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Monday, October 26, 2020

NCLAT on insolvency process: ‘Resolution plan withdrawal after approval from CoC frustrates CIRP exercise’

In an earlier judgment in the matter of Educomp Solutions, the NCLAT had overturned a decision by the National Company Law Tribunal (NCLT) and ruled that a resolution plan once approved by the CoC could not be withdrawn by the resolution applicant on any grounds.

New Delhi | October 1, 2020 4:00:36 am

The National Company Law Appellate Tribunal (NCLAT) reiterated that a resolution plan once approved by the committee of creditors (CoC) of a company could not be withdrawn as it “frustrates the entire exercise of corporate insolvency resolution process”.

“A resolution applicant whose resolution plan stands approved by committee of creditors cannot be permitted to alter his position to the detriment of various stake holders after pushing out all potential rivals during the bidding process. This is fraught with disastrous consequences for the corporate debtor which may be pushed into liquidation,” the NCLAT said in its judgment.

In an earlier judgment in the matter of Educomp Solutions, the NCLAT had overturned a decision by the National Company Law Tribunal (NCLT) and ruled that a resolution plan once approved by the CoC could not be withdrawn by the resolution applicant on any grounds.

In its judgment on Wednesday as well, the NCLAT rejected a plea moved by Kundan Care Products which wanted to withdraw its resolution plan for Astonfield Solar (Gujarat) Private on grounds that it was “unfit for implementation”.

The company, Kundan Care, also wanted that its performance bank guarantee, be returned to it now that it was unwilling to go through with the process as the plan had been “rendered commercially unviable on account of delay in conclusion” of the insolvency process.

The plea moved by Kundan Care had already been rejected by a special bench-II of the National Company Law Tribunal (NCLT) at Delhi, which had ruled that it would not be appropriate for it to deal with an issue that was already sub-judice before the Supreme Court.

The adjudicating authority had also said that there was no provision in the Insolvency and Bankruptcy Code (IBC), which allowed the adjudicating authority to allow withdrawal of a resolution plan after approval by the CoC.

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