EBIX SINGAPORE PRIVATE LIMITED versus COMMITTEE OF CREDITORS OF EDUCOMP SOLUTIONS LIMITED & ANR.
[2021] 14 S.C.R. 321, Supreme Court of India, 2021
Outcome: Disposed off
Segment: Ratio
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EBIX SINGAPORE PRIVATE LIMITED
v.
COMMITTEE OF CREDITORS OF EDUCOMP SOLUTIONS
LIMITED & ANR.
(Civil Appeal No. 3224 of 2020)
SEPTEMBER 13, 2021
[DR DHANANJAYA Y. CHANDRACHUD AND
M. R. SHAH, JJ.]
Insolvency and Bankruptcy Code, 2016 – ss.5(26), 7, 9, 10,
12, 23, 25, 30, 31, 60(5), 61 & 74(3) – National Company Law
Tribunal Rules, 2016 – r.11 – Insolvency and Bankruptcy Board of
India (Insolvency Resolution Process For Corporate Persons)
regulations, 2016 – regn. 36A, 36B and 39 – Whether withdrawals
or modifications by successful Resolution Applicants are permissible
under IBC – Held: The framework, as it stands, only enables
withdrawals from the CIRP process by following the procedure
detailed in Section 12A of the IBC and Regulation 30A of the CIRP
Regulations and in the situations recognized in those provisions –
Enabling withdrawals or modifications of the Resolution Plan at
the behest of the successful Resolution Applicant, once it has been
submitted to the Adjudicating Authority after due compliance with
the procedural requirements and timelines, would create another
tier of negotiations which will be wholly unregulated by the statute
– Since the 330 days outer limit of the CIRP u/s. 12(3) of the IBC,
including judicial proceedings, can be extended only in exceptional
circumstances, this open-ended process for further negotiations or
a withdrawal, would have a deleterious impact on the Corporate
Debtor, its creditors, and the
economy at large as the liquidation
value depletes with the passage of time – A failed negotiation for
modification after submission, or a withdrawal after approval by
the CoC and submission to the Adjudicating Authority, irrespective
of the content of the terms envisaged by the Resolution Plan, when
unregulated by statutory timelines could occur after a lapse of time,
as is the case in the present appeals – Permitting such a course of
action would either result in a down-graded resolution amount of
the Corporate Debtor and/or a delayed liquidation with depreciated
assets which frustrates the core aim of the IBC – If the legislature in
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its wisdom, were to recognize the concept of withdrawals or
modifications to a Resolution Plan after it has been submitted to the
Adjudicating Authority, it must specifically provide for a tether under
the IBC and/or the Regulations – These are matters for legislative
policy – In the present framework, even if an impermissible
understanding of equity is imported through the route of residual
powers or the terms of the Resolution Plan are interpreted in a
manner that enables the appellants’ desired course of action, it is
wholly unclear on whether a withdrawal of a CoC-approved
Resolution Plan at a later stage of the process would result in the
Adjudicating Authority directing mandatory liquidation of the
Corporate Debtor – Pertinently, this direction has been otherwise
provided in Section 33(1)(b) of the IBC when an Adjudicating
Authority rejects a Resolution Plan under Section 31 – In this
context, the existing insolvency framework in India provides no
scope for effecting further modifications or withdrawals of CoC-
approved Resolution Plans, at the behest of the successful Resolution
Applicant, once the plan has been submitted to the Adjudicating
Authority – A Resolution Applicant, after obtaining the financial
information of the Corporate Debtor through the informational
utilities and perusing the IM, is assumed to have analyzed the risks
in the business of the Corporate Debtor and submitted a considered
proposal
– A submitted Resolution Plan is binding and irrevocable
as between the CoC and the successful Resolution Applicant in terms
of the provisions of the IBC and the CIRP Regulations.
Insolvency and Bankruptcy Code, 2016 – Res judicata –
Applicability of – Held: The prayer for withdrawal of the Resolution
Plan in the First Withdrawal Application was not substantial and
one that the Court was bound to grant, since it was contingent upon
a re-evaluation, which in itself was contingent upon receiving the
information sought in prayers (i) and (ii) – Since the latter two
contingencies never arose, the NCLT did not apply its mind to the
prayer for withdrawal independently – When it filed the Second
Withdrawal Application, it was dismissed on a technical ground and
not on its merits – When a revised Third Withdrawal Application
was filed, the NCLT then adjudicated it on its merits and allowed it
– Hence, since the NCLT did not adjudicate Resolution applicant
‘E’ prayer for withdrawal of their Resolution Plan on its merits while
dismissing the First Withdrawal Application, the opportunity to seek
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the relief was not available to resolution applicant ‘E’ in a real
sense – Therefore, the finding of the NCLAT on this issue is reversed
and hold that resolution applicant ‘E’ Third Withdrawal Application
was not barred by res judicata.
Disposing of the appeals, the Court
HELD: 1. A reading together of the UNCITRAL Guide and
the BLRC Report clarifies, in no uncertain terms, that the
procedure designed for the insolvency process is critical for
allocating economic coordination between the parties who partake
in, or are bound by the process. This procedure produces
substantive rights and obligations. For instance, the composition
of the CoC, the method and percentage of its voting, the timelines
for CIRP, the obligation on the RP to file specific forms after
every stage of the process and the obligation to explain to the
Adjudicating Authority reasons for any deviations from the
timeline while submitting a Resolution Plan, and other such
procedural requirements create a mechanism which tightly
structures the conduct of all participants in the insolvency
process. This process 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 the broader insolvency
framework. An analysis of the framework of the statute and
regulations provides an insight into the dynamic and
comprehensive nature of the statute. Upholding the procedural
design and sanctity of the process is critical to
its functioning.
The interpretative task of the Adjudicating Authority, Appellate
Authority, and even this Court, must be cognizant of, and allied
with that objective. The UNCITRAL Guide has echoed this
position by noting the interplay between the procedural design
of the insolvency law.
Any claim seeking an exercise of the Adjudicating
Authority’s residuary powers under Section 60(5)(c) of the IBC,
the NCLT’s inherent powers under Rule 11 of the NCLT Rules
2016 or even the powers of this Court under Article 142 of the
Constitution must be closely scrutinized for broader compliance
with the insolvency framework and its underlying objective. The
adjudicating mechanisms which have been specifically created
by the statute, have a narrowly defined role in the process and
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must be circumspect in granting reliefs that may run counter to
the timeliness and predictability that is central to the IBC. 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 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 allied parties
who are statutorily bound by the impact of a resolution or
liquidation of a Corporate Debtor. [Paras 97-98][422-D-H; 423-
C-E]
2. The IBC provides a roadmap for the entire CIRP in
Chapter II of Part II. This process is tightly regulated to include,
inter alia, timelines of the CIRP specified by Section 12, duties of
the RP to provide adequate information to propose a Resolution
Plan in Section 29 and restrictions on who can be a Resolution
Applicant in Section 29A.
Once a Resolution Applicant submits a Resolution Plan
under sub-Section (1) of Section 30, the RP must assess whether
it conforms with all the requirements of sub-Section (2). Having
satisfied itself, the RP under sub-Section (3) must then present
those Resolution Plans to the CoC which fulfill the criteria under
sub- Section (2). The CoC will then proceed to decide on the
approval of the Resolution Plan, with a majority vote of sixty-six
percent, after satisfying itself that the requirements under sub-
Section (4) have been met, including testing the Resolution Plan
for its feasibility and viability. A Resolution Applicant may attend
this meeting of the CoC under sub-Section (5), but it does not
have a right to vote unless it is also a financial creditor. The
Resolution Plan approved by the CoC under sub-Section (4) is
then placed by the RP before the Adjudicating Authority for its
approval under sub-Section (6).
 Other than the IBC, the process is also regulated by the
CIRP Regulations created under the IBC. Regulation 37 provides
an illustration of the solutions which can be proposed in a
Resolution Plan. Regulation 38 provides for the mandatory
contents of a Resolution Plan, which are similar to the pre-
conditions mentioned in Section 30(2) of the IBC. Regulation 39
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provides for the process of approval of a Resolution Plan by the
CoC, and under sub-Regulation (3), the CoC has to evaluate every
Resolution Plan based on an “evaluation matrix” it has come up
with under Regulation 5(ha).
Having briefly taken an overview of the process, we now
understand that there are broadly three stages: (i) the first stage
is prior to and ends with the approval of the Resolution Plan by
the CoC; (ii) the second stage is the interim period between the
Resolution Plan’s approval by the CoC and before its confirmation
by the Adjudicating Authority; and (iii) the third stage is after the
approval of the Resolution Plan by the Adjudicating Authority. In
the first stage, the relationship between the parties is explicitly
governed by the provisions of the IBC – such as the right of a
prospective Resolution Applicant to seek the IM and RFRP upon
submission of its EOI, which may have been rejected by the RP
(as it happened in the K’s Appeal). In the third stage, the same
holds true since Section 31(1) makes the Resolution Plan binding
upon all the stakeholders and its violation will attract a penalty
under Section 74 of the IBC. However, what we are assessing
right now is the interim second stage between both of those. To
understand the relationship of the parties therein, it becomes
important to understand the exact “nature” of the Resolution
Plan after it has been submitted to the Adjudicating Authority
and before it has been approved under
Section 31(1). [Paras 101-
103][424-D; 427-C-H; 428-A-C]
3. The determination of the nature of the Resolution 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 CoC62, 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
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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 CoC63. Prior to
the IBBI (CIRP) (Fourth Amendment) Regulations 2020, which
now requires the CoC to vote on all Plans simultaneously after
recording its deliberations on the feasibility and viability of each
Plan, Regulation 39(3) earlier enabled the CoC to approve a
Resolution Plan with “such modifications as it deems fit”. This
meant that the prospective Resolution Applicants and the CoC
would indulge in several rounds of negotiations, within a strict
time-frame, to arrive at a mutually agreeable Resolution Plan
which was then subject to voting by the CoC. Subsequent to the
voting, the RP would submit the plan to the Adjudicating Authority
along with receipt of the PBG and a compliance certificate in the
form of Form H. Each of the stages detailed above correspond to
several rights and obligations on all parties that are specifically
created by the statute. [Para 105][428-H; 429-A-E]
4. 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 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, Inc65,
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
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between approval by the CoC and the approval of the Adjudicating
Authority would require us to analyse whether all elements of
contract formation have been satisfied, including the question of
whether the acceptance of the Resolution Plan by the CoC fulfils
the criteria laid down under Section 7 of the Contract Act or
whether the conditionality of seeking approval from the
Adjudicating Authority makes the Resolution Plan a contingent
contract. Our intent of laying down the consequences of our
determination of Resolution Plans as contracts is to highlight the
importance of ascertaining the nature of a CoC-approved
Resolution Plan, prior to its approval by the Adjudicating
Authority.
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,
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.
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
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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 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. 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
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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 that give the parties room
to bargain while keeping them from taking position that veer
toward extreme hold up. [Paras 107-110][430-C-G; 431-A-H; 432-
A-G]
5. 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
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.
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
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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. 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.
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 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. [Paras 112-114][433-D-G; 434-A-F]
6. The above observations were in the context of a PPA
entered into under the provisions of Electricity Supply Act 1948.
Section 43-A(1) of the Act stipulated that the generating company
may enter into a contract with the Electricity Board. Thus, the
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judgement pre-supposes the existence of a subsisting contract.
The controversy in the case was whether the PPA could be
characterized as a statutory contract. To say that a Resolution
Plan is a statutory contract, we must first consider whether the
IBC envisages the CoC-approved Resolution Plan as a contract.
There is no provision under the IBC referring to a Resolution
Plan as a contract, unlike Section 43-A(1) of the Electricity Supply
Act 1948 which mentions that a contract may be entered into
between the concerned parties. The legal force of a Resolution
Plan arises due to the framework provided under the IBC. The
mechanisms of the IBC provide sufficient guidance on the conduct
of all participants in the process and the binding effect of the
CoC- approved Resolution Plan is evidenced by the execution of
a PBG furnished by the successful Resolution Applicant, in
compliance with the CIRP Regulations. This PBG is returnable
once the Adjudicating Authority approves the Resolution Plan
under Section 31 and makes it binding on all stakeholders.
Therefore, the IBC and its regulations institute sufficient
safeguards to ensure the binding effect of a CoC-approved
Resolution Plan. In our discussion in Sections I and J below, we
further elaborate on the nature of a CoC-approved Resolution
Plan and the code of conduct that is permissible by the statutory
framework. [Para 116][435-G-H; 436-A-D]
7. The lack of an apparent international consensus on the
issue of
whether instruments like CoC-approved Resolution Plans
are contracts, prior to the Court’s sanction, is also attributable
to the peculiarity of the insolvency regime in each jurisdiction.
This Court will have to be wary of transplanting international
doctrines that are evolved as responses to the specific features
of a jurisdiction’s insolvency regime, without identifying an
analogous framework in our insolvency regime.
