The Supreme Court of India has established that a Committee of Creditors (CoC) cannot withdraw an approved insolvency resolution plan once it has been submitted to the Adjudicating Authority for confirmation, even if the corporate debtor’s financial situation significantly improves during the pendency of proceedings. In a ruling delivered by Justices J.B. Pardiwala and K. Vinod Chandran, the court affirmed that the commercial wisdom of the creditors, while central to the insolvency process, does not extend to unilaterally abandoning a commitment once the statutory process has reached the stage of confirmation before the National Company Law Tribunal (NCLT).

The dispute arose from insolvency proceedings against a corporate debtor originally involved in toll collection on National Highway 45. When the resolution plan was initially approved by the CoC, the corporate debtor’s financial health was fragile, largely due to the impact of the COVID-19 pandemic. The successful resolution applicant had proposed a resolution amount of ₹172.55 crore at a time when the company held an opening cash balance of approximately ₹30 crore. However, extended legal delays—stemming from various rounds of litigation—resulted in a dramatic shift in the company’s fortunes. By the time the plan was ready for final approval, the corporate debtor’s opening cash balance had risen to roughly ₹165 crore.

Seeking to capitalize on this turnaround, the CoC unanimously requested to withdraw its approval, arguing that the resolution applicant would reap a windfall gain by acquiring the entity with significantly lower fresh capital infusion than originally anticipated. They sought the issuance of a new invitation for expressions of interest, hoping for better offers. Concurrently, the holding company of the corporate debtor petitioned for the abandonment of the Corporate Insolvency Resolution Process (CIRP) entirely, claiming it could settle creditor dues through a one-time settlement. The NCLT initially allowed the withdrawal, but the National Company Law Appellate Tribunal (NCLAT) subsequently set aside that order, leading to the appeal before the Supreme Court.

Financial Turnaround Sparks Litigation Crisis

In rejecting the appeal, the Supreme Court clarified that the legislative scheme of the Insolvency and Bankruptcy Code (IBC), 2016, offers no "exit route" for the CoC once a plan moves past the stage of internal approval. The court emphasized that the binding nature of the plan is not merely a matter of private contract, but a statutory mandate designed to ensure the orderly resolution of distressed assets. The justices reasoned that allowing the CoC to "turn turtle" whenever market conditions improve would undermine the very certainty that the insolvency framework aims to provide.

Addressing the argument regarding the "windfall" gain for the successful resolution applicant , the court observed that such shifts in profitability were part of the risk-reward matrix inherent in long-term commercial resolutions. Justice K. Vinod Chandran noted, "Read together, we are of the opinion that the withdrawal of an application can only be till the CoC approves the plan and after it is placed before the Adjudicating Authority , there can be no withdrawal either of the application or the approved Resolution Plan." This observation underscores the court’s commitment to preventing the abuse of the CIRP process by creditors who may seek to re-negotiate agreements based on fluctuating asset values.

Binding Nature of Insolvency Framework

The court drew heavily from its previous landmark judgment in Ebix Singapore (P) Ltd. v. Committee of Creditors of Educomp Solutions Ltd. , which established that the Insolvency and Bankruptcy Code does not provide a framework for the withdrawal or modification of a resolution plan by either the CoC or the resolution applicant once the document is before the Adjudicating Authority. The bench observed that the statutory provisions of Section 12A of the IBC, which allow for the withdrawal of insolvency applications under specific circumstances with a 90 percent majority vote, cannot be isolated from the broader procedural mandates found in Sections 30 and 31.

The Supreme Court rejected the contention that the CoC, by virtue of its continued interest in the plan until implementation, possesses a latent power to pivot. While acknowledging that the CoC remains an active body throughout the resolution process, the court clarified that this status does not grant it authority to act in contradiction to the binding nature of an approved plan. The decision serves as a significant deterrent against institutionalized opportunism, ensuring that the resolution process remains predictable for bidders who commit time, resources, and performance bonds to the revival of failing companies.

Mandate for Adjudicating Authority Review

Despite dismissing the CoC's plea for withdrawal, the Supreme Court did not entirely ignore the changed circumstances of the corporate debtor. Instead, it directed the NCLT to expedite the consideration of all pending applications, including both the proposal for the confirmation of the resolution plan and the holding company’s one-time settlement bid. The court explicitly stated that the NCLT must verify whether the current plan meets the requirements stipulated under Section 30(2) of the IBC, which requires that creditors receive at least as much as they would in a liquidation scenario, and that the distribution remains fair and equitable.

The court cautioned that while the improved financial position is a relevant factor for the NCLT’s consideration, it is not an automatic basis for rejecting an otherwise compliant plan. "The improved profitability alone cannot be a reason to refuse approval if the Resolution Plan meets the requirements under sub-section (2) of Section 30," the judgment clarified. The Adjudicating Authority is now tasked with weighing the viability of the current resolution plan against the alternative of a one-time settlement , while ensuring the process adheres to the primary objectives of value maximization and the timely resolution of debt. The appeal was disposed of with a final directive for the NCLT to render a decision as soon as possible to mitigate the impact of the delays already incurred.