While directing a liquidator to proceed with the remaining part of the liquidation in accordance with the CoC, the Supreme Court has held that once the Committee of Creditors (CoC), after applying its commercial wisdom, has approved the resolution plan, the successful resolution applicant (SRA) is prohibited from negotiating further and is expected to act in a time bound manner to implement the plan.

The Apex Court was considering the appeals filed under Section 62 of the Insolvency and Bankruptcy Code, 2016 (Code) challenging the correctness of the judgment passed by the National Company Law Appellate Tribunal, New Delhi (NCLAT) in a Company Appeal.

The Division Bench of Justice K. V. Viswanathan and Justice Vipul M. Pancholi held, “Therefore, it is clear that once the CoC, after applying its commercial wisdom, has approved the resolution plan, the SRA is prohibited from negotiating further and is expected to act in a time bound manner to implement the plan. In the present case, it is seen that the appellant was deliberately trying to delay the implementation of the plan citing the purported conditionality of the LoI. This defeats the purpose of the Code as the otherwise timebound and swift process is now being delayed at the behest of the appellant.”

AOR Purti Gupta represented the Appellant while Senior Advocate Gaurav Agarwal represented the Respondent.

Factual Background

The Corporate Insolvency Resolution Process (CIRP) out of which the appeals arose concerned the Corporate Debtor M/s. Oracle Home Textiles Limited. The CIRP was admitted and with the permission of the National Company Law Tribunal (NCLT), the appellant submitted a Resolution Plan. The appellant was the Promotor/Director of M/s. Oracle Homes Textiles Limited. This entity had a certificate of MSME (Micro, Small, and Medium Enterprises). The Resolution Plan submitted by him was approved by the Committee of Creditors (CoC).When the appellant’s plan was submitted and was under consideration, certain third parties had moved the Adjudicating Authority as prospective resolution applicants (PRA) seeking permission to file Resolution Plans for the Corporate-Debtor. Those applications were pending before the Adjudicating Authority. A Letter of Intent (LoI) was issued by the RP to the appellant. The appellant characterized the LoI as a conditional LoI but the RP refused to treat them as conditional.

The appellant filed an application seeking re-issuance of an unconditional LoI. A Second LoI came to be issued on the ground that the appellant failed to submit the accepted copy of the LoI within the time stipulated. When the acceptance of the third LOI was not done, the RP informed the appellant that the earnest money deposit of Rs 1 crore was forfeited as per the terms and conditions of the RFRP. The appellant filed an application before the Adjudicating Authority seeking restoration of Earnest Money Deposit (EMD) contending that the forfeiture was contrary to clause 1.9.4 of the RFRP. The CIRP period came to an end and the CoC voted on the liquidation of the Corporate-Debtor. The same was approved with a voting percentage of 99.61%. After the CoC voted for liquidation, the RP filed an application seeking approval for liquidation based upon the decision of the CoC in its 33rd meeting.

Two Interlocutory Applications of the appellant and the Interlocutory Application of the RP were disposed of by three separate orders by the Adjudicating Authority. While the two applications of the appellant were dismissed, the application of the RP came to be allowed. This resulted in three appeals being filed before the NCLAT by the appellant. By the impugned order, all three Company Appeals were dismissed. It was in such circumstances that the appellant approached the Apex Court.

Reasoning

The Bench, at the outset, clarified that the stipulation about the LoI being subject to the outcome of the pending applications of PRA would not make the LoI conditional for the appellant to renege from the plan. Considering the minutes of meetings of the CoC, the Bench noted that the appellant was made aware of the pending litigation and the other conditions which the LoIs had allegedly imposed on the appellant.

“Equally, the condition with regard to the underwriting,the risk of staff and workers in any pending litigation, cannot be said to be a conditional one on the facts of the present case. As the discussion in the minutes indicate, the appellant in the 27th CoC meeting agreed to the same. The appellant cannot be permitted to blow hot and cold”, it added.

Considering that the the RFRP clearly stipulated that where there is failure to submit the performance guarantee within the stipulated time or in case of any non-compliance with the plan, there could be forfeiture of EMD, the Bench stated, “Hence, we find no illegality in the RP forfeiting the EMD of Rs.1,00,00,000/- (Rupees one crore).”

The Bench further stated, “Not only did the appellant not object to the terms, as evidenced from the minutes of the meetings, he had expressly agreed for the same. The device adopted by the appellant was an indirect attempt to renege from the plan. It was a clear subterfuge. Knowing fully well that one cannot withdraw directly from the plan approved by the CoC, an attempt was made in an indirect manner by harping on about certain stipulations as conditionalities to shift the blame on the CoC for the appellant’s unwillingness to take the plan forward. This clever ploy has rightly been scotched by the fora below. If such artifices are allowed to succeed, the entire architecture of the IBC would crumble and the laudable objects sought to be achieved by the said Code would become a far cry.”

Referring to clause 2 of Section 33 and the explanation to the said clause 2, the Bench clarified that where an SRA after lulling the CoC to believe that it will comply with the plan, reneges from the plan and where the CoC resolves to liquidate the company so as to realize the money and disburse the claims of the different claimants, no fault can be found with the process. As per the Bench, the fora below have rightly refused to interfere in the well-informed commercial decision of the CoC to reject the plan of the appellant and liquidate the CD, which was approved with a voting percentage of 99.61%.

Thus, dismissing the appeal, the Bench ordered, “The respondent No.3 Liquidator is directed to proceed with the remaining part of the liquidation in accordance with the Code.”

Cause Title: Sanjay Dave v. Andhra Bank Ltd. & Ors. (Neutral Citation: 2026 INSC 580)

Appearance

Appellant: AOR Purti Gupta, Advocates Henna George, Sunidhi Sah, Khushi Sharma, Pooja

Respondent: Senior Advocate Gaurav Agarwal, AOR Surya Prakash, Advocate Arun Kumar Shukla, Naman Shukla, Yasharth Shukla, Anjali Sharma, Mandeep Singh Vinaik, Deepak Bashta, AOR Shagun Matta

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