The absence of any specific provision in the IBC or the
regulations referring to a CoC-approved Resolution Plan as a
contract and the lack of clarity in the BLRC report regarding the
nature of such a Resolution Plan, constrains us from arriving at
the conclusion that CoC-approved Resolution Plans will be
governed by the Contract Act and common law principles
governing contracts, save and except for the specific prohibitions
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and deeming fictions under the IBC. Regulation 39(3) of CIRP
regulations, as it stood before the IBBI (CIRP) (Fourth
Amendment) Regulations 2020 and applicable to the three
appellants before us, enabled a framework where a draft
Resolution Plan would involve several rounds of negotiations and
revisions between the Resolution Applicant and the CoC, before
it is approved by the latter and submitted to the Adjudicating
Authority. However, this statutorily-enabled room for commercial
negotiation is not enough to over-power the other elements of
regulation that detract from the view that CoC-approved
Resolution Plans are contracts. CoC-approved Resolution Plans,
before the approval of the Adjudicating Authority under Section
31, are a function and product of the IBC’s mechanisms. Their
validity, nature, legal force and content is regulated by the
procedure laid down under the IBC, and not the Contract Act.
The voting by the CoC also occurs only after the RP has verified
the contents of the Resolution Plan and confirmed that it meets
the conditions of the IBC and the regulations therein. The
amended Regulation 39(3) further regulates the conduct of the
CoC on voting on Resolution Plans and has introduced the
requirement of simultaneous voting. The IBBI’s Discussion
Paper issued on 27 August 2021 has invited comments on
regulating the process on revisions that can be made to resolution
plans submitted to the CoC. These
developments bolster the
conclusion that the mechanism prior to submission of a CoC-
approved resolution plan is subject to continuous procedural
scrutiny by the IBC and cannot be considered as a simple
contractual negotiation between two parties. Section J below
details how a common law remedies of withdrawal or modification
on account of frustration or force majeure are not applicable to
CoC- approved Resolution Plans owing to the nature of the IBC.
Similarly, the whole host of remedies such as liquidated and
unliquidated damages, restitution, novation and frustration, unless
specifically provided by the IBC, are not available to a successful
Resolution Applicant whose Plan has been approved by the CoC
and is awaiting the approval of the Adjudicating Authority. The
Insolvency Law Committee Report of February 2020 has
recommended the CIRP process to mandate Resolution Plans to
provide for the apportionment of the profit or loss accrued by the
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Corporate Debtor during the CIRP. These reports are periodically
commissioned by the parliament to review the functioning of the
Code and suggest amendments. However, if the intention was to
view a CoC- approved Resolution Plan as a contract, the principles
of unjust enrichment would have been sufficient to address the
issue and an amendment may not be considered necessary. A
Resolution Applicant, as a third party partaking in the insolvency
regime, seeks to acquire the business of the Corporate Debtor
without the entirety of its debts, statutory liabilities and avoiding
certain transactions with third parties. These benefits are a
function of the coercive mechanisms of the IBC which enable a
third party to acquire the assets of a Corporate Debtor without
its liabilities, for a negotiated amount of the debt that is owed by
the Corporate Debtor. Typically, resolution amounts envisage
payment of a fraction of debt that is owed to the creditors and the
business is acquired as a going concern with its employees. The
Resolution Plan is drafted in a way that it is implementable in the
future and brings about a quietus to the CIRP. Enabling Resolution
Applicants to seek remedies that are not specified by the IBC,
by seeking recourse to the Contract Act would be antithetical to
the IBC’s insolvency regime. The elements of contractual
interpretation can be relied upon to construe the language of the
terms of the Resolution Plan, in the event of a dispute, but not
to
re-fashion and distort the mechanism of the IBC altogether. This
Court in Laxmi Pat Surana v. Union Bank of India has held that
the IBC is a self-contained Code. Thus, importing principles of
any other law or a statute like the Contract Act into the IBC
regime would introduce unnecessary complexity into the working
of the IBC and may lead to protracted litigation on considerations
that are alien to the IBC. To give an example, the CoC can forfeit
the PBG furnished by the successful Resolution Applicant under
certain circumstances in terms of the RFRP and Resolution Plan
including, inter alia, on the ground that the Resolution Applicant
has failed to implement the resolution or has contributed to its
failure. Regulation 36B (4A) of CIRP regulations provides for
the furnishing of such performance security once the plan is
approved by creditors. The Regulations do not provide that the
performance security has to be a reasonable estimate of loss as
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is expected of penalty clauses under contract law, rather the
explanation provides that the performance security should be 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”. Further, in the event that the
CoC enters into a settlement with the Corporate Debtor and
withdraws from the CIRP under Section 12A, Regulation 30A
provides for only payment of insolvency costs and not
compensation or damages to Resolution Applicant for investing
time and money in the process. The parties may resort to invoking
principles of frustration or force majeure to evade implementation
of the Resolution Plan leading to unnecessary litigation. This
Court in Amtek Auto (supra), had curbed a similar attempt by a
successful Resolution Applicant who had relied on a force majeure
clause in its Resolution Plan to seek a direction compelling the
CoC to negotiate a modification to its Resolution Plan. The Court
held that there was no scope for negotiations between the parties
once the Resolution Plan has been approved by the CoC. Thus,
contractual principles and common law remedies, which do not
find a tether in the wording or the intent of the IBC, cannot be
imported in the intervening period between the acceptance of
the CoC and the approval by the Adjudicating Authority.
Principles
of contractual construction and interpretation may serve as
interpretive aids, in the event of ambiguity over the terms of a
Resolution Plan. However, remedies that are specific to the
Contract Act cannot be applied, de hors the over-riding principles
of the IBC. [Paras 124-125][440-D-G; 441-A-E; 442-A-G; 443-
A-E]
8. 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. ICICI Bank a three judge Bench of this Court
observed that “one of the important objectives of the Code is to
bring the insolvency law in India under a single unified umbrella
with the object of speeding up of the insolvency process”.
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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. [Para 143][458-G-H; 459-A-C]
9. 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. 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
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litigation which would cause the delay that the IBC seeks to
disavow.
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 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.
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.
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. The delays on account of the lockdown were
also mitigated by the IBBI (Insolvency Resolution Process for
Corporate Persons) (Third Amendment) Regulations 2020, which
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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 re- negotiations 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
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.[Paras
146-147][464-D-H; 465-A-D, F; 466-C-H]
10. The approval of the Adjudicating Authority under
Section 31(1) of the IBC has the effect of making the Resolution
Plan binding on all stakeholders. These stakeholders include the
employees of the corporate debtor whose terms of employment
would be governed by the Resolution Plan, the Central and State
Governments who would
receive their tax dues on the basis of
the terms of the Resolution Plan and local authorities to whom
dues are owed. These stakeholders are not direct participants in
the CIRP but are bound by its consequence by virtue of the
approval of the Resolution Plan, under Section 31(1) of the IBC.
Section 31(1) ensures that the Resolution Plan becomes binding
on all stakeholders after it is approved by the Adjudicating
Authority. The language of Section 31(1) cannot be construed to
mean that a Resolution Plan is indeterminate or open to
withdrawal or modification until it is approved by the Adjudicating
Authority or that it is not binding between the CoC and the
successful Resolution Applicant. Regulation 39(4) of CIRP
Regulations mandates that the RP should endeavour to submit
the Plan at least fifteen days before the statutory period of the
CIRP under Section 12 is due to expire along with a receipt of a
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PBG and a compliance certificate as Form H. It is pertinent to
note that sub-Section (3) to Section 12 mandates that the CIRP
process, including legal proceedings, must be concluded within
330 days. This three-hundred-and- thirty-day period can be
extended only in exceptional circumstances, if the process is at
near conclusion and serves the object of the IBC, as held by a
three judge Bench of this Court in Essar Steel (supra). Therefore,
after accounting for all statutorily envisaged delays which the RP
has to explain in its Form H and otherwise through Regulation
40B, the procedure envisages a fifteen-day window between
submission of Resolution Plan and its approval or rejection by
the Adjudicating Authority. This clearly indicates that the statute
envisages a certain level of finality before the Resolution Plan is
submitted for approval to the Adjudicating Authority. Even the
CoC is not permitted to approve multiple Resolution Plans or
solicit EOIs after submission of a Resolution Plan to the
Adjudicating Authority, which would possibly be in contemplation
if the Resolution Applicant was permitted to withdraw from, or
modify, the Plan after acceptance by the CoC. Regulation 36B(4A)
requires the furnishing of a performance security which will be
forfeited if a Resolution Applicant fails to implement the Plan.
This is collected before the Adjudicating Authority approves the
Plan. Notably, the regulations also direct
forfeiture of the
performance security in case the Resolution Applicant
“contributes to the failure of implementation”, which could
potentially include any attempts at withdrawal of the Plan.
The report of the BLRC also notes that the negotiations in
the CIRP must be time bound and it envisages that one of the
ways in which the CIRP comes to a close is that the RP is able to
obtain a binding agreement from the CoC. Such a binding
agreement is placed before the Adjudicating Authority, which
orders the closure of the CIRP. If the Adjudicating Authority does
not receive a binding agreement, it can send the Corporate Debtor
into liquidation. [Paras 150-151][468-F-H; 469-A-G]
11. Regulation 38(3) mandates that a Resolution Plan be
feasible, viable and implementable with specific timelines. A
Resolution Plan whose implementation can be withdrawn at the
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behest of the successful Resolution Applicant, is inherently
unviable, since open-ended clauses on modifications/withdrawal
would mean that the Plan could fail at an undefined stage, be
uncertain, including after approval by the Adjudicating Authority.
It is inconsistent to postulate, on the one hand, that no withdrawal
or modification is permitted after the approval by the Adjudicating
Authority under Section 31, irrespective of the terms of the
Resolution Plan; and on the other hand, to argue that the terms
of the Resolution Plan relating to withdrawal or modification must
be respected, in spite of the CoC’s approval, but prior to the
approval by the Adjudicating Authority. The former position follows
from the intent, object and purpose of the IBC and from Section
31, and the latter is disavowed by the IBC’s structure and
objective. The IBC does not envisage a dichotomy in the binding
character of the Resolution Plan in relation to a Resolution
Applicant between the stage of approval by the CoC and the
approval of the Adjudicating Authority. The binding nature of a
Resolution Plan on a Resolution Applicant, who is the proponent
of the Plan which has been accepted by the CoC cannot remain
indeterminate at the discretion of the Resolution Applicant. The
negotiations between the Resolution Applicant and the CoC are
brought to an end after the CoC’s approval. The only
conditionality that remains is the approval of the Adjudicating
Authority, which has a
limited jurisdiction to confirm or deny the
legal validity of the Resolution Plan in terms of Section 30 (2) of
the IBC. If the requirements of Section 30(2) are satisfied, the
Adjudicating Authority shall confirm the Plan approved by the
CoC under Section 31(1) of the IBC.
If the appellants’ claim were to succeed, a clause enabling
a Resolution Applicant to withdraw/seek modification for reasons
such as a ‘Material Adverse Event’ could also be set up by a
Resolution Applicant when it is being prosecuted under Section
74 (3). It was contended before us that Form H, which is a
compliance certificate that is to be submitted by the RP to the
Adjudicating Authority along with the Resolution Plan, mentions
that the RP can enter details as to whether the Resolution Plan is
subject to any conditionalities under Clause 12. Thus, the
argument goes that this permits the Resolution Applicant to
stipulate in the Resolution Plan certain contingencies under which
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it can withdraw the Plan, for instance if there is an occurrence of
an ‘Material Adverse Event’. A form is subservient to the statute.
