TMI Blog2021 (9) TMI 983X X X X Extracts X X X X X X X X Extracts X X X X ..... UPREME COURT ], Hon ble Supreme Court has referred to Section 12 of IBC which stipulates the timeline within which the CIRP is to be completed. Regulation 40A of the CIRP Regulations provides a detailed model timeline for CIRP which accounts for all the procedural eventualities that are permitted by the statute and the Regulations - As observed by the Hon ble Supreme Court, the Resolution Applicant is deemed to be aware of the IBC and its mechanisms. The Resolution Applicant, after obtaining the financial information of the Corporate Debtor through the informational utilities and perusing the IM, is assumed to have analysed the risks in the business of the Corporate Debtor and submitted a considered proposal. After the plan has been approved, the SRA could not be heard making the complaints regarding incomplete information (which here is even otherwise not established) to withdraw from the Resolution Plan. The grievance appears to be made just to raise a petit ground. The judgment in the matter of Ebix Singapore [ 2021 (9) TMI 672 - SUPREME COURT ] has been passed by the Hon ble Supreme Court on 13th September, 2021, after the arguments in these Appeals were over. The Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt) and was placed before the Adjudicating Authority for approval under Section 30/31 of the Insolvency and Bankruptcy Code, 2016 ( IBC for short), the Successful Resolution Applicant ( SRA for short) comprising of (i) Suraksha Asset Reconstruction Limited , (ii) Lakshdeep Investment and Finance Private Limited and (iii) Suraksha Reality Limited filed Application to the Adjudicating Authority to withdraw the Resolution Plan post approval by the CoC. The Adjudicating Authority granted Application permitting the SRA to withdraw the Resolution Plan and also directed the Resolution Professional- Mr. Shailen Shah to return the performance security given by the Resolution Applicant by way of Bank Guarantee. The concerned directions in para 75 of the impugned order may be reproduced, which reads as under:- 75. In view of the above discussion, we order as under: (i) The Resolution Applicant is granted permission to withdraw its Resolution Plan. (ii) Resolution Professional is directed to return the performance security of ₹ 75 Crores given by the Resolution Applicant by way of Bank guarantee within ten working days from the date of this order. (iii) Resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal may deem fit in eyes of equity, justice and good conscience. 5. Against the same impugned order, the Resolution Professional has filed Company Appeal (AT) (Insolvency) No. 826 of 2020. The Resolution Professional is also seeking setting aside of impugned order and seeking modification of the directions (ii) and (iii) (supra). 6. The SRA comprising of the three entities mentioned above has filed Company Appeal (AT) (Insolvency) No. 913 of 2020 claiming setting aside of observations of the Adjudicating Authority in Para 58 of the impugned order where the SRA made submissions pertaining to business losses and misstatements made by the Resolution Professional and loss of O M business. Para 58 of the impugned order reads as under:- 58. The Resolution Applicant has pointed out that there were serious adverse impacts due to delay and for which he has relied on various facts such as cancelling of O M Contracts and uncertainty regarding renewal of O M contract, substantial portion of other income in the cash flow meaning thereby that business was not generating cash from basic operations and erosion in the value of assets. The Resolution Applicant has also claimed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dum was submitted on 13.11.2018. The Resolution Plan was approved by 69.87 per cent of voting share by CoC on 16.11.2018 one day before expiry of 270 days. The Resolution Professional filed IA 476 of 2018 on 18.11.2018 for approval of the Resolution Plan. The SRA had submitted performance Bank guarantee for a sum of ₹ 75 Crores on 26.11.2018 (which has been kept alive and valid by judicial orders). 8. The impugned order shows that the SRA filed chart of dates and events of entire CIRP claiming that due to various applications filed time got consumed in completion of pleadings in various litigations and the application for approval of the Resolution Plan could not be heard. The various incidents relating to litigations were argued before the Adjudicating Authority and the SRA claimed before the Adjudicating Authority that even if the plan is approved, the same may not attain finality in the next one or two years. The SRA claimed before the Adjudicating Authority that the Adjudicating Authority had vide order dated 03.12.2019 directed CoC to revisit the Resolution Plan in the light of judgment of the Hon ble Supreme Court in the matter of Committee of Creditors of Essar Ste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 60 of the IBC and relying on the same held in para 23 of the impugned order