TMI Blog2021 (9) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... OMAN KHAVAR VERSUS TUKARAM SHRIDHAR BHAT AND ANOTHER [ 2013 (12) TMI 1673 - SUPREME COURT] , has held that the doctrine of res judicata can only apply when there has been a conscious adjudication of the issue on merits. Res judicata cannot apply solely because the issue has previously come up before the court. The doctrine will apply where the issue has been heard and finally decided on merits through a conscious adjudication by the court. In the present case, the NLCT s order dismissing the First Withdrawal Application makes it clear that it had only considered only that part of prayer (iv) which related to re-evaluation of the Resolution Plan, possibly because Ebix had hoped to re-evaluate the Resolution Plan on the basis of the information received as a consequence of prayers (i) and (ii) and those prayers were rejected since such information was not available. Res judicata cannot apply solely because the issue has previously come up before the court. The doctrine will apply where the issue has been heard and finally decided on merits through a conscious adjudication by the court. In the present case, the NLCT s order dismissing the First Withdrawal Application makes i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olly unclear on whether a withdrawal of a CoC-approved Resolution Plan at a later stage of the process would result in the Adjudicating Authority directing mandatory liquidation of the Corporate Debtor. Pertinently, this direction has been otherwise provided in Section 33(1)(b) of the IBC when an Adjudicating Authority rejects a Resolution Plan under Section 31. In this context, we hold that the existing insolvency framework in India provides no scope for effecting further modifications or withdrawals of CoC-approved Resolution Plans, at the behest of the successful Resolution Applicant, once the plan has been submitted to the Adjudicating Authority. A Resolution Applicant, after obtaining the financial information of the Corporate Debtor through the informational utilities and perusing the IM, is assumed to have analyzed the risks in the business of the Corporate Debtor and submitted a considered proposal. A submitted Resolution Plan is binding and irrevocable as between the CoC and the successful Resolution Applicant in terms of the provisions of the IBC and the CIRP Regulations. Impact of Delay in approving the Plan - I t would also be sobering for us to recognize that wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment has been divided into sections to facilitate analysis. Further, a Glossary of defined terms which have been used throughout the judgment has also been provided. The sections in the judgment are as follows: Glossary ............................................................................................................ 5 A Civil Appeal No 3224 of 2020 the Ebix Appeal ...................................... 11 A.1 The appeal .......................................................................................... 11 A.2 Initiation of CIRP ................................................................................. 11 A.3 Invitation, submission and approval of Resolution Plan ...................... 12 A.4 Investigations into financial transactions of Educomp ........................ 15 A.5 Applications for withdrawal of the Resolution Plan ............................. 20 A.6 Orders of NCLT and NCLAT ............................................................... 24 A.7 Present status of SFIO and CBI investigation ..................................... 28 B Civil Appeal No 3560 of 2020 the Kundan Care Appeal ........................ 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Resolution Plan by a successful Resolution Applicant under the IBC ................................................................................................ 134 J.1 The absence of a legislative hook or a regulatory tether to enable a withdrawal .................................................................................................. 134 J.2 Terms of the Resolution Plan are not sufficient to effect withdrawals or modifications after its submission to the Adjudicating Authority................. 145 K Factual Analysis ...................................................................................... 158 K.1 The Ebix Appeal ................................................................................ 158 K.1.1 Res Judicata ............................................................................... 159 K.1.2 Analysis of the Resolution Plan of Ebix ...................................... 167 K.1.3 Duties of the RP .......................................................................... 175 K.2 The Kundan Care Appeal .................................................................. 179 K.3 The Seroco Appeal .................... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rh State Electricity Board Provident Fund Trust CSEB Application CA No 160 (PB) of 2018 - filed by E-RP before NCLT Ebix Ebix Singapore Private Limited Ebix Appeal Civil Appeal No 3224 of 2020 E-CoC Committee of Creditors of Educomp Solutions Limited Educomp Educomp Solutions Limited EMD Earnest Money Deposit EOI Expression of Interest E-RP Resolution Professional for Educomp Solutions Limited Essar Steel CoC of Essar Steel India Ltd. v. Satish Kumar Gupta Ors. EXIM Bank Export Import Bank of India First Withdrawal Application CA 1252 (PB) of 2019 in CP (IB) No 101 (PB) of 2017 - filed by Ebix before NCLT Ghanshyam Mishra Sons Ghanashyam Mishra and Sons Private Limited through the Authorized Signatory v. Edelweiss Asset Reconstruc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses Properties Ltd. Schofield v Smith RP Resolution Professional SARFAESI Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 SBI State Bank of India SBI Application CA No 639 (PB) of 2018 - filed by SBI before NCLT Second Withdrawal Application CA 1310 (PB) of 2019 in CP (IB) No 101 (PB) of 2017 - filed by Ebix before NCLT Seroco Seroco Lighting Industries Private Limited Seroco Appeal Civil Appeal No 295 of 2021 SFIO Serious Frauds Investigation Office SICA Sick Industrial Companies Act 1985 Singapore Act Companies (Amendment) Act 2017 Swiss Ribbons Swiss Ribbons (P) Ltd v. Union of India Third Withdrawal Application CA No 1816 (PB) of 2019 in CP (IB) No 101 (PB) of 2017 - filed by Ebi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution Plan 6 In terms of Section 25(2)(h) of the IBC, the E-RP invited EOI on 18 October 2017 from prospective bidders, investors and lenders. 7 On 10 November 2017, the last date for submission of EOIs was extended to 17 November 2017. Commencing from 5 December 2017, the E-RP provided access to the Virtual Data Room of Educomp to prospective Resolution Applicants who had submitted a confidentiality undertaking and made an upfront payment of ₹ 5,00,000. 8 On 5 December 2017, the final RFRP was issued in accordance with Section 25(2)(h) of the IBC. The last date for submission of the Resolution Plans was 8 January 2018. The RFRP was amended on 17 January 2018 and 20 January 2018 to extend the last date for submission to 20 January 2018. On 25 January 2018, In applications CA No 30 of 2018 and CA No 42 of 2018 , the NCLT again extended the last date for submission of the Resolution Plans until 27 January 2018. 9 By the last date for submission, Resolutions Plans were received by the E-RP from Ebix and another entity. These were shared with the E-CoC on 29 January 2018. Following this, both the Applicants were invited to give their presentations to the E-CoC on 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cademic session in India i.e. April 2018, subject to being selected as the successful applicant (as per the terms and conditions provided in the resolution plan), and the approval of the plan by the NCLT. This would have provided the Resolution Applicant with sufficient time to restructure the operations of the Company. As you are aware, the operations of the Company are already under stress and it would be safe to assume that no new contracts / customers are coming up. Further, the competitors of the Company may be trying to take undue advantage of the situation, which may further erode the business value of the Company and may make the revival process more difficult. The above negatively impacts the commercial consideration provided by the Resolution Applicant in the resolution plan submitted for the Company. As per the clause 7 of the Resolution Plan dated February 19, 2018 submitted by the Resolution Applicant, the terms of the resolution plan is valid for six months from the date of the submission of the plan i.e. August 19th, 2018. In light the above and fact that delay in completion of the resolution process is negatively impacting the commercial consideration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he E-RP and E-CoC could move an application before NCLT according to law, if advised to do so by E-CoC. 20 Pursuant to NCLT s order dated 9 August 2018, the E-CoC hosted its 13th meeting on 13 August 2018, and a resolution was passed with a 77.85 per cent vote to appoint an independent agency to conduct a Special Investigation Audit into the affairs of Educomp. The relevant terms of the resolution are as follows: RESOLVED THAT a special investigation audit on the affairs of the Company be conducted by an independent agency, which shall be appointed by the Committee of Creditors, for period beginning from [1st January 2014] to [30th January 2018] having following scope of work: (i) All the matters/issues (approximate 21 in number) raised in the Annual Audit Report of the Company for the Financial Year 2016-17 issued by Haribhakti Co, basis which adverse opinion has been issued; (ii) Transactions involving alleged deliberate transfer of business between the Company and SmartClass Educational Services Private Limited ( SESPL ) prior to the commencement of the insolvency process of the Company; (iii) Transactions regarding genuineness of receivables from Edusma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial investigation audit, shall be appointed by the Core Committee, comprising of SBI, IDBI Bank, Axis Bank, IFC, Yes Bank and J K Bank 21 The resolution was placed before the NCLT on 20 August 2018, when it was hearing the CSEB Application and the Approval Application. The NCLT directed the E-RP to file an appropriate application. In accordance with the resolution dated 13 August 2018 and NCLT s order dated 20 August 2018, the E-RP filed the Investigation Audit Application, CA No 793 (PB) of 2018 under Section 60(5) of the IBC seeking directions from NCLT to carry out the Special Investigation Audit of Educomp. 22 It is stated before us that the Investigation Audit Application was heard on 11 September 2018, 20 September 2018, 27 September 2018 and 4 October 2018. On 4 October 2018, while reserving its order in the Investigation Audit Application, the NCLT also directed the E-RP to file an affidavit in relation to the transactions carried out by Educomp under Sections 43, 45, 50 and 66 of the IBC. 23 The E-RP states that such an affidavit was filed, stating that on the basis of the books of account and other relevant material pertaining to Educomp, no transactions whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On 5 July 2019, Ebix filed the First Withdrawal Application, CA 1252 (PB) of 2019 in CP (IB) No 101 (PB) of 2017 under Section 60(5) of the IBC, for the following reliefs: i. Direct that the Ld. Resolution Professional supply a copy of the Special Investigation Audit to the Resolution Applicant forthwith; ii. Direct that the Ld. Resolution Professional supply a copy of the Certificates under Sections 43, 45, SO and 66 of the Insolvency and Bankruptcy Code, 2016 to the Resolution Professional forthwith; iii. Withhold approval of the Resolution Plan sanctioned by the Committee of Creditors of the Corporate Debtor, as filed before this Hon'ble Tribunal on 11.04.2018, pending detailed consideration of the same by the Resolution Applicant; iv. Grant the Resolution Applicant sufficient time to re-evaluate its proposals contained in the Resolution Plan, and also to suitably revise/modify and/or withdraw its Resolution Plan; (emphasis supplied) Ebix contends that the application was necessitated because: (i) the Approval Application had been pending before the NCLT for 17 months, much beyond the period envisaged in the RFRP and its Resolution Plan; (ii) Educom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On 5 September 2019, the NCLT dismissed the Second Withdrawal Application with the following order: C.A. No. 1310(PB)/2019 In para 'B (xii)' under the caption 'facts of the case', the following averments have been made [ ] The italic portion of the aforesaid para shows that the prayer for withdrawal of the Resolution Plan has been made inter alia on the suggestion of the Court which is neither reflected in the order nor is born out from any record. Such an averments imputing to the Court something which has never been said is condemnable. The cause of action cannot be based on any such things. Accordingly, we dismiss this application with liberty to the applicant to file fresh one on the same cause of action, if so advised. 30 Thereafter, Ebix filed the Third Withdrawal Application, seeking the following reliefs: i. Allow the Resolution Applicant to withdraw the Resolution Plan dated 19.02.2018 (along with the Addendum/Financial Proposal dated 21.02.2019) submitted by it, and as approved by the Committee of Creditors; ii. Direct the Ld. Resolution Professional and/or Educomp Solutions Limited and the Committee of Creditors to refund the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y on merit and/or adjudicated upon in CA No.1252(PB)/2019. 12. Doctrine of Constructive Res Judicata does not apply to the issues/points, or any lis' between parties that has not been decided previously, and despite being pleaded, has not been considered by a court/tribunal and expressly dealt with in the order so passed. 