, due to the intervening circumstances before its confirmation by the NCLT which had materially altered the financial projections. Hence, the NCLT should allow it to withdraw the Resolution Plan. In the alternative, Kundan Care proposed renegotiation of the Resolution Plan by stating the following:
“55. That Para 78 of the Reply is the Prayer Clause, which is wrong and denied. The Prayer Clause of C.A. No. 16798/2019 is reiterated and reaffirmed. Alternatively, and without prejudice to the above, it is prayed that the Applicant may be permitted to re-negotiate the financial proposal with the CoC”

/2019 is reiterated and reaffirmed. Alternatively, and without prejudice to the above, it is prayed that the Applicant may be permitted to re-negotiate the financial proposal with the CoC”

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

The NLCT passed an order dated 3 July 2020, by which it rejected Kundan Care’s application by noting that: (i) it did not have jurisdiction to permit withdrawal; and (ii) the matter was also sub judice before this Court by the virtue of Kundan Care’s application in the GUVNL Appeal. The order stated: “IA 1679/2019
Counsels for the Resolution Applicant, COC and IRP are present.

lso sub judice before this Court by the virtue of Kundan Care’s application in the GUVNL Appeal. The order stated: “IA 1679/2019
Counsels for the Resolution Applicant, COC and IRP are present.

Page 29 of 197 The Resolution Applicant has prayed to withdraw the resolution plan which was submitted before this Tribunal after approval of the COC. After careful consideration of the matter, we are of the view that the NCLT has no jurisdiction to permit withdrawal of the resolution plan which has been placed before the authority with due approval of the COC. Notwithstanding this fact, it has been pointed out by the Counsel for the COC that another matter is subjudiced before the Hon'ble Supreme Court in which inter-alia a similar request has been made. This has been submitted by the Cotinsel for the COC on page 31 of the reply filed by COC in response to the application.

Keeping this in view, it will not be appropriate for this Tribunal to deal with an issue which is already subjudiced before the Hon'ble Supreme Court. The Application is hereby rejected.”

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

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

ed 3 July 2020 passed by the NCLT. NCLAT did not issue notice in the appeal, but heard the submissions of all parties at the stage of admission and directed them to file their written submissions.

By the impugned judgment dated 30 September 2020, the NCLAT dismissed the appeal by Kundan Care, relying on the judgment impugned in the Ebix Appeal. It noted: “7. Be it seen that the CIRP process undertaken involves filing of Expression of Interest by the prospective Resolution Applicants which may ultimately manifest in the form of prospective Resolution Plan after negotiations as regards improvement or revision in terms of the proposed Resolution Plan. This process is in the nature of a bidding process where, based on consideration of the provisions of a Resolution Plan with regard to financial matrix, capacity of the Resolution Applicant to generate funds, infusion of funds, upfront payment, the distribution mechanism and the period over which the claims of various stake holders are to be satisfied

ity of the Resolution Applicant to generate funds, infusion of funds, upfront payment, the distribution mechanism and the period over which the claims of various stake holders are to be satisfied

Page 30 of 197 besides the feasibility and viability of the Resolution Plan, a Resolution Applicant emerges as the highest bidder (Hl) eliminating the Resolution Plans of Resolution Applicants, which are ranked H2 and H3. The approval of a Resolution Plan by the Committee of Creditors with requisite majority has the effect of eliminating H2 and H3 from the arena. Though, such approved Resolution Plan would be binding on the Corporate Debtor and all stake holders only after the Adjudicating Authority passes an order under Section 31 of the I&B Code approving the Resolution Plan submitted by Resolution Professional with the approval of Committee of Creditors in terms of provisions of Section 30(6) of the I&B Code, it does not follow that the Successful Resolution Applicant would be at liberty to withdraw the Resolution Plan duly approved by the Committee of Creditors and laid before the Adjudicating Authority for approval thereby sabotaging the entire Corporate Insolvency Resolution Process, which is designed to achieve an object. 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.

lan 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, more so when it is a going concern. That apart, there is no express provision in the I&B Code allowing a Successful Resolution Applicant to stage a U-tum and frustrate the entire exercise of Corporate Insolvency Resolution Process. The argument advanced on behalf of the Appellant that there is no provision in the I&B Code compelling specific performance of Resolution Plan by the Successful Resolution Applicant has to be repelled on four major grounds:-
(i) There is no provision in the l&B Code entitling the Successful Resolution Applicant to seek withdrawal after its Resolution Plai1 stands approved by the Committee of Creditors with requisite majority;

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

majority;

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

Page 31 of 197 (iii) The Resolution Applicant in such case is estopped from wriggling out of the liabilities incurred under the approved Resolution Plan and the principle of estoppel by conduct would apply to it;

(iv) The value of the assets of the Corporate Debtor is bound to have depleted because of passage of time consumed in Corporate Insolvency Resolution Process and in the event of Successful Resolution Applicant being permitted to walk out with impunity, the Corporate Debtor's depleting value would leave all stake holders in a state of devastation.”

The NCLAT held that withdrawal of a Resolution Plan by the Resolution Application after its approval by the CoC cannot be permitted since: (i) it contravenes the principles of IBC, which require the CIRP to be conducted in a time-bound manner in order to maximise the value of the assets of the Corporate Debtor; (ii) permitting Kundan Care to withdraw would sabotage the CIRP, where the A-CoC had previously rejected other prospective Resolution Applicants in favor of Kundan Care; (iii) there is no specific provision in the IBC for allowing withdrawal; (iv) the Resolution Plan incorporated contractual terms binding the Resolution Applicant, and it is not akin to a contract of personal service which is legally unenforceable;

allowing withdrawal; (iv) the Resolution Plan incorporated contractual terms binding the Resolution Applicant, and it is not akin to a contract of personal service which is legally unenforceable; (v) by the virtue of principle of estoppel of conduct, Kundan Care is estopped from withdrawing; and (vi) the withdrawal may lead to the Astonfield’s liquidation, and the value of its assets were bound to have depleted in the interim.”

The catch points, we may notice from the conspectus of the case noticed by the Hon’ble Supreme Court (ibid) are: - I. The CoC commenced e-voting on the Ebix’s Resolution Plan on 21 February, 2021 at 7 p.m. and the voting lines were kept open till 7 p.m. of 22 February, 2018. 74.16% members of the CoC voted to approve the plan. 17.29% members voted to reject the plan and the remaining

Page 32 of 197 members having 8.55% vote shares cumulatively, abstained from voting on the Resolution Plan. Thus, the Resolution Plan failed to achieve the minimum percentage of vote share, as required in terms of the provisions of Section 30(4) of IBC, 2016 [in terms of the provisions of Section 6 of the Insolvency and Bankruptcy Code (Amendment) Act, 2018 i.e., Act No.8 of 2018, came into force w.e.f. 23.11.2017, the CoC might approve a Resolution Plan by a vote of not less than 75% of voting share of the Financial Creditors.

(Amendment) Act, 2018 i.e., Act No.8 of 2018, came into force w.e.f. 23.11.2017, the CoC might approve a Resolution Plan by a vote of not less than 75% of voting share of the Financial Creditors. Nevertheless, in terms of the provisions of Section 23(iii)(a) of the Act No.26 of 2018, which came into force on the 6th day of June, 2018, Section 4 of the Code was further amended and for the word seventy-five, the word sixty-six was substituted. Thus, as on relevant dates i.e., 21 February, 2018 and 22 February, 2018 in order to be treated as approved by CoC, the Resolution Plan needed to muster 75% vote share].
II. A day later i.e., on 23 February, 2018, one of the members of the CoC (CSEB) informed the RP by e-mail that due to a technical error, it could not participate in the e-voting process and wanted its affirmative vote to be recorded on the Resolution Plan. The CSEB’s vote could enhance the voting share in favour of Ebix’s Resolution Plan to 75.35% i.e., the vote percentage required for approval of the plan. Thus, the RP filed CA No. 160 (PB) of 2018 under Section 60(5) of IBC, 2016 to seek the direction from this Tribunal in respect of CSEB’s late vote. Nevertheless, in terms of the order dated 28th February, 2018, this Tribunal directed RP to file an application under Section 30(6) of IBC, 2016 for approval of Ebix’s

respect of CSEB’s late vote. Nevertheless, in terms of the order dated 28th February, 2018, this Tribunal directed RP to file an application under Section 30(6) of IBC, 2016 for approval of Ebix’s

Page 33 of 197 Resolution Plan and made it clear that the issue of CSEB’s vote would be taken up along with the application for approval of Resolution Plan.
III. On 3 April, 2018 an Indian online news publication, the Wire published an article titled “How Educomp May Have Subverted the Spirit of India’s Insolvency and Bankruptcy Process”. Another article titled “Educomp’s Insolvency Process Becomes Murkier as Ebix Buys Smartclass Educational Services” was published by the Wire on 26 April, 2018. Based on these reports, IFC a Financial Creditor of Educomp filed C.A. No.358 of 2018 before this Adjudicating Authority seeking investigation qua the affairs of the CD. Nevertheless on 01.08.2018 the MCA directed an investigation qua the affairs of CD by SFIO.
IV. In the meantime, on 2 July, 2018 the Ebix wrote a letter to RP to expedite the CIRP qua Educomp.
V. On 10 January, 2019, this Adjudicating Authority reserved its order qua the application filed for approval of Resolution Plan.
VI. On 5 July, 2019, Ebix filed C.A. No. 1252 (PB) of 2019 in CP(IB) No. 101 (PB) of 2017 for withdrawal of the plan for Resolution of Insolvency of CD, submitted by it. The application was dismissed on 10.07.2019.
VII. The 2nd application viz. C.A. No.

in CP(IB) No. 101 (PB) of 2017 for withdrawal of the plan for Resolution of Insolvency of CD, submitted by it. The application was dismissed on 10.07.2019.
VII. The 2nd application viz. C.A. No. 1310 (PB) of 2019, filed by the Ebix for withdrawal of Resolution Plan was also dismissed by this Adjudicating Authority on 5 September, 2019.
VIII. On 18 September, 2019, this Adjudicating Authority issued notice in the third withdrawal application and directed the RP to place it before the CoC. The RP placed the application before the CoC in its 14th meeting

Page 34 of 197 held on 26 September, 2019. The CoC resolved not to allow the application for withdrawal.
IX. In terms of the order dated 2 January, 2020, this Adjudicating Authority allowed the third withdrawal application filed by the SRA (Ebix) for withdrawal of its Resolution Plan, with the view:- (i) An unwilling Successful Resolution Applicant would be unable to implement the Resolution Plan effectively; (ii) Under the provisions of Section 31 of the Code, a Resolution Plan becomes binding only after acceptance of a plan by the Adjudicating Authority; (iii) An unwilling and reluctant Resolution Applicant who had withdrawn his Resolution Plan can neither put the Corporate Debtor back to its feet nor effective implementation of its Resolution Plan can be ensured; (iv) Compelling an unwilling and reluctant Resolution Applicant to implement the plan may lead to uncertainty;

back to its feet nor effective implementation of its Resolution Plan can be ensured; (iv) Compelling an unwilling and reluctant Resolution Applicant to implement the plan may lead to uncertainty; (v) Once the Applicant is unwilling and reluctant and itself has chosen to withdraw its Resolution Plan, a doubt arises as to whether the Resolution Applicant has the capability to implement the said plan. Uncertainty in the implementation of the Resolution Plan cannot also be ruled out.
X. As a consequence of its order allowing the third withdrawal application, this Tribunal also dismissed the approval application on 3 January, 2020 being infructuous.
XI. The CoC filed Company Appeal assailing the order dated 2nd January, 2020. On 3 February, 2020 the NCLAT stayed the order dated 2 January, 2020 passed by this Adjudicating Authority. The CoC also filed a separate

Page 35 of 197 Appeal viz. Company Appeal (AT) (Insolvency) No. 587 of 2020 assailing the order dated 3rd January, 2020 passed by this Adjudicating Authority.
XII. By its order dated 29 July, 2020 the NCLAT could set aside the order passed by this Adjudicating Authority, allowing the withdrawal of Resolution Plan, submitted by Ebix/SRA. Dealing with the plea of res judicata the NCLAT held that there being no appeal against the order of this Adjudicating Authority, rejecting the first withdrawal application, the issue had attained finality.

th the plea of res judicata the NCLAT held that there being no appeal against the order of this Adjudicating Authority, rejecting the first withdrawal application, the issue had attained finality. The finding and conclusion arrived at by the Hon’ble NCLAT qua other issues could be noted in last part of para 34 of the judgment of Hon’ble Supreme Court (ibid).
XIII. It is also mentioned in para 37 of the judgment passed by Hon’ble Supreme Court that the CoC passed a resolution with 77.05% vote share, providing that the EMD of Rs.2 crore furnished by Ebix/SRA in terms of the clause 1.9.1 of RFRP was required to be forfeited. In the wake, the RP issued a letter to IBBI on 1 April, 2020 for encashment of the EMD.
6. The order passed by Hon’ble NCLAT could be assailed by the SRA i.e., Ebix Singapore Pte. Ltd. (hereinafter referred to as “Ebix”) /SRA before Hon’ble Supreme Court, by filing Civil Appeal No. 3224 of 2020 (Supra). The contentions advanced on behalf of the Appellant in support of the Appeal, before Hon’ble Supreme Court, as noted in judgment dated 13th September, 2021 passed by Hon’ble Supreme Court reads thus: -
“D
Submissions of counsel in the Ebix Appeal

D.1 Submissions for the appellant

82 Mr K V Vishwanathan, learned Senior Counsel appearing on behalf of Ebix submitted that a successful Resolution Applicant may

ounsel in the Ebix Appeal

D.1 Submissions for the appellant

82 Mr K V Vishwanathan, learned Senior Counsel appearing on behalf of Ebix submitted that a successful Resolution Applicant may

