The National Company Law Appellate Tribunal ("NCLAT"), while supporting the decision of the National Company Law Tribunal, New Delhi Bench ("NCLT"), held in a significant decision that the successful resolution applicant cannot be allowed to withdraw its resolution plan once it has been approved by the committee of creditors ("CoC") of the corporate debtor in order to preserve the sanctity of the corporate insolvency resolution process ("CIRP").
In the instant case titled Committee of Creditors of Metalyst Forging Ltd. v. Deccan Value Investors LP, the issue raised for clarification before the NCLAT was:
Whether the resolution plan can be withdrawn or not?
With regard to this issue, while upholding the NCLT's decision, the NCLAT cited the ruling in Committee of Creditors of Educomp Solutions Ltd. v. EBIX Singapore Pte Ltd. and held that it is crucial that the Appellant's resolution plan, which has been approved by the CoC of the Corporate Debtor, not be withdrawn in order to maintain the sanctity of the resolution process. The NCLAT further ruled that the Appellant could not, at this point in the Corporate Debtor's CIRP, request the withdrawal of its resolution plan or escape the requirements imposed by the resolution plan, which has already been accepted by the CoC.
The NCLAT also cited the Supreme Court of India's ruling in K. Shashidhar v. Indian Overseas Bank & Ors. and concluded that an adjudicating authority lacks the necessary authority to allow the withdrawal of a resolution plan and that its role in reviewing the CoC's decision to approve the Appellant's resolution plan is limited to ensuring that it complies with Section 30(2) of the IBC.
The NCLAT categorically stated that,
“The aforesaid provision makes it clear that the Adjudicating Authority, if it is satisfied that the resolution plan as approved by the 'Committee of Creditors' meets the requirements as referred to in sub-section (2) of Section 30, then only will approve the resolution plan. Where the Adjudicating Authority is satisfied that the resolution plan does not confirm the requirements of Section 30(2), by an order rejecting the 'resolution plan'."
As a result, the NCLAT rejected the Appellant's appeal and determined that the NCLT's order was not flawed by any legal principles. As a result, the NCLT will now have to decide whether to accept or reject the resolution plan proposed by the appellant. The judgement has opened up a new challenge for potential applicants for resolution, one that requires them to exercise sufficient due diligence and take into account a variety of complex "material adverse effects" in their resolution plan before submitting it for the resolution professional's and/or the CoC's consideration. The judgement also makes it quite apparent that neither the adjudicating body nor the NCLAT will consider applications that would render the intent and scope of the IBC meaningless.