Introduction

The case of Kundan Care Products Ltd. (Through Its Director) v. Amit Gupta And Others adjudicated by the National Company Law Appellate Tribunal (NCLAT) on September 30, 2020, has set a significant precedent in the realm of insolvency resolution under the Insolvency and Bankruptcy Code, 2016 (I&B Code). This case revolves around the appellant, Kundan Care Products Ltd., challenging the rejection of its application to withdraw its approved resolution plan for the corporate debtor, M/s Astonfield Solar (Gujarat) Pvt. Ltd., by the National Company Law Tribunal (NCLT). Key issues include the admissibility of withdrawal of an approved resolution plan and the powers of the Adjudicating Authority in such matters.

Summary of the Judgment

Kundan Care Products Ltd., having emerged as the successful resolution applicant in the insolvency resolution process (CIRP) of Astonfield Solar, sought to withdraw its approved resolution plan along with the cancellation of its Performance Bank Guarantee. The NCLT rejected this application on the grounds of ongoing litigation in the Apex Court that rendered the issue sub-judice. The appellant contended that the I&B Code does not prohibit withdrawal post-approval and that their withdrawal would not disrupt the CIRP. The NCLAT upheld the NCLT's decision, emphasizing the sanctity of the resolution process and the binding nature of an approved resolution plan, thereby dismissing the appeal.

Analysis

Precedents Cited

The judgment extensively references previous rulings to bolster its stance. Notably:

• Deccan Value Investors LP v. Ebix Singapore Pte. Ltd. & Anr. (Company Appeal (AT) No.1276/2019): Affirmed that post-approval, a resolution plan cannot be withdrawn by the successful resolution applicant.
• Committee of Creditors of Educomp Solutions Ltd. v. EBIX Singapore Pte Ltd. (Company Appeal (AT) (Insolvency) No.203 of 2020): Reiterated that Adjudicating Authorities cannot override the Committee of Creditors' decisions unless specific grounds under Section 32 (a to e) of the I&B Code are met.
• K Shashidhar v. Indian Overseas Bank and Ors. (2019): Highlighted the limited scope of Adjudicating Authorities in interfering with the Committee of Creditors' commercial decisions.

These precedents collectively underscore the judiciary's commitment to preserving the Committee of Creditors' autonomy in insolvency resolutions, preventing unilateral actions by resolution applicants that could jeopardize the CIRP.

Legal Reasoning

The tribunal's legal reasoning centers on several core principles:

• Binding Nature of Approved Resolution Plans: Once the Committee of Creditors approves a resolution plan with the requisite majority, it becomes a binding contract that cannot be unilaterally altered or withdrawn by the resolution applicant.
• Jurisdiction of the Adjudicating Authority: The NCLT lacks the jurisdiction to entertain withdrawal applications for approved resolution plans, especially when such matters are sub-judice before the Apex Court.
• Estoppel and Contractual Obligations: The resolution applicant is estopped from withdrawing the plan after having accepted its terms, reinforcing the principle of contractual obligations under the I&B Code.
• Protection of Stakeholders: Allowing withdrawal post-approval could lead to liquidation, adversely affecting all stakeholders involved, thereby contravening the I&B Code's objective of maximizing asset value and balancing stakeholder interests.

The tribunal meticulously addressed the appellant's arguments, reaffirming that the I&B Code does not provide provisions for such withdrawals and that the integrity of the CIRP must be upheld.

Impact

This judgment reinforces the authority of the Committee of Creditors in the CIRP, ensuring that once a resolution plan is approved, it is final and binding. The decision deters resolution applicants from attempting to retract their plans post-approval, thereby maintaining the stability and predictability of insolvency proceedings. Future cases will likely reference this judgment to uphold the sanctity of approved resolution plans, limiting judicial interference unless specific statutory grounds are present.

Complex Concepts Simplified

Resolution Plan

A resolution plan is a proposal submitted by potential buyers (resolution applicants) outlining how they intend to revive the insolvent company, repay creditors, and ensure the company's continuity.

Committee of Creditors (CoC)

The CoC comprises financial creditors of the insolvent company. They have the authority to approve or reject resolution plans based on their feasibility and viability.

Adjudicating Authority

This refers to the National Company Law Tribunal (NCLT) at the initial stage and the National Company Law Appellate Tribunal (NCLAT) upon appeal. They oversee the CIRP, ensuring compliance with the I&B Code.

Sub-Judice

A matter is considered sub-judice when it is under judicial consideration and therefore prohibited from being discussed publicly. In this case, the issue was pending before the Apex Court, making it sub-judice.

Conclusion

The Kundan Care Products Ltd. v. Amit Gupta And Others judgment serves as a pivotal reference in insolvency jurisprudence, underscoring the inviolable nature of approved resolution plans. By disallowing the withdrawal of such plans, the NCLAT ensures that the CIRP remains a structured and reliable mechanism for corporate insolvency resolution. This decision not only fortifies the role of the Committee of Creditors but also safeguards the interests of all stakeholders involved, promoting confidence in the insolvency resolution framework established by the I&B Code.

Moving forward, stakeholders in CIRP processes can anticipate robust protections against unilateral withdrawals of approved plans, thereby fostering a more stable and predictable insolvency resolution environment.