as under:- 23. In this regard, we are of the view that as far as jurisdiction of NCLT as Adjudicating Authority u/s 31 of IBC, 2016 is concerned there cannot be any dispute that when a plan is approved by CoC and such plan is submitted by Resolution Professional before the Adjudicating Authority u/s 30(6) for its approval, the Adjudicating Authority is obliged either to approve or reject this plan, if such plan complies or does not comply with provisions of Section 30(2) of IBC, 2016, as the case may be. Admittedly, in this application, we are not concerned with the approval of a Resolution Plan on an application filed by Resolution Professional which has been approved by COC but we are concerned with the application filed by the Resolution Applicant for withdrawal of plan post CoC s approval. Therefore, in our humble view, provisions of Section 31 are not at all attracted in this situation. Having said so, now, we have to look whether there is any bar, express or implied, in the IBC, 2016 or Regulations made there-under to refuse such withdrawal so that our jobs become easy and there is no n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court in the matters of Committee of Creditors of Essar Steel India Limited Through Authorised Signatory vs. Satish Kumar Gupta Ors. [Civil Appeal No. 8766-67 of 2019] and K. Sashidhar vs. Indian Overseas Bank and Ors [MANU/SC/0189/2019]. It is argued that Section 60(5) could not have been relied on to grant application when there are specific provisions in the form of Sections 30 and 31 of the IBC. It is also argued that the grounds raised for withdrawal from the Resolution Plan were no grounds on the basis of which the Resolution Plan could be allowed to be withdrawn. It is argued that once the Resolution Professional has filed the application before the Adjudicating Authority for approval of the Resolution Plan, if for any reason it is not approved within reasonable time, such protracting of the matter before the Adjudicating Authority could not be ground for permitting withdrawal of the Resolution Plan. It is also argued that the apprehension created by the SRA that there was change of circumstances of the Corporate Debtor with regard to deterioration of the business and assets of the Corporate Debtor has no basis and such grounds also could not be raised for claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Debtor had 4870 Mega Watts contracts as on 06.04.2018 in the Information Memorandum, knowing very well that 174 MW of O M contracts were already withdrawn/ terminated by customers prior to CIRP. The SRA has argued that it became aware of the termination of 174 MW contracts from the reply of the Resolution Professional when it was filed before the Adjudicating Authority. The Counsel has further argued claiming that there is deterioration of services rendered by the Corporate Debtor and termination of contracts because of the management of the Corporate Debtor by the Resolution Professional in the course of CIRP. It is also argued that in the 14th CoC meeting held on 23.12.2019, the Appellants were allowed only a short duration to discuss their eligibility and all material discussions were taken in their absence. That, no opportunity was provided to SRA to withdraw the Resolution Plan. The argument is that the Resolution Plan had become unviable on account of delay in its approval and termination of contracts by the customers of the Corporate Debtor. 18. The argument of the SRA with regard to Para 58 is that the Adjudicating Authority wrongly did not accept the submissions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under several disparate statutes including SICA, SARFAESI, etc. The Hon ble Supreme Court then proceeded to refer to UNCITRAL Guide before analysing the framework of the statute. Reference was made to UNCITRAL Guide and BLRC Report. Then it was observed in Para 116 of the judgment as follows:- 116. Any claim seeking an exercise of the Adjudicating Authority's residuary powers under Section 60(5)(c) of the IBC, the NCLT's inherent powers under Rule 11 of the NCLT Rules 2016 or even the powers of this Court under Article 142 of the Constitution must be closely scrutinized for broader compliance with the insolvency framework and its underlying objective. The adjudicating mechanisms which have been specifically created by the statute, have a narrowly defined role in the process and must be circumspect in granting reliefs that may run counter to the timeliness and predictability that is central to the IBC. Any judicial creation of a procedural or substantive remedy that is not envisaged by the statute would not only violate the principle of separation of powers, but also run the risk of altering the delicate coordination that is designed by the IBC framework and have grave imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to the warning noted by the Hon ble Supreme Court in the matter of Essar Steel in Para 127 of the said judgment. 