13 October, 2021
Matter: Ebix Singapore Pte Ltd v. Committee of Creditors of Educomp Solutions Ltd. and Ors.
Order dated: 13 September 2021.
Summary: In the present case, the resolution plan submitted by Ebix Singapore Pte Ltd. (Ebix) for Educomp Solution Ltd. (Educomp) was approved by the Committee of Creditors (CoC). While an application was pending before the NCLT for final approval of resolution plan, Ebix sought permission of NCLT to withdraw the resolution plan citing delays in getting NCLT’s final approval on the resolution plan, financial mismanagement of Educomp by the erstwhile management, etc., and NCLT allowed Ebix to withdraw the resolution plan. This order was reversed by the NCLAT in appeal.
The issue under consideration before the SC was whether once a resolution plan is approved by the CoC and submitted to NCLT, can the successful resolution applicant withdraw or modify the resolution plan. SC observed that resolution plans under the Insolvency and Bankruptcy Code, 2016 (Code) are not in a nature of a traditional contract, and the process leading up to their formulation and acceptance by the CoC is regulated by the Code. The Code does not provide for withdrawals or modifications of resolution plans once approved by the CoC and an application is filed seeking final sanction of the NCLT. Therefore, common law remedies available under the Indian Contract Act are not available to the parties since a submitted resolution plan is not a contract which can be otherwise voidable on account of frustration, force majeure, or other such instances. Hence, parties can only seek reliefs that are specifically envisaged in the Code.
SC further held that the framework of the Code, as it stands, only enables withdrawals from the Corporate Insolvency Resolution Process (CIRP) by following the procedure detailed in the Code with approval of 90% voting share of the CoC. Enabling withdrawals or modifications of the resolution plan at the behest of the successful resolution applicant, once it has been submitted to the NCLT after due compliance with the procedural requirements and timelines, would create another tier of negotiations which will be wholly unregulated by the Code, and therefore cannot be allowed. Accordingly, the SC held that once the resolution plan is approved by CoC and submitted to NCLT; the successful resolution applicant cannot withdraw or modify the resolution plan.
For further information, please contact:
Souvik Ganguly, Partner, Acuity Law
