Supreme Court held that once a resolution plan is approved by the Committee of Creditors, it cannot be withdrawn or modified by the resolution applicant.
The Supreme Court Bench of Justice Sanjiv Khanna and Justice Dipankar Datta held that under the Insolvency and Bankruptcy Code, once a resolution plan is approved by the Committee of Creditors, it cannot be withdrawn or modified by the resolution applicant. This principle, established in Ebix Singapore Private Limited v. Committee of Creditors of Educomp Solutions Limited and Another, REEDLAW 2021 SC 09523, prevents delays and uncertainties in the insolvency resolution process. The Court emphasized that resolution plans are binding upon approval by the adjudicating authority and that resolution applicants must exercise diligence and caution in their submissions. Therefore, the Court set aside the National Company Law Appellate Tribunal's judgment and approved the resolution plan submitted by Deccan Value Investors L.P. and DVI PE (Mauritius) Ltd.
The Supreme Court issued a significant ruling on cross-appeals under Section 62 of the Insolvency and Bankruptcy Code, 2016. The appeals were filed by Deccan Value Investors L.P. and DVI PE (Mauritius) Ltd., the Committee of Creditors of Metalyst Forgings Limited, and Dinkar Venkatasubramanian, the Resolution Professional of Metalyst Forgings Limited. The Court found the impugned judgment of the NCLAT upholding the NCLT's order legally flawed and unsustainable, citing the judgment in Ebix Singapore Private Limited v. Committee of Creditors of Educomp Solutions Limited and Another, REEDLAW 2021 SC 09523. The ruling in Ebix Singapore Private Limited established that a resolution applicant cannot withdraw or modify a resolution plan after the Committee of Creditors' approval. This principle aims to prevent delays and uncertainties in the insolvency resolution process.
Despite arguments regarding the lack of information or fraud by the resolution professional, the Court concluded that these did not constitute fraud. The Court examined the available data, including the information memorandum and virtual data room, which were accessible to prospective resolution applicants. It dismissed claims of misinformation regarding the corporate debtor's financials and manufacturing capacity, emphasizing the responsibility of resolution applicants to conduct due diligence.
The Apex Court highlighted that resolution plans are prepared by financial experts after thorough analysis and scrutiny. While acknowledging potential data asymmetry in distressed companies, the Court held that resolution applicants must exercise caution and diligence before submitting plans. Consequently, the Court set aside the NCLAT's judgment and approved the resolution plan submitted by Deccan Value Investors L.P. and DVI PE (Mauritius) Ltd.
The Supreme Court directed parties to appear before the NCLT to expedite further proceedings, effectively resolving the matter and disposing of pending applications.
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