22. In para 164 of the judgment in the matter of Ebix Singapore (Supra), Hon ble Supreme Court has referred to Section 12 of IBC which stipulates the timeline within which the CIRP is to be completed. Regulation 40A of the CIRP Regulations provides a detailed model timeline for CIRP which accounts for all the procedural eventualities that are permitted by the statute and the Regulations. Para 164 has then reproduced Regulation 40A of CIRP Regulations. Further, Para 166 is as follows:- 166. 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 judgment - 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 the IBC. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roval 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 Rajagopal102 that Regulation 30A is directory, and not mandatory in nature since Section 12A of the IBC does not stipulate a deadline by which a withdrawal from the CIRP can be made. Thus, in exceptional cases withdrawals from the CIRP under Section 12A of IBC could be permitted even after the invitation of EOI has been issued. Regulation 30A of the CIRP Regulations was then amended by the IBBI (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations 2019, w.e.f. 25 July 2019 to reiterate the decision of this Court. The newly amended provision allows for withdrawals even after the invitation for expression of interest has been issued, provided that the applicant states the reasons justifying such withdrawal. Similarly, on 25 January 2019, a two judge Bench of this Court in Swiss Ribbons (supra) interpreted the true import of Section 12A and clarified that if the CoC is not yet constituted, a party can approach the Adjudicating Authority, which may in exerc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of equity or fairness that seek reliefs which are misaligned with the goals of the statute and upset the economic coordination envisaged between the parties, cannot be read into the statute through judicial interpretation. While parties have the freedom to negotiate certain commercial terms of the Resolution Plan to gain wide support, their ability to negotiate is circumscribed by the governing statute. A court cannot interpret the negotiated arrangements that are represented in the Resolution Plan in a manner that hampers the objectives of the IBC which is a speedy, predictable and timely resolution. The Resolution Applicant is deemed to be aware of the IBC and its mechanisms before it steps into the fray and consents to be bound by its underlying objectives. 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 busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 170 of the judgment it has been held as under:- 170. The IBC is silent on whether a successful Resolution Applicant can withdraw its Resolution Plan. However, the statutory framework laid down under the IBC and the CIRP Regulations provide a step-by-step procedure which is to be followed from the initiation of CIRP to the approval by the Adjudicating Authority. Regulation 40A describes a model-timeline for the CIRP that accounts for every eventuality that may arise between the commencement of the CIRP and approval of the Resolution Plan by the Adjudicating Authority, including the different stages for pressing a withdrawal of the CIRP under Section 12A. Even a modification to the RFRP is envisaged by the CIRP Rules and is subject to a timeline. The absence of any exit routes being stipulated under the statute for 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 Interpretation1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis supplied] 26. In the conclusion drawn by the Hon ble Supreme Court it has been observed in Para 246 as follows:- 246. 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 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 assum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was mis-information in Information Memorandum, we need not go into these details to burden this judgment with those details as the law is now clear on the issues as involved in the present Appeals. 29. For the above reasons, we pass the following orders:- I. Company Appeal (AT) (Insolvency) No. 814 of 2020 and Company Appeal (AT) (Insolvency) No. 826 of 2020 are allowed. The impugned order is quashed and set aside. II. Company Appeal (AT) (Insolvency) No. 913 of 2020 filed by the Successful Resolution Applicant is dismissed. III. The matter is remitted back to the Adjudicating Authority. Adjudicating Authority is directed to consider I.A. No. 476/2018 in C.P. (IB) No. 14/2018 filed by the Resolution Professional under Section 30/31 of IBC urgently and decide the same within one month. IV. When Company Appeal (AT) (Insolvency) No. 814 of 2020 and Company Appeal (AT) (Insolvency) No. 826 of 2020 were filed, on 21st September, 2020, the impugned direction in paragraph 75(ii) of Impugned Order were put on hold. During the pendency of these Appeals, the Successful Resolution Applicant was time to time directed to keep the Performance Bank Guarantee alive and the concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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