13. Even a bare perusal of the Order dated 10.07.2019 would indicate that the issue of withdrawal of the Resolution Plan by the Resolution Applicant was not dealt with on merit and that no decision has either been passed or attained finality as regards allowing the party to withdraw the Resolution Plan. 14. It is also pertinent to note here that the Resolution Applicant had subsequently taken up the prayer for withdrawal of the Resolution Plan in the Application bearing CA No.1310 (PB)/2019. While dealing with the said Application, liberty was given to the Applicant vide order dated 01.09.2019 to re-file an application for withdrawal of the Resolution Plan. This direction further confirms that there was no conscious adjudication in CA No.1252(PB)/2019 on the issue of withdrawal of the resolution plan by the Applicant. (emphasis supplied) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness in its way under Article 19(1)(g) of the Constitution. Once the applicant is unwilling and reluctant and itself has chosen to withdraw its resolution plan, a doubt arises as to whether the resolution applicant has the capability to implement the said plan. Uncertainty in the implementation of the resolution plan cannot also be ruled out. (emphasis supplied) The NCLT also directed that Educomp s CIRP be extended by a period of 90 days, commencing from 16 November 2019. 33 As a consequence of its order allowing the Third Withdrawal Application, the NCLT also dismissed the Approval Application on 3 January 2020 as being infructuous. 34 E-CoC filed the Withdrawal Appeal assailing NCLT s order dated 2 January 2020. On 3 February 2020, the NCLAT stayed the order dated 2 January 2020. The Approval Appeal, Company Appeal (AT) (Insolvency) No 587 of 2020 was also filed by the E-CoC under Section 61 of the IBC, assailing NCLT s order dated 3 January 2020. 35 By its order dated 29 July 2020, NCLAT set aside the order of the NCLT allowing the withdrawal of the resolution plan. On the issue of res judicata, the NCLAT held that there being no appeal against the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of a consortium of banks; (ii) Since the initiation of an enquiry by the MCA on 1 August 2018, the SFIO has requisitioned documents/information, which have been provided; (iii) The last communication from the SFIO was received on 27 February 2020; and (iv) In response to the grievance of some members of the E-CoC that the E-RP had only informed them of the investigations at a belatedly, the Chairperson of the E-CoC justified it by stating that the communication could only take place once the relevant investigation was completed. However, for future references, the Chairperson took note of the suggestion that the E-RP would add all members of the E-CoC to a WhatsApp group, where real-time updates could be shared. At the meeting, the E-CoC also passed a resolution with 77.05 per cent majority vote directing the E-RP to invoke and forfeit the EMD of ₹ 2 crores furnished by Ebix in accordance with Clause 1.9.1 of RFRP. The E-RP issued a letter to IDBI on 1 April 2020 for encashment of the EMD. 38 In the 17th meeting of the E-CoC on 8 May 2020, the E-RP provided further updates in relation to the CBI and SFIO investigations, noting that they were still ongoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived nine EOIs, out of which seven were found to be eligible. However, Kundan Care did not submit its EOI within the time prescribed by the A-RP, and its belated submission was rejected by the A-RP. 47 Thereafter, A-RP issued the RFRP on 6 March 2019 to the prospective Resolution Applicants who had been selected. Further, the IM was issued on 13 March 2019. Based on this, two Resolution Plans were received by the A-RP on 31 May 2019, which were then discussed with the A-CoC. 48 In the interim, Kundan Care filed an application, CA No 1119 of 2019 before the NCLT challenging the A-RP s rejection of its belated EOI. A-RP received the notice of this application on 30 August 2019. By order dated 6 September 2019, the NCLT allowed Kundan Care s application. Thereafter, it was provided access to the RFRP, IM and other documents pertaining to Astonfield in the data room. 49 Kundan Care submitted its Resolution Plan for consideration on 16 September 2019. The Resolution Plan was placed before the A-CoC, which requested Kundan Care to submit a revised proposal. Kundan Care then submitted an updated draft of its Resolution Plan on 29 October 2019. 50 A-RP then conducted the 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der /BC shall have an overriding effect over the PPA. Further, the Hon'ble NCLAT vide order dated 15 October 2019 has clearly stated that even in the event of Liquidation of the Corporate Debtor the appellant, Gujarat Urja Vikas Nigam Limited, cannot terminate the Power Purchase Agreement under the Code. Also, the Liquidator shall ensure that the Corporate Debtor remains a going concern. It is therefore very evident and clear that the Power Purchase Agreement cannot be terminated and has to continue even after the Resolution Plan has been approved by the Hon'ble NCLT. 56 On 29 August 2019, the NCLT allowed the applications and set aside the notice of default issued by GUVNL. It held that allowing the termination of the PPA would adversely affect the going concern status of Astonfield. However, it held that if Astonfield was to undergo liquidation subsequently, the termination would be permitted. 57 The NCLT s judgment was challenged by GUVNL in an appeal, Company Appeal (AT) Insolvency No 1045 of 2019 before the NCLAT. By judgment dated 15 October 2019, the NCLAT dismissed the appeal and partly upheld the decision of the NCLT, in as much as it disallowed the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 60(5) of the IBC seeking permission of the NCLT to withdraw its Resolution Plan, which had been previously approved by the A-CoC and was pending confirmation by the NCLT under Section 31 of the IBC. In its application, it prayed for the following reliefs: a) Allow the present application and permit the Applicant to withdraw its Resolution Plan as submitted and approved by the CoC on 14.11.2019; b) Direct that the Performance Bank Guarantee submitted by the Applicant be cancelled/revoked/returned/refunded to the Applicant; In its application, Kundan Care stated that there was no bar under the IBC on it withdrawing its Resolution Plan before it was confirmed by the NCLT. It sought to withdraw its Resolution Plan on account of four reasons: (i) That there was uncertainty in relation to the PPA with GUVNL, since the GUVNL Appeal was pending before this Court. It noted that the PPA was central to the CIRP, and its termination would affect its Resolution Plan. Further, it noted that GUVNL had unilaterally refused permission to Astonfield to change the solar panels which had been damaged in the floods of 2017, and had not made any payments to Astonfield for the electricit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation revenue of roughly INR 1800 lacs per annum or roughly INR 150 lacs per month which is being incurred by the Project. 18. I say and submit that in addition to the aforesaid generation loss, a sum of INR 12 lacs (approx.) is being incurred towards monthly CIRP cost on account of the delay in the CIR process. 61 Thereafter, Kundan Care also filed an application for impleadment, IA No 9679 of 2020 in the GUNVL Appeal pending before this Court, along with an application for directions, IA No 9682 of 2020 praying, in exercise of this Court s jurisdiction under Article 142 of the Constitution of India, for the following reliefs: a) Set aside/quash the Notice dated 28.03.2019 issued by Gujarat Urja Vikas Nigam Limited to Astonfield Solar (Gujarat) Private Limited and declare that the Applicant/Corporate Debtor shall be free to change/replace the solar panels/modules and other equipment of the Project, as may be deemed fit by the Applicant/Corporate Debtor; b) Declare that the Power Purchase Agreement dated 30.04.2010 executed between Gujarat Urja Vikas Nigam Limited and Astonfield Solar (Gujarat) Private Limited shall stand extended by the period of moratorium decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Prayer Clause, which is wrong and denied. The Prayer Clause of C.A. No. 16798/2019 is reiterated and reaffirmed. Alternatively, and without prejudice to the above, it is prayed that the Applicant may be permitted to re-negotiate the financial proposal with the CoC 65 The A-CoC also filed its reply to Kundan Care s application on 30 June 2020, where it stated that: (i) NCLT could not adjudicate upon the application since Kundan Care had filed another application before this Court in the GUVNL Appeal; and (ii) in any case, Kundan Care knew of the risks while entering the CIRP and should not be allowed to withdraw at such a belated stage. 66 The NLCT passed an order dated 3 July 2020, by which it rejected Kundan Care s application by noting that: (i) it did not have jurisdiction to permit withdrawal; and (ii) the matter was also sub judice before this Court by the virtue of Kundan Care s application in the GUVNL Appeal. The order stated: IA 1679/2019 Counsels for the Resolution Applicant, COC and IRP are present. The Resolution Applicant has prayed to withdraw the resolution plan which was submitted before this Tribunal after approval of the COC. After careful c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roved Resolution Plan would be binding on the Corporate Debtor and all stake holders only after the Adjudicating Authority passes an order under Section 31 of the I B Code approving the Resolution Plan submitted by Resolution Professional with the approval of Committee of Creditors in terms of provisions of Section 30(6) of the I B Code, it does not follow that the Successful Resolution Applicant would be at liberty to withdraw the Resolution Plan duly approved by the Committee of Creditors and laid before the Adjudicating Authority for approval thereby sabotaging the entire Corporate Insolvency Resolution Process, which is designed to achieve an object. A Resolution Applicant whose Resolution Plan stands approved by Committee of Creditors cannot be permitted to alter his position to the detriment of various stake holders after pushing out all potential rivals during the bidding process. This is fraught with disastrous consequences for the Corporate Debtor which may be pushed into liquidation as the CIRP period may by then be over thereby setting at naught all possibilities of insolvency resolution and protection of a Corporate Debtor, more so when it is a going concern. That apart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal 70 This is an appeal under Section 62 of the IBC from an order dated 10 December 2020 of the NCLAT. By its judgment, the NCLAT dismissed an appeal, Company Appeal (AT) (Insolvency) No 1054 of 2020 instituted by Seroco, under Section 61 of the IBC against an order dated 23 October 2020 of the NCLT. 71 The NCLT dismissed an application, IA No 96 of 2020 in CP (IB) No 29 of 2018 by Seroco under Section 60(5) seeking permission to modify its Resolution Plan submitted for the Corporate Debtor Arya Filaments. NCLT relied on the impugned judgment in the Kundan Care Appeal. Further, it noted that while the application prayed for a modification of the Resolution Plan, its title was Application for withdrawal under section 60(5) of the Insolvency and Bankruptcy Code, 2016 . 72 In appeal, the NCLAT partly upheld the NCLT s decision and held that Seroco could not be allowed to modify or withdraw the Resolution Plan approved by the Arya-CoC since: (i) it was the sole Resolution Applicant in the CIRP; (ii) Arya Filaments was an MSME; and (iii) it was aware of Arya Filaments financial condition when it submitted the Resolution Plan. However, it set aside the NCLT s decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o file the revised Resolution Plan before the NCLT, and keep the proceedings on the confirmation of the previous Resolution Plan in abeyance. 