In its decision dated September 13, 2021, in the case of Ebix Singapore Private Limited v. Committee of Creditors of Educomp Solutions Limited and Another (Civil Appeal No. 3224 of 2020), the Hon. Supreme Court ("SC") held that a submitted resolution plan is binding and irrevocable between the Committee of Creditors ("CoC") and the successful resolution applicant under the terms of the Insolvency and Bankruptcy Code, 2016 ("IBC") and the Insolvency Procedures Act.
In the instant case titled Ebix Singapore Private Limited v. Committee of Creditors of Educomp Solutions Limited and Another, the issue raised for clarification before the Apex Court was:
Whether a resolution applicant has the right to withdraw or alter its resolution plan after the resolution professional has submitted it to the adjudicating authority and before the latter approves it in accordance with IBC Section 31(1)?
With regard to this issue, In Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta [2020] 8 SCC 531, the SC took note of its ruling. which, while underlining the IBC's justification for making fast resolution of stressed assets a crucial component, was forced to abide by the actus curiae neminem gravabit maxim that no individual should suffer as a result of the court's error or the process's delay. The SC decided to merely strike down the word "mandatorily," leaving the rest of Section 12(3) of the IBC intact, after noting that earlier statutory experiments for insolvency had failed due to delay as a result of protracted legal proceedings. The SC concluded that the law as it currently stands requires that the CIRP be completed within 330 days, taking into account the time spent on judicial processes, with only exceptional circumstances being granted a brief extension. returning to the subject of a successful resolution applicant under the IBC withdrawing or changing their resolution plan.
The SC noted that in the absence of a clear legislative provision, the SC will not grant the Adjudicating Authority the authority to order a reluctant CoC to renegotiate a submitted resolution plan or consent to its withdrawal at the request of the resolution applicant. Before exercising its authority of approval or rejection under Section 31 of the IBC, the Adjudicating Authority may only ask the CoC to reevaluate certain components of the resolution plan to verify conformity with Section 30(2) of the IBC. The SC ruled in dismissing the current appeal that the Adjudicating Authority's residual powers under the IBC cannot be used to enact procedural remedies that have a significant impact on the insolvency process. Enabling the successful resolution applicant to withdraw or modify the resolution plan after it has been presented to the adjudicating authority would lead to further rounds of talks and litigation unrelated to the IBC's goals, potentially extending the IBC's bankruptcy procedure.
The Court categorically stated that,
“The delays were attributable to (i) the NCLT taking considerable time in admitting CIRPs; (ii) late and unsolicited bids by Resolution Applicants after the original bidder becomes public upon passage of the deadline for submission of the Plan; and (iii) multiplicity of litigation and the appellate process to the NCLAT and the Supreme Court130. Such inordinate delays cause commercial uncertainty, and degradation in the value of the Corporate Debtor and make the insolvency process inefficient and expensive. We urge the NCLT and NCLAT to be sensitive to the effect of such delays on the insolvency resolution process and be cognizant that adjournments hamper the efficacy of the judicial process. The NCLT and the NCLAT should endeavour, on a best effort basis, to strictly adhere to the timelines stipulated under the IBC and clear pending resolution plans forthwith. The judicial delay was one of the major reasons for the failure of the insolvency regime that was in effect prior to the IBC. We cannot let the present insolvency regime meet the same fate.”