Page 36 of 197 be permitted to withdraw the resolution plan (pending approval of the Adjudicating Authority), on account of: (a) subsequent developments in relation to Educomp (which in this case relate to investigations of fraud and mismanagement during the pre-CIRP period); and (b) due to an inordinate lapse of time, which has resulted in the complete erosion of the fundamental commercial substratum underlying the Resolution Plan. Further, he argues that the NCLAT did not correctly apply the doctrine of constructive res judicata. He has made the following submissions:

(i) Ebix is not bound by the Resolution Plan prior to the approval of the Adjudicating Authority, in terms of the CIRP documents read with the scheme of IBC. In this regard, our attention was drawn to:
(a) Section 31(1) of the IBC, which provides that the Resolution Plan is “binding…on all stakeholders” only upon approval by the Adjudicating Authority;
(b) Section 74(3) of the IBC, which provides that a person can be prosecuted or punished for contravening the Resolution Plan only after its approval by the Adjudicating Authority;

ng Authority;
(b) Section 74(3) of the IBC, which provides that a person can be prosecuted or punished for contravening the Resolution Plan only after its approval by the Adjudicating Authority;
(c) The documents underlying the CIRP, i.e., invitation of EOI, the RFRP, sanction letter and Resolution Plan take effect of a binding contract only upon the approval of the Adjudicating Authority and the execution of definitive agreements thereafter;
(d) Clause 1.1.6 of the RFRP provides that the Plan submitted by Ebix will have to be approved by the Adjudicating Authority and will be binding on all the stakeholders in relation to the Corporate Debtor and Ebix, only after it has been approved by the Adjudicating Authority;
(e) Clause 1.10(1) of the RFRP provides that Ebix shall be responsible for the implementation and supervision of the Resolution Plan from the date of approval by the Adjudicating Authority; and

Page 37 of 197 (f) Clause 2.2.9 of the RFRP provides that Ebix shall, pursuant to approval by the Adjudicating Authority, execute definitive agreements; (ii) The Resolution Plan constitutes an offer qualified by time and cannot be enforced against the parties after such a long period of time has elapsed. In this regard, the following terms of the documents underlying the CIRP were highlighted:
(a) Clause 1.1.5 of the RFRP, which invites Resolution Plans from prospective Resolution Applicants.

ed. In this regard, the following terms of the documents underlying the CIRP were highlighted:
(a) Clause 1.1.5 of the RFRP, which invites Resolution Plans from prospective Resolution Applicants. Further, Clause 1 of the covering letter for submission of the Resolution Plan provides that Ebix is setting out the offer in relation to the insolvency resolution of Educomp;
(b) The Resolution Plan was valid only for six months, since Clause 1.8.3 of the RFRP invites resolution plans/offers with a validity of six months;
(c) In accordance with the RFRP, Clause 7 of the Resolution Plan provides that it is valid for a period of six months from the date of submission. The appellant is a liberty to withdraw the resolution plan if there is delay of several months beyond the period of six months. It was emphasized that the Resolution Plan is a qualified offer which is not open to acceptance for an indefinite period. Reliance was placed on the decision of this Court in Riya Travel & Tours (India) (P) Ltd. v. C.U. Chengappa to support this proposition;
(d) The CSEB Application for the approval of the resolution plan continues to be pending before the Adjudicating Authority, while the Approval Appeal is pending before the Appellate Authority. A period of eighteen months has passed from the date of submission of the resolution plan (i.e., 19 February 2018) and twenty-seven months from the CIRP commencement date. Such severe and inordinate delay is impermissible under Section 12 of the IBC and justifies the withdrawal of the Plan;

ruary 2018) and twenty-seven months from the CIRP commencement date. Such severe and inordinate delay is impermissible under Section 12 of the IBC and justifies the withdrawal of the Plan;

Page 38 of 197 (e) The delay in the approval was on account of the actions of members of the E-CoC, who had sought a special audit of Educomp due to the concerns relating to mismanagement of its affairs. Several members had filed applications (IFC, Axis Bank and SBI) before the Adjudicating Authority in this regard. The Adjudicating Authority by orders dated 13 August 2018, 20 August 2018 and 31 August 2018 took cognizance of these applications and directed them to be placed before the E-CoC. The E-CoC approved the Investigation Audit Application filed on its behalf before the Adjudicating Authority for conducting a special audit by 77.85 per cent votes;
(f) SFIO initiated investigation against Educomp. Ebix became aware of the investigation only through disclosures made to NSE/BSE and regulators on 12 June 2019;
(g) Ebix had sent a notice dated 2 July 2018 to the E-CoC/E-RP stating that the severe delays in the CIRP have prejudiced the commercial considerations underlying the Resolution Plan and, in any case, the Resolution Plan was valid only for six months. It urged the E-CoC/E-RP to expedite the process for obtaining the Adjudicating Authority’s approval. Thereafter, Ebix filed the First Withdrawal Application for seeking information relating to the financial position and other commercial aspects of Educomp.

he Adjudicating Authority’s approval. Thereafter, Ebix filed the First Withdrawal Application for seeking information relating to the financial position and other commercial aspects of Educomp. After the dismissal of the First Withdrawal Application, the appellant filed the Second and Third Withdrawal Applications for withdrawal of its Resolution Plan; and
(h) The above sequence of events shows that Ebix had no role to play in the delays plaguing the CIRP of Educomp. Section 12 of the IBC stipulates that the insolvency resolution process should be completed in 270 days with an outer limit of 330 days. This Court in CoC of Essar Steel India Ltd. v. Satish Kumar Gupta & Ors. has held that “[i]t is only in such

Page 39 of 197 exceptional cases that time can be extended, the general rule being that 330 days is the outer limit within which resolution of the stressed assets of the corporate debtor must take place beyond which the corporate debtor is to be driven into liquidation”;
(iii) The events that have taken place subsequent to the submission of Resolution Plan justify its withdrawal. In this regard, it was urged on behalf of Ebix that:

(a) The Resolution Plan was based on certain considerations that were fundamental to the Ebix’s bid for the business of Educomp, and were crucial for keeping the business of Educomp as a going concern. These were the government contracts and IP driven solutions in the education and health industries.

e business of Educomp, and were crucial for keeping the business of Educomp as a going concern. These were the government contracts and IP driven solutions in the education and health industries. However, due to the inordinate delay in the completion of the CIRP, many of the government contracts may have ended. Further, various technology driven solutions and intellectual property owned and operated by Educomp, which Ebix had sought to acquire, were no longer valid; (b) The E-CoC passed a resolution with 77.85 per cent votes to conduct a special audit into the affairs of Educomp, which shows that evidence is available to conclude that the affairs of the company were mismanaged, which materially affect the economic considerations underlying the Resolution Plan;
(c) The affairs of Educomp are also being investigated by the SFIO and CBI, which provides further evidence that the affairs of Educomp were severally mismanaged and are susceptible to criminal investigations;
(d) There has been a lapse of over three years resulting in an erosion of vital business prospects of Educomp; and
(e) The implementation and viability of a Resolution Plan is to be assessed at the time of consideration of such plan by the competent Court/Tribunal, and not at the time of submission

comp; and
(e) The implementation and viability of a Resolution Plan is to be assessed at the time of consideration of such plan by the competent Court/Tribunal, and not at the time of submission

Page 40 of 197 of the Plan. The subsequent events that have transpired after the submission of the Resolution Plan are relevant for evaluating the commercial viability and the capability to implement the plan. In the present case, the substratum forming the basis of the resolution plan has been eroded by the occurrence of the abovementioned events. Thus, the successful Resolution Applicant has the right to withdraw the Resolution Plan in such circumstances;
(iv) Material information relating to the financial position and affairs of Ebix was not provided to Ebix after the submission of the Resolution Plan, as a consequence of which, there is an impairment of a fair process in the conduct of a commercial transaction. In this context: (a) Section 29(2) of the IBC, provides that all relevant information should be provided to the Resolution Applicant;
(b) Regulation 36 of the CIRP Regulations provides that the IM prepared under Section 29 of the IBC should contain information relating to, inter alia: (1) “assets and liabilities…”; (2) “the latest annual financial statement”; and (3) details of “…ongoing investigations or proceedings initiated by Government and statutory authorities”.

r alia: (1) “assets and liabilities…”; (2) “the latest annual financial statement”; and (3) details of “…ongoing investigations or proceedings initiated by Government and statutory authorities”. While this information is relevant for the preparation of the Resolution Plan, there is a continuing obligation to disclose such information if there is a substantial delay in the CIRP (beyond the period prescribed under Section 12 of the IBC) qua the Corporate Debtor;
(c) The Resolution Applicant’s right to complete and accurate information relating to the Corporate Debtor has been recognized under the UNCITRAL Guide. The principle of “equality of information” to all stakeholders, including the resolution applicant, has been underlined in the BLRC Report; and

Page 41 of 197 (d) The E-CoC/E-RP withheld information relating to mismanagement of affairs of Educomp between 2014-2018, and also in relation to the investigation into the affairs of Educomp by governmental authorities;
(v) The Adjudicating Authority has the power to permit the withdrawal of the Resolution Plan. Under Section 31 of the IBC, it has the power to independently satisfy itself that the “Resolution Plan as approved 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 the Adjudicating Authority can assess whether adequate provisions have been made for the “implementation and supervision of the resolution plan”. This Court in K Sashidhar v.

the IBC provides that the Adjudicating Authority can assess whether adequate provisions have been made for the “implementation and supervision of the resolution plan”. This Court in K Sashidhar v. IOC has emphasized that the Adjudicating Authority has the discretion to reject the Resolution Plan if it does not conform to the stated requirements of Section 30(2)(d). The proviso to Section 31(1) of the IBC expressly prohibits the Adjudicating Authority from approving a plan that is incapable of being effectively implemented. The NCLAT, in the impugned judgement, has not considered whether the exercise of the jurisdiction by the Adjudicating Authority under Section 31(1) read with Section 30(2)(d) was valid. In the present circumstances, the Resolution Plan is no longer capable of being implemented due to the erosion of the commercial basis of the Resolution Plan and an inordinate lapse of time;
(vi) The NCLT had good and valid reasons allowing for the withdrawal of the resolution plan since:
(a) There was no approval by the E-CoC with the requisite majority of 75 per cent. When the voting took place on the resolution plan submitted by the Appellant on 22 February 2018, there was a shortage in the votes required to achieve the statutory requirement of 75 per cent of votes in the E-CoC. On 23 February 2018, one of the financial creditors who was not present at the meeting of the E-CoC intimated its

quired to achieve the statutory requirement of 75 per cent of votes in the E-CoC. On 23 February 2018, one of the financial creditors who was not present at the meeting of the E-CoC intimated its

Page 42 of 197 agreement with the resolution plan and accordingly the Approval Application was filed on 7 March 2018. Orders have been reserved on the Approval Application on 10 January 2018; and (b) Fulfilment of the Plan cannot be foisted on an unwilling Applicant. This view of the NCLT is consistent with the legal position which vests it with the power to permit a withdrawal from a resolution plan for good and substantial reasons; and
(vii) The doctrine of res judicata does not bar the relief that Ebix had sought in its Third Withdrawal Application of its Resolution Plan. The First Withdrawal Application arose from a different cause of action, namely seeking information and re-evaluation of the financial position of Educomp due to a lapse of time. The order dated 10 July 2019 passed by the Adjudicating Authority in the First Withdrawal Application had only adjudicated the issue relating to the non-disclosure of information and material sought by Ebix, and had not considered the relief of withdrawal of Resolution Plan. This was also confirmed in the express finding of the Adjudicating Authority in its order dated 2 January 2020, which was appealed before the NCLAT.”

The CoC opposed the appeal.

lution Plan. This was also confirmed in the express finding of the Adjudicating Authority in its order dated 2 January 2020, which was appealed before the NCLAT.”

The CoC opposed the appeal. The submissions advanced on behalf of CoC, as noted by Hon’ble Supreme Court reads thus: -
“D.2 Submissions for the first respondent

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

(i) Ebix submitted its Resolution Plan on 27 January 2018, after month-long negotiations. Meetings between the E-CoC and Ebix were conducted on 17 February 2018, 19 February 2018 and 21 February 2018. Addendums were submitted on 21 February 2018. The mutually approved and negotiated plan was put to

Page 43 of 197 vote, and approved by 75.36 per cent of the E-CoC. This constituted a binding contract between Ebix and the E-CoC;
(ii) The IBC is a complete code as held by this Court in M/s Embassy Property Developments Pvt. Ltd. v. State of Karnataka & Ors. and M/s Innoventive Industries Ltd. v. ICICI Bank & Anr.. It does not envisage withdrawals of Resolution Plans after mutual negotiations between the Resolution Applicant and the CoC, which culminates into a binding agreement. The Adjudicating Authority 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 Nigam Limited v. Amit Gupta;
(iii) The basic tenets of any insolvency law are to ensure the sanctity of the prescribed processes and timelines.

iption, as held by this Court in Gujarat Urja Vikas Nigam Limited v. Amit Gupta;
(iii) The basic tenets of any insolvency law are to ensure the sanctity of the prescribed processes and timelines. Maximization of the value of assets and resolution of the Corporate Debtor are the core objectives of the IBC, as held by this Court in Swiss Ribbons (P) Ltd v. Union of India. Enabling withdrawals, especially at the tail end of the process, would push financially distressed Corporate Debtors into liquidation;
(iv) The Specific Relief (Amendment) Act 2018, as is evinced from the speech of the Union Minister of Law & Justice before the Rajya Sabha while introducing the amendments, shifted the paradigm on contract enforcement in India where specific performance is now the norm, rather than the exception; (v) The resolution process involves significant public money, resources and time. Enabling withdrawals would undermine the goals of predictability and finality, which the legislature had recognized as the need of the hour in the Rajya Sabha debates on the IBC;
(vi) Non-implementation of Resolution Plans after approval from the Adjudicatory Authority under Section 31 of the IBC, pertinently

as the need of the hour in the Rajya Sabha debates on the IBC;
(vi) Non-implementation of Resolution Plans after approval from the Adjudicatory Authority under Section 31 of the IBC, pertinently