79 Thereafter, on 10 July 2020, Seroco filed an application before the NCLT praying for the following reliefs: a) permit the Applicant to revise the Resolution Plan dated 13.3.2020 in terms of letter dated 09/06/2020 at Annexure C hereto; b) direct the Respondent No. 2 to consider the modified resolution plan as per Letter at Annexure C and vote afresh on the same; c) direct the Respondent No.1 to provide an updated Information Memorandum providing financial condition of the Corporate Debtor as on 1/07/2020; d) during the hearing of this Application, stay the implementation, operation and execution of the Resolution Plan dated 13.3.2020 of the Applicant; It noted that its Resolution Plan was filed eighteen months ago and was based on an IM published two years previously, following which the conditions had materially altered. Hence, Seroco stated that while it was genuinely interested in Arya Filaments, its changed circumstances meant that it could not pay the entire consideration envisaged in the Resolution Plan approved b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 10 December 2020, where it noted: 2. After hearing learned counsel for the Appellant and having regard to the Judgments rendered by this Appellate Tribunal holding that the Successful Resolution Applicant cannot be permitted to withdraw the approved Resolution Plan coupled with the fact that the Appellant in the instant case being the sole Resolution Applicant in the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor which has been classified as an MSME and admittedly having knowledge of the financial health of the Corporate Debtor as a promoter or a connected person cannot be permitted to seek revision of the approved Resolution Plan on that ground which would not be a material irregularity within the ambit of Section 61(3) of the Insolvency and Bankruptcy Code, 2016. We are of the considered opinion that there is no merit in this appeal and the same is liable to be dismissed. Considering Arya Filament s position as an MSME, Seroco being a company formed by its former employees (who would have been aware of its financial condition) and also being the sole Resolution Applicant, the NCLAT refused to permit modification/withdrawal of the Resolution Pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he documents underlying the CIRP were highlighted: (a) Clause 1.1.5 of the RFRP, which invites Resolution Plans from prospective Resolution Applicants. Further, Clause 1 of the covering letter for submission of the Resolution Plan provides that Ebix is setting out the offer in relation to the insolvency resolution of Educomp; (b) The Resolution Plan was valid only for six months, since Clause 1.8.3 of the RFRP invites resolution plans/offers with a validity of six months; (c) In accordance with the RFRP, Clause 7 of the Resolution Plan provides that it is valid for a period of six months from the date of submission. The appellant is a liberty to withdraw the resolution plan if there is delay of several months beyond the period of six months. It was emphasized that the Resolution Plan is a qualified offer which is not open to acceptance for an indefinite period. Reliance was placed on the decision of this Court in Riya Travel Tours (India) (P) Ltd. v. C.U. Chengappa, (2001) 9 SCC 512 to support this proposition; (d) The CSEB Application for the approval of the resolution plan continues to be pending before the Adjudicating Authority, while the Approval Appeal is pend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the corporate debtor is to be driven into liquidation ; (iii) The events that have taken place subsequent to the submission of Resolution Plan justify its withdrawal. In this regard, it was urged on behalf of Ebix that: (a) The Resolution Plan was based on certain considerations that were fundamental to the Ebix s bid for the business of Educomp, and were crucial for keeping the business of Educomp as a going concern. These were the government contracts and IP driven solutions in the education and health industries. However, due to the inordinate delay in the completion of the CIRP, many of the government contracts may have ended. Further, various technology driven solutions and intellectual property owned and operated by Educomp, which Ebix had sought to acquire, were no longer valid; (b) The E-CoC passed a resolution with 77.85 per cent votes to conduct a special audit into the affairs of Educomp, which shows that evidence is available to conclude that the affairs of the company were mismanaged, which materially affect the economic considerations underlying the Resolution Plan; (c) The affairs of Educomp are also being investigated by the SFIO and CBI, which provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (v) The Adjudicating Authority has the power to permit the withdrawal of the Resolution Plan. Under Section 31 of the IBC, it has the power to independently satisfy itself that the Resolution Plan as approved by the CoC meets the requirements as referred to in sub-section (2) of Section 30 . Section 30(2)(d) of the IBC provides that the Adjudicating Authority can assess whether adequate provisions have been made for the implementation and supervision of the resolution plan . This Court in K Sashidhar v. IOC, (2019) 12 SCC 150 has emphasized that the Adjudicating Authority has the discretion to reject the Resolution Plan if it does not conform to the stated requirements of Section 30(2)(d). The proviso to Section 31(1) of the IBC expressly prohibits the Adjudicating Authority from approving a plan that is incapable of being effectively implemented. The NCLAT, in the impugned judgement, has not considered whether the exercise of the jurisdiction by the Adjudicating Authority under Section 31(1) read with Section 30(2)(d) was valid. In the present circumstances, the Resolution Plan is no longer capable of being implemented due to the erosion of the commercial basis of the Reso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elopments Pvt. Ltd. v. State of Karnataka Ors., (2020) 13 SCC 308 and M/s Innoventive Industries Ltd. v. ICICI Bank Anr., (2018) 1 SCC 407 . It does not envisage withdrawals of Resolution Plans after mutual negotiations between the Resolution Applicant and the CoC, which culminates into a binding agreement. The Adjudicating Authority cannot contravene the text to invoke the spirit/object of the IBC without a conscious statutory prescription, as held by this Court in Gujarat Urja Vikas Nigam Limited v. Amit Gupta, 2021 SCCOnLine SC 194, para 181 ; (iii) The basic tenets of any insolvency law are to ensure the sanctity of the prescribed processes and timelines. Maximization of the value of assets and resolution of the Corporate Debtor are the core objectives of the IBC, as held by this Court in Swiss Ribbons (P) Ltd v. Union of India, (2019) 4 SCC 17, paras 27-28 . Enabling withdrawals, especially at the tail end of the process, would push financially distressed Corporate Debtors into liquidation; (iv) The Specific Relief (Amendment) Act 2018, as is evinced from the speech of the Union Minister of Law Justice before the Rajya Sabha while introducing the amendments, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clause 1.13.5, which did not envisage any change or supplemental information to the Resolution Plan, after the submission date; (b) Clause 1.8.4, which stated that a submitted Resolution Plan shall be irrevocable; and (c) Clause 1.10(l), which stipulated that the Resolution Applicant will not be permitted to withdraw the Resolution Plan; (xii) The RFRP did not envisage six months to be the validity of the Resolution Plan. Clause 1.8.3, which stipulated a minimum six-month validity of the Resolution Plan, is relatable to the acceptance of the plan by the E-CoC and not the Adjudicating Authority. This is evident from the clauses of the RFRP which stipulate that the submitted plan is irrevocable; (xiii) The resolution process belies the claim that withdrawals were permissible after the six-month period. The process was delineated in the following terms: (a) Clause 1.3.1 and 1.3.2 empowers the E-RP to issue an invitation to prospective resolution applicants, subject to, inter alia, non-disclosure agreements and participation fees; (b) Clause 1.3.6, read with Clause 1.9.1, enables a party to submit a Resolution Plan upon payment of an earnest money deposit of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lan binding on all other stakeholders. The Adjudicating Authority s approval under Section 31(1) amounts to a super-added imprimatur to the concluded terms between the CoC and the Successful Resolution Applicant; and (c) A conjoint reading of Clause 1.1.6, along with Clause 1.8.4, which declares a submitted Resolution Plan to be irrevocable, and Clause 1.10(l), which prohibits withdrawal of a submitted Resolution Plan, belies the claim that the Resolution Plan is binding on the Successful Resolution Applicant only after approval of the Adjudicating Authority; (xv) The delay in the resolution process is not attributable to the E-CoC. It cannot be cited to allow Ebix to withdraw from a legally binding plan; (a) The E-CoC approved the submitted Resolution Plan within 270 days, and it was promptly filed before the Adjudicating Authority in March 2018. The orders on the plan approval were reserved in January 2019 and pronounced only in January 2020. The delay cannot be attributable to the E-CoC or used to withdraw from a plan which provided a 90 per cent haircut; and (b) actus curiae neminem gravabit, i.e., the act of Court shall harm no man, is a settled principle in law; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicata since the grounds raised by Ebix were rejected by the NCLT in the First Withdrawal Application on 10 July 2019. The liberty granted by the NCLT to file a fresh application on 5 September 2019 was with respect to filing a proper pleading without defects, and not on merits. This conditional liberty cannot be construed as a waiver of the objection of res judicata. In any event, the issue of limited validity of the approved Resolution Plan and delay of seventeen months, is barred by the principles of constructive res judicata. 84 In the alternative, if Ebix were to succeed before this Court, the learned Senior Counsel on behalf of the E-CoC has prayed that this Court exercise its powers under Article 142 of the Constitution of India, and extend the limitation period for conducting the insolvency process by three to four months for a fresh process to be initiated, subject to the consent of the E-CoC. D.3 Submissions for the second respondent 85 Supporting the submissions of the E-CoC, Mr Nakul Dewan, learned Senior Counsel, has appeared on behalf of the E-RP. He has submitted that: (i) Upon the approval of a Resolution Plan by the CoC, a concluded contract comes in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided for such an eventuality. Section 12A was inserted by amendment for situations involving a withdrawal from the CIRP. On the contrary, Section 74 provides for penalties in case the Resolution Applicant does not comply with the Resolution Plan; (v) Ebix s argument, that the RFRP which provides that the Resolution Plan must be approved within six months would also include its approval by the Adjudicating Authority, is contrary to the IBC since the parties, through an agreement, cannot impose a restriction/condition on a judicial authority; (vi) In any case, Ebix has actively pursued the Resolution Plan even after the period of six months by communicating with the E-CoC/E-RP, arguing in its favor in the Approval Application and by extending the EMD. The First Withdrawal Application was filed only on 5 July 2019, after the expiry of nearly one year from the expiry of the period of six months on 19 August 2018; (vii) The investigations by the SFIO and CBI were initiated after the filing of the Approval Application before the NCLT. Since the E-RP was not aware of any discrepancies or illegalities committed by the former management of Educomp, information about such activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seeking withdrawal were circumscribed by Section 61(3) of the IBC, which concerns appeals against approval of a Resolution Plan. Kundan Care sought to invoke jurisdiction under Section 61(1) of the IBC which provides a right of appeal against any order of the NCLT; (d) The facts and circumstances, on the basis of which the feasibility and viability of the Resolution Plan were approved by the A-CoC in its commercial wisdom, have changed. Since the edifice of the A-CoC s satisfaction had altered, the NCLT has power to look into the facts which warrant withdrawal or modification of the Resolution Plan; (e) The legislative background of Section 31 of the IBC does not contemplate circumstances that could arise after submission of the Resolution Plan to the Adjudicating Authority. The UNCITRAL Guide and the BLRC Report place the viability of the Corporate Debtor at the heart of the insolvency process. The CIRP mandates interests of stakeholders to be better preserved by reorganization than liquidation. The BLRC Report was relied upon by this Court in K Sashidhar (supra) to propound the principle of commercial wisdom of the CoC which the Adjudicating Authority cannot interfere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al repeated CIRP; and (j) The proposition that a Resolution Plan approved by the CoC cannot be withdrawn or modified under any circumstance, no matter the extent of impossibility or unviability that may have arisen subsequently, is seriously flawed and is likely to lead to draconian and absurd consequences. In the event that the basis of the Resolution Plan is completely eroded, a Resolution Applicant s failure to implement the Plan would invite penal prosecution under Section 74 of the IBC and a repeated CIRP. This will discourage prospective Resolution Applicants from coming forward with their Plans in the future, thus defeating the very purpose and object behind the IBC; (ii) There is no concluded and binding contract between the Resolution Applicant and the CoC, prior to approval by the Adjudicating Authority: (a) There is no concluded contract between the Resolution Applicant and the CoC until the NCLT approves of the same. Section 7 of the Contract Act requires the acceptance of offer to be absolute, unconditional and unqualified. Clauses 1.1.9, 1.2, 1.9.4 and 2.2.6 of the RFRP record the fact that the Plan would be binding only after the approval of the Adjudicating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rioration of the assets of Astonfield owing to the floods in Gujarat, repudiation of Astonfield s insurance claim due to the alleged failure of the A-RP to provide supporting documents and misrepresentation in respect of trade receivables towards non-availing the benefit of accelerated depreciation; and (g) Kundan Care had also demonstrated good faith since it sought to withdraw the Resolution Plan on 17 December 2019, soon after GUVNL Appeal was listed before this Court. This interim application for withdrawal was filed within a month of the A-RP submitting the plan to the Adjudicating Authority. The NCLAT erred in noting that this was a ploy on behalf of Kundan Care to frustrate the CIRP after pushing out all rivals during the bidding process; (iii) Alternatively, the CoC-approved Resolution Plan is a contingent contract under Section 32 of the Indian Contract Act: (a) The contract has become void since the contingency of certainty of PPA with GUVNL within a specified time through approval of the NCLT has become impossible; (b) GUVNL s Appeal against the continuation of the PPA, resolved by this Court in Gujarat Urja (supra), compounded by the COVID-19 pandemic and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LT. In other words, a Plan approved by the CoC does not result in a concluded contract because it is replaceable by another party. 