CoC Cannot Remit Approved Resolution Plan Post-Submission To Adjudicating Authority: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench comprising Justice Ashok Bhushan (Chairperson), Barun Mita (Technical Member) and Arun Baroka (Technical Member) have held that once a resolution plan has been approved by the CoC and submitted to the Adjudicating Authority, the CoC cannot seek remit it back to the CoC for fresh consideration. Brief Facts On 13.10.2020, the Adjudicating Authority (NCLT, Chandigarh bench) admitted the Section 9 application under IBC against Eon Electric Limited (Corporate Debtor). On 11.08.2022, the CoC approved the Resolution Plan submitted by Santoshi Hyvolt Electricals Pvt. Ltd. (SRA) by a vote share of 99.26%. The Resolution Professional filed IA No. 1629 of 2022 before the NCLT for approval of the Resolution Plan. EESL invoked the bank guarantees given by the corporate debtor to the extent of Rs. 15.84 crores. State Bank of India (Financial Creditor) expressed concerns over the increased CIRP costs and the non-feasibility of the Resolution Plan. The financial creditor filed IA No. 26 of 2024 to remit back to CoC for further review. The application was opposed by the SRA and the Resolution Professional. The Adjudicating Authority held that the CoC could not request to remit the Resolution Plan after its submission to the Adjudicating Authority. It held IA No. 26 of 2024 was not maintainable and rejected it on 19.11.2024. The financial creditor filed the appeal challenging the order of the Adjudicating Authority in IA No. 26 of 2024. Submissions Counsel for the Appellant submitted that although plan approval application filed on 01.10.2022, EESL invoked the bank guarantees and by invocation of bank guarantees of Rs.14.38 Crores, the CIRP costs increased upto Rs.23 Crores. Rs.2.21 Crores was added by the Resolution Professional in the CIRP costs. The Appellant contended that the resolution plan had become un-implementable and unviable due to subsequent event. Hence, the application was filed for remitting the plan for fresh consideration. Counsel for the SRA submitted that the CoC having approved the Resolution Plan with 99.26% vote shares was well aware of the issuance of bank guarantees by the corporate debtor to the EESL when the CoC had approved the resolution plan. It was clearly bound by the said approval and could not ask the Adjudicating Authority to remit the plan for reconsideration. SRA submitted that by virtue of Regulation 18 (2) of the CIRP Regulations 2016, no CoC meeting can be convened which may have effect on the Resolution Plan. Thus, the Resolution taken by the CoC meeting held on 18.11.2023 was not in accordance with law. Observations The Tribunal referred to Ebix Singapore Pvt. Ltd. vs. Committee of Creditors of Educomp Solutions Limited and Anr. (2022) where the Supreme Court held that the Resolution Plan after being approved by the CoC is inter se binding between the CoC and the SRA. The Adjudicating Authority had held that the CoC cannot decide the matters to remit back the resolution plan and the CoC, after submission of the resolution plan to the Adjudicating Authority, cannot request for remitting it back. The Tribunal noted Regulation 18(2) of the CIRP Regulations as amended w.e.f. 16.09.2022. The explanation to Regulation 18 was added and it clarified that the meeting of the CoC convened till the resolution plan is approved under Section 31(1) or order of liquidation is passed under Section 33 can decide on matters which do not affect the resolution plan submitted before the Adjudicating Authority. The Tribunal noted that the Regulation was introduced on 16.09.2022 whereas the plan was approved by the CoC on 11.08.2022, hence, the amended Regulation was not applicable. The Tribunal thus held that no decision could have been taken by the CoC in any meeting held subsequent to submission of the application for approval before the Adjudicating Authority which may affect the resolution plan submitted. The Tribunal held that the prayer made by the State Bank of India for remitting the resolution plan back to the CoC cannot be accepted in view of the law laid down in State Bank of India and Ors. vs. Consortium of Murari Lal Jalan and Florian Fritsch and Anr. (2024), which held:- “... the existing insolvency framework does not provide any scope for effecting further modifications or withdrawals of the resolution plan approved by the committee of creditors, at the behest of the successful resolution applicant, once the plan has been submitted to the Adjudicating Authority...” The Tribunal dismissed the appeal. It allowed the appellant to raise arguments when the plan approval came up for consideration with respect to statutory requirement under proviso to sub section (1) of Section 31 and sub-section (2) of Section 30. Case Title: State Bank of India vs. Santoshi Hyvolt Electricals Pvt. Ltd. & Ors. Case Number:...

CoC Cannot Remit Approved Resolution Plan Post-Submission To Adjudicating Authority: NCLAT

Tazeen Ahmed

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