Page 44 of 197 on a narrow scope of judicial review, is liable to criminal prosecution under Section 74(3) of the IBC. This Court should not allow a successful Resolution Applicant to withdraw from a duly concluded contract;
(vii) The consequences of permitting a withdrawal by Ebix would push Educomp towards liquidation, which would risk thousands of crores of public monies owed to public sector banks during the economic crisis caused by the COVID-19 pandemic;
(viii) Permitting withdrawal of an approved Resolution Plan would tread on the exclusive domain of the CoC, which has the power to determine the feasibility and viability of a Resolution Plan. The mandate of Section 30(2)(d) of the IBC, which envisages ‘implementation and supervision of the resolution plan’, would be breached if the Court would allow withdrawals by holding that an unwilling Resolution Applicant 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 parameters delineated in Section 30(2), which does not envisage the withdrawal or unwillingness of the Resolution Applicant to continue with a CoC- approved Resolution Plan.

the IBC, is confined to parameters delineated in Section 30(2), which does not envisage the withdrawal or unwillingness of the Resolution Applicant to continue with a CoC- approved Resolution Plan. The Adjudicating Authority, as a creature of the statute, cannot exercise jurisdiction beyond the scope of the IBC or second-guess the commercial wisdom of the CoC, as held by this Court in Essar Steel (supra), after noting the observations of this Court in K Sashidhar (supra);
(x) The Supreme Court, in Essar Steel (supra) and K Sashidhar (supra), has held that the Adjudicating Authority cannot 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 ensure predictability and finality. The provisions which elucidated this aim were:

Page 45 of 197 (a) Clause 1.13.5, which did not envisage any change or supplemental information to the Resolution Plan, after the submission date;
(b) Clause 1.8.4, which stated that a submitted Resolution Plan shall be irrevocable; and (c) Clause 1.10(l), which stipulated that the Resolution Applicant will not be permitted to withdraw the Resolution Plan; (xii) The RFRP did not envisage six months to be the validity of the Resolution Plan. Clause 1.8.3, which stipulated a minimum six- month validity of the Resolution Plan, is relatable to the acceptance of the plan by the E-CoC and not the Adjudicating Authority.

he Resolution Plan. Clause 1.8.3, which stipulated a minimum six- month validity of the Resolution Plan, is relatable to the acceptance of the plan by the E-CoC and not the Adjudicating Authority. This is evident from the clauses of the RFRP which stipulate that the submitted plan is irrevocable;
(xiii) The resolution process belies the claim that withdrawals were permissible after the six-month period. The process was delineated in the following terms: (a) Clause 1.3.1 and 1.3.2 empowers the E-RP to issue an invitation to prospective resolution applicants, subject to, inter alia, non-disclosure agreements and participation fees;
(b) Clause 1.3.6, read with Clause 1.9.1, enables a party to submit a Resolution Plan upon payment of an earnest money deposit of Rs 2 crore. Along with the Resolution Plan, the Resolution Applicant was required to submit an undertaking accepting the terms of the RFRP, including the minimum six- month period of Resolution Plan validity;
(c) Clause 1.9.3, read with Clause 1.9.5, ensures that a CoC approved Resolution Plan becomes a binding contract between the E-CoC and Ebix, since the earnest money deposit needs to be replaced with a performance guarantee, which is 10 per cent of the Resolution Plan value. Any

an becomes a binding contract between the E-CoC and Ebix, since the earnest money deposit needs to be replaced with a performance guarantee, which is 10 per cent of the Resolution Plan value. Any

Page 46 of 197 violation of the concluded contract, which would be the approved Resolution Plan in this case, would give the E-CoC the right to invoke the performance guarantee;
(d) The above clauses, in addition to clause 1.8.3, read with 1.9.5, evince that the six-month validity is with respect of the EMD alone, and is hence only related to a period until acceptance by the E-CoC;
(e) The consequence of approval by the Adjudicating Authority under Section 31 of the IBC is that the parties enter into definitive binding agreements, the implementation of the Resolution Plan commences and the performance guarantee is returned. A Section 31-approval binds all stakeholders to a concluded contract between the Ebix and the E-CoC;
(f) The CoC or the RP do not have the authority to impose a time limit on the Adjudicating Authority. Therefore, it would not be plausible to construe Clause 1.8.3 to impose a maximum validity period on a Resolution Plan; and
(g) In any event, Ebix had waived the term of validity of the plan being six months by pursuing the plan after six months, i.e., from August 2018 till reserving of orders by the Adjudicating Authority in January 2019, and not raising any claims till July 2019.

n being six months by pursuing the plan after six months, i.e., from August 2018 till reserving of orders by the Adjudicating Authority in January 2019, and not raising any claims till July 2019. Therefore, Ebix is estopped from raising the plea, after the purported expiry of the validity period; (xiv) Clause 1.1.6 of the RFRP, which reiterated Section 31 of the IBC and states that the Resolution Plan will be binding on all stakeholders only after the approval of the Adjudicating Authority, does not militate against E-CoC’s proposition that the CoC-approved Resolution Plan is a concluded contract. This is because:

Page 47 of 197 (a) Section 30(4) of the IBC does not contemplate any statutory exit after the approval of the Resolution Plan by the CoC, which determines its feasibility and viability;
(b) Clause 1.1.6 paraphrases Section 31(1) of the IBC, which merely makes the Resolution Plan binding on all other stakeholders. The Adjudicating Authority’s approval under Section 31(1) amounts to a ‘super-added imprimatur’ to the concluded terms between the CoC and the Successful Resolution Applicant; and
(c) A conjoint reading of Clause 1.1.6, along with Clause 1.8.4, which declares a submitted Resolution Plan to be irrevocable, and Clause 1.10(l), which prohibits withdrawal of a submitted Resolution Plan, belies the claim that the Resolution Plan is binding on the Successful Resolution Applicant only after approval of the Adjudicating Authority; (xv) The delay in the resolution process is not attributable to the E- CoC.

the Resolution Plan is binding on the Successful Resolution Applicant only after approval of the Adjudicating Authority; (xv) The delay in the resolution process is not attributable to the E- CoC. It cannot be cited to allow Ebix to withdraw from a legally binding plan;
(a) The E-CoC approved the submitted Resolution Plan within 270 days, and it was promptly filed before the Adjudicating Authority in March 2018. The orders on the plan approval were reserved in January 2019 and pronounced only in January 2020. The delay cannot be attributable to the E-CoC or used to withdraw from a plan which provided a 90 per cent haircut; and
(b) actus curiae neminem gravabit, i.e., the act of Court shall harm no man, is a settled principle in law;
(xvi) Ebix’s argument that the substratum or commercial viability has eroded due to the subsequent circumstances is facetious since:

Page 48 of 197 (a) Ebix had conducted its own due diligence, in accordance with the RFRP. Section 29 of the IBC also enabled the appellant to access to an IM on Educomp, which would include all relevant information, including financial position and pending disputes.

nce with the RFRP. Section 29 of the IBC also enabled the appellant to access to an IM on Educomp, which would include all relevant information, including financial position and pending disputes. Clause 1.13.7 of the RFRP also stipulates that failure to conduct adequate due diligence is not a ground to relieve the Resolution Applicant from its obligations under a submitted Resolution Plan;
(b) Ebix continued to be interested in Educomp as late as 1 June 2020, when it addressed a letter stating that the software licenses for online education, issued by Educomp, have become even more relevant in the circumstances of the pandemic;
(c) The Investigation Audit Application for investigations into the affairs of Educomp was filed in May 2018 and disposed of by August 2018, which was prior to the Adjudicating Authority reserving its orders on the Resolution Plan. In any event, no such audit by the Special Investigation Team was undertaken; (d) According to the information available with the E-CoC, the E- RP had provided all the information available with Educomp regarding the CBI and SFIO investigations, on a best effort basis. Additionally, Ebix was also appearing before the NCLT when the E-CoC sought an investigation into the affairs of Educomp, as recorded in the order of the NCLT dated 9 August 2018;
(e) Ebix had evaluated the business and business conduct of Educomp, before submitting a Resolution Plan worth Rs 314 crores, against an admitted financial debt worth Rs 3003 crores.

ugust 2018;
(e) Ebix had evaluated the business and business conduct of Educomp, before submitting a Resolution Plan worth Rs 314 crores, against an admitted financial debt worth Rs 3003 crores. This 90 per cent haircut indicates that the appellant was aware of the conditions of Educomp; and

Page 49 of 197 (f) In any event, Section 32A of the IBC grants immunity to a Resolution Applicant from any offences committed by the Corporate Debtor, prior to the commencement of the CIRP, and provides certainty that the assets of the Corporate Debtor, as represented, would be available in the same manner as at the time of submission of a Resolution Plan. Section 25(2)(j) of the IBC empowers and obligates the RP to file applications for avoidance of certain transactions, to protect the interests of the Resolution Applicant; and (xvii) The Third Withdrawal Application is barred by res judicata
since the grounds raised by Ebix were rejected by the NCLT in the First Withdrawal Application on 10 July 2019. The liberty granted by the NCLT to file a fresh application on 5 September 2019 was with respect to filing a proper pleading without defects, and not on merits. This conditional liberty cannot be construed as a waiver of the objection of res judicata. In any event, the issue of limited validity of the approved Resolution Plan and delay of seventeen months, is barred by the principles of constructive res judicata.”

jection of res judicata. In any event, the issue of limited validity of the approved Resolution Plan and delay of seventeen months, is barred by the principles of constructive res judicata.”

The RP supported the stand taken by the CoC and the submissions advanced on its behalf, as noted by Hon’ble Supreme Court, reads thus:
“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 has submitted that:
(i) Upon the approval of a Resolution Plan by the CoC, a concluded contract comes into existence between the Resolution Applicant and CoC. Any withdrawal of the Resolution Plan would violate the concluded contract;

Page 50 of 197 (ii) In the present case, Clauses 1.9.3 and 1.9.5, give the right to the E-CoC to invoke the PBG submitted by Ebix if it attempts to renege from its contractual obligation to implement the Resolution Plan;

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

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

(a) The UNCITRAL Guide, according to which the role of judicial authorities is limited to approving the Resolution Plan after ensuring that it was approved by the CoC properly.

contemplated by:

(a) The UNCITRAL Guide, according to which the role of judicial authorities is limited to approving the Resolution Plan after ensuring that it was approved by the CoC properly. It does not envisage that the role of the judicial authorities would extend to questioning the commercial wisdom of the CoC, much less allow for the withdrawal of the Resolution Plan at the behest of the Resolution Applicant;

(b) The BLRC Report: (1) notes that the UNCITRAL Guide was used as a benchmark by Parliament while enacting the IBC; (2) opined that the CoC should be the driving force behind the resolution of the Corporate Debtor; and (3) does not discuss the withdrawal of a Resolution Plan;

(c) The UK Act does not allow for the withdrawal of a Resolution Plan and limits the grounds of challenge. In Singapore, the Singapore Act allows challenges to the Resolution Plan, without envisaging withdrawal;

(d) The Resolution Plan is a contract executed under the aegis of the IBC and hence the statute must be interpreted so as to further its objectives. Reliance for this proposition is placed on the following English decisions: (1) Allied Domecq (Holdings) Ltd v. Allied Domecq First Pension Trust Ltd; (2) Reinwood Ltd

to further its objectives. Reliance for this proposition is placed on the following English decisions: (1) Allied Domecq (Holdings) Ltd v. Allied Domecq First Pension Trust Ltd; (2) Reinwood Ltd

Page 51 of 197 v. L Brown & Sons Ltd; (3) Doleman v. Shaw; and (4) Standard Life Assurance Ltd v. Oak Dedicated Ltd; and

(e) If the Parliament while enacting the IBC intended to permit the withdrawal of the Resolution Plan after its approval by the CoC or NCLT, it would have provided for such an eventuality. Section 12A was inserted by amendment for situations involving a withdrawal from the CIRP. On the contrary, Section 74 provides for penalties in case the Resolution Applicant does not comply with the Resolution Plan;

(v) Ebix’s argument, that the RFRP which provides that the Resolution Plan must be approved within six months would also include its approval by the Adjudicating Authority, is contrary 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 Plan even after the period of six months by communicating with the E-CoC/E- RP, arguing in its favor in the Approval Application and by extending the EMD. The First Withdrawal Application was filed only on 5 July 2019, after the expiry of nearly one year from the expiry of the period of six months on 19 August 2018;

(vii) The investigations by the SFIO and CBI were initiated after the filing of the Approval Application before the NCLT.

one year from the expiry of the period of six months on 19 August 2018;

(vii) The investigations by the SFIO and CBI were initiated after the filing of the Approval Application before the NCLT. Since the E-RP was not aware of any discrepancies or illegalities committed by the former management of Educomp, information about such activities could not have been provided to intending Resolution Applicants under Section 29 of the IBC. Section 29 only envisages that the RP will provide information to prospective Resolution Applicants on a best-effort basis;

(viii) Ebix is a professional corporate entity, and through the express provisions of its own Resolution Plan, has stated that it has significant previous experience in the revival of stressed assets. Before submitting its Resolution Plan for Educomp, Ebix was

Page 52 of 197 provided access to the Virtual Data Room by the E-RP and conducted its due diligence. Hence, it should not be allowed to seek a withdrawal, by arguing that certain facts were not within its knowledge; and

(ix) In view of the decision of this court in Nagabhushanammal v. C Chandikeswaralingam, the Third Withdrawal Application was barred by the principles of res judicata since it sought the same prayer which was raised in the First Withdrawal Application, and rejected by the NCLT in its order dated 10 July 2019.”

was barred by the principles of res judicata since it sought the same prayer which was raised in the First Withdrawal Application, and rejected by the NCLT in its order dated 10 July 2019.”