The conditionalities contemplated in Form H could be those which
do not strike at the root of the IBC. They can include commercial
conditions and business arrangements with the CoC. However,
conditions for withdrawal or re-negotiation of the Resolution Plan
cannot pass the test of ‘viability’ and ‘implementability’ as they
would make the resolution process indeterminate and
unpredictable. A two judge Bench of this Court in K Sashidhar
(supra), while discussing the jurisdiction of the Adjudicating
Authority under Section 31 to evaluate a Resolution Plan, has
observed that the Resolution Plan should “be an overall credible
plan, capable of achieving timelines specified in the Code
generally, assuring successful revival of the corporate debtor and
disavowing endless speculation”. Section 30(2)(d) of the IBC and
Regulation 38 of the CIRP Regulations also provide that the
Resolution Plan should be implementable. In the absence of
specific statutory language allowing for withdrawals or even
modifications by the successful Resolution Applicant, it would be
difficult to imply the existence of such an option based on the
terms of the Resolution Plan, irrespective of, and especially when
they do not form a part of Clause 12 in Form H, as is the case in
all the three Resolution Plans that are in
dispute in this present
appeal. [Paras 153-154][471-B-H; 472-A-F]
12. Regulation 40A envisages a model-time line for the
CIRP. Any deviation from this timeline needs to be specifically
explained by the RP in Clause 10 of Form H. Regulation 40B
imposes a time-limit on the RP for filing the requisite forms at
different stages of the CIRP, including forms seeking extensions
on account of delays at any stage. The failure to fill these forms
within the stipulated deadline results in disciplinary action against
the RP by the IBBI. Further, as discussed in Section I of the
judgement, various mandatory timelines have been imposed for
undertaking specific actions under the CIRP. If the legislature
intended to allow withdrawals or subsequent negotiations by
successful Resolution Applicants, it would have prescribed
specific timelines for the exercise of such an option. The
recognition of a power of withdrawal or modification after
submission of a CoC-approved Resolution Plan, by judicial
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interpretation, will have the effect of disturbing the statutory
timelines and delaying the CIRP, leading to a depletion in the
value of the assets of a Corporate Debtor in the event of a
potential liquidation. Hence, it is best left to the wisdom of the
legislature, based on the experiences gained from the working
of the enactment, to decide whether the option of modification or
withdrawal at the behest of the Resolution Applicant should be
permitted after submission to the Adjudicating Authority; if so,
the conditions and the safeguards subject in which it can be allowed
and the statutory procedure to be adopted for its exercise.
Based on the plain terms of the statute, the Adjudicating
Authority lacks the authority to allow the withdrawal or
modification of the Resolution Plan by a successful Resolution
Applicant or to give effect to any such clauses in the Resolution
Plan. Unlike Section 18(3)(b) of the erstwhile SICA which vested
the Board for Industrial and Financial Reconstruction with the
power to make modifications to a draft scheme for sick industrial
companies, the Adjudicating Authority under Section 31(2) of the
IBC can only examine the validity of the plan on the anvil of the
grounds stipulated in Section 30(2) and either approve or reject
the plan. The Adjudicating Authority cannot compel a CoC to
negotiate further with a successful Resolution Applicant. A
rejection by the Adjudicating Authority is followed by a direction
of mandatory
liquidation under Section 33. Section 30(2) does
not envisage setting aside of the Resolution Plan because the
Resolution Applicant is unwilling to execute it, based on terms
of its own Resolution Plan.
Further, no such power can be vested with the Adjudicating
Authority under its residuary jurisdiction in terms of Section 60
(5)(c). In a decision of a three judge Bench of this Court in Gujarat
Urja (supra), it was held that, “the NCLT’s residuary jurisdiction
[under Section 60(5)(c)] though wide, is nonetheless defined by
the text of the IBC. Specifically, the NCLT cannot do what the
IBC consciously did not provide it the power to do”. Further, the
court observed that “this Court must adopt an interpretation of
the NCLT’s residuary jurisdiction which comports with the broader
goals of the IBC”. The effect of allowing the Adjudicating
Authority to permit withdrawals of resolution plans that are
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submitted to it, would be to confer it with a power that is not
envisaged by the IBC and defeat the objectives of the statute,
which seeks a timely and predictable insolvency resolution of
Corporate Debtors.
After the amendment to Section 12 in 2019 which mandate
a 330 days outer-limit for conclusion of the CIRP (which can be
breached only under exceptional circumstances as held in Essar
Steel (supra)), it would be antithetical to the purpose of the IBC
to allow the Adjudicating Authority to use its plenary powers under
Section 60(5)(c) to potentially extend these timelines to enable
the CoC to either issue a fresh RFRP if the Resolution Plan is
withdrawn by a successful Resolution Applicant or direct further
negotiations with the Resolution Applicant who is seeking a
modification of the plan, whose failure could result in withdrawal
as well. The likely consequence of a withdrawal by a successful
Resolution Applicant after going through the stages of the CIRP
for nearly 180 days (provided all statutory timelines have been
strictly followed)would inevitably be a delayed liquidation after
the value of the assets has further depreciated. In the event of
intervening delays on account of litigation or otherwise, the delay
would be even more severe. If a CoC, could be compelled by the
Adjudicating Authority to negotiate with the successful
Resolution Applicant, it would have to resign itself to a commercial
bargain at a
much lower value. If Parliament intended to permit
such withdrawals/modifications sought by successful Resolution
Applicants as being beneficial to the economic policy, which it
has sought to pursue while enacting the IBC, it would have
prescribed timelines for setting the clock-back or directing
immediate liquidation if the withdrawals occur after a certain
period. For instance, under Regulation 36B (5) any modification
to the RFRP or the evaluation matrix is deemed as a fresh issue
of the RFRP and the timeline for submission of Resolution Plan
starts afresh. Parliament has not legislated to provide for the
eventuality argued by the appellants. [Paras 156-159][475-D-H;
476-A-H; 477-A-D]
13. Before proceeding further, it is important to compare
the reliefs sought by ‘E’ in the First, Second and Third Withdrawal
Applications.
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From the above table, it is clear that the prayers in the
Second and Third Withdrawal Applications were identical. Further,
prayer (iii) of both corresponds to prayer (iii) of the First
Withdrawal Application, in almost identical terms, while prayer
(ii) was not present in the First Withdrawal Application at all. At
the same time, prayers (i) and (ii) in the First Withdrawal
Application have not been repeated in the Second and Third
Withdrawal Applications. However, what is at issue is prayer (iv)
of the First Withdrawal Application and prayer (i) of the Second
and Third Withdrawal Applications. Through the former, ‘E’
sought permission to re-evaluate its Resolution Plan and to
suitably “revise/modify and/or withdraw” it, while through the
latter, ‘E’ sought permission to withdraw its Resolution Plan. Now
we must analyse whether this would attract the principle of res
judicata. [Para 165][480-C-E]
14. Res judicata cannot apply solely because the issue has
previously come up before the court. The doctrine will apply where
the issue has been “heard and finally decided” on merits through
a conscious adjudication by the court. In the present case, the
NLCT’s order dismissing the First Withdrawal Application makes
it clear that it had only considered only that part of prayer (iv)
which related to re-evaluation of the Resolution Plan, possibly
because ‘E’ had hoped to re-evaluate the Resolution Plan on the
basis of the information received as a consequence of
prayers (i)
and (ii) and those prayers were rejected since such information
was not available. [Para 171][483-D-F]
15. The prayer for withdrawal of the Resolution Plan in the
First Withdrawal Application was not substantial and one that the
Court was bound to grant, since it was contingent upon a re-
evaluation, which in itself was contingent upon receiving the
information sought in prayers (i) and (ii). Since the latter two
contingencies never arose, the NCLT did not apply its mind to
the prayer for withdrawal independently. When it filed the Second
Withdrawal Application, it was dismissed on a technical ground
and not on its merits. When a revised Third Withdrawal
Application was filed, the NCLT then adjudicated it on its merits
and allowed it. Hence, since the NCLT did not adjudicate E’s
prayer for withdrawal of their Resolution Plan on its merits while
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dismissing the First Withdrawal Application, the opportunity to
seek the relief was not available to ‘E’ in a real sense. Therefore,
we reverse the finding of the NCLAT on this issue and hold that
E’s Third Withdrawal Application was not barred by res judicata.
[Para 174][484-G; 485-A-B]
16. This submission of ‘E’ cannot be accepted since the
terms of the RFRP or the Resolution Plan relate to the validity of
the Resolution Plan for the period of negotiation with the E-CoC
and not for a period after the Resolution Plan is submitted for the
approval of the Adjudicating Authority. The time which may be
taken before the Adjudicating Authority is an imponderable which
none of the parties can predict. In fact, this is emphasized by
Clause 1.3.7 of the RFPF which contains a schedule of the
Resolution Plan submission process.
Parties cannot indirectly impose a condition on a judicial
authority to accept or reject its Plan within a specified time period,
failing which the CIRP process will inevitably come to an end. In
this case, the draft Resolution Plan of ‘E’ was submitted on 29
January 2018 and remained valid for the term of the multiple
rounds of negotiations with the E-CoC, until its submission to
the Adjudicating Authority on 7 March 2018, which was within
the six-month period envisaged in the Plan.
Even if it were to be assumed, for the sake of argument,
that the term in the submitted Resolution Plan was in the nature
of a qualified offer which would expire after six months of its
submission, failing the imprimatur of the Adjudicating Authority
under Section 31 which would make it binding on all parties, the
surrounding terms of the RFRP and the subsequent legal
materials including the LOI and the Compliance Certificate (Form
H) under CIRP Regulations make it clear that there was no scope
to resile from the implementation of the Resolution Plan, once it
had been submitted to the Adjudicating Authority, except in the
event of a rejection. Clause 1.9.3 of the RFRP required ‘E’ to
replace its EMD with a PBG equivalent to ten per cent of the
Resolution Plan value, if it were to be declared as the ‘successful
Resolution Applicant’. This PBG can be invoked under Clause
1.9.5 of the RFRP if the Resolution Applicant fails to implement
the Resolution Plan. Further, Clause 1.8.4 of the RFRP states
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that “[a] Resolution Plan submitted by a Resolution Respondent
shall be irrevocable”.
E’s submission that Clause 1.10(l) is applicable only upon
approval of the Adjudicating Authority is not plausible since the
Resolution Plan becomes binding on all stakeholders as a
consequence of the approval under Section 31. The E- RP’s
argument holds much weight when it is argued that Clause 1.10(l)
cannot be construed to infer that the Adjudicating Authority would
declare ‘E’ as the ‘Successful Resolution Applicant’ once again,
which would then impose the obligation of barring withdrawals
for the first time. E-RP, has also submitted before us that the
validity of the Resolution Plan being six months was not
mentioned as a specific conditionality in Form H that was
submitted by the E-RP along with the Resolution Plan to the
Adjudicating Authority, which evinces that the six-month validity
was only vis-à- vis the acceptance by the E-CoC.
‘E’ has also tried to argue that its position has changed
manifestly because of new allegations which have come up in
relation to the financial conduct of Educomp. However, in this
regard, it is pertinent to note Clause 1.3.2 of the RFRP which
directs prospective Resolution Applicants to conduct their own
due diligence.
‘E’ was responsible for conducting their own due diligence
of Educomp and could not use that as a reason to revise/modify
their approved Resolution Plan. In any event, Section 32A of the
IBC grants immunity to the
Corporate Debtor for offences
committed prior to the commencement of CRIP and it cannot be
prosecuted for such offences from the date the Resolution Plan
has been approved by the Adjudicating Authority under Section
31, if the Resolution Plan results in a change of management or
control of the Corporate Debtor subject to certain conditions.
Thus, in any case even if it is found that there was any
misconduct in the affairs of Educomp prior the commencement
of the CIRP, ‘E’ will be immune from any prosecution or
punishment in relation to the same. The submission that ‘E’ has
been placed in a prejudicial position due to the initiation of
investigation into the affairs of Educomp by the CBI and SFIO is
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nothing but a red herring since such investigations have no
bearing on ‘E’.
Finally, it is also important to note that no clause of ‘E’ own
Resolution Plans provides them with a right to revise/withdraw
their Resolution Plan after its approval by the E-CoC, but before
its confirmation by the Adjudication Authority. Clause 9.1 permits
withdrawal in the event the Resolution Plan is not approved in
its entirety by the NCLT, while Clause 9.7 allows for an
amendment for the purposes of implementation of the Resolution
Plan but only when the E-CoC approves it with a seventy-five
per cent vote. Hence, ‘E’ did not have any right under their own
Resolution Plan to revise/withdraw it.
It is also pertinent to note that ‘E’ did not stop pursuing
their Resolution Plan after the expiry of six months, if the true
import of the commercial bargain was a withdrawal of the
Resolution Plan after six months of its submission. The First
Withdrawal Application was filed on 10 September 2019, which
was after one year of the alleged expiry of the six-month period.
Therefore, even if the submitted Resolution Plan was considered
as a conditional offer the terms did not enable a withdrawal of the
Resolution Plan in the event that the Adjudicating Authority does
not approve it under Section 31 within six months of its
submission. [Paras 179-183][487-B-C, E-H; 488-A-B, E-H; 489-
E; 490-G-H; 491-A-D]
17. Section 29 of the IBC places a duty upon
the RP to
provide an IM to the Resolution Applicant, containing such
information which may be relevant to the Resolution Applicant
to draft its Resolution Plan. [Para 186][491-G-H]
18. Under the IBC, there is a duty upon the RP to collect
as much information about the Corporate Debtor as is accurately
possible to do. When such information is communicated through
an IM to the Resolution Applicant, the RP must be careful to
clarify when its information is not comprehensive and what factors
may cause a change. [Para 189][493-G-H]
19. ‘E’ cannot dispute that E-RP had provided it the
relevant information required under Section 29 to formulate its
Resolution Plan. The issues in relation to financial investigations
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into the conduct of Educomp arose when the two articles were
published by The Wire, both of which were after the Approval
Application had been filed by the E-RP. Further, ‘E’ was aware of
all the proceedings before the NCLT since the various
applications were often listed along with the Approval Application,
in which it continued to appear. Finally, ‘E’ has brought nothing
on record to prove that E-RP knew of the SFIO and CBI
investigations before a regulatory disclosure was made by
Educomp. Hence, it cannot be stated that the E-RP had faltered
in its duty to provide relevant information to ‘E’. [Para 191][494-
F-G]
20. During the course of the hearing of the present appeal,
the compilation of additional documents has been filed by ‘K’.
