Emphasising that improved profitability alone cannot justify refusing approval of a plan that meets Section 30(2), the Supreme Court has held that resolution plan is binding between the Committee of Creditors (CoC) and the successful resolution applicant even before National Company Law Tribunal (NCLT) approval. That binding effect flows from the IBC framework, rather than ordinary contract law.
Although the CoC retains an interest until implementation, that continuing role does not dilute the binding nature of the approved plan or permit decisions affecting the plan submitted to the adjudicating authority. The NCLT must verify the corporate debtor’s current financial position and cash balance against the plan’s terms. However, improved profitability alone cannot justify refusal if the plan complies with Section 30(2) IBC, added the Court.
Accordingly, clarifying over withdrawal of approved resolution plan, the Apex Court declined to interfere with the NCLAT’s order and requested joint, expeditious consideration of the plan-approval application and the holding company’s application to end the CIRP. Except for the ruling on the plan’s binding nature, its observations were prima facie and would not govern final adjudication.
Briefly, the Committee of Creditors (CoC) approved a resolution plan submitted by the consortium of S.M. Kamal Pasha and another applicant. While the plan awaited NCLT approval, a stay granted in earlier Supreme Court proceedings delayed its implementation. The CoC subsequently sought to withdraw its approval, arguing that the corporate debtor’s improved financial position would give the successful resolution applicant (SRA) a windfall and that fresh bids could secure better recovery for creditors.
The holding company separately sought to end the insolvency process through a one-time settlement (OTS). The NCLT permitted withdrawal, but the NCLAT reversed that decision and restored the applications for plan approval and consideration of the holding company’s proposal. The creditor banks appealed to the Supreme Court.
A Two-Judge Bench comprising Justice K. Vinod Chandran and Justice J.B. Pardiwala explained that a CoC-approved resolution plan is binding between the CoC and the SRA even before NCLT approval. This binding effect comes from the IBC framework, not merely from ordinary contract law. Applying Ebix Singapore (P) Ltd. v. Committee of Creditors of Educomp Solutions Ltd. [(2022) 2 SCC 401], the Court held that the restriction against withdrawing or modifying an approved plan applies equally to the CoC. The NCLT cannot second-guess commercial wisdom or direct unilateral changes, and its scrutiny must focus on compliance with Section 30(2) IBC.
Explaining on withdrawal of approved resolution plan, the Apex Court further clarified that the CoC’s continuing role until implementation does not permit it to take decisions affecting the plan submitted to the adjudicating authority or dilute the plan’s binding nature. Reading Sections 12A, 30 and 31 together, the Court held that withdrawal of the insolvency application is available only until the CoC approves the resolution plan. Once the approved plan is placed before the NCLT, neither the insolvency application nor the approved plan can be withdrawn. The plan remains binding on the CoC and the SRA.