In para 93 to 98 of the judgment dated 13.09.2021 (supra), Hon’ble Supreme Court analysed the purpose of Insolvency and viewed that an examination of raison d’etre (reason for being) of the IBC must necessarily precede its analytical interpretation. Referring to the UNCITRAL (United Nations Commission on International Trade Law) guide, Hon’ble Supreme Court noted that each jurisdiction evolves its own insolvency regime based on its political and economic goals, thus the UNCITRAL guide also refrain from prescribing mandates for the specific choices (procedural or substantive) that an insolvency law should provide. Hon’ble Supreme Court also made a reference to the BLRC (Bankruptcy Legislative Reforms Committee) Report to espouse that a good realisation can generally be obtained if the firm is sold as a going concern, thus the delay, which induces liquidation, causes value destruction. In the wake, it could be deciphered that achieving a high recovery rate is primarily about identifying and combating the sources of delay.
10. Hon’ble Supreme Court also noted the concluded statement in the executive summary of BLRC Report which acknowledged that the failure of business plans is integral to the process of market economy. When business

e Court also noted the concluded statement in the executive summary of BLRC Report which acknowledged that the failure of business plans is integral to the process of market economy. When business

Page 53 of 197 failure takes place, the best outcome for society is to have a rapid re-negotiation between the financers to finance the going concern using a new arrangement of liabilities and a new management team. If this cannot be done, the best outcome for society is a rapid liquidation. In para 97 of the judgment, Hon’ble Supreme Court could observe that the CIRP invariably has an impact on the conduct of the Resolution Applicant, who participates in the process and consents to be bound by the RFRP and broader insolvency framework. It is the view taken by Hon’ble Supreme Court that the interpretive task of this Adjudicating Authority, Appellate Authority and even of Hon’ble Supreme Court must be cognizant of the objective of the CIRP. In terms of the view taken by Hon’ble Supreme Court, any claim seeking an exercise of the Adjudicating Authority’s residuary powers under Section 60(5)(c) of the IBC, the NCLT’s inherent powers under Rule 11 of the NCLT Rule 2016 or even the powers of Hon’ble Supreme Court under Article 142 of the Constitution must be closely scrutinised for broader compliance with the insolvency framework and its underlying objective.

016 or even the powers of Hon’ble Supreme Court under Article 142 of the Constitution must be closely scrutinised for broader compliance with the insolvency framework and its underlying objective. It is also the view taken by the Hon’ble Supreme Court in the judgment dated 13 September, 2021 that any judicial creation of a procedural or substantive remedy that is not envisaged by the statute would not only violate the principle of separation of powers but would also run the risk of altering the delicate coordination that is designed by the IBC framework and have grave implications on the outcome of the CIRP, the economy of the country and the lives of the workers and other relied parties who are statutorily bound by the impact of a resolution or liquidation of Corporate Debtor.

Page 54 of 197 11. In para 104 of the judgment, Hon’ble Supreme Court noted the argument put forth on behalf of the Appellant/Ebix that the Resolution Plan is in the nature of an offer which becomes binding as concluded contract only once the Adjudicating Authority approves it. Nevertheless, having taken note of the rival submissions put forth on behalf of the counsels for the parties, Hon’ble Supreme Court observed that the scope of the commercial bargain with the Resolution Applicant evinces a sense of a negotiated agreement that is arrived at between the parties which resembles an exercise of contractual freedom by the CoC and the Resolution Applicant.

he Resolution Applicant evinces a sense of a negotiated agreement that is arrived at between the parties which resembles an exercise of contractual freedom by the CoC and the Resolution Applicant. Hon’ble Supreme Court also viewed that if it is held that the CoC-approved Resolution Plans are indeed contracts, their provisions would still have to conform to the statutory provisions of the IBC. However, such an interpretation would entail that CoC-approved Resolution Plans are at the intersection of the IBC and the Contract Act. This would mean that certain principles of contract law, for example those relating to discharge, penalties, remedies, and damages would become applicable to CoC-approved Resolution Plans. The text of the IBC does not specify whether Resolution Plans at the second stage of the process i.e., in the intervening period of submission to and approval by the Adjudicating Authority are pure contracts. As noted previously, by specifications such as eligibility for Resolution Applicants, the contents of the IM and duties of the RP to prospective Resolution Applicant and statutory provisions on timelines and voting strictly govern the insolvency process even prior to the submission of the plan to the Adjudicating Authority. The CoC which according to the Ebix is like a free contracting party governed by the binding principles of the statute with regard to the contents and nature of the statutory plan that it approves under Section 30(4) and even its own

s like a free contracting party governed by the binding principles of the statute with regard to the contents and nature of the statutory plan that it approves under Section 30(4) and even its own

Page 55 of 197 composition. While dealing with the contention regarding the Resolution Plan being contract, Hon’ble Supreme Court recorded that in fact a commentator had noted that the purpose of bankruptcy law is to actually solve a specific ‘contacting failure’ that a company’s financial distress. Such a ‘contacting failure’ arises because ‘financial distress involves too many parties with strategic bargaining incentives and too many contingencies for the firm and its creditors to define a set of rules of every scenario’. Thus, insolvency law recognises that parties can take benefits of such incomplete contact to hold each other up for their individual gain. Finally, Hon’ble Supreme Court viewed that the contractual principles and common law remedies, which do not find a tether in the wording or the intent of the IBC cannot be imported in the intervening period between the acceptance of the CoC and the approval by the Adjudicating Authority. Principles of contractual constructions and interpretations may serve as interpreting aids, in the event of ambiguity over the terms of the Resolution Plan. However, remedies that are specific to the Contract Act cannot be implied de hors the over-riding principles of the IBC.

eting aids, in the event of ambiguity over the terms of the Resolution Plan. However, remedies that are specific to the Contract Act cannot be implied de hors the over-riding principles of the IBC.
Para 104 to 125 of the judgment of Hon’ble Supreme Court, which deals with the contentions of the parties as to, “whether the Resolution Plan is a kind of contract or not” reads thus: -
“104 To summarize the arguments of the parties, the appellants have argued that Resolution Plans are in the nature of an offer, which becomes binding as a concluded contract only once the Adjudicating Authority has approved the Resolution Plan. Section 7 of the Contract Act requires the acceptance of offer to be absolute, unconditional and unqualified. Since the approval by the CoC is effectively conditional upon the confirmation of the Plan by the Adjudicating Authority, it cannot be said that there is absolute acceptance of the Resolution

Page 56 of 197 Plan. Alternatively, it has been argued that Resolution Plans approved by the CoC are contingent contracts, whose enforceability is conditional upon the approval of the Adjudicating Authority in accordance with Section 32 of the Contract Act. The Respondents (RPs and the CoCs) have argued that a concluded contract comes into being when the Resolution Plan is approved by the CoC and a successful Resolution Applicant cannot renege from their contractual obligation to implement the Resolution Plan.

ed contract comes into being when the Resolution Plan is approved by the CoC and a successful Resolution Applicant cannot renege from their contractual obligation to implement the Resolution Plan. In furtherance of this argument, Mr Shyam Divan appearing for the E-CoC made a reference to the Specific Relief (Amendment) Act 2018, which has brought a change to the regime on contract enforcement in India by making specific performance the norm rather than the exception.
105 The determination of the nature of the Resolution Plan would help 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. The insolvency process, as governed by the IBC, does not merely structure the conduct of all the participants in the process after finalization and approval of a Resolution Plan by a CoC, but also the conduct stemming from the very first steps of inviting prospective Resolution Applicants. The RP, with the approval of the CoC, invites prospective Resolution Applicants through an RFRP. Once an unconditional EOI has been received from prospective Resolution Applicants who are otherwise eligible under Section 29A, the RP prepares an IM as per the provisions of Section 29 which furnishes all relevant information of the Corporate Debtor to enable prospective Resolution Applicants to make an informed decision, before proposing a Resolution Plan.

ovisions of Section 29 which furnishes all relevant information of the Corporate Debtor to enable prospective Resolution Applicants to make an informed decision, before proposing a Resolution Plan. As a consequence of the IBC and its regulations, prospective Resolution Applicants, who are not disqualified under Section 29A, propose drafts of their Resolution Plans. The RP examines the Resolution Plan against the contours of Section 30(2) and submits only the eligible plans to the CoC. Prior to the IBBI (CIRP) (Fourth Amendment) Regulations 2020, which now requires the CoC to vote on all Plans

Page 57 of 197 simultaneously after recording its deliberations on the feasibility and viability of each Plan, Regulation 39(3) earlier enabled the CoC to approve a Resolution Plan with “such modifications as it deems fit”. This meant that the prospective Resolution Applicants and the CoC would indulge in several rounds of negotiations, within a strict time- frame, to arrive at a mutually agreeable Resolution Plan which was then subject to voting by the CoC. Subsequent to the voting, the RP would submit the plan to the Adjudicating Authority along with receipt of the PBG and a compliance certificate in the form of Form H. Each of the stages detailed above correspond to several rights and obligations on all parties that are specifically created by the statute.

e PBG and a compliance certificate in the form of Form H. Each of the stages detailed above correspond to several rights and obligations on all parties that are specifically created by the statute.
106 Since the interpretation of the IBBI (CIRP)(Fourth Amendment) Regulations 2020 and the impact on the Resolution Applicants and the CoC to negotiate the terms of the Resolution Plan is not before this Court and the present appeal essentially seeks to determine the nature of the Resolution Plan after its approval by the CoC and prior to its approval by the Adjudicating Authority, this Court will proceed to determine of the nature of such a Plan, on the assumption of the law as it stood then, i.e., Regulation 39(3) which directed that “[t]he committee shall evaluate the resolution plans received under sub- regulation (1) strictly as per the evaluation matrix to identify the best resolution plan and may approve it with such modifications as it deems fit” 64. This power of the CoC to suggest modifications invariably entailed an element of negotiation with the Resolution Applicants, who would make suitable revisions and re-submit their Resolution Plans. The scope of a commercial bargain with the Resolution Applicants evinces a sense of a negotiated agreement that is arrived between the parties, which resembles an exercise of contractual freedom by the CoC and the Resolution Applicant.
107 If this court were to hold that CoC-approved Resolution Plans are indeed contracts, their provisions would still have to conform to the statutory provisions of the IBC.

Resolution Applicant.
107 If this court were to hold that CoC-approved Resolution Plans are indeed contracts, their provisions would still have to conform to the statutory provisions of the IBC. However, such an interpretation

Page 58 of 197 would entail that CoC-approved Resolution Plans are at the intersection of the IBC and the Contract Act. This would mean that certain principles of contract law, for example those relating to discharge, penalties, remedies and damages would become applicable to CoC-approved Resolution Plans. For instance, in the United States, plans confirmed by courts have been characterized as contracts, whose breach can even give rise to contractual remedies. In In re Hoffinger Indus, Inc, a bankruptcy court in Arkansas has held that “a confirmed plan should be enforceable and amenable to damages between contractually bound parties.” Indeed, it has been argued before us that Resolution Plans should be enforced through the contractual remedy of specific performance. Further, a determination that Resolution Plans are contracts in the period between approval by the CoC and the approval of the Adjudicating Authority would require us to analyse whether all elements of contract formation have been satisfied, including the question of whether the acceptance of the Resolution Plan by the CoC fulfils the criteria laid down under Section 7 of the Contract Act or whether the conditionality of seeking approval from the Adjudicating Authority makes the Resolution Plan a contingent contract.

ulfils the criteria laid down under Section 7 of the Contract Act or whether the conditionality of seeking approval from the Adjudicating Authority makes the Resolution Plan a contingent contract. Our intent of laying down the consequences of our determination of Resolution Plans as contracts is to highlight the importance of ascertaining the nature of a CoC- approved Resolution Plan, prior to its approval by the Adjudicating Authority.
108 The text of the IBC does not specify whether Resolution Plans at the second stage of the process, i.e., in the intervening period of submission to and approval by the Adjudicating Authority, are pure contracts. As noted previously, by specifications such as eligibility for resolution applicants, the contents of the IM and duties of the RP to prospective Resolution Applicants and statutory procedures on timelines and voting, strictly govern the insolvency process even prior to the submission of the Plan to the Adjudicating Authority. The CoC,

tive Resolution Applicants and statutory procedures on timelines and voting, strictly govern the insolvency process even prior to the submission of the Plan to the Adjudicating Authority. The CoC,

Page 59 of 197 who the appellants allege is in the nature of a free contracting party, is governed by the binding principles of the statute with regard to the contents and nature of the statutory plan that it approves under Section 30(4) and even its own composition.
109 Section 30(4) provides that the consent of all the members of 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 scenarios envisaged 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, the percentage of debt owed between the operational and financial creditors and other such variables impact voting thresholds inter se members of the CoC. A sixty-six per cent vote of the CoC is required to approve a Resolution Plan. The dissenting creditors are deemed to have given their approval and are bound by the decision of the majority of the CoC. The dissenting creditors are bound as a result of the statutory provision and not because they have actually consented to be parties to such an arrangement.

he decision of the majority of the CoC. The dissenting creditors are bound as a result of the statutory provision and not because they have actually consented to be parties to such an arrangement. Other elements governing the Resolution Plan indicate that the entire process from initiation and leading up to its acceptance by the CoC takes place within the framework of the IBC. In addition, the IBC provides penalties for non-compliance with the Resolution Plan after its approval under Section 31 and forfeiture of the PBG for failing to implement the Resolution Plan or contributing to the failure of its implementation. The violation of the terms of the Resolution Plan does not give rise to a claim of damages, rather it leads to prosecution and imposition of punishment under Section 74 of the IBC. On the contrary, a CoC’s withdrawal of the CIRP under Section 12A is coupled with a requirement of payment of CIRP costs, but no damages are statutorily payable to the Resolution Applicant, irrespective of the stage of the withdrawal.

the CIRP under Section 12A is coupled with a requirement of payment of CIRP costs, but no damages are statutorily payable to the Resolution Applicant, irrespective of the stage of the withdrawal.