On 5 July 2021, ‘K’ had addressed a communication to EXIM
Bank and PFCL “seeking a revision/renegotiation of the
resolution amount/financial proposal” of ‘K’ for the resolution of
Astonfield. Responding to the above communication, EXIM Bank
has addressed a letter dated 12 July 2021 stating that a meeting
was held by “the lenders” (EXIM Bank and PFCL) on 9 July
2021, on a without prejudice basis to deal with the issues raised
by ‘K’ in their letter dated 5 July 2021.
Pursuant to the above exchange of communications, a joint
request has been made on behalf of ‘K’ and of the A-CoC.
This Court had been informed that EXIM Bank and PFCL
represent 98 per cent of the financial creditors of Astonfeld. In
view of the above agreement
which has been arrived at, we deem
it appropriate to exercise our jurisdiction under Article 142 of
the Constitution of India for a one-time relief and direct that:
(i)The A-CoC shall convene and take a decision on the
proposal submitted by ‘K’ on 5 July 2021, and the response by
EXIM Bank and PFCL dated 12 July 2021;
ii) In the event, that a revised Resolution Plan is agreed
upon by the A-CoC, it shall be submitted through the A-RP for
the approval of the NCLT within a week thereafter. In the event
that a revised Resolution Plan is not agreed upon, the original
Resolution Plan, as submitted before the NCLT on 15 November
2019, shall prevail; and
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(iii) The NCLT shall dispose of the application with the
revised Resolution Plan expeditiously, and preferably within a
period of two weeks from the date of receipt of an application
from the A-RP for the approval of the revised Resolution Plan.
We clarify that the above directions have been issued in
view of the submission which has been urged as noted, and shall
not amount to any finding by this Court on the issues raised with
regard to modification or withdrawal of Resolution Plans at the
behest of the Resolution Applicant. [Para 195-197][497-A-B, F-
H; 498-A-C]
21. ‘S’ has relied on the terms of its Resolution Plan which
envisage payment to the Arya-CoC by sale of land and building,
and old/unusable/spare plant and machineries to urge that there
has been a frustration of the contract because of the economic
slowdown which must have impacted the value of these assets.
The proposed revised solution envisages a further haircut to the
Arya- CoC where Rs 1.5 crores less would be paid, over an
extended timeline. There are no terms in the Resolution Plan or
the Form H submitted by Arya-RP that could provide such a
benefit to ‘S’.
Conclusion
This Court is cognizant that the extraordinary circumstance
of the COVID- 19 pandemic would have had a significant impact
on the businesses of Corporate Debtors and upon successful
Resolution Applicants whose Plans may not have been sanctioned
by the Adjudicating Authority in time,
for myriad reasons. But
the legislative intent of the statute cannot be overridden by the
Court to render outcomes that can have grave economic
implications which will impact the viability of the IBC.
The residual powers of the Adjudicating Authority under
the IBC cannot be exercised to create procedural remedies which
have substantive outcomes on the process of insolvency. The
framework, as it stands, only enables withdrawals from the CIRP
process by following the procedure detailed in Section 12A of
the IBC and Regulation 30A of the CIRP Regulations and in the
situations recognized in those provisions. Enabling withdrawals
or modifications of the Resolution Plan at the behest of the
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successful Resolution Applicant, once it has been submitted to
the Adjudicating Authority after due compliance with the
procedural requirements and timelines, would create another tier
of negotiations which will be wholly unregulated by the statute.
Since the 330 days outer limit of the CIRP under Section 12(3) of
the IBC, including judicial proceedings, can be extended only in
exceptional circumstances, this open-ended process for further
negotiations or a withdrawal, would have a deleterious impact on
the Corporate Debtor, its creditors, and the economy at large as
the liquidation value depletes with the passage of time. A failed
negotiation for modification after submission, or a withdrawal after
approval by the CoC and submission to the Adjudicating Authority,
irrespective of the content of the terms envisaged by the
Resolution Plan, when unregulated by statutory timelines could
occur after a lapse of time, as is the case in the present three
appeals before us. Permitting such a course of action would either
result in a down-graded resolution amount of the Corporate Debtor
and/or a delayed liquidation with depreciated assets which
frustrates the core aim of the IBC.
If the legislature in its wisdom, were to recognize the
concept of withdrawals or modifications to a Resolution Plan after
it has been submitted to the Adjudicating Authority, it must
specifically provide for a tether under the IBC and/or the
Regulations. This tether must be coupled with
directions on
narrowly defined grounds on which such actions are permissible
and procedural directions, which may include the timelines in
which they can be proposed, voting requirements and threshold
for approval by the CoC (as the case may be). They must also
contemplate at which stage the Corporate Debtor may be sent
into liquidation by the Adjudicating Authority or otherwise, in
the event of a failed negotiation for modification and/or withdrawal.
These are matters for legislative policy.
In the present framework, even if an impermissible
understanding of equity is imported through the route of residual
powers or the terms of the Resolution Plan are interpreted in a
manner that enables the appellants’ desired course of action, it
is wholly unclear on whether a withdrawal of a CoC-approved
Resolution Plan at a later stage of the process would result in the
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Adjudicating Authority directing mandatory liquidation of the
Corporate Debtor. Pertinently, this direction has been otherwise
provided in Section 33(1)(b) of the IBC when an Adjudicating
Authority rejects a Resolution Plan under Section 31. In this
context, we hold that the existing insolvency framework in India
provides no scope for effecting further modifications or
withdrawals of CoC-approved Resolution Plans, at the behest of
the successful Resolution Applicant, once the plan has been
submitted to the Adjudicating Authority. A Resolution Applicant,
after obtaining the financial information of the Corporate Debtor
through the informational utilities and perusing the IM, is
assumed to have analyzed the risks in the business of the
Corporate Debtor and submitted a considered proposal. A
submitted Resolution Plan is binding and irrevocable as between
the CoC and the successful Resolution Applicant in terms of the
provisions of the IBC and the CIRP Regulations. In the case of
Kundan Care, since both, the Resolution Applicant and the CoC,
have requested for modification of the Resolution Plan because
of the uncertainty over the PPA, cleared by the ruling of this
Court in Gujarat Urja (supra), a one-time relief under Article 142
of the Constitution is provided with the conditions prescribed in
Section K.2.
It would also be sobering for us to recognize that whilst
this Court has declared the position in law to not
enable a
withdrawal or modification to a successful Resolution Applicant
after its submission to the Adjudicating Authority, long delays in
approving the Resolution Plan by the Adjudicating Authority affect
the subsequent implementation of the plan. These delays, if
systemic and frequent, will have an undeniable impact on the
commercial assessment that the parties undertake during the
course of the negotiation. The thirty-second report of the Ministry
of Corporate Affairs’ Standing Committee on Finance (2020-2021)
on the ‘Implementation of Insolvency and Bankruptcy Code-
Pitfalls and Solutions’ represented a despondent state of affairs
with regard to pendency of applications before the Adjudicating
Authority.
In its observations, the Report noted that a delay in the
resolution process with more than seventy-one per cent cases
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pending for more than 180 days is in deviation of the original
objective and timeline for CIRP that was envisaged by the IBC.
The delays were attributable to: (i) the NCLT taking considerable
time in admitting CIRPs; (ii) late and unsolicited bids by
Resolution Applicants after the original bidder becomes public
upon passage of the deadline for submission of the Plan; and (iii)
multiplicity of litigation and the appellate process to the NCLAT
and the Supreme Court. Such inordinate delays cause commercial
uncertainty, degradation in the value of the Corporate Debtor
and makes the insolvency process inefficient and expensive. We
urge the NCLT and NCLAT to be sensitive to the effect of such
delays on the insolvency resolution process and be cognizant that
adjournments hamper the efficacy of the judicial process. The
NCLT and the NCLAT should endeavor, on a best effort basis,
to strictly adhere to the timelines stipulated under the IBC and
clear pending resolution plans forthwith. Judicial delay was one
of the major reasons for the failure of the insolvency regime that
was in effect prior to the IBC.
In light of the above, the appeals preferred by ‘E’(Civil
Appeal 3224 of 2020) and ‘S’ (Civil Appeal 295 of 2021) stand
dismissed. The parties to the appeal preferred by ‘K’ (Civil Appeal
3560 of 2020) shall abide by the directions issued by this Court
in exercise of its Article 142 powers as a one-time relief, as
specified in paragraph 196 (Section K.2) of this
judgement. [Para
200-206][498-G-H; 499-E-H; 500-A-H; 501-A-E; 502-A-E]
SK Gupta v. KP Jain (1979) 3 SCC 54 : [1979] 2 SCR
1184; India Thermal Power Ltd. v. State of MP (2000) 3
SCC 379 : [2000] 1 SCR 925; CoC of Essar Steel India
Ltd. v. Satish Kumar Gupta & Ors. (2020) 8 SCC 531 :
[2019] 16 SCR 275; Government of Andhra Pradesh
v. P Laxmi Devi (2008) 4 SCC 720 : [2008] 3 SCR
330; Satyadhyan Ghosal v. Deorajin Debi (1960) 3
SCR 590; Sheodan Singh v. Daryao Kunwar (1966) 3
SCR 300; Krishan Lal v. State of J&K (1994) 4 SCC
422 : [1994] 2 SCR 149; Daryao v. State of U.P. (1962)
1 SCR 574; Erach Boman Khavar v. Tukaram Shridhar
Bhat (2013) 15 SCC 655 : [2013] 17 SCR 1055;
Jaswant Singh v. Custodian of Evacuee Property (1985)
3 SCC 648 : [1985] 1 Suppl. SCR 331 – relied on.
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Riya Travel & Tours (India) (P) Ltd. v. C.U. Chengappa
(2001) 9 SCC 512; K Sashidhar v. IOC (2019) 12 SCC
150 : [2019] 3 SCR 845; M/s Embassy Property
Developments Pvt. Ltd. v. State of Karnataka & Ors.
(2020) 13 SCC 308 : [2019] 17 SCR 559; M/s
Innoventive Industries Ltd. v. ICICI Bank & Anr. (2018)
1 SCC 407 : [2017] 8 SCR 33; Gujarat Urja Vikas
Nigam Limited v. Amit Gupta (2021) SCC OnLine SC
194; Swiss Ribbons (P) Ltd v. Union of India (2019) 4
SCC 17 : [2019] 3 SCR 535; Nagabhushanammal v. C
Chandikeswaralingam (2016) 4 SCC 434 : [2016] 2
SCR 19; National Thermal Power Corporation Ltd. v.
Siemens Atkeingesellschaft AIR 2007 SC 1491 : [2007]
3 SCR 399; Haridwar Singh v. Bagun Sumbrui (1973)
3 SCC 889 : [1972] 3 SCR 629; Committee of Creditors
AMTEK Auto Limited Through Corporation Bank v.
Dinkar T Venkatasubramanian & Ors. (2021) 4 SCC
457; Kalparaj Dharamshi v. Kotak Investment Advisors
Ltd. (2021) SCC OnLine SC 204; Jaypee Kensington
Boulevard Apartments Welfare Association & Ors. v.
NBCC (India) Ltd. & Ors. (2020) SCC OnLine SC
1192; Ghanashyam Mishra and Sons Private Limited
through the Authorized Signatory v. Edelweiss Asset
Reconstruction Company Limited through the Director
& Ors. (2021) SCC OnLine SC 313; Laxmi Pat Surana
v. Union Bank of India (2020) SCC OnLine SC 1187;
Arcelor Mittal (India) (P) Ltd. v. Satish Kumar Gupta
(2019) 2 SCC 1 : [2018] 12 SCR 362; Maharashtra
Seamless v. Padmanabhan Venkatesh
(2020) 11 SCC
467 : [2020] 2 SCR 1157; Innoventive Industries Ltd v.
ICICI Bank (2018) 1 SCC 407 : [2017] 8 SCR 33;
Lokhandwala Kataria Construction (P) Ltd v. Nisus
Finance and Investment Managers LLP (2018) 15 SCC
589; Uttara Foods and Feeds (P) Ltd v. Mona
Pharmachem (2018) 15 SCC 587; Brilliant Alloys (P)
Ltd v. S Rajagopal (2018) SCC OnLine SC 3154 –
referred to.
