Approved Resolution Plan couldn’t be reopened or remanded by CoC

Conclusion: Once a Resolution Plan was approved by the CoC and submitted for approval under Section 31 of the Insolvency and Bankruptcy Code, 2016, the plan becomes binding inter se between the CoC and the Successful Resolution Applicant, and neither the CoC nor any subsequent reconstitution of the CoC can withdraw from or revisit the approved plan.

Held: Resolution Plan submitted by appellant–successful resolution applicant (SRA) was approved by the Committee of Creditors (CoC) with 100% voting share. Resolution Professional thereafter filed an application under Section 30(6) seeking approval of the Resolution Plan before the Adjudicating Authority. During pendency of the plan approval application, certain claims were admitted pursuant to orders of the Adjudicating Authority, resulting in reconstitution of the CoC with the inclusion of a new financial creditor. The reconstituted CoC subsequently passed resolutions seeking withdrawal of the plan approval application and cancellation of the Letter of Intent issued to the SRA. Applications were also filed seeking remand of the Resolution Plan to the CoC for reconsideration. Adjudicating Authority, relying upon three grounds—namely (i) alleged non-payment to secured creditors in terms of Section 53, (ii) change in constitution of the CoC preventing a newly inducted creditor from deliberating on the plan, and (iii) alleged procedural irregularities regarding the eligibility of the SRA—remanded the Resolution Plan to the CoC for reconsideration. Aggrieved, the SRA preferred the present appeal. Appellant contended that once the Resolution Plan had been approved by the CoC and submitted to the Adjudicating Authority, the CoC had no jurisdiction to withdraw or revisit the plan, and the Adjudicating Authority could not remand the plan on grounds that effectively interfered with the commercial wisdom of the CoC. It was further submitted that Regulation 12(3) of the CIRP Regulations expressly protects the validity of decisions taken by the CoC prior to inclusion of a new creditor, and therefore the subsequent induction of a creditor could not invalidate the earlier approval of the plan. Appellant also contended that the Resolution Plan contemplated payments to all creditors out of the total plan outlay and complied with Section 30(2). Respondents, including certain creditors and the Resolution Professional, supported the impugned order, arguing that the plan failed to provide payment to a secured creditor and that the reconstituted CoC was entitled to reconsider the plan. It was held that once the Resolution Plan was approved by the CoC and submitted before the Adjudicating Authority for approval under Section 31, the plan becomes binding inter se between the CoC and the successful resolution applicant, and neither the CoC nor the Resolution Professional had the authority to withdraw or revisit it. The subsequent reconstitution of the CoC could not affect the validity of the earlier decision approving the plan in view of Regulation 12(3). Further, under Regulation 18(2), meetings of the CoC during pendency of the plan approval application could not be used to take decisions affecting the already submitted Resolution Plan. The reasons recorded by the Adjudicating Authority for remanding the plan—relating to payment to secured creditors, change in CoC composition, and alleged ineligibility of the SRA—were found to be unsustainable and contrary to the statutory framework. Consequently, the impugned order remanding the Resolution Plan was set aside; the plan approval application was revived before the Adjudicating Authority for fresh consideration in accordance with law, and the applications seeking withdrawal and remand of the plan were rejected.