Page 60 of 197 110 The CoC even with the requisite majority, while approving the Resolution Plan must consider the feasibility and viability of the Plan and the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of section 53 of the IBC. The CoC cannot approve a Resolution Plan proposed by an applicant barred under Section 29A of the IBC. Regulation 37 and 38 of the CIRP Regulations govern the contents of a Resolution Plan. Furthermore, a Resolution Plan, if in compliance with the mandate of the IBC, cannot be rejected by the Adjudicating Authority and becomes binding on its approval upon all stakeholders – including the Central and State Government, local authorities to whom statutory dues are owed, operational creditors who were not a part of the CoC and the workforce of the Corporate Debtor who would now be governed by a new management. Such features of a Resolution Plan, where a statute extensively governs the form, mode, manner and effect of approval distinguishes it from a traditional contract, specifically in its ability to bind those who have not consented to it. In the pure contractual realm, an agreement binds parties who are privy to the contract.

hes it from a traditional contract, specifically in its ability to bind those who have not consented to it. In the pure contractual realm, an agreement binds parties who are privy to the contract. In the context of a resolution Plan governed by the IBC, the element of privity becomes inapplicable once the Adjudicating Authority confirms the Resolution Plan under 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 Resolution Plan. In fact, a commentator has noted that the purpose of bankruptcy law is to actually solve a specific ‘contracting failure’ that accompanies financial distress. Such a contracting failure arises because “financial distress involves too many parties with strategic bargaining incentives and too many contingencies for the firm and 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 individual gain. In an attempt to solve the issue of incompleteness and the hold-up threat, the insolvency law provides procedural protections i.e., “the law puts in place guardrails

up for their individual gain. In an attempt to solve the issue of incompleteness and the hold-up threat, the insolvency law provides procedural protections i.e., “the law puts in place guardrails

Page 61 of 197 that give the parties room to bargain while keeping them from taking position that veer toward extreme hold up”.
111 It may be useful to refer to how this Court has analyzed instruments that are analogous to a Resolution Plan. In SK Gupta v. KP Jain, this Court while discussing the nature of compromise or arrangements entered between a company and its creditors or members observed that such a compromise or arrangement once sanctioned by the court is not merely an agreement between parties because it binds even dissenting creditors or members through statutory force. This Court made the following observations:
“12…The scheme when sanctioned does not merely operate as an agreement between the parties but has statutory force and is binding not only on the company but even dissenting creditors or members, as the case may be. The effect of the sanctioned scheme is “to supply by recourse to the procedure thereby prescribed the absence of that individual agreement by every member of the class to be bound by the scheme which would otherwise be necessary to give it validity” [see J.K. (Bombay) Pvt. Ltd. v. New Kaiser-i-Hind Spg. & Wvg. Co. Ltd.

ual agreement by every member of the class to be bound by the scheme which would otherwise be necessary to give it validity” [see J.K. (Bombay) Pvt. Ltd. v. New Kaiser-i-Hind Spg. & Wvg. Co. Ltd. [AIR 1970 SC 1041 : (1969) 2 SCR 866, 891 : (1970) 40 Com Cas 689] ]..”
(emphasis supplied) 112 While the above observations were made in the context of a scheme that has been sanctioned by the Court, the Resolution Plan even prior to the approval of the Adjudicating Authority is binding inter se the CoC and the successful Resolution Applicant. The Resolution Plan cannot be construed purely as a ‘contract’ governed by the Contract Act, in the period intervening its acceptance by the CoC and the approval of the Adjudicating Authority. Even at that stage, its binding effects are produced by the IBC framework. The BLRC Report mentions that “[w]hen 75% of the creditors agree on a revival plan, this plan would be binding on all the remaining creditors”. The BLRC Report also mentions that, “the RP submits a binding agreement to the Adjudicator before the default maximum date”. We have further

plan would be binding on all the remaining creditors”. The BLRC Report also mentions that, “the RP submits a binding agreement to the Adjudicator before the default maximum date”. We have further

Page 62 of 197 discussed the statutory scheme of the IBC in Sections I and J of this judgement to establish that a Resolution Plan is binding inter se the CoC and the successful Resolution Applicant. Thus, the ability of the Resolution Plan to bind those who have not consented to it, by way a statutory procedure, indicates that it is not a typical contract.
113 The BLRC Report, which furnished the first draft of the IBC and elaborated on the aims behind the overhaul of the insolvency regime, 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 ‘financial arrangement’, ‘revival plan’ 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 BLRC in characterizing the nature of the Resolution Plan as a contract. The binding effect of the Resolution Plan has the consequence of preventing the CoC or the Resolution Applicant to renege from its terms after the plan has been approved by the CoC through a voting mechanism.

effect of the Resolution Plan has the consequence of preventing the CoC or the Resolution Applicant to renege from its terms after the plan has been approved by the CoC through a voting mechanism. The fleeting mention of a ‘binding contract’ on one occasion in the BLRC Report (which was a pre- legislative text that underwent subsequent modifications by the Legislature) to indicate the binding nature of the Resolution Plan and the finality of negotiations once it is approved by the CoC, does not establish the legal nature of the document, especially when it is not complemented by the text and design of the IBC.
114 Certain stages of the CIRP resemble the stages involved in the formation of a contract. Echoes of the process involved in the formation of a contract resonate in the steps antecedent to the approval of a Resolution Plan such as: (i) the issuance of an RFRP may be equated to an invitation to offer; (ii) a Resolution Plan can be considered as a proposal or offer; and (iii) the approval by the CoC may be similar to an acceptance of offer. The terms of the Resolution Plan contain a commercial bargain between the CoC and Resolution Applicant. There

or offer; and (iii) the approval by the CoC may be similar to an acceptance of offer. The terms of the Resolution Plan contain a commercial bargain between the CoC and Resolution Applicant. There

Page 63 of 197 is 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 premised upon the agreement or consent of those bound (although as a procedural step the IBC requires sixty-six percent votes of creditors), but upon its compliance with the procedure stipulated under the IBC.
115 It was argued for the E-RP that a Resolution Plan is a contract executed in furtherance of a statutory regime under the IBC. A question arises whether a Resolution Plan can be classified as a ‘statutory contract’. This Court has defined a statutory contract in India Thermal Power Ltd. v. State of MP in the following terms:
“11. Section 43 empowers the Electricity Board to enter into an arrangement for purchase of electricity on such terms as may be agreed. Section 43-A(1) provides that a generating company may enter into a contract for the sale of electricity generated by it with the Electricity Board.

of electricity on such terms as may be agreed. Section 43-A(1) provides that a generating company may enter into a contract for the sale of electricity generated by it with the Electricity Board. As regards the determination of tariff for the sale of electricity by a generating company to the Board, Section 43(1)(2) provides that the tariff shall be determined in accordance with the norms regarding operation and plant-load factor as may be laid down by the authority and in accordance with the rates of depreciation and reasonable return and such other factors as may be determined from time to time by the Central Government by a notification in the Official Gazette. These provisions clearly indicate that the agreement can be on such terms as may be agreed by the parties except that the tariff is to be determined in accordance with the provision contained in Section 43-A(2) and notifications issued thereunder. Merely because a contract is entered into in exercise of an enabling power conferred by a statute that by itself cannot render the contract a statutory contract. If entering into a contract containing the prescribed terms and conditions is a must under the statute then that contract becomes a statutory contract. If a contract incorporates certain terms and conditions in it which are statutory then the said contract to that extent is statutory. A contract may contain certain other terms

ting Authority, including the different stages for pressing a withdrawal of the CIRP under Section 12A. Even a modification to the RFRP is envisaged by the CIRP Rules and is subject to a timeline. As has been provided in Regulation 36B(5) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, any modification in RFRP or the evaluation matrix issued under sub-regulation 1 of Regulation 36B shall be deemed to be fresh issue and shall be subject to timeline under sub-regulation 3. The modification in RFRP cannot be made more than once. The absence of any exit routes being stipulated under the statute for a successful Resolution Applicant is indicative of proscription of any withdrawal at its behest. The rule of casus omissus is an established rule of

Page 75 of 197 interpretation which provides that an omission in a statute cannot be supplied by judicial construction. In Para 147 of the judgment, Hon’ble Supreme Court could notice the situation arising out of economic slowdown that impacted every business of the country and viewed that no legislative relief for enabling withdrawals or re-negotiations have been provided qua the Resolution Plan, while certain other amendments in the wake of covid were carried in the Code. With reference to the UNCITRAL guidelines, their Lordships could express that even the guidelines do not contain any provisions for withdrawal of a submitted plan. Presently, we need to examine as to, “whether the Resolution Applicant can oppose its own Resolution Plan”.

at even the guidelines do not contain any provisions for withdrawal of a submitted plan. Presently, we need to examine as to, “whether the Resolution Applicant can oppose its own Resolution Plan”. While dealing with the application for approval of the Resolution Plan and dealing with the contentions put forth by counsels for the parties, we may not avoid the reproduction of Paras 126 to 148 of the judgment passed by Hon’ble Supreme Court, which reads thus: - “I Statutory framework governing the CIRP

126 The CIRP is a time bound process with a specific aim of maximizing the value of assets. IBC and the regulations made under it lay 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 within 180 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 Adjudicating Authority for extending this period up to 90 days. The first proviso to Section 12(3) clarifies that such an extension can only be granted once. In Arcelor Mittal (India) (P) Ltd. v. Satish Kumar Gupta, this Court had held that the time taken in legal proceedings in relation to the CIRP must be excluded from the timeline mentioned in Section 12. Since this could extend the CIRP indefinitely, the Insolvency and Bankruptcy Code (Amendment) Act 2019, inserted a second proviso to Section 12(3) with effect from 16 August 2019 to

n Section 12. Since this could extend the CIRP indefinitely, the Insolvency and Bankruptcy Code (Amendment) Act 2019, inserted a second proviso to Section 12(3) with effect from 16 August 2019 to

Page 76 of 197 state that the CIRP in its entirety must be mandatorily completed within 330 days from the insolvency commencement date, including the time taken in legal proceedings. A legislative amendment that takes away the basis of a judicial finding is indicative of the strong emphasis of the IBC on its timelines and its attempt to thwart the prospect of stakeholders engaging in multiple litigations, solely with the intent of causing undue delay. Delays are also a cause of concern because the liquidation value depletes rapidly, irrespective of the imposition of a moratorium, and a delayed liquidation is harmful to the value of the Corporate Debtor, the recovery rate of the CoC and consequentially, the economy at large. In Essar Steel (supra) a three judge Bench of this Court, emphasized the rationale of the Insolvency and Bankruptcy Code (Amendment) Act 2019, which introduced the second proviso to Section 12(3). The court adverted to the BLRC report which underscored delays in legal proceedings as the cause of the failure of the previous insolvency regime under the SICA and the recovery mechanism in SARFAESI. It also extracted a Speech of the Union Minister in the Rajya Sabha to explain the proposal for the amendment in 2019, which was to avoid the same pitfalls in the IBC. The Court, speaking through Justice R F Nariman, noted:
“119.

Union Minister in the Rajya Sabha to explain the proposal for the amendment in 2019, which was to avoid the same pitfalls in the IBC. The Court, speaking through Justice R F Nariman, noted:
“119. The speech of the Hon'ble Minister on the floor of the House of the Rajya Sabha also reflected the fact that with the passage of time the original intent of quick resolution of stressed assets is getting diluted. It is therefore essential to have time-bound decisions to reinstate this legislative intent. It was also pointed out on the floor of the House that the experience in the working of the Code has not been encouraging. The Minister in her speech to the Rajya Sabha gives the following facts and figures:
“Now, regarding the Corporate Insolvency Resolution Process (CIRP), under the Code, I want to give you data again as of 30- 6-2019. First, I will talk about the status of CIRPs. Number of admitted cases is 2162; number of cases closed on appeal, which I read out about, is 174; number of cases closed by withdrawal under Section 12-A, is 101, I have given you a slightly later data; number of cases closed by resolution is 120; closed by liquidation, 475; and ongoing CIRPs are 1292.

cases closed by withdrawal under Section 12-A, is 101, I have given you a slightly later data; number of cases closed by resolution is 120; closed by liquidation, 475; and ongoing CIRPs are 1292.

Page 77 of 197 So, now, I would like to mention the number of days of waiting. I would like to mention here the details of the ongoing CIRPs, along with the timelines. Ongoing CIRPs are 1292, the figure just now I gave you. Over 330 days, 335 cases; over 270 days, 445 cases; over 180 days and less than 270 days, 221 cases; over 90 days but less than 180 days, 349 cases; less than 90 days, 277 cases. The number of days pending includes time, if any, excluded by the tribunals. So, that gives you a picture on what is the kind of wait and, therefore, why we want to bring the amendments for this speeding up.”
[…]
123. As the speech of the Hon'ble Minister on the floor of the House only indicates the object for which the amendment was made 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 amended Section 12, but only in order to explain why the Amending Act of 2019 was brought about.”