87 In the course of the final stage of the hearings, Kundan Care submitted that it had mutually negotiated a settlement with A-RP/A-CoC and requested the exercise of this Court s powers under Article 142 of the Constitution of India for a one-time relief of modification, which would enable them to arrive at a mutually acceptable modification to the Resolution Plan. E.2 Submissions for the first respondent 88 Mr Nakul Dewan, learned Senior Counsel appeared on behalf of the A-RP in the Kundan Care Appeal. He has also appeared on behalf of the E-RP in the Ebix Appeal, both being collectively disposed of by this judgement. He has made the following submissions, in addition to the arguments recorded above in the Ebix Appeal: (i) There is no direct provision with respect to withdrawal of a Resolution Plan under the IBC by a Resolution Applicant, once approved by the CoC. Consequently, the Adjudicating or Appellate Authority has no jurisdiction to direct withdrawals or modification of Resolution Plans; (ii) Section 12 of the IBC provides for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bly be payable from the pending insurance claim. A table detailing the financial health of Astonfield for the last three years was also annexed, to bolster the claim that financial health has improved and profits can still be generated; and (viii) The delay in approval of the Resolution Plan by the Adjudicating Authority is an imponderable which cannot be used to resile from a binding contract. The delay is also not attributable to the A-RP or the A-CoC. E.3 Submissions for the second respondent 89 Mr V Giri, learned Senior Counsel appearing for EXIM Bank on behalf of the A-CoC, has made the following submissions: (i) A Resolution Plan approved by the CoC is submitted by the RP to the NCLT under Section 30(6) of the IBC. Once the NCLT is satisfied that the Resolution Plan complies with the requirements of Section 30(2), it grants its approval to the Plan, which becomes binding on all the stakeholders involved in the Resolution Plan. Thus, in the above scheme of things, IBC does not contemplate withdrawal of Resolution Plan once it has been approved by the CoC; (ii) The penal provision under Section 74(3) is applicable to a successful Resolution Applicant as it is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Resolution Applicant subject to the approval of the NCLT. The successful Resolution Applicant accepts the LOI and submits a PBG. The successful Resolution Applicant is required to state that the LOI is accepted unconditionally . It is only after the LOI is unconditionally accepted by the successful Resolution Applicant and the PBG is furnished, that the RP makes an application to the NCLT for approval of the Resolution Plan; and (e) Contracting parties cannot renege on their promise to perform the contract without facing any consequences. F Submissions of counsel in the Seroco Appeal F.1 Submissions for the appellant 90 Mr Tirth Nayak has made the following submissions on behalf of Seroco: (i) The Resolution Plan was submitted on the basis of information that was provided under the IM issued by the Arya-RP in August 2018. Over 18 months have passed since the Resolution Plan was submitted. The inordinate delay in the approval of the Resolution Plan by the NCLT, along with the outbreak of COVID-19 pandemic, has substantially affected the valuation of Arya Filaments, apart from impacting its business operations and financial position. Thus, Seroco is entitled to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the application for modification was made within 2 months of the outbreak of the pandemic; (ii) The Resolution Plan of Seroco was approved by the Arya-CoC on 10 May 2019 and submitted to the Adjudicating Authority for approval on 14 May 2019. When Seroco filed their application before the NCLT for modification of the Resolution Plan, Kotak and UBIL, by their emails dated 13 July 2020 and 17 July 2020 respectively, had informed the Arya-RP that they record their disapproval for any such attempts at modification of the Resolution Plan which sought to reduce the resolution amount payable to secured creditors by ₹ 1.5 crore; (iii) There has been no material change in the assets or valuation of Arya Filaments. Seventy-five per cent of the funds were to be generated by Seroco by the sale of the Arya Filament s assets; and (iv) The following authorities were cited to elucidate on the power of the Adjudicating Authority, which is tightly circumscribed by the IBC, and designed to uphold the commercial wisdom of the CoC: K Sashidhar, Paras 52-58, 62, 68, 65 (supra), Essar Steel, Paras 65, 67, 69 and 88 (supra), Committee of Creditors AMTEK Auto Limited Through C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goals. It notes, Pgs 14-16 of the UNCITRAL Legislative Guide to an Insolvency Law, available at accessed on 20 August 2021 : 15. Since an insolvency regime cannot fully protect the interests of all parties, some of the key policy choices to be made when designing an insolvency law relate to defining the broad goals of the law (rescuing businesses in financial difficulty, protecting employment, protecting the interests of creditors, encouraging the development of an entrepreneurial class) and achieving the desired balance between the specific objectives identified above. Insolvency laws achieve that balance by reapportioning the risks of insolvency in a way that suits a State s economic, social and political goals. As such, an insolvency law can have widespread effects in the broader economy .. [ ] 17. There is no universal solution to the design of an insolvency law because States vary significantly in their needs, as do their laws on other issues of key importance to insolvency, such as security interests, property and contract rights, remedies and enforcement procedures. Although there may be no universal solution, most insolvency laws address the range of issues r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more likely it is that liquidation will be the only answer. Second, the liquidation value tends to go down with time as many assets suffer from a high economic rate of depreciation. From the viewpoint of creditors, a good realisation can generally be obtained if the firm is sold as a going concern. Hence, when delays induce liquidation, there is value destruction. Further, even in liquidation, the realisation is lower when there are delays. Hence, delays cause value destruction. Thus, achieving a high recovery rate is primarily about identifying and combating the sources of delay. In identifying the sources of delay, adjudicating mechanisms were identified as one of the two important sources of delay which need to be equipped with the right resources. In order to respond to the rapid changes in the economy, the BLRC report recommended the formation of an IBBI which would function as a regulator and formulate regulations that dynamically detail the procedural norms of the working of the IBC with the necessary immediacy. It is also important for this Court, as a constitutional authority which determines questions of law concerning the IBC framework, to note that a rapid liqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of all participants in the insolvency process. This process invariably has an impact on the conduct of the Resolution Applicant who participates in the process and consents to be bound by the RFRP and the broader insolvency framework. An analysis of the framework of the statute and regulations provides an insight into the dynamic and comprehensive nature of the statute. Upholding the procedural design and sanctity of the process is critical to its functioning. The interpretative task of the Adjudicating Authority, Appellate Authority, and even this Court, must be cognizant of, and allied with that objective. The UNCITRAL Guide has echoed this position by noting the interplay between the procedural design of the insolvency law and the corresponding institutional infrastructure by observing, page 20, UNCITRAL Guide, supra note 56 : 27. While the institutional framework is not discussed in any detail in the Legislative Guide, some of the issues are touched upon below. Notwithstanding the variety of substantive issues that must be resolved, insolvency laws are highly procedural in nature. The design of the procedural rules plays a critical role in determining how roles are to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Resolution Applicant has been defined in Section 5(25) of the IBC as follows: (25) resolution applicant means a person, who individually or jointly with any other person, submits a resolution plan to the resolution professional pursuant to the invitation made under clause (h) of sub-section (2) of Section 25 or pursuant to Section 54-K, as the case may be 101 The IBC provides a roadmap for the entire CIRP in Chapter II of Part II. This process is tightly regulated to include, inter alia, timelines of the CIRP specified by Section 12, duties of the RP to provide adequate information to propose a Resolution Plan in Section 29 and restrictions on who can be a Resolution Applicant in Section 29A. Thereafter, Section 30 provides for the submission of a Resolution Plan, and it reads as follows: 30. Submission of resolution plan.-(1) A resolution applicant may submit a resolution plan along with an affidavit stating that he is eligible under Section 29-A to the resolution professional prepared on the basis of the information memorandum. (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan- (a) provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time being in force for the implementation of actions under the resolution plan, such approval shall be deemed to have been given and it shall not be a contravention of that Act or law. (3) The resolution professional shall present to the committee of creditors for its approval such resolution plans which confirm the conditions referred to in sub-section (2). (4) The committee of creditors may approve a resolution plan by a vote of not less than sixty-six per cent of voting share of the financial creditors, after considering its feasibility and viability the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of Section 53, including the priority and value of the security interest of a secured creditor, and such other requirements as may be specified by the Board: Provided that the committee of creditors shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017, where the resolution applicant is ineligible under Section 29-A and may require the resolution professional to invite a fresh resolution plan where no othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Other than the IBC, the process is also regulated by the CIRP Regulations created under the IBC. Regulation 37 provides an illustration of the solutions which can be proposed in a Resolution Plan. Regulation 38 provides for the mandatory contents of a Resolution Plan, which are similar to the pre-conditions mentioned in Section 30(2) of the IBC. Regulation 39 provides for the process of approval of a Resolution Plan by the CoC, and under sub-Regulation (3), the CoC has to evaluate every Resolution Plan based on an evaluation matrix it has come up with under Regulation 5(ha). 103 Having briefly taken an overview of the process, we now understand that there are broadly three stages: (i) the first stage is prior to and ends with the approval of the Resolution Plan by the CoC; (ii) the second stage is the interim period between the Resolution Plan s approval by the CoC and before its confirmation by the Adjudicating Authority; and (iii) the third stage is after the approval of the Resolution Plan by the Adjudicating Authority. In the first stage, the relationship between the parties is explicitly governed by the provisions of the IBC such as the right of a prospective Resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conduct stemming from the very first steps of inviting prospective Resolution Applicants. The RP, with the approval of the CoC, Section 25(2)(h), IBC , invites prospective Resolution Applicants through an RFRP. Once an unconditional EOI has been received from prospective Resolution Applicants who are otherwise eligible under Section 29A, the RP prepares an IM as per the provisions of Section 29 which furnishes all relevant information of the Corporate Debtor to enable prospective Resolution Applicants to make an informed decision, before proposing a Resolution Plan. As a consequence of the IBC and its regulations, prospective Resolution Applicants, who are not disqualified under Section 29A, propose drafts of their Resolution Plans. The RP examines the Resolution Plan against the contours of Section 30(2) and submits only the eligible plans to the CoC, Regulation 39(2), CIRP Regulations . Prior to the IBBI (CIRP) (Fourth Amendment) Regulations 2020, which now requires the CoC to vote on all Plans simultaneously after recording its deliberations on the feasibility and viability of each Plan, Regulation 39(3) earlier enabled the CoC to approve a Resolution Plan with such modifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le those relating to discharge, penalties, remedies and damages would become applicable to CoC-approved Resolution Plans. For instance, in the United States, plans confirmed by courts have been characterized as contracts, whose breach can even give rise to contractual remedies. In In re Hoffinger Indus, Inc, 327 B.R. 389 (Bankr. E.D. Ark. 2005), United States Bankruptcy Court, E.D. Arkansas , a bankruptcy court in Arkansas has held that a confirmed plan should be enforceable and amenable to damages between contractually bound parties. Indeed, it has been argued before us that Resolution Plans should be enforced through the contractual remedy of specific performance. Further, a determination that Resolution Plans are contracts in the period between approval by the CoC and the approval of the Adjudicating Authority would require us to analyse whether all elements of contract formation have been satisfied, including the question of whether the acceptance of the Resolution Plan by the CoC fulfils the criteria laid down under Section 7 of the Contract Act or whether the conditionality of seeking approval from the Adjudicating Authority makes the Resolution Plan a contingent contract. