The Supreme Court has declared the position in the law to not enable a withdrawal or modification to a successful Resolution Applicant after its submission to the Adjudicating Authority, long delays in approving the Resolution Plan by the Adjudicating Authority affect the subsequent implementation of the plan. These delays, if systemic and frequent, will have an undeniable impact on the commercial assessment that the parties undertake during the course of the negotiation.
The Supreme Court Division Bench comprising Justices Dr. Dhananjaya Y. Chandrachud and M. R. Shah was hearing a case on Monday on corporate insolvency.
In a 190-page exhaustive judgment, the Supreme Court Bench observed, "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."
The thirty-second Report of the Ministry of Corporate Affairs’ Standing Committee on Finance (2020-2021) on the ‘Implementation of Insolvency and Bankruptcy Code- Pitfalls and Solutions’127 represented a despondent state of affairs with regard to the pendency of applications before the Adjudicating Authority.
In its observations, the Report noted that a delay in the resolution process with more than seventy-one per cent of cases pending for more than 180 days is in deviation of the original objective and timeline for CIRP that was envisaged by the IBC129. The delays were attributable to:
the NCLT taking the considerable time in admitting CIRPs;
late and unsolicited bids by Resolution Applicants after the original bidder becomes public upon passage of the deadline for submission of the Plan;
the multiplicity of litigation and the appellate process to the NCLAT and the Supreme Court. Such inordinate delays cause commercial uncertainty, degradation in the value of the Corporate Debtor and make the insolvency process inefficient and expensive.
The Apex Court urged 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 endeavour, on a best effort basis, to strictly adhere to the timelines stipulated under the IBC and clear pending resolution plans forthwith. The judicial delay was one of the major reasons for the failure of the insolvency regime that was in effect prior to the IBC.
The Supreme Court couldn't let the present insolvency regime meet the same fate. In light of the above, the appeals preferred by Ebix (Civil Appeal 3224 of 2020) and Seroco (Civil Appeal 295 of 2021) stand dismissed. The parties to the appeal preferred by Kundan Care (Civil Appeal 3560 of 2020) shall abide by the directions issued by this Court in the exercise of its Article 142 powers as a one-time relief, as specified in paragraph 196 (Section K.2) of this judgement.
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