127 The decision in Essar Steel (supra) while reiterating the rationale of the IBC for ensuring timely resolution of stressed assets as a key factor, had to defer to the principles of actus curiae neminem gravabit, i.e., no person should suffer because of the fault of the court or the delay in the procedure.

of stressed assets as a key factor, had to defer to the principles of actus curiae neminem gravabit, i.e., no person should suffer because of the fault of the court or the delay in the procedure. In spite of this Court’s precedents which otherwise strike down provisions which interfere with a litigant’s fundamental right to non-arbitrary treatment under Article 14 by mandatory conclusion of proceedings without providing for any exceptions, this Court refused to strike down the second proviso to Section 12(3) in its entirety. It noted that the previous statutory experiments for insolvency had failed because of delay as a result of extended legal proceedings and chose to only strike down the word ‘mandatorily’, keeping the rest of the provision intact. Therefore, the law as it stands, mandates the conclusion of the CIRP – including time taken in legal proceedings, within 330 days with a short extension to be granted only in exceptional cases. However, the Court has warned that this discretion must be exercised sparingly and only in the following situations:
“127…Thus, while leaving the provision otherwise intact, we strike down the word “mandatorily” as being manifestly

is discretion must be exercised sparingly and only in the following situations:
“127…Thus, while leaving the provision otherwise intact, we strike down the word “mandatorily” as being manifestly

Page 78 of 197 arbitrary under Article 14 of the Constitution of India and as being an excessive and unreasonable restriction on the litigant's right to carry on business under Article 19(1)(g) of the Constitution. The effect of this declaration is that ordinarily the time taken in relation to the corporate resolution process of the corporate debtor must be completed within the outer limit of 330 days from the insolvency commencement date, including extensions and the time taken in legal proceedings. However, on the facts of a given case, if it can be shown to the Adjudicating Authority and/or Appellate Tribunal under the Code that only a short period is left for completion of the insolvency resolution process beyond 330 days, and that it would be in the interest of all stakeholders that the corporate debtor be put back on its feet instead of being sent into liquidation and that the time taken in legal proceedings is largely due to factors owing to which the fault cannot be ascribed to the litigants before the Adjudicating Authority and/or Appellate Tribunal, the delay or a large part thereof being attributable to the tardy process of the Adjudicating Authority and/or the Appellate Tribunal itself, it may be open in such cases for the Adjudicating Authority and/or Appellate Tribunal to extend time beyond 330 days.

dy process of the Adjudicating Authority and/or the Appellate Tribunal itself, it may be open in such cases for the Adjudicating Authority and/or Appellate Tribunal to extend time beyond 330 days. Likewise, even under the newly added proviso to Section 12, if by reason of all the aforesaid factors the grace period of 90 days from the date of commencement of the Amending Act of 2019 is exceeded, there again a discretion can be exercised by the Adjudicating Authority and/or Appellate Tribunal to further extend time keeping the aforesaid parameters in mind. It is only in such exceptional cases that time can be extended, the general rule being that 330 days is the outer limit within which resolution of the stressed assets of the corporate debtor must take place beyond which the corporate debtor is to be driven into liquidation.”

128 The evolution of the IBC framework, through an interplay of legislative amendments, regulations and judicial interpretation, consistently emphasizes the predictability and timeliness of the IBC. The legislature and the IBBI have been proactive to introduce amendments to the procedural framework, that respond to changes in the economy. For instance, Regulation 40(c), which came into effect on 20 April 2020, was inserted in the CIRP Regulations to take into

ents to the procedural framework, that respond to changes in the economy. For instance, Regulation 40(c), which came into effect on 20 April 2020, was inserted in the CIRP Regulations to take into

Page 79 of 197 account the delay that may be caused to the CIRP on account of the lockdown being imposed by the Central Government due to the COVID-19 pandemic. Regulation 40(c) provides that the delay in completing any activity related to the CIRP because of imposition of lockdown will not be counted for the purposes of the timeline that has been stipulated under the statutory framework. If the CIRP is not completed within the prescribed timeline, the Corporator Debtor is sent into liquidation. This understanding of the evolution of the law is critical to our task of judicial interpretation. We cannot afford to be swayed by abstract conceptions of equity and ‘contractual freedom’ of the parties to freely negotiate terms of the Resolution Plan with unfettered discretion, that are not grounded in the intent of the IBC.

129 The IBC and the regulations provide a detailed procedure for the completion of CIRP. An application for initiation of CIRP is filed either by the financial creditor, operational creditor or the Corporate Debtor itself under Sections 7, 9 and 10 of the IBC, respectively.

on of CIRP. An application for initiation of CIRP is filed either by the financial creditor, operational creditor or the Corporate Debtor itself under Sections 7, 9 and 10 of the IBC, respectively. Once the application is admitted by the Adjudicating Authority, it passes the following orders under Section 13(1) of the IBC: (i) declaration of a moratorium for the purposes referred to in Section 14 of the IBC; (ii) causing a public announcement to be made for the initiation of CIRP and issuing a call for submissions of claims as may be specified under Section 15 of the IBC; and (iii) appointing an IRP in accordance with Section 16 of the IBC.

130 Section 13(2) provides that the public announcement is to be made immediately after the appointment of an IRP. The word ‘immediately’ here means not later than three days from the date of appointment as provided in the explanation to Regulation 6(1) of the CIRP Regulations. Section 15 of the IBC lists down the information that should be included in the public announcement of CIRP. It should specify the last date up to which the claims, i.e., a right of payment or right to remedy as defined under Section 3(6) of the IBC, can be made by creditors, workmen and employees. Regulation 6(2)(c) provides

last date up to which the claims, i.e., a right of payment or right to remedy as defined under Section 3(6) of the IBC, can be made by creditors, workmen and employees. Regulation 6(2)(c) provides

Page 80 of 197 that the last date of submission of claims shall be fourteen days from the date of appointment of the IRP. The public announcement also specifies the date on which the CIRP shall close, which is the one hundred and eightieth day from the date of the admission of the application under Sections 7, 9 or 10, as may be applicable. Regulation 6 of the CIRP Regulations stipulates additional requirements relating to how the public announcement is to made.

131 On receipt of claims from the operational creditors, financial creditors, workmen and employees, the IRP prepares a list of creditors after verifying the claims. Regulation 13(1) provides that the verification of all the claims is to be done within seven days from the last date of receipt of the claims. Thereafter, the IRP constitutes a CoC in accordance with Section 21(1) of the IBC. Regulation 17 of the CIRP Regulations stipulates that the IRP must submit a report certifying the constitution of the CoC within two days of the claims being verified. The IRP is required to hold the first meeting of the CoC within seven days of filing of the report under the said regulation. If the appointment of the RP by the CoC is delayed, the IRP is to perform the functions of the RP from the fortieth day of the insolvency commencement date till the RP is appointed under Section 22 of the IBC.

tment of the RP by the CoC is delayed, the IRP is to perform the functions of the RP from the fortieth day of the insolvency commencement date till the RP is appointed under Section 22 of the IBC.

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

e that the Corporate Debtor remains a going concern until the Resolution Plan is approved by the Adjudicating Authority. The powers and duties of the RP are listed under Section 23(2) of the IBC.

Page 81 of 197

133 The significant, if not the most important, duty of the RP is to solicit Resolution Plans. The RP is empowered to invite prospective Resolution Applicants who fulfil the criteria as laid down by the RP and approved by the CoC, considering the complexity and the scale of the business operations of the Corporate Debtor and other such conditions specified by the IBBI, to submit a Resolution Plan or Plans under Section 25(2)(h) of the IBC. Further, a person should not be ineligible to be a Resolution Applicant under Section 29A of the IBC. Section 5(25) defines a Resolution Applicant in the following terms: "resolution applicant" means a person, who individually or jointly with any other person, submits a resolution plan to the resolution professional pursuant to the invitation made under clause (h) of sub-section (2) of section 25; or pursuant to section 54K, as the case may be.”

134 The first step in the process of soliciting a Resolution Plan is the preparation of an IM containing relevant information as specified by the IBBI for formulating a Resolution Plan in accordance with Section 29(1) of the IBC. The contents of the IM are specified under Regulation 36(2) of the CIRP Regulations.

rmation as specified by the IBBI for formulating a Resolution Plan in accordance with Section 29(1) of the IBC. The contents of the IM are specified under Regulation 36(2) of the CIRP Regulations. Regulation 36(1) of the CIRP Regulations specifies the timelines within which the RP must submit the IM to members of the CoC, which is within two weeks of his appointment but not later than the fifty-fourth day from the insolvency commencement date, whichever is earlier. Thereafter, the RP issues an invitation of EOI not later than the seventy-fifth day from the insolvency commencement date to seek expressions of interest from eligible prospective Resolution Applicants in terms of Regulation 36A of the CIRP Regulations. A prospective Resolution Applicant is required to submit an unconditional EOI within the time stipulated under the invitation, which shall not be less than fifteen days from the date of the issue of invitation. The RP conducts a due diligence of the Resolution Applicant based on material available on record in terms of Regulation 36A(8) of the CIRP Regulations. Thereafter, the RP issues a provisional list of eligible prospective Resolution Applicants

on Applicant based on material available on record in terms of Regulation 36A(8) of the CIRP Regulations. Thereafter, the RP issues a provisional list of eligible prospective Resolution Applicants

Page 82 of 197 within ten days of the last date for submission of EOIs to the CoC and to all the prospective Resolution Applicants who had submitted the EOI. Regulation 36A also specifies the timeline within which any objection can be made against the inclusion or exclusion of a prospective Resolution Applicant on the list, which is five days from the issue of the list. The RP is required to publish a final list of prospective Resolution Applicants within ten days of the last date for the receipt of objections by the CoC.

135 Under Regulation 36B of the CIRP Regulations, the RP has to issue the IM, evaluation matrix for consideration of the Resolution Plan and an RFRP within five days of the date of issue of the provisional list of Resolution Applicants to every prospective Resolution Applicant on the list and any other prospective Resolution Applicants who have contested their non-inclusion in the list. Regulation 36B stipulates that the RFRP shall contain detailed steps of each process and the manner and purposes of interaction between the RP and the prospective resolution applicant along with the corresponding timelines. A minimum of thirty days is given to the prospective Resolution Applicant to submit a Resolution Plan.

tween the RP and the prospective resolution applicant along with the corresponding timelines. A minimum of thirty days is given to the prospective Resolution Applicant to submit a Resolution Plan. A Resolution Plan is defined under Section 5(26) of the IBC:
“resolution plan" means a plan proposed by resolution applicant for insolvency resolution of the corporate debtor as a going concern in accordance with Part II;
Explanation.--For the removal of doubts, it is hereby clarified that a resolution plan may include provisions for the restructuring of the corporate debtor, including by way of merger, amalgamation and demerger;”

136 The timeline for the submission of Resolution Plans can be extended by an RP with the approval of the CoC. The RFRP must require the resolution applicant to furnish a performance security in case their Resolution Plan is approved by the CoC under Regulation 36B(4A). The performance security shall stand forfeited if, after the approval of the Resolution Plan by the Adjudicating Authority, the

eir Resolution Plan is approved by the CoC under Regulation 36B(4A). The performance security shall stand forfeited if, after the approval of the Resolution Plan by the Adjudicating Authority, the

Page 83 of 197 Resolution Applicant fails to implement or contributes to the failure of implementation of the plan. Under the regulation, a performance security is defined as “security of such nature, value, duration and source, as may be specified in the request for resolution plans with the approval of the committee, having regard to the nature of resolution plan and business of the corporate debtor”. Regulations 37 and 38 list down the mandatory contents of the Resolution Plan.

137 The RP is required to review the Resolution Plan submitted in terms of Section 30(2) of the IBC, which provides that:
“Section 30 - Submission of resolution plan
[…]
(2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan—

(a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor;

(b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than—

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

in such manner as may be specified by the Board which shall not be less than—

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

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

Explanation 1.--For the removal of doubts, it is hereby clarified that a distribution in accordance with the provisions of this clause shall be fair and equitable to such creditors.

Explanation 2.--For the purposes of this clause, it is hereby declared that on and from the date of commencement of the

provisions of this clause shall be fair and equitable to such creditors.

Explanation 2.--For the purposes of this clause, it is hereby declared that on and from the date of commencement of the

Page 84 of 197 Insolvency and Bankruptcy Code (Amendment) Act, 2019, the provisions of this clause shall also apply to the corporate insolvency resolution process of a corporate debtor—

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

(ii) where an appeal has been preferred under section 61 or section 62 or such an appeal is not time barred under any provision of law for the time being in force; or

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

(c) provides for the management of the affairs of the Corporate debtor 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 the time being in force;

(f) conforms to such other requirements as may be specified by the Board.

sion of the resolution plan;

(e) does not contravene any of the provisions of the law for the time being in force;

(f) conforms to such other requirements as may be specified by the Board.

Explanation.-- For the purposes of clause (e), if any approval of shareholders is required under the Companies Act, 2013 (18 of 2013) or any other law for the time being in force for the implementation of actions under the resolution plan, such approval shall be deemed to have been given and it shall not be a contravention of that Act or law.” (emphasis supplied)

Sub-Section (3) of Section 30 of the IBC provides that the RP shall present Resolution Plans which conform to the above requirements before the CoC for approval. Sub-Section (4) of Section 30 stipulates that the CoC may approve a Resolution Plan by a vote of not less than sixty-six per cent after considering the feasibility and viability of the plan and any such requirements specified by the IBBI.

138 The CoC has been given wide powers under the IBC. It can direct the Corporate Debtor into liquidation any time before the approval by the Adjudicating Authority, under Section 33(2) of the IBC.

8 The CoC has been given wide powers under the IBC. It can direct the Corporate Debtor into liquidation any time before the approval by the Adjudicating Authority, under Section 33(2) of the IBC.

Page 85 of 197 Further, under Section 12A of the IBC the Adjudicating Authority may allow withdrawal of the application submitted under Sections 7, 9 or 10 of the IBC for initiation of the CIRP (i.e., initiation of the CIRP by the financial creditor, operational creditor and the corporate applicant, respectively) if the withdrawal is approved by ninety per cent of the voting share of the CoC. Dealing with the question whether a successful Resolution Applicant can retreat through the route provided under Section 12A of the IBC, a three-judge Bench of this Court in Maharashtra Seamless v. Padmanabhan Venkatesh observed that, “[t]he exit route prescribed in Section 12A is not applicable to a Resolution Applicant. The procedure envisaged in the said provision only applies to applicants invoking Sections 7, 9 and 10 of the code”. However, this Court left the question whether a successful Resolution Applicant “altogether forfeits their right to withdraw from such process [CIRP] or not”, open for subsequent judicial determination.

139 In terms of Regulation 39(4), the RP shall endeavour to submit the Resolution Plan approved by the CoC before the Adjudicating Authority for its approval under Section 31 of the IBC, at least fifteen days before the maximum period for completion of CIRP.

bmit the Resolution Plan approved by the CoC before the Adjudicating Authority for its approval under Section 31 of the IBC, at least fifteen days before the maximum period for completion of CIRP. Section 31(1) provides that the Adjudicating Authority shall approve the Resolution Plan if it is satisfied that it complies with the requirements set out under Section 30(2) of the IBC. Essentially, the Adjudicating Authority functions as a check on the role of the RP to ensure compliance with Section 30(2) of the IBC and satisfies itself that the plan approved by the CoC can be effectively implemented as provided under the proviso to Section 31(1) of the IBC. Once the Resolution Plan is approved by the Adjudicating Authority, it becomes binding on the Corporate Debtor and its employees, members, creditors, guarantors and other stakeholders involved in the Resolution Plan. Section 31(1) of the IBC is extracted below:
“Section 31 - Approval of resolution plan

r and its employees, members, creditors, guarantors and other stakeholders involved in the Resolution Plan. Section 31(1) of the IBC is extracted below:
“Section 31 - Approval of resolution plan

Page 86 of 197 (1) If the Adjudicating Authority is satisfied that the resolution plan 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 resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed, guarantors and other stakeholders involved in the resolution plan.