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the failure of its implementation. The violation of the terms of the Resolution Plan does not give rise to a claim of damages, rather it leads to prosecution and imposition of punishment under Section 74 of the IBC. On the contrary, a CoC s withdrawal of the CIRP under Section 12A is coupled with a requirement of payment of CIRP costs, but no damages are statutorily payable to the Resolution Applicant, irrespective of the stage of the withdrawal. 110 The CoC even with the requisite majority, while approving the Resolution Plan must consider the feasibility and viability of the Plan and the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of section 53 of the IBC. The CoC cannot approve a Resolution Plan proposed by an applicant barred under Section 29A of the IBC. Regulation 37 and 38 of the CIRP Regulations govern the contents of a Resolution Plan. Furthermore, a Resolution Plan, if in compliance with the mandate of the IBC, cannot be rejected by the Adjudicating Authority and becomes binding on its approval upon all stakeholders including the Central and State Government, local authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een the parties but has statutory force and is binding not only on the company but even dissenting creditors or members, as the case may be. The effect of the sanctioned scheme is to supply by recourse to the procedure thereby prescribed the absence of that individual agreement by every member of the class to be bound by the scheme which would otherwise be necessary to give it validity [see J.K. (Bombay) Pvt. Ltd. v. New Kaiser-i-Hind Spg. Wvg. Co. Ltd. [AIR 1970 SC 1041 : (1969) 2 SCR 866, 891 : (1970) 40 Com Cas 689] ].. (emphasis supplied) 112 While the above observations were made in the context of a scheme that has been sanctioned by the Court, the Resolution Plan even prior to the approval of the Adjudicating Authority is binding inter se the CoC and the successful Resolution Applicant. The Resolution Plan cannot be construed purely as a contract governed by the Contract Act, in the period intervening its acceptance by the CoC and the approval of the Adjudicating Authority. Even at that stage, its binding effects are produced by the IBC framework. The BLRC Report mentions that [w]hen 75% of the creditors agree on a revival plan, this plan would be binding on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be similar to an acceptance of offer. The terms of the Resolution Plan contain a commercial bargain between the CoC and Resolution Applicant. There is also an intention to create legal relations with binding effect. However, it is the structure of the IBC which confers legal force on the CoC-approved Resolution Plan. The validity of the Resolution Plan is not premised upon the agreement or consent of those bound (although as a procedural step the IBC requires sixty-six percent votes of creditors), but upon its compliance with the procedure stipulated under the IBC. 115 It was argued for the E-RP that a Resolution Plan is a contract executed in furtherance of a statutory regime under the IBC. A question arises whether a Resolution Plan can be classified as a statutory contract . This Court has defined a statutory contract in India Thermal Power Ltd. v. State of MP, (2000) 3 SCC 379 in the following terms: 11. Section 43 empowers the Electricity Board to enter into an arrangement for purchase of electricity on such terms as may be agreed. Section 43-A(1) provides that a generating company may enter into a contract for the sale of electricity generated by it with the Ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a Resolution Plan arises due to the framework provided under the IBC. The mechanisms of the IBC provide sufficient guidance on the conduct of all participants in the process and the binding effect of the CoC-approved Resolution Plan is evidenced by the execution of a PBG furnished by the successful Resolution Applicant, in compliance with the CIRP Regulations. This PBG is returnable once the Adjudicating Authority approves the Resolution Plan under Section 31 and makes it binding on all stakeholders. Therefore, the IBC and its regulations institute sufficient safeguards to ensure the binding effect of a CoC-approved Resolution Plan. In our discussion in Sections I and J below, we further elaborate on the nature of a CoC-approved Resolution Plan and the code of conduct that is permissible by the statutory framework. 117 While insolvency regimes are specific to each jurisdiction, it may be useful to analyze how Resolution Plans or similar instruments are characterized in foreign jurisdictions. 118 Certain precedents from other jurisdictions have been cited by Mr Nakul Devan for the E-RP, to argue that contracts entered into, in furtherance of a statutory regime have to be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al obligation, Re TBL Realisations Plc, Oakley-Smith v Greenberg, [2004] B.C.C. 81 (Court of Appeal) , is a statutory contract, Tucker v Gold Fields Mining LCC, [2010] B.C.C. 544 (Court of Appeal) , or has a contractual effect and is subject to ordinary principles of interpretation applying to contracts, Heis v Financial Services Compensation Scheme Ltd, [2018] EWCA Civ 1327 (Court of Appeal) . However, the position on this issue is not completely settled. In a recent decision of the High Court of Justice, Re Rhino Enterprises Properties Ltd. Schofield v Smith [2020] EWHC 2370 (Ch). , it was held that the CVA is not a contract. Crucially the court made the following observations: 83. Further, and as noted by Mr Pymont QC in SHB Realisations Ltd, a voluntary arrangement is not formed or analysed as a contract. Certain legal principles applicable to contracts, for example their interpretation, are applied to voluntary arrangements; that is no less true of other instruments which are not contracts. Other principles of contract law, for example those relating to penalties, are not applicable to voluntary arrangements. Mr Pymont QC concluded that a voluntary arrangement is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rizing schemes (different from CVAs) as statutory contracts, observed: 46.. [ .] (b) In Australia, [the] authorities [namely, Hill v Anderson Meat Industries Ltd [1971] 1 NSWLR 868, Caratti and Bond Corp Holdings Ltd v Western Australia (1992) 7 ACSR 472] establish that an approved scheme does indeed derive its force from the court order, [and] not from the antecedent resolutions of members and creditors. 122 Under the United States Bankruptcy Code, a restructuring plan becomes binding once it is confirmed by the court in terms of Section 1141. There are decisions of the bankruptcy courts in the United States which indicate that such restructuring plans are characterized as contracts, In re Hoffinger Indus, Inc, 327 B.R. 389 (Bankr. E.D. Ark. 2005), United States Bankruptcy Court, E.D. Arkansas . It has been held that a confirmed plan is binding on the debtor and the plan proponent and has the same effect as contract, In Re Shenandoah Realty Partners, L.P. v. Ascend Health Care, Inc, 287 BR 867 (US Bankruptcy Court, WD) . However, commentators have noted that the United States Bankruptcy Code s, embrace of a contractual paradigm is somewhat inconsistent Both bankru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diction s insolvency regime, without identifying an analogous framework in our insolvency regime. 125 The absence of any specific provision in the IBC or the regulations referring to a CoC-approved Resolution Plan as a contract and the lack of clarity in the BLRC report regarding the nature of such a Resolution Plan, constrains us from arriving at the conclusion that CoC-approved Resolution Plans will be governed by the Contract Act and common law principles governing contracts, save and except for the specific prohibitions and deeming fictions under the IBC. Regulation 39(3) of CIRP regulations, as it stood before the IBBI (CIRP) (Fourth Amendment) Regulations 2020 and applicable to the three appellants before us, enabled a framework where a draft Resolution Plan would involve several rounds of negotiations and revisions between the Resolution Applicant and the CoC, before it is approved by the latter and submitted to the Adjudicating Authority, (3) The committee shall evaluate the resolution plans received under sub-regulation (1) strictly as per the evaluation matrix to identify the best resolution plan and may approve it with such modifications as it deems fit: Provided th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gotiation between two parties. Section J below details how a common law remedies of withdrawal or modification on account of frustration or force majeure are not applicable to CoC-approved Resolution Plans owing to the nature of the IBC. Similarly, the whole host of remedies such as liquidated and unliquidated damages, restitution, novation and frustration, unless specifically provided by the IBC, are not available to a successful Resolution Applicant whose Plan has been approved by the CoC and is awaiting the approval of the Adjudicating Authority. The Insolvency Law Committee Report of February 2020 has recommended the CIRP process to mandate Resolution Plans to provide for the apportionment of the profit or loss accrued by the Corporate Debtor during the CIRP, Pages 55-56, Report of the Insolvency Law Committee (February 2020), Ministry of Corporate Affairs, available at accessed on 20 August 2021 . These reports are periodically commissioned by the parliament to review the functioning of the Code and suggest amendments. However, if the intention was to view a CoC-approved Resolution Plan as a contract, the principles of unjust enrichment would have been sufficient to address t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... committee, having regard to the nature of resolution plan and business of the corporate debtor . Further, in the event that the CoC enters into a settlement with the Corporate Debtor and withdraws from the CIRP under Section 12A, Regulation 30A provides for only payment of insolvency costs and not compensation or damages to Resolution Applicant for investing time and money in the process. The parties may resort to invoking principles of frustration or force majeure to evade implementation of the Resolution Plan leading to unnecessary litigation. This Court in Amtek Auto (supra), had curbed a similar attempt by a successful Resolution Applicant who had relied on a force majeure clause in its Resolution Plan to seek a direction compelling the CoC to negotiate a modification to its Resolution Plan. The Court held that there was no scope for negotiations between the parties once the Resolution Plan has been approved by the CoC. Thus, contractual principles and common law remedies, which do not find a tether in the wording or the intent of the IBC, cannot be imported in the intervening period between the acceptance of the CoC and the approval by the Adjudicating Authority. Principles o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It also extracted a Speech of the Union Minister in the Rajya Sabha to explain the proposal for the amendment in 2019, which was to avoid the same pitfalls in the IBC. The Court, speaking through Justice R F Nariman, noted: 119. The speech of the Hon'ble Minister on the floor of the House of the Rajya Sabha also reflected the fact that with the passage of time the original intent of quick resolution of stressed assets is getting diluted. It is therefore essential to have time-bound decisions to reinstate this legislative intent. It was also pointed out on the floor of the House that the experience in the working of the Code has not been encouraging. The Minister in her speech to the Rajya Sabha gives the following facts and figures: Now, regarding the Corporate Insolvency Resolution Process (CIRP), under the Code, I want to give you data again as of 30-6-2019. First, I will talk about the status of CIRPs. Number of admitted cases is 2162; number of cases closed on appeal, which I read out about, is 174; number of cases closed by withdrawal under Section 12-A, is 101, I have given you a slightly later data; number of cases closed by resolution is 120; closed by liquida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble restriction on the litigant's right to carry on business under Article 19(1)(g) of the Constitution. The effect of this declaration is that ordinarily the time taken in relation to the corporate resolution process of the corporate debtor must be completed within the outer limit of 330 days from the insolvency commencement date, including extensions and the time taken in legal proceedings. However, on the facts of a given case, if it can be shown to the Adjudicating Authority and/or Appellate Tribunal under the Code that only a short period is left for completion of the insolvency resolution process beyond 330 days, and that it would be in the interest of all stakeholders that the corporate debtor be put back on its feet instead of being sent into liquidation and that the time taken in legal proceedings is largely due to factors owing to which the fault cannot be ascribed to the litigants before the Adjudicating Authority and/or Appellate Tribunal, the delay or a large part thereof being attributable to the tardy process of the Adjudicating Authority and/or the Appellate Tribunal itself, it may be open in such cases for the Adjudicating Authority and/or Appellate Tribunal to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poses referred to in Section 14 of the IBC; (ii) causing a public announcement to be made for the initiation of CIRP and issuing a call for submissions of claims as may be specified under Section 15 of the IBC; and (iii) appointing an IRP in accordance with Section 16 of the IBC. 130 Section 13(2) provides that the public announcement is to be made immediately after the appointment of an IRP. The word immediately here means not later