Allied Domecq (Holdings) Ltd v. Allied Domecq First
Pension Trust Ltd. [2008] Pens. L.R. 425; Reinwood
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D
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353
Ltd v. L Brown & Sons Ltd. [2008] 1 W.L.R. 696;
Doleman v. Shaw [2009] Bus. L.R. 1175; Standard Life
Assurance Ltd v. Oak Dedicated Ltd. [2008] EWHC
222 (Comm); Oakley-Smith v. Greenberg [2004]
B.C.C. 81; Tucker v. Gold Fields Mining LCC [2010]
B.C.C. 544; Heis v. Financial Services Compensation
Scheme Ltd. [2018] EWCA Civ 1327; Re Rhino
Enterprises Properties Ltd. Schofield v. Smith [2020]
EWHC 2370; Daewoo Singapore Pte Ltd. v. CEL
Tractors Private Limited [2001] 4 SLR 35; Kempe and
Another v. Ambassador Insurance Co. [1998] 1 W.L.R.
271; Caratti v. Hillman [1974] WAR 92; Re
Shenandoah Realty Partners, L.P. v. Ascend Health
Care, Inc 287 BR 867 – referred to.
Case Law Reference
(2001) 9 SCC 512
referred to
Para 82(ii)(c)
[2019] 16 SCR 275
relied on
Para 82(ii)(h)
[2019] 3 SCR 845
referred to
Para 82(v)
[2019] 17 SCR 559
referred to
Para 83(ii)
[2017] 8 SCR 33
referred to
Para 83(ii)
[2019] 3 SCR 535
referred to
Para 83(ii)
[2016] 2 SCR 19
referred to
Para 85(ix)
[2007] 3 SCR 399
referred to
Para 86(i)(a)
[1972] 3 SCR 629
referred to
Para 86(iii)(c)
(2021) 4 SCC 457
referred to
Para 91(iv)
[1979] 2 SCR 1184
relied on
Para 111
[2000] 1 SCR 925
relied on
Para 115
[2018] 12 SCR 362
referred to
Para 126
[2020] 2 SCR 1157
referred to
Para 138
[2017] 8 SCR 33
referred to
Para 143
(2018) 15 SCC 589
referred to
Para 145
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(2018) 15 SCC 587
referred to
Para 145
[2008] 3 SCR 330
relied on
Para 145
[1960] 3 SCR 590
relied on
Para 164
[1966] 3 SCR 300
relied on
Para 166
[1994] 2 SCR 149
relied on
Para 168
[1962] 1 SCR 574
relied on
Para 169
[2013] 17 SCR 1055
relied on
Para 170
[1985] 1 Suppl. SCR 331
relied on
Para 173
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3224
of 2020.
From the Judgment and Order dated 29.07.2020 of the National
Company Law Appellate Tribunal at New Delhi in Company Appeal
(AT) (Insolvency) No.203 of 2020.
With
Civil Appeal No. 3560 of 2020 and Civil Appeal No. 295 of 2021.
K. V. Vishwanathan, Ritin Rai, Ramji Srinivasan, Sr. Advs., Rajat
Sehgal, Gautam Swarup, Mrs. Vandana Anand, Mandavya Kapoor,
Karthikeya Jaiswal, Ms. Gunjan Jindal, Prithu Garg, Shailendra Singh,
Ms. Harimohana N, Ankush Bhardwaj, Shivkrit Raj, Vinam Gupta, Advs.
for the appellant.
Shyam Divan, Nakul Dewan, V. Giri, Jayant Mehta, Sr. Advs.,
Ms. Misha, Siddhant Kant, Ms. Moulshree Shukla, S. S. Shroff, Atul
Sharma, Abhishek Sharma, Ms. Ashly Cherian, Ms. Anisha Mahajan,
Ms. Harshita Agarwal, Gautam Talukdar, Ms. Pooja Mahajan,
Ms. Mahima Singh, S. Mahajan, Avinash B. Amarnath, Ashish Rana,
Anurag Singh, Ms. Sonia Dube, Shatadru Chakraborty, Ms. Kanchan
Yadav, Ms. Surbhi Anand, Surya Kapoor for M/s Legal Options, Advs.
for the respondents.
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The Judgment of the Court was delivered by
DR DHANANJAYA Y CHANDRACHUD, J.
This judgment has been divided into sections to facilitate analysis.
Further, a Glossary of defined terms which have been used throughout
the judgment has also been provided. The sections* in the judgment are
as follows:
Glossary ................................................................................... 5
A Civil Appeal No 3224 of 2020 – the Ebix Appeal .............. 11
A.1
The appeal ................................................................... 11
A.2
Initiation of CIRP ........................................................ 11
A.3
Invitation, submission and approval of Resolution
Plan.............................................................................. 12
A.4
Investigations into financial transactions of
Educomp...................................................................... 15
A.5
Applications for withdrawal of the Resolution Plan .... 20
A.6
Orders of NCLT and NCLAT..................................... 24
A.7
Present status of SFIO and CBI investigation ............ 28
B Civil Appeal No 3560 of 2020 – the Kundan
Care Appeal........................................................................... 29
B.1
The appeal ................................................................... 29
B.2
Initiation of CIRP ........................................................ 30
B.3
Invitation, submission and approval of
Resolution
Plan............................................................ 31
B.4
Astonfield’s dispute with GUVNL .............................. 32
B.5
Withdrawal of the Resolution Plan .............................. 35
C Civil Appeal No 295 of 2021 – the Seroco Appeal............ 43
C.1
The appeal ................................................................... 43
C.2
Initiation of CIRP ........................................................ 44
C.3
Submission and Approval of Resolution Plan .............. 44
C.4
Modification of the Resolution Plan ............................ 45
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
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*Ed. Note : The Page Nos. mentioned alongside the respective sections are as per the
Original Judgment.
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D Submissions of counsel in the Ebix Appeal ....................... 48
D.1
Submissions for the appellant ...................................... 48
D.2
Submissions for the first respondent ........................... 56
D.3
Submissions for the second respondent ...................... 64
E Submissions of counsel in the Kundan Care Appeal.......... 68
E.1
Submissions for the appellant ...................................... 68
E.2
Submissions for the first respondent ........................... 76
E.3
Submissions for the second respondent ...................... 78
F Submissions of counsel in the Seroco Appeal .................... 80
F.1
Submissions for the appellant ...................................... 80
F.2
Submissions for the second and third respondents ...... 82
G
Purpose of a law on insolvency................................... 84
H
Nature of a Resolution Plan ........................................ 90
I
Statutory framework governing the CIRP ................ 115
J
Withdrawal of the Resolution Plan by a successful
Resolution Applicant under the IBC .......................... 134
J.1
The absence of a legislative hook or a regulatory
tether to enable a withdrawal .................................... 134
J.2
Terms of the Resolution Plan are not sufficient to
effect withdrawals or modifications after its
submission to the Adjudicating Authority .................. 145
K
Factual Analysis
........................................................ 158
K.1
The Ebix Appeal........................................................ 158
K.1.1 Res Judicata .............................................................. 159
K.1.2 Analysis of the Resolution Plan of Ebix .................... 167
K.1.3 Duties of the RP ....................................................... 175
K.2
The Kundan Care Appeal ......................................... 179
K.3
The Seroco Appeal.................................................... 183
L
Conclusion ................................................................. 185

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Glossary
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
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NCLT 
National Company Law Tribunal  
NSE 
National Stock Exchange 
PBG 
Performance Bank Guarantee 
PFCL 
Power Finance Corporation Limited 
PPA 
Power Purchase Agreement 
Recovery of Debts Act 
Recovery of Debts Due to Banks and Financial Institutions 
Act 1993 
RFRP 
Request For Resolution Plan 
Rhino 
Re Rhino Enterprises Properties Ltd. Schofield v Smith 
RP 
Resolution Professional 
SARFAESI 
Securitisation and Reconstruction of Financial Assets and 
Enforcement of Security Interest Act 2002 
SBI 
State Bank of India 
SBI Application 
CA No 639 (PB) of 2018 - filed by SBI before NCLT 
Second Withdrawal 
Application 
CA 1310 (PB) of 2019 in CP (IB) No 101 (PB) of 2017 - filed 
by Ebix before NCLT 
Seroco 
Seroco Lighting Industries Private Limited 
Seroco Appeal 
Civil Appeal No 295 of 2021 
SFIO 
Serious Frauds Investigation Office 
SICA 
Sick Industrial Companies Act 1985 
Singapore Act 
Companies (Amendment) Act 2017 
Swiss Ribbons 
Swiss Ribbons (P) Ltd v. Union of India 
Third Withdrawal Application
CA No 1816 (PB) of 2019 in CP (IB) No 101 (PB) of 2017 - 
filed by Ebix before NCLT 
UBIL 
Union Bank of India Limited 
UK Act 
UK Insolvency Act 1986 
UNCITRAL Guide 
UNCITRAL Legislative Guide on Insolvency Laws 
Uttara Foods 
Uttara Foods and Feeds (P) Ltd v. Mona Pharmachem 
Withdrawal Appeal 
Company Appeal (AT) (Insolvency) No 203 of 2020 - filed 
by E-CoC before NCLAT 
A Civil Appeal No 3224 of 2020 – the Ebix Appeal
A.1 The appeal
1. This
judgment arises out of an appeal from a judgment dated
29 July 2020 of the NCLAT. The NCLAT allowed the Withdrawal
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
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Appeal1 instituted by the first respondent, E-CoC, under Section 61 of
the IBC against a judgment dated 2 January 2020 of the NCLT at its
Principal Bench in New Delhi.
2. The NCLT allowed the Third Withdrawal Application2 filed by
Ebix under Section 60(5) of the IBC to withdraw its Resolution Plan
submitted for Educomp. While reversing that order, the NCLAT held
that the application to withdraw from the Resolution Plan could not have
been allowed since: (i) it was barred by res judicata; and (ii) the NCLT
does not have jurisdiction to permit such a withdrawal. The correctness
of the view of the NCLAT comes up for determination in the present
appeal.
A.2 Initiation of CIRP
3. On 5 May 2017, Educomp filed a petition3 under Section 10 of
the IBC seeking to initiate voluntary CIRP. The NCLT admitted this
petition on 30 May 2017, and appointed an IRP. Hence, 30 May 2017
would be taken as the ‘Insolvency Commencement Date’ for the purposes
of Section 5(12) of the IBC.
4. 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.
5. On an application4 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
6. 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.
7. 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
1  Company Appeal (AT) (Insolvency) No 203 of 2020
2  CA No 1816 (PB) of 2019 in CP (IB) No 101 (PB) of 2017
3  CP (IB) No 101 (PB) of 2017
4  CA No 405(PB) of 2017
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to prospective Resolution Applicants who had submitted a confidentiality
undertaking and made an upfront payment of Rs 5,00,000.
8. 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 20185, the NCLT again extended the
last date for submission of the Resolution Plans until 27 January 2018.
9. By the last date for submission, Resolutions Plans were received
by the E-RP from Ebix and another entity. These were shared 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.
10. 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.
11. 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).
12. A day later on 23 February 2018, one of the members of the
E-CoC (CSEB) informed the E-RP by an email that due to a technical
error, they could not participate in the e-voting process. CSEB had a
voting share of 1.195 per cent in the E-CoC, and wanted its affirmative
vote to be recorded on the Resolution Plan. CSEB’s vote would enhance
the voting share in favour of Ebix’s resolution plan to 75.35 per cent,
thus meeting the threshold under Section 30(4).
13. The E-RP filed the CSEB Application6 under Section 60(5) to
seek the directions of the NCLT in regard to CSEB’s late vote. NCLT
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
5  In applications CA No 30 of 2018 and CA No 42 of 2018
6  CA No 160 (PB) of 2018
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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 Application7 seeking NCLT’s approval to Ebix’s Resolution
Plan under Section 30(6).
14. 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. 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
7 CA No 195 (PB) of 2018
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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
15. 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”8. Another article titled
“Educomp’s Insolvency Process Becomes Murkier as Ebix Buys
Smartclass Educational Services” was published by The Wire on 26 April
20189.
16. The E-RP has stated before this Court that based on these
reports, IFC, a financial creditor of Educomp, filed the IFC Application10
under Section 60(5) of the IBC seeking investigation of the affairs/
transactions of Educomp. On 4 May 2018, when the IFC Application
came up before the NCLT, along with the CSEB Application and the
Approval Application, it directed the E-RP to file its reply and also directed
IFC to serve a notice on Ebix.
17. Similar applications- Axis Application11 and SBI Application12,
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.
18. In the
meantime, on 1 August 2018, due to allegations of
financial mismanagement of Educomp between 2014-2018, the MCA
directed an SFIO investigation13 into its affairs.