Provided that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this subsection, satisfy that the resolution plan has provisions for its effective implementation.”
(emphasis supplied)

A contravention of a Resolution Plan binding under Section 31 is punishable under Section 74 (3) of the IBC.

olution plan has provisions for its effective implementation.”
(emphasis supplied)

A contravention of a Resolution Plan binding under Section 31 is punishable under Section 74 (3) of the IBC. Section 74 (3) of the IBC provides thus:
“Section 74 - Punishment for contravention of moratorium or the resolution plan
[….]
(3) Where the corporate debtor, any of its officers or creditors or any person on whom the approved resolution plan is binding under section 31, knowingly and wilfully contravenes any of the terms of such resolution plan or abets such contravention, such corporate debtor, officer, creditor or person shall be punishable with imprisonment of not less than one year, but may extend to five years, or with fine which shall not be less than one lakh rupees, but may extend to one crore rupees, or with both.”

140 If the Resolution Plan is rejected by the Adjudicating Authority, the Corporate Debtor goes into liquidation in accordance with Section 33(1) of the IBC. The order of the Adjudicating Authority rejecting a Resolution Plan and directing liquidation under Section 33 of the IBC can be appealed only on the grounds of material irregularity or fraud, as stipulated under Section 61(4) of the IBC. The order of the Adjudicating Authority approving a Resolution Plan can be appealed

be appealed only on the grounds of material irregularity or fraud, as stipulated under Section 61(4) of the IBC. The order of the Adjudicating Authority approving a Resolution Plan can be appealed

Page 87 of 197 before the NCLAT under Section 61(3) of the IBC only on the grounds specified in that section. The grounds of appeal are as follows: “Section 61 - Appeals and Appellate Authority
[….]
(3) An appeal against an order approving a resolution plan under section 31 may be filed on the following grounds, namely:--

(i) the approved resolution plan is in contravention of the provisions of any law for the time being in force;

(ii) there has been material irregularity in exercise of the powers by the resolution professional during the corporate insolvency resolution period;

(iii) the debts owed to operational creditors of the corporate debtor have not been provided for in the resolution plan in the manner specified by the Board;

(iv) the insolvency resolution process costs have not been provided for repayment in priority to all other debts; or

(v) the resolution plan does not comply with any other criteria specified by the Board.

solvency resolution process costs have not been provided for repayment in priority to all other debts; or

(v) the resolution plan does not comply with any other criteria specified 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 section 54N, may be filed on grounds of material irregularity or fraud committed in relation to such a liquidation order.”

141 Under Regulation 39(5) of the CIRP Regulations, the RP is required to send a copy of the order of the Adjudicating Authority accepting or rejecting the Resolution Plan on a ‘forthwith basis’. Regulation 39(5A) specifies that within fifteen days of the date of the order of Adjudicating Authority approving the Resolution Plan, the RP must inform each claimant about the principle or formulae for the payment of debts under the Resolution Plan.

142 As noted above, Section 12 of the IBC stipulates the timeline within which the CIRP is to be completed. The RP on the instructions of the CoC may make an application for extension of the CIRP. Regulation 40A of the CIRP Regulations provides a detailed model

within which the CIRP is to be completed. The RP on the instructions of the CoC may make an application for extension of the CIRP. Regulation 40A of the CIRP Regulations provides a detailed model

Page 88 of 197 timeline for CIRP which accounts for all the procedural eventualities that are permitted by the statute and the regulations. Regulation 40A is extracted below:
“40-A. Model time-line for corporate insolvency resolution process.—The following Table presents a model timeline of corporate insolvency resolution process on the assumption that the interim resolution professional is appointed on the date of commencement of the process and the time available is hundred and eighty days:

Page 89 of 197

Page 90 of 197

AA: Adjudicating Authority; AR: Authorised Representative; CIRP: Corporate Insolvency Resolution Process; CoC: Committee of Creditors; EoI: Expression of Interest; IM: Information Memorandum; IRP: Interim Resolution Professional; RA: Resolution Applicant; RP: Resolution Professional; RFRP: Request for Resolution Plan.”

143 The statutory framework governing the CIRP seeks to create a mechanism for resolving insolvency in an efficient, comprehensive and timely manner. The IBC provides a detailed linear process for undertaking CIRP of the Corporate Debtor to minimize any delays, uncertainty in procedure and disputes. The roles and responsibilities of the important actors in the CIRP are clearly defined under the IBC and its regulations. In Innoventive Industries Ltd v.

s, uncertainty in procedure and disputes. The roles and responsibilities of the important actors in the CIRP are clearly defined under the IBC and its regulations. In Innoventive Industries Ltd v. ICICI Bank a three judge Bench of this Court observed that “one of the important

Page 91 of 197 objectives of the Code is to bring the insolvency law in India under a single unified umbrella with the object of speeding up of the insolvency process”. Recently, in Gujarat Urja (supra) a three judge Bench of this Court observed that a “delay in completion of the insolvency proceedings would diminish the value of the debtor’s assets and hamper the prospects of a successful reorganization or liquidation. For the success of an insolvency regime, it is necessary that insolvency proceedings are dealt with in a timely, effective and efficient manner”. The stipulation of timelines and a detailed procedure under the IBC ensures a timely completion of CIRP and introduces transparency, certainty and predictability in the insolvency resolution process. The UNCITRAL Guide also states that the insolvency law of a jurisdiction should be transparent and predictable. It notes the value of such predictability in the following terms:
“11. An insolvency law should be transparent and predictable. This will enable potential lenders and creditors to understand how insolvency proceedings operate and to assess the risk associated with their position as a creditor in the event of insolvency.

. This will enable potential lenders and creditors to understand how insolvency proceedings operate and to assess the risk associated with their position as a creditor in the event of insolvency. This will promote stability in commercial relations and foster lending and investment at lower risk premiums. Transparency and predictability will also enable creditors to clarify priorities, prevent disputes by providing a backdrop against which relative rights and risks can be assessed and help define the limits of any discretion. Unpredictable application of the insolvency law has the potential to undermine not only the confidence of all participants in insolvency proceedings, but also their willingness to make credit and other investment decisions prior to insolvency. As far as possible, an insolvency law should clearly indicate all provisions of other laws that may affect the conduct of the insolvency proceedings (e.g. labour law; commercial and contract law; tax law; laws affecting foreign exchange, netting and set-off and debt for equity swaps; and even family and matrimonial law).”

This Court should proceed with caution in introducing any element in the insolvency process that may lead to unpredictability, delay and complexity not contemplated by the legislature. With this birds’-eye

t should proceed with caution in introducing any element in the insolvency process that may lead to unpredictability, delay and complexity not contemplated by the legislature. With this birds’-eye

Page 92 of 197 view of the framework of insolvency through the CIRP, we proceed to answer the question of law raised in this judgement - whether a Resolution Applicant is entitled to withdraw or modify its Resolution Plan, once it has been submitted by the Resolution Professional to the Adjudicating Authority and before it is approved by the latter under Section 31(1) of the IBC.

J Withdrawal of the Resolution Plan by a successful Resolution Applicant under the IBC

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

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

its creditors than under liquidation; and third, enable a smoother and faster transition to liquidation in the event that a time bound CIRP fails, in a bid to avert further deterioration of value.

145 Since the aim of the statute is to preserve the interests of the corporate debtor and the CoC, it was recognized that settlements between the corporate debtor and the CoC may be in the best interests of all stakeholders since insolvency is averted. Two decisions of two judge Benches of this Court, in Lokhandwala Kataria Construction (P) Ltd v. Nisus Finance and Investment Managers LLP and Uttara Foods and Feeds (P) Ltd v. Mona Pharmachem, (prior to the insertion of Section 12A which enabled withdrawal of the CIRP on account of settlement between the parties), had refused to effectuate this remedy by exercising inherent powers of the

Page 93 of 197 Adjudicating Authority under Rule 11 of the NCLT Rules 2016 or the power of parties to make applications to the Adjudicating Authority under Rule 8 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016. In Uttara Foods (supra) this Court had granted a one-time relief under Article 142 of the Constitution since all the parties were present before it and had presented it with signed consent terms.

In Uttara Foods (supra) this Court had granted a one-time relief under Article 142 of the Constitution since all the parties were present before it and had presented it with signed consent terms. This course of action, in refraining from the exercise of inherent powers to effect procedures and remedies that were not specifically envisaged by the statute, was explicitly affirmed by the Insolvency Law Committee Report dated March 2018 which proceeded to suggest amendments to the IBC and recommended a ninety per cent voting threshold by the CoC for withdrawals of a CIRP and a specific amendment to Rule 8 of the then existing CIRP Rules to enable parties to file such applications. This report led to the insertion of Section 12A which vested the CoC with the power to withdraw the CIRP or vote on such withdrawal, if sought by the Corporate Debtor. This provision was introduced with retrospective effect on 6 June 2018. Significantly, no such exit routes have been contemplated for the Resolution Applicant. It is relevant to note that the newly inserted and then unamended Regulation 30A (w.e.f. 4 July 2018) of the CIRP Regulations stipulated that withdrawal under Section 12A can be allowed through submitting an application to the IRP or RP (as the case maybe) before the invitation for EOI is issued to the public. The CoC was to consider the application within seven days of its constitution and an approval for such application required approval of the ninety per cent of the voting share of the CoC.

public. The CoC was to consider the application within seven days of its constitution and an approval for such application required approval of the ninety per cent of the voting share of the CoC. However, on 14 December 2018, a two judge Bench of this Court, held in Brilliant Alloys (P) Ltd v. S Rajagopal that Regulation 30A is directory, and not mandatory in nature since Section 12A of the IBC does not stipulate a deadline by which a withdrawal from the CIRP can be made. Thus, in exceptional cases withdrawals from the CIRP under Section 12A of IBC could be permitted even after the invitation of EOI has been issued. Regulation

Page 94 of 197 30A of the CIRP Regulations was then amended by the IBBI (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations 2019, w.e.f. 25 July 2019 to reiterate the decision of this Court. The newly amended provision allows for withdrawals even after the invitation for expression of interest has been issued, provided that the applicant states the reasons justifying such withdrawal. Similarly, on 25 January 2019, a two judge Bench of this Court in Swiss Ribbons (supra) interpreted the true import of Section 12A and clarified that if the CoC is not yet constituted, a party can approach the Adjudicating Authority, which may in exercise of its inherent powers under Rule 11 of the NCLT Rules 2016, allow or reject an application for withdrawal or settlement.

ed, a party can approach the Adjudicating Authority, which may in exercise of its inherent powers under Rule 11 of the NCLT Rules 2016, allow or reject an application for withdrawal or settlement. On 25 July 2019, the IBBI (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2019 amended Regulation 30A in terms of this decision in interpreting Section 12A and now specifically provides the procedure under the IBC that relates to affecting a withdrawal under Section 12A before the constitution of the CoC. The applicant submits an application for withdrawal through the IRP, directly before the Adjudicating Authority, since the CoC is not yet constituted to consider such an application. To ensure that the process for withdrawal is timely and efficient, the present Regulation 30A provides that the IRP shall submit an application for withdrawal of the CIRP prior to the constitution of the CoC to the Adjudicating Authority on behalf of the applicant within three days of the receipt. Alternatively, if the application for withdrawal is made after the constitution of the CoC, such application will be considered by the CoC within seven days of its receipt. If the CoC approves such an application with ninety per cent voting share, it is to be submitted to the Adjudicating Authority within three days of approval.

CoC within seven days of its receipt. If the CoC approves such an application with ninety per cent voting share, it is to be submitted to the Adjudicating Authority within three days of approval. Further, the application for withdrawal has to be accompanied by a bank guarantee towards estimated expenses relating to costs of the IRP (in case of a withdrawal prior to constitution of the CoC) or insolvency resolution process costs (where withdrawal is after constitution of the

Page 95 of 197 CoC). It is clear that withdrawal of the CIRP is allowed only if it upholds the interests of the CoC, is time-bound, and takes into consideration how the expenses relating to the insolvency process up to withdrawal shall be borne. Thus, even the exit under Section 12A of the CoC, which is not available to the Resolution Applicant, is regulated by procedural provisions indicating that the legislature has applied its mind to the timelines and costs involved in the CIRP. Pertinently, the regulations do not provide for any costs that are payable to the prospective Resolution Applicants or a successful Resolution Applicant, who must have incurred a significant expense in participating in the process. This Court, in Maharashtra Seamless (supra) had denied relief to a Resolution Applicant who had sought to invoke Section 12A to resile from its Resolution Plan. The nature of the statute indicates the clarity of its purpose – primacy of the interests of the creditors who are seeking to cut their losses through a CIRP.

