IBC | Once CoC Approves Resolution Plan, Successful Resolution Applicant Can't Negotiate Further : Supreme Court

The Supreme Court has reaffirmed the binding nature of Committee of Creditors (CoC)-approved resolution plans under the Insolvency and Bankruptcy Code, 2016 (IBC), holding that a Successful Resolution Applicant (SRA) cannot indirectly back out of a plan by later objecting to conditions that were discussed and accepted during CoC meetings.

A bench comprising Justice K.V. Viswanathan and Justice Vipul M. Pancholi declined to interfere with the concurrent findings of the NCLT and NCLAT, which had rejected the Successful Resolution Applicant's plea seeking restoration of the Earnest Money Deposit (EMD), holding that the appellant had failed to comply with the terms of the Resolution Plan after disputing the allegedly conditional nature of the Letter of Intent (LoI) issued in its favour.

“…once the CoC, after applying its commercial wisdom, has approved the resolution plan, the SRA is prohibited from negotiating further and is expected to act in a time bound manner to implement the plan. In the present case, it is seen that the appellant was deliberately trying to delay the implementation of the plan citing the purported conditionality of the LoI. This defeats the purpose of the Code as the otherwise timebound and swift process is now being delayed at the behest of the appellant.”, the Court observed.

The Case

The corporate insolvency resolution process (CIRP) against Oracle Home Textiles Limited commenced on August 9, 2018. The appellant, who was part of the suspended management of the corporate debtor, was later permitted by the NCLT in February 2020 to submit a resolution plan.

The Committee of Creditors approved the appellant's resolution plan on May 10, 2021 with an overwhelming 99.90% voting share.

However, disputes subsequently arose over the terms of the Letter of Intent issued by the Resolution Professional (RP). The appellant contended that the LoI was “conditional” and contrary to the approved resolution plan.

When the appellant failed to accept the LoI and furnish the performance guarantee within the stipulated timeline, the RP forfeited the EMD of ₹1 crore. Ultimately, the CoC resolved with 99.61% voting share to liquidate the company under Section 33(2) of the IBC.

The NCLT rejected the appellant's challenge and allowed liquidation. The NCLAT affirmed the decision, following which the matter reached the Supreme Court.

Decision

Dismissing the appeal, the judgment authored by Justice Viswanathan rejected the Appellant's belated attempt to renege on the plan, which was already approved by the CoC.

“It was a clear subterfuge. Knowing fully well that one cannot withdraw directly from the plan approved by the CoC, an attempt was made in an indirect manner by harping on about certain stipulations as conditionalities to shift the blame on the CoC for the appellant's unwillingness to take the plan forward. This clever ploy has rightly been scotched by the fora below. If such artifices are allowed to succeed, the entire architecture of the IBC would crumble and the laudable objects sought to be achieved by the said Code would become a far cry.”, the Court observed.

Reference was made to the case of Ebix Singapore Private Limited vs. Committee of Creditors of Educomp Solutions Limited and Another, 2021 LiveLaw (SC) 447, where the Court held against the scope for negotiations and discussions after the approval of the resolution plan by the CoC, noting that it would be plainly contrary to the terms of IBC.

“There is nothing in Section 33 of the Code which detracts from the said course of action. Hence, we are of the opinion that the Fora below rightly allowed the application of the RP viz-aviz the liquidation process and rightly dismissed the applications of the appellant.”, the court added.

In terms of the aforementioned, the appeal was dismissed.

Headnote

Insolvency and Bankruptcy Code, 2016 – Section 33(2) & Section 62 – Withdrawal or Modification of Resolution Plan – Approving and Reprobating Conditions in Letter of Intent (LoI) – Forfeiture of Earnest Money Deposit (EMD) – Commercial Wisdom of the Committee of Creditors (CoC) – Supreme Court held the following – i. No Scope for Reneging After CoC Approval - Once a Resolution Plan is approved by the CoC, the Successful Resolution Applicant (SRA) is precluded from raising grievances regarding conditions in the Letter of Intent (LoI) that were already within their knowledge and expressly agreed upon during CoC meetings. A submitted resolution plan is binding and irrevocable between the CoC and the SRA; ii. Artifices to Delay/Modify Plan Prohibited - SRAs cannot employ clever ploys or indirect attempts (subterfuges) to back out of a CoC-approved plan by characterizing standard legal contingencies in an LoI as "conditionalities" - Such actions threaten to crumble the statutory architecture of the IBC; iii. Legality of EMD Forfeiture - Forfeiture of the Earnest Money Deposit (EMD) is fully justified under the Request For Resolution Plan (RFRP) if the SRA fails to submit the required performance bank guarantee within the stipulated time or non-complies with the resolution process; iv. Paramountcy of CoC's Decision to Liquidate - The decision of the CoC to liquidate the Corporate Debtor prior to the confirmation of the resolution plan especially when the SRA defaults or vacillates is a business decision taken in its commercial wisdom and is not amenable to judicial review. [Relied on Ebix Singapore Private Limited vs. Committee of Creditors of Educomp Solutions Limited and Another (2022) 2 SCC 401; Chairman, State Bank of India and Another v. M.J. James (2022) 2 SCC 301; Nagubai Ammal and Others v. B. Shama Rao and Others (1956) 1 SCC 698; Rajasthan State Industrial Development & Investment Corporation and Another v. Diamond & Gem Development Corporation Limited and Another (2013) 5 SCC 470; Manish Kumar v. Union of India (2021) 5 SCC 1; Paras 26-42]

Cause Title: SANJAY DAVE Vs. ANDHRA BANK LTD. & ORS.

Citation : 2026 LiveLaw (SC) 562

Click here to download judgment

Appearance:

For Appellant(s) : Ms. Purti Gupta, AOR Ms. Henna George,Adv. Ms. Sunidhi Sah,Adv. Ms. Pooja,Adv. Ms. Khushi Sharma,Adv.

For Respondent(s) : No.1 Mr. Gaurav Agarwal,Sr.Adv. Mr. Surya Prakash, AOR Mr. Arun Kumar Shukla,Adv. Mr. Naman Shukla,Adv. Mr. Yasharth Shukla,Adv. For

Respondent No.3 Ms. Anjali Sharma, Adv. Mr. Mandeep Singh Vinaik, Adv. Mr. Deepak Bashta, Adv. Ms. Shagun Matta, AOR