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
8  Manoj Gairola, “How Educomp May Have Subverted the Spirit of India’s Insolvency
and Bankruptcy Process” (The Wire, 3 April 2018) available at <https://thewire.in/
business/how-educomp-may-have-subverted-the-spirit-of-indias-insolvency-and-
bankruptcy-process> accessed on 26 July 2021
9  Manoj Gairola, “Educomp’s Insolvency Process Becomes Murkier as Ebix Buys
Smartclass Educational Services” (The Wire, 26 April 2018) available at <https://
thewire.in/business/educomps-insolvency-process-becomes-murkier-as-ebix-buys-
smartclass-educational-services> accessed on 26 July 2021
10 CA No 358 of 2018
11 IA No 448 (PB) of 2018
12 CA No 639 (PB) of 2018
13 Order No 32/2018/SFIO/CL-II
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19. 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.
20. 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 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;
(vi) Transaction relating to advance received by the Company
from Educomp Raffles Higher Education Limited;
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(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;
(xi) Any other issue, which the Committee of Creditors may
deem fit
RESOLVED FURTHER THAT the Resolution Professional,
be and is hereby authorized by the Committee of Creditors and
directed to file appropriate application/petition with the Hon’ble
National Company Law Tribunal, inter alia, seeking consent/order
of the Hon’ble NCLT on the proposed special investigation audit
to be conducted by the independent agency.
RESOLVED FURTHER THAT given the limitations inherent
in the previous audits conducted on the Company, and in order for
the said investigation to be comprehensive, the Resolution
Professional, while filing such application/ petition, shall also, as
an additional prayer, seek consent/ order of the Hon’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
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
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Core Committee, comprising of SBI, IDBI Bank, Axis Bank, IFC,
Yes Bank and J&K Bank”
21. The resolution was placed before the NCLT on 20 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 E-RP filed the Investigation
Audit Application14 under Section 60(5) of the IBC seeking directions
from NCLT to carry out the Special Investigation Audit of Educomp.
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.
23. 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.
24. 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.
25. 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”.
[…]
14 CA No 793 (PB) of 2018
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3. It is pertinent to note that BDO India LLP carried out transaction
audit in order to ascertain if there was any preferential,
undervalued, extortionate or fraudulent transactions falling within
the ambit of Section 43, 45, 50 and 66 of the Code. The Transaction
review report was prepared by BDO India LLP in February 2018
which was further circulated and discussed with the CoC. On
examination of the BDO Report and other relevant material
available with the Resolution Professional during the CIRP period,
no transaction was found by the Resolution Professional which
was required to be avoided in terms of the said Sections. Further,
the two land transactions as alleged in the Media Report have not
been reported by BDO in their Report and hence, the Resolution
Professional is not in a position to comment on the same.
As regards allegation in the Media Report 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
26. On 5 July 2019, Ebix filed the First Withdrawal Application15
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. 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;
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
15 CA 1252 (PB) of 2019 in CP (IB) No 101 (PB) of 2017
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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)
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.
27. 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.”
28. Thereafter, Ebix filed the
Second Withdrawal Application16
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;
16 CA 1310 (PB) of 2019 in CP (IB) No 101 (PB) of 2017
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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;”
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.”
29. 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.
Accordingly, we dismiss this application with liberty to the applicant
to file fresh one on the same cause of action, if so advised.”
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
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30. 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 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 said application was
dismissed by this Hon’ble Tribunal on the basis that modification/
revaluation of the Resolution Plan could not be permitted. The
Applicant thereafter filed an Application bearing PB/IA/1310/2019
seeking withdrawal of the Resolution Plan simpliciter, which was
dismissed by the Hon’ble Tribunal vide order dated
07.09.2019,
while granting liberty to file a fresh application seeking withdrawal
of the Resolution Plan.”
The reasons for withdrawal were the same as those in the previous
applications for withdrawal.
31. On 18 September 2019, the NCLT issued notice in the Third
Withdrawal Application and directed the E-RP to place it before the
E-CoC. The E-RP placed the application before the E-CoC at the
14th meeting on 26 September 2019. The E-CoC resolved not to allow
the application for withdrawal.
A.6 Orders of NCLT and NCLAT
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32. 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
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.
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)
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
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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 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 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
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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
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.
33. 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.
34. 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 Appeal17 was also filed by
the E-CoC under Section 61 of the IBC, assailing NCLT’s order dated 3
January 2020.
35. 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. 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
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
17 Company Appeal (AT) (Insolvency) No 587 of 2020
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the 1st Respondent /’Resolution Applicant is barred by the principle
of ‘Res Judicata’ notwithstanding the liberty to file fresh one.”
On the merits of the application for withdrawal, the NCLAT held
that: (i) once the Resolution Plan was approved by the CoC, the NCLT
did not have jurisdiction to permit its withdrawal; (ii) the Adjudicating
Authority could not enter upon the wisdom of the decision of the CoC to
approve the Resolution Plan; (iii) the Resolution Applicant had accepted
the conditions of the Resolution Plan and no change could be permitted;
(iv) orders have already been reserved in the Approval Application; (v)
no Special Investigation Audit had been conducted; (vi) Section 32A of
the IBC grants full immunity to the Resolution Applicant from any offences
committed before the commencement of the CIRP; and (vii) 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
36. 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.
37. 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;
(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
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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.
38. 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.
39. 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
40. This appeal arises under Section 62 of the IBC from a judgment
dated 30 September 2020 of the NCLAT. The NCLAT dismissed an
appeal18 instituted by the appellant, Kundan Care, under Section 61 of
the IBC against an order dated 3 July 2020 of the NCLT.
41. The NCLT had dismissed an application19 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.
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
18 Company Appeal (AT) (Insolvency) No 653 of 2020
19 IA No 1679 of 2019 in CP No (IB)-940 (ND) of 2018
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42. The correctness of this view of the NCLAT now comes up
for determination in the present appeal. While issuing notice on
16 November 2020, this Court had directed for an ad-interim stay on
the judgment of the NCLAT, which continues till date.
B.2 Initiation of CIRP
43. On 20 November 2018, Astonfield filed a petition20 under
Section 10 of the IBC seeking to initiate voluntary CIRP. The NCLT
admitted this petition on 27 November 2018 and appointed an IRP.
44. 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
45. 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.
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 A-RP, and its belated submission was rejected by
the A-RP.
47. 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.
48. In the interim, Kundan Care filed an application21 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.
20 CP No (IB)-940 (ND) of 2018
21 CA No 1119 of 2019
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49. 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.
50. 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.
51. The A-CoC voted on the Resolution Plans on 14 November
2019, where the Resolution Plan submitted by Kundan Care was approved
with a majority of 99.28 per cent, with 0.72 per cent abstaining. On
15 November 2019, the A-RP issued a Letter of Award to Kundan Care.
Kundan Care also deposited a PBG of Rs 5 Crores with the A-RP/A-
CoC.
52. A-RP then filed an application22 for approval of the Resolution
Plan under Section 31 of the IBC before the NCLT, along with Form H,
as mandated under the CIRP Regulations. This application is currently
pending adjudication before the NCLT.
B.4 Astonfield’s dispute with GUVNL
53. Before proceeding further, it is important to discuss the dispute
arising out of Astonfield’s PPA with GUVNL. The PPA was signed on
30 April 2010, came into force in December
2012. and was valid for a
period of 25 years. Crucially, this PPA was the only agreement entered
into by Astonfield and formed the entirety of its business.
54. When CIRP was initiated against Astonfield, GUVNL issued
a notice of default under Article 9.2.1(e) of the PPA, stating that the
initiation of insolvency was an “event of default”. This was challenged
before the NCLT by A-RP23 and EXIM Bank24 through applications
under Section 60(5) of the IBC.
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
22 CA No 1526 of 2019
23 CA No 700 of 2019
24 CA No 701 of 2019
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55. 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. 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.
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.”
56. 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.
57. The NCLT’s judgment was challenged by GUVNL in an
appeal25 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.
58. GUVNL challenged NCLAT’s judgment in the GUVNL
Appeal26 before this Court. When the present appeal was filed by Kundan
25 Company Appeal (AT) Insolvency No 1045 of 2019
26 Civil Appeal No 9241 of 2019
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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, 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
59. 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:
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
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“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
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. 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”.
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60. On 6 January 2020, Kundan Care filed an additional affidavit
outlining the additional costs it would face on account of: (i) deterioration
of the solar panels due to GUVNL unilaterally not permitting their
replacement, thereby leading to additional cost of Rs 30 crores (against
an initial expected cost of Rs 9 crore); (ii) Astonfield’s Plant not
producing electricity at its optimum level, thereby leading to a loss of
revenue up to Rs 150 lacs per month; and (iii) CIRP costs on 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. 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.”
61. Thereafter, Kundan Care also filed an application for
impleadment27 in the GUNVL Appeal pending before this Court, along
with an application for directions28 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
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
27 IA No 9679 of 2020
28 IA No 9682 of 2020
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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;
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;”
62. While the GUVNL appeal and its application remained pending,
on 14 May 2020, Kundan Care requested the NCLT to take up its
application for an early hearing. Following this, the application was listed
on 15 June 2020.
63. On 12 June 2020, A-RP filed its reply to Kundan Care’s
application and additional affidavit, where it opposed the withdrawal of
the Resolution Plan after its approval by the A-CoC and stated that:
(i)
In relation to the ongoing dispute with GUVNL, Kundan
Care was aware of the same when it submitted the
Resolution Plan;
(ii)
In relation to the damage to the solar panels, it pointed out
that the A-RP had informed Kundan Care about the floods
in 2019 and an Operation and
Management Agency had
been hired to clear the water at the Project Site, which had
been done;
(iii)
In relation to the repudiation of the insurance claim, the
RFRP or IM never guaranteed that the claim would be
successful. In any case, the A-RP was actively pursuing
the challenge to its repudiation;
(iv)
In relation to the “Accelerated Depreciation”, that the same
had been listed as a “doubtful debt” by the A-RP in the IM.
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Further, in any case, Kundan Care would have done their
own due diligence surrounding it; and
(v)
In relation to Astonfield’s Plant not operating at full capacity,
the IM issued by A-RP noted that the floods in 2017 had
affected the Plant and it may not be able to operate at full
capacity.
64. 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 re-negotiation 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”
65. 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.
66. 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.
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
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
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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.”
67. In view of the NCLT’s order, Kundan Care made an oral
request for withdrawal of its application to this Court when the GUVNL
Appeal was listed on 20 July 2020. This request was allowed by this
Court.
68. Thereafter, the appellant filed an appeal before the NCLAT,
challenging the order dated 3 July 2020 passed by the NCLT. NCLAT
did not issue notice in the appeal, but heard the submissions of all parties
at the stage of admission and directed them to file their written
submissions.
69. By the impugned judgment dated 30 September 2020, the
NCLAT dismissed the appeal by Kundan Care, relying on the judgment
impugned in the Ebix Appeal. It noted:
“7. Be it seen that the CIRP process undertaken involves 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 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
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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. 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;
(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;
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
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(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; (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.
C Civil Appeal No 295 of 2021 – the Seroco Appeal
C.1 The appeal
70. This is an appeal under Section 62 of the IBC from an
order
dated 10 December 2020 of the NCLAT. By its judgment, the NCLAT
dismissed an appeal29 instituted by Seroco, under Section 61 of the IBC
against an order dated 23 October 2020 of the NCLT.
71. The NCLT dismissed an application30 by Seroco under Section
60(5) seeking permission to modify its Resolution Plan submitted for the
Corporate Debtor – Arya Filaments. NCLT relied on the impugned
judgment in the Kundan Care Appeal. Further, it noted that while the
application prayed for a modification of the Resolution Plan, its title was
“Application for withdrawal under section 60(5) of the Insolvency and
Bankruptcy Code, 2016”.
72. In appeal, the NCLAT partly upheld the NCLT’s decision and
held that Seroco could not be allowed to modify or withdraw the
29 Company Appeal (AT) (Insolvency) No 1054 of 2020
30 IA No 96 of 2020 in CP (IB) No 29 of 2018
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Resolution Plan approved by the Arya-CoC since: (i) it was the sole
Resolution Applicant in the CIRP; (ii) Arya Filaments was an MSME;
and (iii) it was aware of Arya Filaments’ financial condition when it
submitted the Resolution Plan. However, it set aside the NCLT’s decision
in relation to the costs imposed on Seroco.
C.2 Initiation of CIRP
73. The second respondent, Kotak, being a financial creditor of
Arya Filaments, filed a petition31 under Section 7 of the IBC seeking to
initiate CIRP.
74. By an order dated 17 August 2018, the NCLT initiated CIRP
against Arya Filaments and appointed the first respondent, Mr Ravi
Kapoor, as the IRP. Thereafter, a CoC was constituted, which consisted
of Kotak Mahindra and the third respondent, UBIL. The Arya-CoC
then appointed Mr Ravi Kapoor as the RP.
C.3 Submission and Approval of Resolution Plan
75. The Arya-RP thereafter invited Resolutions Plans for Arya
Filaments. Seroco, being a company formed by the former employees
of Arya Filaments, submitted a Resolution Plan on 13 March 2019 where,
inter alia, they offered to pay Rs 6,79,22,000. This was the only
Resolution Plan which was received.
