Resolution Plan Approved By CoC Cannot Be Withdrawn Unless Section 30(2) Of IBC Is Breached: NCLAT

The NCLAT Bench of Justices Ashok Bhushan, Barun Mitra and Arun Baroka affirmed that the law is well settled that the Resolution Plan which is approved by the CoC cannot be allowed to be withdrawn and any clause which contemplate withdrawal of the plan is unenforceable unless section 30(2) of the IBC is breached. Brief Facts These two Appeals have been filed by the same Appellant challenging two orders passed by the Adjudicating Authority has been filed challenging the order dated 07.03.2024 passed in IA No.3689 of 2022 filed by the Appellant/ Applicant .Company Appeal (AT) (Insolvency) No. 1821 of 2024 has been filed by the Appellant challenging the order dated 09.08.2024 by which order Adjudicating Authority has allowed IA No.2455 of 2022 filed by the Resolution Professional for approval of the Resolution Plan. The Corporate Debtor- 'Nirmal Lifestyle Realty Private Limited' entered into MoU with Ralliwolf Limited on 01.10.2004 in terms whereof Ralliwolf agreed to sell land admeasuring 20262 sq. mtrs. along with all the structures thereon to the corporate debtor for consideration of Rs.7 Crores on as is where is basis. The amount of Rs.7 Crore was paid by the corporate debtor to Ralliwolf. A registered Development Agreement dated 04.08.2005 was entered between the Ralliwolf Ltd. and the Corporate Debtor. The development agreement provided that in consideration of MOU and in further consideration of an amount of Rs.7 Crores paid by the developers to the owner, the owner gives license authorises and permits the developers to enter upon all that piece and parcel of the land for the purpose of commencing and carrying out the work of development and construction, pending the transfer of the said property by the owner to the developers or their nominees. In pursuance of clause 6(ii) of the Development Agreement, a General Power of Attorney dated 06.08.2005 was executed in favour of Mr. Dharmesh Jain and his wife Mrs. Anju Jain by Ralliwolf Limited to enable the Corporate Debtor to undertake the development activities with respect to the property. Corporate Debtor had taken certain deposits and loans and on account of default committed by the corporate debtor proceedings under Section 7 against the corporate debtor commenced vide order dated 06.12.2021 of the Adjudicating Authority. After negotiations and deliberations between the CoC and the SRA, a revised Resolution Plan was submitted where SRA sought that the Power of Attorney executed in favour of the Appellant and his wife shall stand cancelled. The Appellant who had been suspended Director and shareholder of the corporate debtor filed an IA No.3689 of 2022 seeking rejection of the waiver sought by the SRA in clause 7.33 of the Resolution Plan. Adjudicating Authority by the impugned order dated 07.03.2024 has rejected IA No.3689 of 2022 with cost of Rs.1 Lakh. Contentions The appellant submitted that it is only the person who has given the PoA is entitled to cancel the PoA. The power to cancel the registered document only lay with the Civil Court and the Adjudicating Authority cannot exercise its jurisdiction to cancel a registered document. That the Resolution Plan which is entirely depending on the approval and sanction of third parties is a conditional/ contingent plan and could not have been approved. Per contra, the respondents submitted that the PoA which was executed in favour of the Appellant and his wife were PoA as nominees of the corporate debtor only for the purpose of facilitating the corporate debtor in carrying out the development, making application for approvals and sanction of the plan. That after initiation of the CIRP, the Corporate Debtor is being represented by the IRP/RP and Corporate Debtor having been taken over by the SRA under the Resolution Plan, the PoA which was executed in favour of the Appellant has served its purpose and cannot be continued any further.That the Adjudicating Authority has jurisdiction to permit the cancellation of registered instrument in the insolvency of the corporate debtor. Adjudicating Authority has ample jurisdiction to pass appropriate order to make the PoA ineffective and in-operative. NCLAT's Analysis The NCLAT at the outset rejected the contention with respect to Power of Attorney being illegally cancelled and observed that it is amply clear that the Appellant in the PoA was nothing but nominee of the corporate debtor and Appellant being suspended director of the corporate debtor was treated as nominee of the corporate debtor for the purpose of facilitating the developers. The tribunal further noted that the developers being corporate debtor, PoA was not executed in an individual capacity of the appellant nor gave any right to the subject land. When the Resolution Plan submitted by the SRA is approved and the corporate debtor is being taken over by the SRA, the development of...

Resolution Plan Approved By CoC Cannot Be Withdrawn Unless Section 30(2) Of IBC Is Breached: NCLAT

Mohd Malik Chauhan

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