than three days from the date of appointment as provided in the explanation to Regulation 6(1) of the CIRP Regulations. Section 15 of the IBC lists down the information that should be included in the public announcement of CIRP. It should specify the last date up to which the claims, i.e., a right of payment or right to remedy as defined under Section 3(6) of the IBC, can be made by creditors, workmen and employees. Regulation 6(2)(c) provides that the last date of submission of claims shall be fourteen days from the date of appointment of the IRP. The public announcement also specifies the date on which the CIRP shall close, which is the one hundred and eightieth day from the date of the admission of the application under Sections 7, 9 or 10, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng terms: resolution applicant means a person, who individually or jointly with any other person, submits a resolution plan to the resolution professional pursuant to the invitation made under clause (h) of sub-section (2) of section 25; or pursuant to section 54K, as the case may be. 134 The first step in the process of soliciting a Resolution Plan is the preparation of an IM containing relevant information as specified by the IBBI for formulating a Resolution Plan in accordance with Section 29(1) of the IBC. The contents of the IM are specified under Regulation 36(2) of the CIRP Regulations. Regulation 36(1) of the CIRP Regulations specifies the timelines within which the RP must submit the IM to members of the CoC, which is within two weeks of his appointment but not later than the fifty-fourth day from the insolvency commencement date, whichever is earlier. Thereafter, the RP issues an invitation of EOI not later than the seventy-fifth day from the insolvency commencement date to seek expressions of interest from eligible prospective Resolution Applicants in terms of Regulation 36A of the CIRP Regulations. A prospective Resolution Applicant is required to submit an unc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval of the Resolution Plan by the Adjudicating Authority, the Resolution Applicant fails to implement or contributes to the failure of implementation of the plan. Under the regulation, a performance security is defined as security of such nature, value, duration and source, as may be specified in the request for resolution plans with the approval of the committee, having regard to the nature of resolution plan and business of the corporate debtor . Regulations 37 and 38 list down the mandatory contents of the Resolution Plan. 137 The RP is required to review the Resolution Plan submitted in terms of Section 30(2) of the IBC, which provides that: Section 30 - Submission of resolution plan [ ] (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan-- (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor; (b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than-- (i) the amount to be paid to such cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requirements before the CoC for approval. Sub-Section (4) of Section 30 stipulates that the CoC may approve a Resolution Plan by a vote of not less than sixty-six per cent after considering the feasibility and viability of the plan and any such requirements specified by the IBBI. 138 The CoC has been given wide powers under the IBC. It can direct the Corporate Debtor into liquidation any time before the approval by the Adjudicating Authority, under Section 33(2) of the IBC. Further, under Section 12A of the IBC the Adjudicating Authority may allow withdrawal of the application submitted under Sections 7, 9 or 10 of the IBC for initiation of the CIRP (i.e., initiation of the CIRP by the financial creditor, operational creditor and the corporate applicant, respectively) if the withdrawal is approved by ninety per cent of the voting share of the CoC. Dealing with the question whether a successful Resolution Applicant can retreat through the route provided under Section 12A of the IBC, a three-judge Bench of this Court in Maharashtra Seamless v. Padmanabhan Venkatesh, (2020) 11 SCC 467 observed that, [t]he exit route prescribed in Section 12A is not applicable to a Resolution Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of the IBC provides thus: Section 74 - Punishment for contravention of moratorium or the resolution plan [ .] (3) Where the corporate debtor, any of its officers or creditors or any person on whom the approved resolution plan is binding under section 31, knowingly and wilfully contravenes any of the terms of such resolution plan or abets such contravention, such corporate debtor, officer, creditor or person shall be punishable with imprisonment of not less than one year, but may extend to five years, or with fine which shall not be less than one lakh rupees, but may extend to one crore rupees, or with both. 140 If the Resolution Plan is rejected by the Adjudicating Authority, the Corporate Debtor goes into liquidation in accordance with Section 33(1) of the IBC. The order of the Adjudicating Authority rejecting a Resolution Plan and directing liquidation under Section 33 of the IBC can be appealed only on the grounds of material irregularity or fraud, as stipulated under Section 61(4) of the IBC. The order of the Adjudicating Authority approving a Resolution Plan can be appealed before the NCLAT under Section 61(3) of the IBC only on the grounds specified in that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Norm Latest Timeline Section 16(1) Commencement of CIRP and appointment of IRP . T Regulation 6(1) Public announcement inviting claims Within 3 Days of Appointment of IRP T+3 Section 15(1)( c )/Regulations 6(2)( c ) and 12 (1) Submission of claims For 14 Days from Appointment of IRP T+14 Regulation 12(2) Submission of claims Up to 90th day of commencement T+90 Regulation 13(1) Verification of claims received under Regulation 12(1) Within 7 days from the receipt of the claim T+21 Verification of claims received under Regulation 12(2) T+97 Section 21(6A) (b)/Regulation 16-A Application for appointment of AR Within 2 days from verification of claims received under Regulation 12(1) T+23 Regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Submission of EoI At least 15 days from issue of EoI (Assume 15 days) T+90 Provisional List of RAs by RP Within 10 days from the last day of receipt of EoI T+100 Submission of objections to provisional list For 5 days from the date of provisional list T+105 Final List of RAs by RP Within 10 days of the receipt of objections T+115 Regulation 36-B Issue of RFRP, including Evaluation Matrix and IM Within 5 days of the issue of the provisional list T+105 Receipt of Resolution Plans At least 30 days from issue of RFRP (Assume 30 days) T+135 Regulation 39(4) Submission of CoC approved Resolution Plan to AA As soon as approved by the CoC T+165 Section 31(1) Approval of resolution plan by AA T=180 AA: Adjudica ting Author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks can be assessed and help define the limits of any discretion. Unpredictable application of the insolvency law has the potential to undermine not only the confidence of all participants in insolvency proceedings, but also their willingness to make credit and other investment decisions prior to insolvency. As far as possible, an insolvency law should clearly indicate all provisions of other laws that may affect the conduct of the insolvency proceedings (e.g. labour law; commercial and contract law; tax law; laws affecting foreign exchange, netting and set-off and debt for equity swaps; and even family and matrimonial law). This Court should proceed with caution in introducing any element in the insolvency process that may lead to unpredictability, delay and complexity not contemplated by the legislature. With this birds -eye view of the framework of insolvency through the CIRP, we proceed to answer the question of law raised in this judgement - whether a Resolution Applicant is entitled to withdraw or modify its Resolution Plan, once it has been submitted by the Resolution Professional to the Adjudicating Authority and before it is approved by the latter under Section 31(1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dments to the IBC and recommended a ninety per cent voting threshold by the CoC for withdrawals of a CIRP and a specific amendment to Rule 8 of the then existing CIRP Rules to enable parties to file such applications. This report led to the insertion of Section 12A which vested the CoC with the power to withdraw the CIRP or vote on such withdrawal, if sought by the Corporate Debtor. This provision was introduced with retrospective effect on 6 June 2018. Significantly, no such exit routes have been contemplated for the Resolution Applicant. It is relevant to note that the newly inserted and then unamended Regulation 30A (w.e.f. 4 July 2018) of the CIRP Regulations stipulated that withdrawal under Section 12A can be allowed through submitting an application to the IRP or RP (as the case maybe) before the invitation for EOI is issued to the public. The CoC was to consider the application within seven days of its constitution and an approval for such application required approval of the ninety per cent of the voting share of the CoC. However, on 14 December 2018, a two judge Bench of this Court, held in Brilliant Alloys (P) Ltd v. S Rajagopal, (2018) SCC OnLine SC 3154 that Regulatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of a withdrawal prior to constitution of the CoC) or insolvency resolution process costs (where withdrawal is after constitution of the CoC). It is clear that withdrawal of the CIRP is allowed only if it upholds the interests of the CoC, is time-bound, and takes into consideration how the expenses relating to the insolvency process up to withdrawal shall be borne. Thus, even the exit under Section 12A of the CoC, which is not available to the Resolution Applicant, is regulated by procedural provisions indicating that the legislature has applied its mind to the timelines and costs involved in the CIRP. Pertinently, the regulations do not provide for any costs that are payable to the prospective Resolution Applicants or a successful Resolution Applicant, who must have incurred a significant expense in participating in the process. This Court, in Maharashtra Seamless (supra) had denied relief to a Resolution Applicant who had sought to invoke Section 12A to resile from its Resolution Plan. The nature of the statute indicates the clarity of its purpose primacy of the interests of the creditors who are seeking to cut their losses through a CIRP. Traditional models and understandings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the case may be, under Section 31, Para 73, Essar Steel supra note 34 . In Government of Andhra Pradesh v. P Laxmi Devi, (2008) 4 SCC 720 , while determining the constitutionality of a statute, this Court observed that it should be wary of transgressing into the domain of the legislature, especially in matters relating to economic and regulatory legislation. This Court observed: 80. As regards economic and other regulatory legislation judicial restraint must be observed by the court and greater latitude must be given to the legislature while adjudging the constitutionality of the statute because the court does not consist of economic or administrative experts. It has no expertise in these matters, and in this age of specialisation when policies have to be laid down with great care after consulting the specialists in the field, it will be wholly unwise for the court to encroach into the domain of the executive or legislative (sic legislature) and try to enforce its own views and perceptions. (emphasis supplied) 146 Judicial restraint must not only be exercised while adjudicating upon the constitutionality of the statute relating to economic policy but also in matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a successful Resolution Applicant is indicative of the IBC s proscription of any attempts at withdrawal at its behest. The rule of casus omissus is an established rule of interpretation, which provides that an omission in a statute cannot be supplied by judicial construction. Justice GP Singh in his authoritative treatise, Principles of Statutory Interpretation, GP Singh, Principles of Statutory Interpretation (1st edn., Lexis Nexis 2015) , defines the rule of casus omissus as: It is an application of the same principle that a matter which should have been, but has not been provided for in a statute cannot be supplied by courts, as to do so will be legislation and not construction. But there is no presumption that a casus omissus exists and language permitting the court should avoid creating a casus omissus where there is none. (emphasis supplied) The treatise further discusses that a departure from this rule is only allowed in cases where words have been accidently omitted or the omission has an effect of making any part of the statute meaningless. Further, only such words can be supplied to the statute which would have certainly been inserted by the Parliament, ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Resolution Plans that are pending approval under Section 31, on account of the economic slowdown that impacted every business in the country. However, no legislative relief for enabling withdrawals or re-negotiations has been provided, in the last eighteen months. In the absence of any provision under the IBC allowing for withdrawal of the Resolution Plan by a successful Resolution Applicant, vesting the Resolution Applicant with such a relief through a process of judicial interpretation would be impermissible. Such a judicial exercise would bring in the evils which the IBC sought to obviate through the back-door. 148 It is pertinent to note that even the UNCITRAL Guide does not contain any provisions for withdrawal of a submitted Plan. It only discusses the possibilities of amending a Resolution Plan. The UNCITRAL Guide indicates that it contemplates that the Legislature should choose if it wants to allow any amendments to a submitted Resolution