2A to resile from its Resolution Plan. The nature of the statute indicates the clarity of its purpose – primacy of the interests of the creditors who are seeking to cut their losses through a CIRP. Traditional models and understandings of equity or fairness that seek reliefs which are misaligned with the goals of the statute and upset the economic coordination envisaged between the parties, cannot be read into the statute through judicial interpretation. While parties have the freedom to negotiate certain commercial terms of the Resolution Plan to gain wide support, their ability to negotiate is circumscribed by the governing statute. A court cannot interpret the negotiated arrangements that are represented in the Resolution Plan in a manner that hampers the objectives of the IBC which is a speedy, predictable and timely resolution. The Resolution Applicant is deemed to be aware of the IBC and its mechanisms before it steps into the fray and consents to be bound by its underlying objectives. A Resolution Applicant, after obtaining the financial information of the Corporate Debtor through the informational utilities and perusing the IM, is assumed to have analyzed the risks in the business of the Corporate Debtor and submitted a considered proposal. It cannot demand vesting of certain powers and rights which have been conspicuously omitted by the legislature under the statute, in furtherance of the

Debtor and submitted a considered proposal. It cannot demand vesting of certain powers and rights which have been conspicuously omitted by the legislature under the statute, in furtherance of the

Page 96 of 197 policy objectives of the IBC. A court may not be able to lay down such detailed guidance on how a mechanism for withdrawal, if any, may be provided to a successful Resolution Applicant without disturbing the statutory timelines and adequately evaluating the interests of creditors and other stakeholders, which is ultimately a matter of legislative policy. In Essar Steel (supra), a three judge Bench of this Court, affirmed a two judge Bench decision in K Sashidhar (supra), prohibiting the Adjudicating Authority from second-guessing the commercial wisdom of the parties or directing unilateral modification to the Resolution Plans. These are binding precedents. Absent a clear legislative provision, this court will not, by a process of interpretation, confer on the Adjudicating Authority a power to direct an unwilling CoC to re-negotiate a submitted Resolution Plan or agree to its withdrawal, at the behest of the Resolution Applicant. The Adjudicating Authority can only direct the CoC to re-consider certain elements of the Resolution Plan to ensure compliance under Section 30(2) of the IBC, before exercising its powers of approval or rejection, as the case may be, under Section 31. In Government of Andhra Pradesh v.

Resolution Plan to ensure compliance under Section 30(2) of the IBC, before exercising its powers of approval or rejection, as the case may be, under Section 31. In Government of Andhra Pradesh v. P Laxmi Devi, while determining the constitutionality of a statute, this Court observed that it should be wary of transgressing into the domain of the legislature, especially in matters relating to economic and regulatory legislation. This Court observed:
“80. As regards economic and other regulatory legislation judicial restraint must be observed by the court and greater latitude must be given to the legislature while adjudging the constitutionality of the statute because the court does not consist of economic or administrative experts. It has no expertise in these matters, and in this age of specialisation when policies have to be laid down with great care after consulting the specialists in the field, it will be wholly unwise for the court to encroach into the domain of the executive or legislative (sic legislature) and try to enforce its own views and perceptions.”
(emphasis supplied)

eld, it will be wholly unwise for the court to encroach into the domain of the executive or legislative (sic legislature) and try to enforce its own views and perceptions.”
(emphasis supplied)

Page 97 of 197 146 Judicial restraint must not only be exercised while adjudicating upon the constitutionality of the statute relating to economic policy but also in matters of interpretation of economic statutes, where the interpretative maneuvers of the Court have an effect of transgressing into the law-making power of the legislature and disturbing the delicate balance 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 to hold consultations with stakeholders or experts to decide the direction of economic policy. A court may be inept in laying down a detailed procedure for exercise of the power of withdrawal or modification by a successful Resolution Applicant without impacting the other procedural steps and the timelines under the IBC which are sacrosanct. Thus, judicial restraint must be exercised while intervening in a law governing substantive outcomes through procedure, such as the IBC.

steps and the timelines under the IBC which are sacrosanct. Thus, judicial restraint must be exercised while intervening in a law governing substantive outcomes through procedure, such as the IBC. In this case, if Resolution Applicants are permitted to seek modifications after subsequent negotiations or a withdrawal after a submission of a Resolution Plan to the Adjudicating Authority as a matter of law, it would dictate the commercial wisdom and bargaining strategies of all prospective Resolution Applicants who are seeking to participate in the process and the successful Resolution Applicants who may wish to negotiate a better deal, owing to myriad factors that are peculiar to their own case. The broader legitimacy of this course of action can be decided by the legislature alone, since any other course of action would result in a flurry of litigation which would cause the delay that the IBC seeks to disavow.

147 The IBC is silent on whether a successful Resolution Applicant can withdraw its Resolution Plan. However, the statutory framework laid down under the IBC and the CIRP Regulations provide a step-by- step procedure which is to be followed from the initiation of CIRP to the approval by the Adjudicating Authority. Regulation 40A describes

under the IBC and the CIRP Regulations provide a step-by- step procedure which is to be followed from the initiation of CIRP to the approval by the Adjudicating Authority. Regulation 40A describes

Page 98 of 197 a model-timeline for the CIRP that accounts for every eventuality that may arise between the commencement of the CIRP and approval of the Resolution Plan by the Adjudicating Authority, including the different stages for pressing a withdrawal of the CIRP under Section 12A. Even a modification to the RFRP is envisaged by the CIRP Rules and is subject to a timeline. The absence of any exit routes being stipulated under the statute for a successful Resolution Applicant is indicative of the IBC’s proscription of any attempts at withdrawal at its behest. The rule of casus omissus is an established rule of interpretation, which provides that an omission in a statute cannot be supplied by judicial construction. Justice GP Singh in his authoritative treatise, Principles of Statutory Interpretation, defines the rule of casus omissus as:
“It is an application of the same principle that a matter which should have been, but has not been provided for in a statute cannot be supplied by courts, as to do so will be legislation and not construction.

plication of the same principle that a matter which should have been, but has not been provided for in a statute cannot be supplied by courts, as to do so will be legislation and not construction. But there is no presumption that a casus omissus exists and language permitting the court should avoid creating a casus omissus where there is none.”
(emphasis supplied)

The treatise further discusses that a departure from this rule is only allowed in cases where words have been accidently omitted or the omission has an effect of making any part of the statute meaningless. Further, only such words can be supplied to the statute which would have certainly been inserted by the Parliament, had the omission come to its notice. The relevant paragraph is extracted below:
“As already noticed it is not allowable to read words in a statute which are not there, but “where the alternative lies between either supplying by implication words which appear to have been accidentally omitted, or adopting a construction which deprives certain existing words of all meaning, it is permissible to supply the words”. A departure from the rule of literal construction may be legitimate so as to avoid any part of the statute becoming meaningless. Words may also be read to give effect to the intention of the Legislature which is

the rule of literal construction may be legitimate so as to avoid any part of the statute becoming meaningless. Words may also be read to give effect to the intention of the Legislature which is

Page 99 of 197 apparent from the Act read as a whole. Application of the mischief rule or purposive construction may also enable reading of words by implication when there is no doubt about the purpose which the Parliament intended to achieve. But before any words are read to repair an omission in the Act, it should be possible to state with certainty that these or similar words would have been inserted by the draftsman and approved by Parliament had their attention been drawn to the omission before the Bill passed into law.”

In the wake of the COVID-19 pandemic, several Resolution Plans remained pending before Adjudicating Authorities due to the lockdown and significant barriers to securing a hearing. An Ordinance was swiftly promulgated on 5 June 2020 which imposed a temporary suspension of initiation of CIRP under Sections 7, 9 and 10 of the IBC for defaults arising for six months from 25 March 2020 (extendable by one year). This was followed by an amendment through the IBC (Second Amendment) Act 2020 on 23 September 2020 which provided for a carve-out for the purpose of defaults arising during the suspended period.

. This was followed by an amendment through the IBC (Second Amendment) Act 2020 on 23 September 2020 which provided for a carve-out for the purpose of defaults arising during the suspended period. The delays on account of the lockdown were also mitigated by the IBBI (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations 2020, which inserted Regulation 40C on 20 April 2020, with effect from 29 March 2020, and excluded such delays for the purposes of adherence to the otherwise strict timeline. Recently, the IBC (Amendment) Ordinance 2021 was promulgated with effect from 04 April 2021 providing certain directions to preserve businesses of MSMEs and a fast-track insolvency process. There has been a clamor on behalf of successful Resolution Applicants who no longer wish to abide by the terms of their submitted Resolution Plans that are pending approval under Section 31, on account of the economic slowdown that impacted every business in the country. However, no legislative relief for enabling withdrawals or renegotiations has been provided, in the last eighteen months. In the absence of any provision under the IBC allowing for withdrawal of the Resolution Plan by a successful Resolution

ithdrawals or renegotiations has been provided, in the last eighteen months. In the absence of any provision under the IBC allowing for withdrawal of the Resolution Plan by a successful Resolution

Page 100 of 197 Applicant, vesting the Resolution Applicant with such a relief through a process of judicial interpretation would be impermissible. Such a judicial exercise would bring in the evils which the IBC sought to obviate through the back-door.

148 It is pertinent to note that even the UNCITRAL Guide does not contain any provisions for withdrawal of a submitted Plan. It only discusses the possibilities of amending a Resolution Plan. The UNCITRAL Guide indicates that it contemplates that the Legislature should choose if it wants to allow any amendments to a submitted Resolution Plan. In the event, it does, it should lay down the detailed steps of proposing amendments to a submitted resolution plan. In fact, even the scope of negotiations between the Resolution Applicant and the CoC has to be specifically envisaged by the statute. Further, the UNCITRAL Guide envisages that amendments can be made to the Resolution Plan after it is approved by the creditors only in limited circumstances. It mentions that, “[a]n insolvency law may include limited provision for a plan to be modified after it has been approved by creditors (and both before and after confirmation) if its implementation breaks down or it is found to be incapable of performance, whether in whole or in part, and the specific problem can be remedied”.

rs (and both before and after confirmation) if its implementation breaks down or it is found to be incapable of performance, whether in whole or in part, and the specific problem can be remedied”. If permitted by the statute, the recommendations strongly urge the establishment of a mechanism for amendment after approval by creditors which details requirements of, inter alia, approval by creditors of the modification and consequences of failure to secure approval to the amendments. The BLRC Report has relied on the UNCITRAL Guide while designing the IBC and it is a critical tool for ascertaining legislative choice and intent. Parliament has not introduced an explicit provision under the IBC for allowing any amendment of the Resolution Plan after approval of creditors, let alone a power to withdraw the Resolution Plan at that stage. At the same time, the Corporate Debtor and the CoC have been empowered to withdraw from the CIRP. If it intended to permit parties to amend the

power to withdraw the Resolution Plan at that stage. At the same time, the Corporate Debtor and the CoC have been empowered to withdraw from the CIRP. If it intended to permit parties to amend the

Page 101 of 197 Resolution Plan after submission to the Adjudicating Authority, based on its specific terms of the Resolution Plan, it would have adopted the critical safeguards highlighted by the UNCITRAL.”

The contention put forth on behalf of the Appellants including the SRA (Ebix) viz. a Resolution Plan becomes binding, when it is approved by the Adjudicating Authority under Section 31(1) of IBC, could be noted by the Hon’ble Supreme Court in para 149 of the judgment. It was the contention of the Appellants before the Hon’ble Supreme Court that as Section 74(3) of IBC, provides for punishment for contravening the Resolution Plan only after its approval by the Adjudicating Authority, the SRA was entitled to withdraw the same on the terms of its contractual provisions, as long as it is not made binding under Section 31(1) of IBC. While dealing with the submission, Hon’ble Supreme Court ruled that the Resolution Plan is a creature of the IBC and cannot be construed as a pure contract between two consenting parties, prior to its approval under Section 31 of the IBC.

Supreme Court ruled that the Resolution Plan is a creature of the IBC and cannot be construed as a pure contract between two consenting parties, prior to its approval under Section 31 of the IBC. While dealing with the contention of the Appellants that the terms of Resolution Plan can reserve the right to modify or withdraw its contents after submission to the Adjudicating Authority, the Hon’ble Supreme Court observed that the approval of Adjudicating Authority under Section 31(1) of IBC has the effect of making the Resolution Plan binding on all the stakeholders which includes the employees of the CD and the Central and State Government, who may not be direct participants in CoC, but are effected by the plan, once the same is approved. The language of Section 31(1) cannot be construed to mean that a Resolution Plan is indeterminate or open to withdrawal or modification until it is approved by the Adjudicating Authority or that it is not binding between the CoC and the

construed to mean that a Resolution Plan is indeterminate or open to withdrawal or modification until it is approved by the Adjudicating Authority or that it is not binding between the CoC and the

Page 102 of 197 Successful Resolution Applicant. In para 152 of the judgment, Hon’ble Supreme Court viewed that the binding nature, as between the CoC and the Successful Resolution Applicant of the Resolution Plan submitted for approval by the Adjudicating Authority is further evidenced from the fact that the CoC issued a LOI to the Successful Resolution Applicant stating that it has been selected as the Successful Resolution Applicant and its plan would be submitted to the Adjudicating Authority for its approval. The Successful Resolution Applicant is typically required to accept the LOI unconditionally and submit a Performance Bank Guarantee (PBG). Sequentially, the issuance of LOI is followed by its unconditional acceptance by the Successful Resolution Applicant. Referring to its earlier judgment in Amtek Auto, Hon’ble Supreme Court ruled that the SRA can’t even seek a direction to compel the CoC to negotiate modification in the Resolution Plan. In para 153 of the judgment Hon’ble Supreme Court ruled that the IBC does not envisage dichotomy in the binding character of the Resolution Plan in relation to the RA between the stage of approval by the Coc and approval of the Adjudicating Authority.

that the IBC does not envisage dichotomy in the binding character of the Resolution Plan in relation to the RA between the stage of approval by the Coc and approval of the Adjudicating Authority. The binding nature of a Resolution Plan on a Resolution Applicant, who is a proponent of the plan which has been accepted by the CoC cannot remain indeterminate at the discretion of the Resolution Applicant. The negotiation between the Resolution Applicant and the CoC are brought to an end after the CoC’s approval. The only step left out after approval of a plan by the CoC is the approval by the Adjudicating Authority, which has a limited jurisdiction to confirm or to deny the legal validity of the Resolution Plan in terms of Section 30(2) of the IBC. If the requirements of Section 30(2) are satisfied, the Adjudicating Authority shall confirm the plan, approved by

Page 103 of 197 the CoC under Section 31(1) of the IBC. Para 152-153 of the judgment of Hon’ble Supreme Court reads thus: - “152 The binding nature,