IMPORTANT POINT
Corporate Insolvency Resolution Process – Resolution applicant cannot be permitted to withdraw or modify resolution plan after approval by Committee of Creditors and before an order under Section 31(1) of IBC is passed.

ORDER :

1. This order would decide the cross-appeals under Section 62 of the Insolvency and Bankruptcy Code, 2016¹ [“the Code” for short] filed by the successful resolution applicants - 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.

2. The company in question, the corporate debtor, is Metalyst Forgings Ltd.

3. In our opinion, the impugned judgment dated 07.02.2020 passed by the National Company Law Appellate Tribunal² [“NCLAT” for short], New Delhi, which upholds the order dated 27.09.2019 passed by the National Company Law Tribunal³ [“NCLT” or “adjudicating authority” for short], Mumbai Bench, Mumbai, is legally flawed and unsustainable in view of the judgment of this Court in Ebix Singapore Private Limited vs. Committee of Creditors of Educomp Solutions Limited and Another, (2022) 2 SCC 401.

4. This Court in Ebix Singapore Private Limited (supra), has inter alia held that the resolution applicant cannot withdraw or modify the resolution plan, after the same is approved by the Committee of Creditors. It is immaterial that post approval by the Committee of Creditors, there is consideration under Section 31(1) of the Code by the adjudicating authority for final approval.

5. The judgment in Ebix Singapore Private Limited (supra) elaborates and sets out several reasons why the resolution applicant cannot be permitted to withdraw or modify the resolution plan after approval by the Committee of Creditors, and before an order under Section 31(1) of the Code is passed. These reasons include delay, consequences of the delay and the uncertainty and complexities that would arise in the Corporate Insolvency Resolution Process, which are unacceptable and not contemplated in law. Even the terms of the resolution plan, will not permit withdrawal or modification in the absence of a statutory provision, that allow withdrawal or amendment in the resolution plan after approval by the Committee of Creditors. The resolution plan approved by the Committee of Creditors is a creature of the Code and not a pure contract between two consenting parties.

6. During the course of arguments, our attention was drawn to the proviso to Section 31(1) of the Code, which postulates that the adjudicating authority, before passing an order for approval of the resolution plan, must satisfy itself that the resolution plan has provisions for its effective implementation. Ebix Singapore Private Limited (supra) did examine this provision but rejected the argument on several grounds, including absence of legislative mandate to direct unwilling Committee of Creditors to re-negotiate or agree to withdrawal of the resolution plan at the behest of the resolution applicant. The effect of approval by the adjudicating authority under Section 31(1) of the Code makes the resolution plan binding on all stakeholders, even those who are not members of the Committee of Creditors. The scrutiny by the adjudicating authority for grant of approval in terms of Section 31(1), read with other provisions of the Code, is limited and restricted. It does not allow or permit the resolution applicant to unilaterally amend/modify, or withdraw the resolution plan post approval by the Committee of Creditors.

7. On facts and to justify the withdrawal, it was submitted that in the present case, the successful resolution applicants were prevented, and were handicapped because of lack of information or rather fraud on the part of the resolution professional. Four aspects were highlighted:

(a) It was concealed that 70 per cent of the revenue of the corporate debtor came from trading, and not from manufacturing.

(b) The Mott Macdonald Report dated 30.09.2016 is factually incorrect and flawed.

(c) Misleading and false statement was made with regard to the uninstalled imported components of 12,500 M.T. Press, which were stored in the land of a sister concern - Clo