Plan. In the event, it does, it should lay down the detailed steps of proposing amendments to a submitted resolution plan, IV.A.52., page 225, and Recommendation 155: 155. The insolvency law should permit amendment of a plan and spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to amend the Resolution Plan after submission to the Adjudicating Authority, based on its specific terms of the Resolution Plan, it would have adopted the critical safeguards highlighted by the UNCITRAL. J.2 Terms of the Resolution Plan are not sufficient to effect withdrawals or modifications after its submission to the Adjudicating Authority 149 It has been contended by the three appellants that a Resolution Plan only becomes binding when it is approved by the Adjudicating Authority under Section 31(1) of the IBC. Further, since Section 74(3) of the IBC, provides that a person can be prosecuted or punished for contravening the Resolution Plan only after its approval by the Adjudicating Authority, the successful Resolution Applicant is entitled to withdraw the Plan, on the terms of its contractual provisions, as long as it is not made binding under Section 31(1) of the IBC. We have held in Section H that a CoC-approved Resolution Plan is a creature of the IBC and cannot be construed as a pure contract between two consenting parties, prior to its approval under Section 31 of the IBC. In this section, independent of the above finding, we proceed to examine the contention tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting Authority, which would possibly be in contemplation if the Resolution Applicant was permitted to withdraw from, or modify, the Plan after acceptance by the CoC. Regulation 36B(4A) requires the furnishing of a performance security which will be forfeited if a Resolution Applicant fails to implement the Plan. This is collected before the Adjudicating Authority approves the Plan. Notably, the regulations also direct forfeiture of the performance security in case the Resolution Applicant contributes to the failure of implementation , which could potentially include any attempts at withdrawal of the Plan. 151 The report of the BLRC also notes that the negotiations in the CIRP must be time bound and it envisages that one of the ways in which the CIRP comes to a close is that the RP is able to obtain a binding agreement from the CoC, 5.3.4, BLRC Report, supra note 55 . Such a binding agreement is placed before the Adjudicating Authority, which orders the closure of the CIRP. If the Adjudicating Authority does not receive a binding agreement, it can send the Corporate Debtor into liquidation. The relevant paragraphs are extracted below: 5.3.4 Rules to close the IRP The Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the IBC by seeking the same relief. This Court rejected the claim and observed that, [t]o assert that there was any scope for negotiations and discussions after the approval of the resolution plan by the CoC would be plainly contrary to the terms of the IBC . 153 Regulation 38(3) mandates that a Resolution Plan be feasible, viable and implementable with specific timelines. A Resolution Plan whose implementation can be withdrawn at the behest of the successful Resolution Applicant, is inherently unviable, since open-ended clauses on modifications/withdrawal would mean that the Plan could fail at an undefined stage, be uncertain, including after approval by the Adjudicating Authority. It is inconsistent to postulate, on the one hand, that no withdrawal or modification is permitted after the approval by the Adjudicating Authority under Section 31, irrespective of the terms of the Resolution Plan; and on the other hand, to argue that the terms of the Resolution Plan relating to withdrawal or modification must be respected, in spite of the CoC s approval, but prior to the approval by the Adjudicating Authority. The former position follows from the intent, object and purpose of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Resolution Plan should be an overall credible plan, capable of achieving timelines specified in the Code generally, assuring successful revival of the corporate debtor and disavowing endless speculation , Para 60 supra note 35 . Section 30(2)(d) of the IBC and Regulation 38 of the CIRP Regulations also provide that the Resolution Plan should be implementable. In the absence of specific statutory language allowing for withdrawals or even modifications by the successful Resolution Applicant, it would be difficult to imply the existence of such an option based on the terms of the Resolution Plan, irrespective of, and especially when they do not form a part of Clause 12 in Form H, as is the case in all the three Resolution Plans that are in dispute in this present appeal. 155 The Insolvency and Bankruptcy Law Committee in its report released in March 2018, supra note 100 noted that many conditional Resolution Plans were being approved by the Adjudicating Authority on account of the uncertainty on statutory clearances, such as by the Competition Commission of India, and the approval by the Adjudicating Authority was being regarded as a single window approval . This was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebtor. If no objections are raised within forty-five days, it would be deemed that they have granted an approval. If objections are raised or conditional approvals are granted, the Resolution Applicant should attempt to clear the objections or meet the conditions before placing the Resolution Plan before the Adjudicating Authority. This Plan would thereafter be placed before the Adjudicating Authority for its approval. The committee further suggested that this timeline of forty-five days should be excluded from calculating the timelines under Section 12 of the IBC. The relevant extract is reproduced below: 14.8. To enable approvals or no-objections to be taken within the scheme of the Code, the Committee decided that amendments should be made to the Code such that once a resolution plan is approved by the CoC, it should be sent to all concerned government and regulatory authorities whose approvals are core to the continued running of the business of the corporate debtor, for their approvals or objections. If they do not raise their objections within forty-five days, they will be deemed to have no objections. This plan would then be placed before the Adjudicating Authority for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this timeline needs to be specifically explained by the RP in Clause 10 of Form H. Regulation 40B imposes a time-limit on the RP for filing the requisite forms at different stages of the CIRP, including forms seeking extensions on account of delays at any stage. The failure to fill these forms within the stipulated deadline results in disciplinary action against the RP by the IBBI. Further, as discussed in Section I of the judgement, various mandatory timelines have been imposed for undertaking specific actions under the CIRP. If the legislature intended to allow withdrawals or subsequent negotiations by successful Resolution Applicants, it would have prescribed specific timelines for the exercise of such an option. The recognition of a power of withdrawal or modification after submission of a CoC-approved Resolution Plan, by judicial interpretation, will have the effect of disturbing the statutory timelines and delaying the CIRP, leading to a depletion in the value of the assets of a Corporate Debtor in the event of a potential liquidation. Hence, it is best left to the wisdom of the legislature, based on the experiences gained from the working of the enactment, to decide whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h can be breached only under exceptional circumstances as held in Essar Steel (supra)), it would be antithetical to the purpose of the IBC to allow the Adjudicating Authority to use its plenary powers under Section 60(5)(c) to potentially extend these timelines to enable the CoC to either issue a fresh RFRP if the Resolution Plan is withdrawn by a successful Resolution Applicant or direct further negotiations with the Resolution Applicant who is seeking a modification of the plan, whose failure could result in withdrawal as well. The likely consequence of a withdrawal by a successful Resolution Applicant after going through the stages of the CIRP for nearly 180 days (provided all statutory timelines have been strictly followed) would inevitably be a delayed liquidation after the value of the assets has further depreciated. In the event of intervening delays on account of litigation or otherwise, the delay would be even more severe. If a CoC, could be compelled by the Adjudicating Authority to negotiate with the successful Resolution Applicant, it would have to resign itself to a commercial bargain at a much lower value. If Parliament intended to permit such withdrawals/modification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal- whether the Third Withdrawal Application by Ebix was barred by res judicata; while this will not have a bearing on the final outcome of the appeal, we shall analyze it briefly. K.1.1 Res Judicata 163 To begin our inquiry, it is important to first consider the contours of the principle of res judicata. In Indian law, the principle has been recognized in Section 11 of the Code of Civil Procedure 1908. Section 11, in so far as is relevant, reads as follows: 11. Res judicata.-No Court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title, in a Court competent to try such subsequent suit or the suit in which such issue has been subsequently raised, and has been heard and finally decided by such Court. [ ] Explanation IV.-Any matter which might and ought to have been made ground of defence or attack in such former suit shall be deemed to have been a matter directly and substantially in issue in such suit. Explanation V.-Any relief claimed in the plaint, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Corporate Debtor, as filed before this Hon'ble Tribunal on 11.04.2018, pending detailed consideration of the same by the Resolution Applicant; iv. Grant the Resolution Applicant sufficient time to re-evaluate its proposals contained in the Resolution Plan, and also to suitably revise/modify and/or withdraw its Resolution Plan; i. Allow the Resolution Applicant to withdraw the Resolution Plan dated 19.02.2018 (along with the Addendum/Financial Proposal dated 21.02.2019) submitted by it, and as approved by the Committee of Creditors; ii. Direct the Ld. Resolution Professional and/or Educomp Solutions Limited and the Committee of Creditors to refund the Earnest Money Deposit of ₹ 2,00,00,000/- furnished by the Resolution Applicant in respect of the Resolution Plan; iii. Withhold approval of the Resolution Plan sanctioned by the Committee of Creditors of the Corporate Debtor, as filed before this Hon'ble Tribunal on 07.03.2018 and recorded vide order dated 1.1.04.2018, pending detailed consideration of the same by the Resolution Applicant; i. Allow the Resolution Applicant to withdraw the Resolution Plan dated 19.02.2018 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The court which decided the former suit must be a court competent to try the subsequent suit or the suit in which such issue is subsequently raised; and (v) The matter directly and substantially in issue in the subsequent suit must have been heard and finally decided by the court in the first suit (emphasis supplied) 167 In the present case, conditions (i) is not in dispute since the parties were the same. As regards (ii), in the First Withdrawal Application, the prayer was to enable Ebix to re-evaluate its proposals and to revise/modify and also withdraw its Resolution Plan. A prayer for withdrawal of the Resolution Plan was raised in the Second and Third Withdrawal Applications. Conditions (iii) and (iv) are also not in issue. What remains to be assessed is compliance with condition (v), i.e., whether Ebix s prayer in the First Withdrawal was in fact heard and decided finally . While dismissing the First Withdrawal Application, the NCLT had held: This is an application filed by one Ebix Singapore Ptd. Limited seeking re-valuation of the Resolution Plan submitted by it before the Resolution Professional. No ground for considering the prayer sought in the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a bar of res judicata. It is true that, prima facie, dismissal in limine even without passing a speaking order in that behalf may strongly suggest that the Court took the view that there was no substance in the petition at all; but in the absence of a speaking order it would not be easy to decide what factors weighed in the mind of the Court and that makes it difficult and unsafe to hold that such a summary dismissal is a dismissal on merits and as such constitutes a bar of res judicata against a similar petition filed under Article 32 170 Another two judge Bench of this Court, in its judgment in Erach Boman Khavar v. Tukaram Shridhar Bhat, (2013) 15 SCC 655 , has held that the doctrine of res judicata can only apply when there has been a conscious adjudication of the issue on merits. Justice Dipak Misra, speaking for the Court, held: 39. From the aforesaid authorities it is clear as crystal that to attract the doctrine of res judicata it must be manifest that there has been a conscious adjudication of an issue. A plea of res judicata cannot be taken aid of unless there is an expression of an opinion on the merits. It is well settled in law that principle of res judicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for by the plaintiff or the applicant. It refers entirely to the grounds set forth in the plaint or the application as the case may be as the cause of action or in other words to the media upon which the plaintiff or the applicant asks the court to arrive at a conclusion in his favour . In order that a defence of res judicata may succeed it is necessary to show that not only the cause of action was the same but also that the plaintiff had an opportunity of getting the relief which he is now seeking in the former proceedings. The test is whether the claim in the subsequent suit or proceedings is in fact founded upon the same cause of action which was the foundation of the former suit or proceedings (emphasis supplied) 174 The prayer for withdrawal of the Resolution Plan in the First Withdrawal Application was not substantial and one that the Court was bound to grant, since it was contingent upon a re-evaluation, which in itself was contingent upon receiving the information sought in prayers (i) and (ii). Since the latter two contingencies never arose, the NCLT did not apply its mind to the prayer for withdrawal independently. When it filed the Second Withdrawal Applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uly approved by the requisite majority of the CoC. No objections were raised against the Approval Application on the ground that the threshold of seventy-five per cent of votes was not met. The Resolution Plan dated 19 February 2018 and the addendum dated 21 February 2018 for a total bid amount of ₹ 400 crores were then submitted by the E-RP to the Adjudicating Authority for approval on 7 March 2018. 