NCLAT ruled that the Committee of Creditors (CoC) lacks jurisdiction to substitute or modify the Successful Resolution Applicant’s Post-Plan approval. NCLAT found that the Adjudicating Authority had erred in approving the modified Resolution Plan with a new Successful Resolution Applicant (SRA).
The National Company Law Appellate Tribunal (NCLAT), Principal Bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) was hearing an appeal and observed that once a Resolution Plan is approved by the Committee of Creditors (CoC), the substitution of the Resolution Applicant (SRA) post-approval is impermissible under the Insolvency and Bankruptcy Code (IBC) and CIRP Regulations, as such modifications are not within the jurisdiction of the CoC or the Adjudicating Authority.
In a recent appeal before the National Company Law Appellate Tribunal (NCLAT), the appellant contested an order dated December 4, 2023, from the National Company Law Tribunal (NCLT), Ahmedabad. The NCLT's order had approved a modified Resolution Plan submitted by 'Westend Investment and Finance Consultancy Private Limited' (Respondent No.4), substituting 'Invent Assets Securitization & Reconstruction Private Limited' (Respondent No.3) as the Resolution Applicant. This substitution was sanctioned by the Committee of Creditors (CoC) due to regulatory constraints on Respondent No.3's eligibility.
The Corporate Insolvency Resolution Process (CIRP) for the corporate debtor commenced on December 9, 2020. Initially, the CoC approved Respondent No.3’s Resolution Plan on October 21, 2021. However, following a Reserve Bank of India (RBI) circular which rendered Respondent No.3 ineligible, the CoC replaced them with Respondent No.4 as the new Resolution Applicant, with unanimous approval on May 5, 2023. The appellant, challenging this substitution, argued that it contravened the Insolvency and Bankruptcy Code (IBC) and CIRP Regulations. They contended that the CIRP should have been restarted with a new Form-G to allow all potential applicants to participate and that the extension of the CIRP beyond its original end date was improper.
The respondents defended the substitution, asserting it was necessary due to Respondent No.3's ineligibility and claimed the appellant had no standing to challenge the process as they were not affected by the CoC’s final decision. On September 1, 2023, the Adjudicating Authority directed the Resolution Professional to clarify the provisions of the Request for Resolution Plan (RFRP) regarding substitutions post-approval. Although the CoC authorized the Resolution Professional to amend the RFRP during its 30th meeting on October 20, 2023, no actual amendment was made, as the RFRP did not permit changing the Resolution Applicant after approval.
The Appellate Tribunal noted that Regulation 39 of the CIRP Regulations 2016 stipulates that only applicants on the final list of Prospective Resolution Applicants (PRAs) can have their plans considered. Respondent No.4, who was not on this list and had not submitted a plan, was wrongfully approved as the Successful Resolution Applicant (SRA), violating these regulations. The Adjudicating Authority’s reliance on the case of Puissant Towers India Private Limited v. Neueon Towers Limited and Others, REEDLAW 2023 NCLAT Chn 06519, was deemed misplaced as it addressed different issues. The Appellate Tribunal cited Supreme Court judgments in Ebix Singapore Private Limited v. CoC of Educomp Solutions Limited and Another, REEDLAW 2023 SC 08637 and SREI Multiple Asset Investment Trust Vision India Fund v. Deccan Chronicle Marketeers and Others, REEDLAW 2023 SC 03570, reinforcing that a Resolution Plan, once approved by the CoC, cannot be altered or withdrawn.
In conclusion, the NCLAT found that the Adjudicating Authority had erred in approving the modified Resolution Plan with a new SRA, given the expiration of the CIRP period and non-compliance with procedural norms. The Tribunal ruled that the CoC lacked the jurisdiction to substitute or modify the SRA post-plan approval and directed that a new Form G be issued within 90 days to initiate a fresh resolution process. Since no new plan was approved, the Resolution Professional was instructed to file for liquidation. The appeal was allowed, with costs to be borne by the parties.
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