NCLT Bengaluru Bench Permits A Resolution Applicant To Withdraw The Resolution Plan

The Resolution Applicant had moved the NCLT under Section 60(5) of the IBC, after discovering certain 'discrepancies' and 'inaccuracies' in the Information Memorandum and other correspondences issued by the Resolution Professional. It was contended that the full disclosure regarding the project lands required for running the Hydro Power Project of the Corporate Debtor was not provided by the Resolution Professional. It was further contended that the project is unviable without the availability of the entire project lands and this could not be factored in the Resolution Plan.

In its Application before the NCLT, the Resolution Applicant sought a declaration/confirmation that its plan stands revoked/withdrawn as well as the return of its Performance Bank Guarantee. Its arguments found favour with the NCLT, which while relying on the NCLAT's decision in Deccan Value^[1] permitted the withdrawal of the Plan but imposed a penalty of Rs. 75 Lakhs on the Resolution Applicant "in the interest of justice". The remaining amount deposited by way of Earnest Money Deposit and Performance Bank Guarantee has been directed to be returned/refunded to the Resolution Applicant.

The NCLT observed that since a Resolution Plan is prepared on the basis of the Information Memorandum, any new discovery of fact that would affect the interests of the Resolution Applicant adversely would entitle it to withdraw the Plan. It was also held that in light of the material inaccuracies in the Information Memorandum, which has been admitted by the Resolution Professional, the Resolution Applicant cannot be compelled to perform and execute the Resolution Plan jeopardizing its own interest, especially when it apprehends huge losses and had kept an exit option in its Resolution Plan to take care of such circumstances.

The Resolution Applicant was represented by Mr V. Srinivasa Raghavan, Senior Advocate and Mr Prithu Garg, Advocate (GnS Legal LLP). The Resolution Professional was represented by Ms Amrita Jain, Advocate.