176 Owing to the intervening applications for investigation into the accounts of Educomp (pertinently, no internal special audit has been conducted till date), Ebix filed the First Withdrawal Application on 5 July 2019, on account of a delay in approval of seventeen months. Thereafter, it filed the Second and Third Withdrawal Applications. 177 Ebix has alleged before this Court that it is entitled to withdraw its Resolution Plan by relying on: (i) the terms of the RFRP, which indicates that the Resolution Plan is binding on the Resolution Applicant only after approval by the Adjudicating Authority under Section 31; (ii) the terms of the Resolution Plan which indicate that the Plan was valid for six months; and (iii) the principles of contract law to urge frustration on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es cannot indirectly impose a condition on a judicial authority to accept or reject its Plan within a specified time period, failing which the CIRP process will inevitably come to an end. In this case, the draft Resolution Plan of Ebix was submitted on 29 January 2018 and remained valid for the term of the multiple rounds of negotiations with the E-CoC, until its submission to the Adjudicating Authority on 7 March 2018, which was within the six-month period envisaged in the Plan. 180 Even if it were to be assumed, for the sake of argument, that the term in the submitted Resolution Plan was in the nature of a qualified offer which would expire after six months of its submission, failing the imprimatur of the Adjudicating Authority under Section 31 which would make it binding on all parties, the surrounding terms of the RFRP and the subsequent legal materials including the LOI and the Compliance Certificate (Form H) under CIRP Regulations make it clear that there was no scope to resile from the implementation of the Resolution Plan, once it had been submitted to the Adjudicating Authority, except in the event of a rejection. Clause 1.9.3 of the RFRP required Ebix to replace its EM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lution Applicants to conduct their own due diligence. In so far as is relevant, it reads: 1.3.2 The Resolution Applicant(s) shall be provided access to the electronic as well as physical data room ( Data Room ) established and maintained by the Company acting through the Resolution Professional and coordinated by PwC in order to conduct a due diligence of the business and operations of the Company Similarly, Clause 1.13.6 also requires prospective Resolution Applicants to conduct independent investigations: 1.13.6 This RFRP does not purport to contain all the information required by the Resolution Applicant. The Resolution Applicant should conduct independent investigations and analysis and should check the accuracy, reliability and completeness of the information in this RFRP and obtain independent advice from appropriate sources, prior to making an assessment of the Company. Ebix was responsible for conducting their own due diligence of Educomp and could not use that as a reason to revise/modify their approved Resolution Plan. In any event, Section 32A of the IBC grants immunity to the Corporate Debtor for offences committed prior to the commencement of CRIP and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to provide assistance under such law as may be applicable to such corporate debtor or person, shall extend all assistance and co-operation to any authority investigating an offence committed prior to the commencement of the corporate insolvency resolution process. Thus, in any case even if it is found that there was any misconduct in the affairs of Educomp prior the commencement of the CIRP, Ebix will be immune from any prosecution or punishment in relation to the same. The submission that Ebix has been placed in a prejudicial position due to the initiation of investigation into the affairs of Educomp by the CBI and SFIO is nothing but a red herring since such investigations have no bearing on Ebix. 182 Finally, it is also important to note that no clause of Ebix s own Resolution Plans provides them with a right to revise/withdraw their Resolution Plan after its approval by the E-CoC, but before its confirmation by the Adjudication Authority. Clause 9.1 permits withdrawal in the event the Resolution Plan is not approved in its entirety by the NCLT, while Clause 9.7 allows for an amendment for the purposes of implementation of the Resolution Plan but only when the E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntellectual property of the corporate debtor it may have access to; and (c) not to share relevant information with third parties unless clauses (a) and (b) of this sub-section are complied with. Explanation.-For the purposes of this section, relevant information means the information required by the resolution applicant to make the resolution plan for the corporate debtor, which shall include the financial position of the corporate debtor, all information related to disputes by or against the corporate debtor and any other matter pertaining to the corporate debtor as may be specified. 187 The BLRC Report elucidates the duties of the RP: 1. The RP must provide the most updated information about the entity as accurately as is reasonably possible to this range of solution providers. In order to do this, the RP has to be able to verify claims to liabilities as well as the assets disclosed by the entity. The RP has the power to appoint whatever outside resources that she may require in order to carry out this task, including accounting and consulting services. 2. The information collected on the entity is used to compile an information memorandum, which is signed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs may cause a change. 190 In the present case, Ebix has alleged that the E-RP did not inform it of the financial investigations into the conduct of Educomp in a timely fashion. To assess this claim, it is important to underline a few dates: (i) 5 December 2017 E-RP provided Virtual Data Room access to Ebix and other prospective Resolution Applicants in relation to Educomp, and the final RFRP was issued; (ii) 7 March 2018 E-RP filed the Approval Application before NCLT in relation to Ebix s Resolution Plan, after its approval by the E-CoC; (iii) 3 April 2018 and 26 April 2018 two articles are published in The Wire in relation to financial mismanagement of Educomp; (iv) 4 May 2018 the IFC Application came up before NCLT, having been filed by a financial creditor of Educomp seeking investigation of the affairs/transactions, in which the E-RP was directed file its reply and IFC was directed to serve a notice on Ebix; (v) 12 June 2019 Educomp made regulatory disclosures to the BSE and NSE in relation to the ongoing investigations by SFIO and CBI; and (vi) 5 July 2019 Ebix filed the First Withdrawal Application. 191 Ebix cannot dispute tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s decision of the NCLT was confirmed by the NCLAT on 30 September 2020. While Kundan Care s appeal against this decision of the NCLAT was pending before this Court, Gujarat Urja (supra) was decided by this Court on 8 March 2021. 194 Kundan Care had initially sought to rely on Clause 5.1 of their Resolution Plan to argue that it had reserved the right to modify or withdraw its submitted Resolution Plan in the event of a material adverse change which affects Astonfield. Clause 5.1 reads as follows: 5.1 Basis of Preparation The preparation of the Resolution Plan is based on the Information Memorandum provided to the Resolution Applicant by the Resolution Professional. If at any time before or after submission of this Resolution Plan, should the information on the basis of which this Resolution Plan has been prepared, change, or new information becomes available, or if there is a material adverse change i.e. shall there have occurred any fact, matter, event, circumstance, condition or change which materially and adversely affects, or could reasonably be expected to materially and adversely affect: individually or in aggregate, the business, operations, assets, liabilities, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2021. Responding to the request of Kundan Care, it has been stated that: 4 lenders were prima facie agreeable to deliberate the financial proposal seeking revision in resolution plan amount in the COC convened by the RP post the directions of the Hon'ble Supreme Court in accordance with the processes laid down by the IBC . Pursuant to the above exchange of communications, a joint request has been made by Mr Ramji Srinivasan, learned Senior Counsel appearing on behalf of Kundan Care and Mr V Giri, learned Senior Counsel appearing on behalf of the A-CoC in the following terms: In view of the letter dated 12 July 2021 issued by the lenders who are members of the CoC, the appellant may be permitted to withdraw Civil Appeal 3560/2020 with liberty to the RA and the CoC to file the revised plan (in terms of the letter dated 12 July 2021) before the NCLT (through the RP) for approval. The CoC shall convene and take a call on the revised plan within one week and the NCLT shall dispose of the matter within two weeks upon receiving IA from RP for approval of revised plan. 196 This Court had been informed that EXIM Bank and PFCL represent 98 per cent of the financial credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contract because of the economic slowdown which must have impacted the value of these assets. The proposed revised solution envisages a further haircut to the Arya-CoC where ₹ 1.5 crores less would be paid, over an extended timeline. There are no terms in the Resolution Plan or the Form H submitted by Arya-RP that could provide such a benefit to Seroco. To the contrary, Clause 19(vii) of the Resolution Plan provides that the preliminary approval of the Resolution Plan by the Arya-CoC is binding on Seroco: 19. Others: [ ] (vii) We understand that the preliminary approval of the resolution pian is the prerogative of the Committee of Creditors and the final approval of the same lies with the Hon'ble Adjudicating authority i.e. NCLT and we undertake that the decision of the Committee of Creditors and NCLT will be final and binding on us. Therefore, there is no scope to grant reliefs even on the terms of the Resolution Plan. As held in Section H of this judgement, common law remedies available under the 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls or modifications to a Resolution Plan after it has been submitted to the Adjudicating Authority, it must specifically provide for a tether under the IBC and/or the Regulations. This tether must be coupled with directions on narrowly defined grounds on which such actions are permissible and procedural directions, which may include the timelines in which they can be proposed, voting requirements and threshold for approval by the CoC (as the case may be). They must also contemplate at which stage the Corporate Debtor may be sent into liquidation by the Adjudicating Authority or otherwise, in the event of a failed negotiation for modification and/or withdrawal. These are matters for legislative policy. 204 In the present framework, even if an impermissible understanding of equity is imported through the route of residual powers or the terms of the Resolution Plan are interpreted in a manner that enables the appellants desired course of action, it is wholly unclear on whether a withdrawal of a CoC-approved Resolution Plan at a later stage of the process would result in the Adjudicating Authority directing mandatory liquidation of the Corporate Debtor. Pertinently, this direction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than seventy-one per cent cases pending for more than 180 days is in deviation of the original objective and timeline for CIRP that was envisaged by the IBC, Ibid., Page 20-21 . The delays were attributable to: (i) the NCLT taking considerable time in admitting CIRPs; (ii) late and unsolicited bids by Resolution Applicants after the original bidder becomes public upon passage of the deadline for submission of the Plan; and (iii) multiplicity of litigation and the appellate process to the NCLAT and the Supreme Court, Ibid., Page 23-25 . Such inordinate delays cause commercial uncertainty, degradation in the value of the Corporate Debtor and makes the insolvency process inefficient and expensive. We urge the NCLT and NCLAT to be sensitive to the effect of such delays on the insolvency resolution process and be cognizant that adjournments hamper the efficacy of the judicial process. The NCLT and the NCLAT should endeavor, on a best effort basis, to strictly adhere to the timelines stipulated under the IBC and clear pending resolution plans forthwith. Judicial delay was one of the major reasons for the failure of the insolvency regime that was in effect prior to the IBC. We cannot le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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