76. At its 4th meeting held on 16 April 2019, the Arya-CoC noted
that Seroco’s Resolution Plan needed some improvements and directed
it to submit a revised Plan. Seroco’s revised Resolution Plan was then
approved by the Arya-CoC in its 5th meeting held on 10 May 2019, with
100 per cent approval.
77. On  or about 15 May 2019, the
Arya-RP filed an application32
under Section 30(6) before NCLT for confirmation of the Resolution
Plan. Form H under the CIRP Regulations was filed by way of an
affidavit on 5 June 2020.
C.4 Modification of the Resolution Plan
78. On 9 June 2020, Seroco addressed a letter to the Arya-RP
and Arya-CoC highlighting that their Resolution Plan was based on the
economic conditions which prevailed at that time, which had been
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
31 CP (IB) No 29 of 2018
32 IA No 280 of 2019 in CP (IB) No 29 of 2018
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significantly altered due to the onset of the COVID-19 pandemic. In
particular, it highlighted that:
(i)
The physical condition of Arya Filament’s machinery would
have deteriorated;
(ii) Financial losses must have been suffered by Arya Filaments
during the COVID-19 pandemic;
(iii) Demand/sale of Arya Filaments’ products must have suffered
during  pandemic; and
(iv) Due to the pandemic, the funds of Seroco have also been
drastically reduced.
It submitted a revised Resolution Plan to be considered by the
Arya-CoC. In the revised Resolution Plan, Seroco offered to pay, inter
alia, an amount of Rs 5,29,22,000. It also requested the Arya-RP and
Arya-CoC to file the revised Resolution Plan before the NCLT, and
keep the proceedings on the confirmation of the previous Resolution
Plan in abeyance.
79. Thereafter, on 10 July 2020, Seroco filed an application before
the NCLT praying for the following reliefs:
“a) permit the Applicant to revise the Resolution Plan dated
13.3.2020 in terms of letter dated 09/06/2020 at Annexure C hereto;
b) direct the Respondent No. 2 to consider the modified resolution
plan as per Letter at Annexure C and vote afresh on the same;
c) direct the Respondent No.1 to provide an updated Information
Memorandum providing financial condition of the Corporate
Debtor as on 1/07/2020;
d) during the hearing of this Application, stay the implementation,
operation and execution of the Resolution Plan dated
13.3.2020
of the Applicant;”
It noted that its Resolution Plan was filed eighteen months ago
and was based on an IM published two years previously, following which
the conditions had materially altered. Hence, Seroco stated that while it
was genuinely interested in Arya Filaments, its changed circumstances
meant that it could not pay the entire consideration envisaged in the
Resolution Plan approved by the Arya-CoC earlier.
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80. Seroco’s application was listed before the bench of the NCLT
which was hearing the Arya-RP’s application for confirmation of the
Resolution Plan. By a common order on 23 October 2020, the NCLT
allowed the Arya-RP’s application and confirmed Seroco’s Resolution
Plan which had been approved by the Arya-CoC. In relation to Seroco’s
application for modification, it noted:
“18. It is the matter of record that the instant application was filed
subsequent to the filling of the above stated IA ie. IA 280 of 2019
filed under Section 30(6) of the IB Code. It is stated by the
Applicant that the Resolution Plan, so submitted by the Applicant,
is based on the Information Memorandum which was published
two years ago. Considering the time of two years and outbreak of
Covid-19, the Applicant is not aware of the current financial
condition of the Corporate Debtor and is now not in a position to
bear the costs/losses of the Corporate Debtor and hence, is seeking
for withdrawal of the Resolution Plan. This story is not believable
as the Corporate Debtor, being a MSME, has filed the plan
considering the financial ‘condition of the Corporate Debtor and
have shown his interest to take the Company. Hence, having no
knowledge of the financial condition does not arise at all.
19. It is pertinent to mention herein that in view of the judgement
passed by Hon’ble NCLAT in Kundan Care Products Ltd vs. Mr.
Amit Gupta Resolution Professional and-Ors (Company Appeal
(AT)
(Insolvency) No. 653 of 2020), the Resolution Plan, once
submitted, cannot be withdrawn as there is no provision in the IB
Code which allows withdrawal of an approved Resolution Plan &
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.
20. Moreover, there is an ambiguity in the instant application with
regard to the relief sought for, as the title of the application states
“Application for withdrawal under section 60(5) of the Insolvency
and Bankruptcy Code, 2016” whereas the prayer, as stated above,
has no whisper regarding the withdrawal of the Resolution Plan.”
Hence, it rejected Seroco’s application and imposed costs of Rs
50,000.
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
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81. Seroco filed an appeal against the NCLT’s judgment, which
came to be dismissed by the NCLAT by its impugned order dated
10 December 2020, where it noted:
“2. After hearing learned counsel for the Appellant and having
regard to the Judgments rendered by this Appellate Tribunal holding
that the Successful Resolution Applicant cannot be permitted to
withdraw the approved Resolution Plan coupled with the fact that
the Appellant in the instant case being the sole Resolution Applicant
in the Corporate Insolvency Resolution Process (CIRP) of the
Corporate Debtor which has been classified as an MSME and
admittedly having knowledge of the financial health of the
Corporate Debtor as a promoter or a connected person cannot be
permitted to seek revision of the approved Resolution Plan on
that ground which would not be a material irregularity within the
ambit of Section 61(3) of the Insolvency and Bankruptcy Code,
2016. We are of the considered opinion that there is no merit in
this appeal and the same is liable to be dismissed.”
Considering Arya Filament’s position as an MSME, Seroco being
a company formed by its former employees (who would have been aware
of its financial condition) and also being the sole Resolution Applicant,
the NCLAT refused to permit modification/withdrawal of the Resolution
Plan.
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 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:
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(a) Section 31(1) of the IBC, which provides that the Resolution
Plan is “binding…on all stakeholders” only upon approval by
the Adjudicating Authority;
(b) Section 74(3) of the IBC, which provides that a person can
be prosecuted or punished for contravening the Resolution
Plan only after its approval by the Adjudicating Authority;
(c) The documents 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
(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. 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;
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
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(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. Chengappa33 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;
(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
33 (2001) 9 SCC 512
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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. 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.34 has held that “[i]t 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”;
(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. 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;
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
34 (2020) 8 SCC 531
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(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
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”. 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
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(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
(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. IOC35 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
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
35 (2019) 12 SCC 150
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shortage in the votes required to achieve the statutory requirement
of 75 per cent of votes in the E-CoC. On 23 February 2018, one
of the financial creditors who was not present at the meeting of
the E-CoC intimated its agreement with the resolution plan and
accordingly the Approval Application was filed on 7 March 2018.
Orders have been reserved on the Approval Application on 10
January 2018; and
(b) Fulfilment of the Plan cannot be foisted on an unwilling
Applicant. This view of the NCLT is consistent with the legal
position which vests it with the power to permit a withdrawal
from a resolution plan for good and substantial reasons; and
(vii) The doctrine of res judicata does not bar the relief that Ebix
had sought in its Third Withdrawal Application of its Resolution Plan.
The First Withdrawal Application arose from a 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.
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 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.36 and M/s Innoventive Industries
36 (2020) 13 SCC 308
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Ltd. v. ICICI Bank & Anr.37. 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 Gupta38;
(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
India39. 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 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;
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
37 (2018) 1 SCC 407
38 2021 SCCOnLine SC 194, para 181
39 (2019) 4 SCC 17, paras 27-28
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(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
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:
(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
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(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. 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 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;
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EDUCOMP SOLUTIONS LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
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(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. 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:
(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
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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. 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:
(a) Ebix had conducted its own due diligence, in accordance
with the RFRP. Section 29 of the IBC also enabled the
appellant to access to an IM on Educomp, which would
include all relevant information, including financial
position and pending disputes. Clause 1.13.7 of the
RFRP also stipulates that failure to conduct adequate
due diligence is not a ground to relieve the Resolution
Applicant from its obligations under a submitted
Resolution Plan;
(b) Ebix continued to be interested in Educomp as late as 1
June 2020, when it addressed a
letter stating that the
software licenses for online education, issued by
Educomp, have become even more relevant in the
circumstances of the pandemic;
(c) The Investigation Audit Application for investigations
into the affairs of Educomp was filed in May 2018 and
disposed of by August 2018, which was prior to the
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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. This 90 per cent haircut indicates that
the appellant was aware of the conditions of Educomp;
and
(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.
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84. In the alternative, if Ebix were to succeed before this Court,
the learned Senior Counsel on behalf of the E-CoC has prayed that this
Court exercise its powers under Article 142 of the Constitution of India,
and extend the limitation period for conducting the insolvency process
by three to four months for a fresh process to be initiated, subject to the
consent of the E-CoC.
D.3 Submissions for the second respondent
85. Supporting the submissions of the E-CoC, Mr Nakul Dewan,
learned Senior Counsel, has appeared on behalf of the E-RP. He has
submitted that:
(i) Upon the approval of a Resolution Plan by the CoC, a
concluded contract comes into existence between the
Resolution Applicant and CoC. Any withdrawal of the
Resolution Plan would violate the concluded contract;
(ii) In the present case, Clauses 1.9.3 and 1.9.5, give the right to
the E-CoC to invoke the PBG submitted by Ebix if it attempts
to renege from its contractual obligation to implement the
Resolution Plan;
(iii)  The withdrawal would also be in violation of the objective of
the IBC, as noted by this Court in Swiss Ribbons (supra),
which is to ensure the revival and continuation of the Corporate
Debtor. The withdrawal of the Resolution Plan at a belated
stage, would lead to the Corporate Debtor going into
liquidation;
(iv) The withdrawal of a Resolution Plan after its approval by the
CoC is not contemplated by:
(a)
The UNCITRAL Guide, according to which the role of
judicial authorities is
limited to approving the Resolution
Plan after ensuring that it was approved by the CoC
properly. It does not 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
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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 Ltd40; (2) Reinwood
Ltd v. L Brown & Sons Ltd41; (3) Doleman v. Shaw42;
and (4) Standard Life Assurance Ltd v. Oak
Dedicated Ltd43; 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
40 [2008] Pens. L.R. 425, paras 24 and 38
41 [2008] 1 W.L.R. 696, paras 5 and 11
42 [2009] Bus. L.R. 1175, paras 40 and 56
43 [2008] EWHC 222 (Comm), para 16
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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. Since
the E-RP was not aware of any discrepancies or illegalities
committed by the former management of Educomp,
information about such activities could not have been provided
to intending Resolution Applicants under Section 29 of the
IBC. Section 29 only envisages that the RP will provide
information to prospective Resolution Applicants on a best-
effort basis;
(viii) Ebix is a professional corporate entity, and through the
express provisions of its own Resolution Plan, has stated
that it has significant previous experience in the revival of
stressed assets. Before submitting its Resolution Plan for
Educomp, Ebix was provided access to the Virtual Data Room
by the E-RP and conducted its due diligence. Hence, it should
not be allowed to seek a withdrawal, by arguing that certain
facts were not within its knowledge; and
(ix) In view of the decision of this court in Nagabhushanammal
v. C Chandikeswaralingam44, 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.
E Submissions of counsel in the Kundan Care Appeal
E.1 Submissions for
the appellant
86. Mr Ramji Srinivasan, learned Senior Counsel appearing on
behalf of Kundan Care, has urged the following submissions:
(i)
The IBC vests the Adjudicating Authority with inherent
powers to direct withdrawal:
(a)
Section 60(5)(c) of the IBC vests the Adjudicating
Authority with wide powers and jurisdiction to “entertain
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
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and dispose of any question of law or facts, arising out
of or in relation to” the CIRP. Rule 11 of the NCLT
Rules 2016 also endows the NCLT with inherent powers.
This Court, in Gujarat Urja (supra), has held that
disputes arising in relation to insolvency can be
adjudicated under Section 60(5)(c). Accordingly, the
dismissal of Kundan Care’s application on “lack of
jurisdiction” is impermissible. Declining to go into merits
of its application amounts to an impermissible refusal to
exercise jurisdiction, as noted by this Court in National
Thermal Power Corporation Ltd. v. Siemens
Atkeingesellschaft45;
(b)
The NCLT erred in rejecting Kundan Care’s contention
by confining its jurisdiction to Section 31(1) of the IBC
which specifically deals with approval or rejection of
Resolution Plans;
(c)
The NCLAT incorrectly proceeded on the assumption
that its powers in disposing off Kundan Care’s application
seeking withdrawal were circumscribed by Section 61(3)
of the IBC, which concerns appeals against approval of
a Resolution Plan. Kundan Care sought to invoke
jurisdiction under Section 61(1) of the IBC which
provides a right of appeal against any order of the NCLT;
(d)
The facts and circumstances, on the basis of which the
‘feasibility and viability’ of the Resolution Plan were
approved by the A-CoC in its commercial wisdom, have
changed. Since the edifice of the A-CoC’s satisfaction
had altered, the NCLT has power to look
into the facts
which warrant withdrawal or modification of the
Resolution Plan;
(e)
The legislative background of Section 31 of the IBC
does not contemplate circumstances that could arise after
submission of the Resolution Plan to the Adjudicating
Authority. The UNCITRAL Guide and the BLRC Report
place the viability of the Corporate Debtor at the heart
of the insolvency process. The CIRP mandates interests
45 AIR 2007 SC 1491, para 5
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of stakeholders to be better preserved by reorganization
than liquidation. The BLRC Report was relied upon by
this Court in K Sashidhar (supra) to propound the
principle of “commercial wisdom of the CoC” which
the Adjudicating Authority cannot interfere with as the
creditors, as the loss-making party in the insolvency, are
best placed to determine the terms of the resolution.
However, this principle does not touch upon instances
where there is a conflict between the CoC and the
Resolution Applicant where the latter will prima facie
suffer a loss. The Resolution Applicant has no stake in
the process until their Plan is approved by the NCLT
and the probability of a complete loss, prior to the
approval of the Plan, is justiciable;
(f)
The IBC contemplates strict timelines, and therefore did
not envisage a scenario of withdrawal, prior to approval
of the Resolution Plan under Section 31(1) of the IBC.
This Court, in Essar Steel (supra), held that the 330-
day outer limit is directory which has resulted in Kundan
Care’s Plan remaining pending before the NCLT for
over a year, resulting in unviability and losses. Therefore,
Section 31 cannot be asserted while adjudicating a plea
for withdrawal or modification of a plan due to
intervening factors having a material adverse effect in
this case;
(g)
Kundan Care’s Resolution Plan was contingent on the
continuance of the PPA with GUVNL. If the
contingency does not arise, the Plan would become
impossible. This Plan was
accepted by the A-CoC on
this contingency. Therefore, disabling withdrawals or
modifications would in fact violate the commercial
wisdom of the A-CoC;
(h)
The Resolution Plan has become unviable and impossible
to implement. If mandatorily implemented, Astonfield is
bound to suffer losses and eventually declare itself
insolvent. These events hinder its effective
implementation and warrant the Plan’s rejection by the
A-CoC since the first proviso of Section 31(1), read with
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Sub-section (2)(d) warrants a determination by the
Adjudicating Authority of the Resolution Plan’s effective
implementation. The determination by the Adjudicating
Authority under Section 31(1) cannot be equated to that
of a rubberstamp where a holistic analysis is precluded;
(i)
BLRC’s Interim Report of February 2015 mentions that
‘viability’ is determined by providing that the cost of
financial arrangement (resolution amount invested by the
Resolution Application) should be lower than the Net
Present Value of future cash flows of the Corporate
Debtor. In Kundan Care’s calculation, the computed Net
Present Value for future cash flow of Astonfield
demonstrates loss and a potential repeated CIRP; and
(j)
The proposition that a Resolution Plan approved by the
CoC cannot be withdrawn or modified under any
circumstance, no matter the extent of impossibility or
unviability that may have arisen subsequently, is seriously
flawed and is likely to lead to draconian and absurd
consequences. In the event that the basis of the
Resolution Plan is completely eroded, a Resolution
Applicant’s failure to implement the Plan would invite
penal prosecution under Section 74 of the IBC and a
repeated CIRP. This will discourage prospective
Resolution Applicants from coming forward with their
Plans in the future, thus defeating the very purpose and
object behind the IBC;
(ii)
There is no concluded and binding contract between the
Resolution
Applicant and the CoC, prior to approval by the
Adjudicating Authority:
(a)
There is no concluded contract between the Resolution
Applicant and the CoC until the NCLT approves of the
same. Section 7 of the Contract Act requires the
acceptance of offer to be absolute, unconditional and
unqualified. Clauses 1.1.9, 1.2, 1.9.4 and 2.2.6 of the
RFRP record the fact that the Plan would be binding
only after the approval of the Adjudicating Authority;
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(b)
The RFRP is in the nature of an invitation to offer.
Kundan Care’s Resolution Plan is an offer that is made
in pursuance of the RFRP. A contract is concluded and
becomes binding between the parties, only upon the
communication of its acceptance under Regulation 39(5)
of the CIRP Regulation, after the approval of the
Adjudicating Authority under Section 31 of the IBC. It
would be incorrect to term it as a concluded contract,
since it would have unforeseeable public ramifications;
(c)
Since there is no concluded contract, withdrawal of an
offer prior to acceptance is a settled principle in contract
law and the Adjudicating Authority can give effect to
this under Section 60(5) of the IBC;
(d)
Arguendo, if there is a concluded contract, it has become
void under Sections 32 and 35 of the Contract Act.
Clause 1.8.3 of the RFRP provided that the Plan must
be valid for not less than six months. On this
representation, Kundan Care prepared financial
projections on the assumption that they would take over
the project on 1 January 2020 and make it operational
by 1 April 2020. The projections were based on the
continuation of GUVNL’s PPA with Astonfield till 2037.
Kundan Care even furnished revised projections based
on the assumption that they would be able to take over
the project by 30 September 2020 and make it operational
by 1 January 2021. Owing to this delay, Kundan Care
had noted that its original projections for the year 2038
went from a cumulative profit
of Rs 886.53 lakhs to a
cumulative loss of Rs 760.71 lakhs. The A-RP’s
statement was recorded by the NCLT on 20 February
2020 that Astonfield is incurring a daily loss of Rs 5
lakhs. This takes the cumulative loss of Astonfield to Rs
1647.24 lakhs;
(e)
Sl.No. 5.1 of Kundan Care’s Resolution Plan also clearly
stated that they would be at liberty to withdraw the
Resolution Plan in the event that there is any change in
the information provided in the IM or new information is
available, which constitutes a ‘material adverse change’.
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Kundan Care contends that this was specifically
introduced due to GUVNL’s attempts to terminate the
PPA. The A-CoC was not obligated to accept this
provision in the Plan, but since it has, the provision must
be enforced;
(f)
Withdrawal was necessitated because of uncertainty
over the continuation of the sole contract of Astonfield,
deterioration of the assets of Astonfield owing to the
floods in Gujarat, repudiation of Astonfield’s insurance
claim due to the alleged failure of the A-RP to provide
supporting documents and misrepresentation in respect
of trade receivables towards non-availing the benefit of
accelerated depreciation; and
(g)
Kundan Care had also demonstrated good faith since it
sought to withdraw the Resolution Plan on 17 December
2019, soon after GUVNL Appeal was listed before this
Court. This interim application for withdrawal was filed
within a month of the A-RP submitting the plan to the
Adjudicating Authority. The NCLAT erred in noting that
this was a ploy on behalf of Kundan Care to frustrate
the CIRP after pushing out all rivals during the bidding
process;
(iii) Alternatively, the CoC-approved Resolution Plan is a
contingent contract under Section 32 of the Indian
Contract Act:
(a)
The contract has become void since the contingency
of certainty of PPA with GUVNL within a specified
time through approval of the NCLT has become
impossible;
(b)
GUVNL’s Appeal against the continuation of the
PPA,
resolved by this Court in Gujarat Urja
(supra), compounded by the COVID-19 pandemic
and the lockdown, is primarily responsible for the
delay in the conclusion of the CIRP. The delay, as
of 14 July 2021, in concluding the CIRP is 608 days.
The CIRP costs (Rs 12 lakhs per month approx.)
are also increasing, which have to be borne entirely
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by Kundan Care. The NCLT should have
considered the alternative prayer of permission to
re-negotiate the financial proposal with the CIRP;
(c)
The A-CoC’s approval through voting constitutes
‘provisional acceptance of offer’, as was held
analogously by this Court in Haridwar Singh v.
Bagun Sumbrui46 which held that the contract
was not concluded in the absence of the
confirmation by the Government of the conditional
acceptance by the Divisional Forest Officer. A
statutory reading of Resolution Plans as contingent
contracts under Section 7 and 32 of the Contract
Act would align with the intention of the IBC in
attracting investors to make offers as conditional
acceptance of the Plan, until it becomes binding
upon approval under Section 31(1) of the IBC; and
(d)
Only section 31(1) of the IBC makes the Resolution
Plan binding on all stakeholders, including the
Resolution Applicant and the CoC. This view is
bolstered by the fact that criminal sanctions for
non-implementation on a Resolution Applicant under
Section 74(2) of the IBC are applicable only after
approval of the Resolution Plan under Section 31(1).
Regulation 36-A(7)(f) of the CIRP Regulations also
states that the refundable deposit can be forfeited
only in case of discovery of any false information
or record by the prospective Resolution Applicant.
Regulation 36-B(4A) also states that the non-
refundable deposit shall be forfeited only on failure
to perform after approval of the Plan under Section
31 of the IBC. The impugned judgement’s effect
is to make it binding prior to the Adjudicating
Authority’s approval which does violence to the
unambiguous language of S.31(1). This is further
supported by the provisions of the IBC as noted by
this Court in ArcelorMittal India Private
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Limited v. Satish Kumar Gupta47, that
disapproval by the CoC of a Plan on the grounds
of Section 29A of the IBC is still appealable by the
Resolution Applicant before the NCLT, and
therefore an approved Plan by CoC can still be
replaced by another Plan which has been able to
satisfy the criteria under section 29A before the
NCLT. In other words, a Plan approved by the
CoC does not result in a concluded contract because
it is replaceable by another party.
87. In the course of the final stage of the hearings, Kundan Care
submitted that it had mutually negotiated a settlement with A-RP/A-
CoC and requested the exercise of this Court’s powers under Article
142 of the Constitution of India for a one-time relief of modification,
which would enable them to arrive at a mutually acceptable modification
to the Resolution Plan.
E. 2 Submissions for the first respondent
88. Mr Nakul Dewan, learned Senior Counsel appeared on behalf
of the A-RP in the Kundan Care Appeal. He has also appeared on behalf
of the E-RP in the Ebix Appeal, both being collectively disposed of by
this judgement. He has made the following submissions, in addition to
the arguments recorded above in the Ebix Appeal:
(i)
There is no direct provision with respect to withdrawal of a
Resolution Plan under the IBC by a Resolution Applicant,
once approved by the CoC. Consequently, the Adjudicating
or Appellate Authority has no jurisdiction to direct
withdrawals or
modification of Resolution Plans;
(ii)
Section 12 of the IBC provides for a time bound period of
180 days extendable up to 330 days for the completion of
the CIRP. Permitting the Resolution Applicant to withdraw
the Resolution Plan after the approval of the CoC sets at
naught the entire time period subsumed in negotiating and
voting upon a Resolution Plan;
(iii)
Kundan Care was permitted to submit its Resolution Plan
in spite of a failure to submit an EOI in time. Kundan Care
47 Civil Appeal No. 9402 of 2018
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was aware of the pending litigation regarding the
continuance of the PPA with GUVNL and had negotiated
with the A-CoC on that basis. Yet, Kundan Care filed an
application to withdraw its Plan within a month of its
approval and filing before the Adjudicating Authority. The
plea of withdrawal is an opportunistic tactic for re-
negotiation;
(iv)
Clause 1.8.4 of the RFRP stated that a submitted Resolution
Plan shall be irrevocable. The format of the cover letter
annexed to the RFRP also makes statements on the binding
effect of the submission and its irrevocability. The LOI issued
by Kundan Care also states that the Resolution Applicant
will not be permitted to withdraw;
(v)
Clause 1.6.2 of the RFRP explicitly stated that any
‘Condition Precedents’ to the Plan had to be set out, for the
CoC to specifically consider. Any walk-away conditions also
had to be conspicuously set out with a heading, and under a
consolidated paragraph. Sl. No.5.1 of the Resolution Plan
was not set out in this format, which clearly evinces that it
is being deployed as an afterthought to evade the
consequences of a submitted Resolution Plan. In any event,
none of the claims of Kundan Care constitute a material
adverse change that they did not account for, after perusing
the IM;
(vi)
Sl.No. 5.1 of Kundan Care’s Resolution Plan was not
introduced as a condition precedent to the Resolution Plan.
Sl.No. 12 of the Form H, that is required to be mandatorily
submitted by the RP to the
Adjudicating Authority, as per
Regulation 39(4) of the CIRP Regulations expressly
stipulates ‘Conditionalities’ that need to be specified, for
the benefit of the Adjudicating Authority. Attempts at
subsequent modification and withdrawal are not supported
by the Resolution Plan, the RFRP or the provisions of the
IBC;
(vii)
The CIRP costs currently stand at Rs 2.5 crore which
Kundan Care had committed to paying in full. As of 26 July
2021, the unpaid CIRP cost is Rs 1.66 crores which would
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]