Withdrawal of Resolution plan under Insolvency and Bankruptcy Code, 2016:

An impediment for the Resolution Applicants

Statement of the Research problem

The Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as IBC) was introduced with
the purpose to resolve the economic loss caused in the execution of the affairs of the company to
the Corporate Debtors by providing for a corporate insolvency resolution process
(hereinafter referred to as CIRP) and thereby acknowledging them as 'going concern entities' to
Resolution Applicants (hereinafter referred to as RA) who are desirous to take over their
management and assets, and service their debts. The CIRP serves as a more advantageous option
instead of liquidation, since a going concern entity is more likely to fetch a higher value for the
creditors than accrued by the original sale of its assets.

Accordingly, interested resolution applicants participate in the CIRP and submit resolution plans,
which are basic instruments for taking over the corporate debtor, thereafter payment the left dues
of its creditors and the procedure of undertaking its revival and rehabilitation. Committee of
Creditors (hereinafter referred to as COC) examines the efficiency of the plan which gets
approved if voted by 65% or more persons in the COC. The approved plan is consequentially
examined and approved by the Adjudicating Authority or the National Company Law Tribunal
(hereinafter referred to as NCLT), which marks the conclusion of the CIRP. Once approved by
the NCLT, the plan must be effectively executed.

But what if the plan, between the stage of approval by COC and prior to its effective
execution, turns unviable and incapable of being implemented? Does the successful RA have
requisite remedy of withdrawal of the plan? Further what kind of consequences does such
RA encounter? Does it discourage prospective applicants? Does IBC prohibit the
withdrawal of such plans if they become unviable? There are many conflicting judicial
pronouncements in this regard. These questions are the research objectives of the researcher for
which she has attempted to find an answer.
Research Questions
 Main body

Chronological history of case laws on this present issue

Cases favoring the process of withdrawal of resolution plan after it’s approval by COC-

 Tarini Steel Company Pvt. Ltd . v. Trinity Auto Components Ltd.1( dated 9th March
2018): NCLAT had allowed the withdrawal of the plan after being approved by the COC
on account of being unviable.
 Committee of Creditors of Metalyst Forging Ltd. v. Deccan Value Investors L.P. &
Ors.( dated 7th February, 2020): It was held that a plan could be withdrawn even after
approval of the CoC. There isn’t any provision in IBC which bars or prohibits the NCLT
from ‘entertaining’ a plea of withdrawal or modification of the plan after CoC’s approval.

Cases against the act of withdrawal of the resolution plan-

 Re: M/s Astonfield Solar (Gujarat) Pvt. Ltd. 2(dated 3rd July, 2020): NCLT lacks the
jurisdiction to entertain the resolution applicant’s plea for withdrawal or modification of
the plan once the COC has approved it.
 CoC of Educomp Solutions Ltd. v. Ebix Singapore Pte. Ltd. & Anr 3.(dated 29th July,
2020); A two-member bench of the National Company Law Appellate Tribunal
(“NCLAT”) had rejected the successful resolution applicant’s application for withdrawal
of his plan, due to the apparent non-viability, following CoC’s approval, thereby
adjudicating that the NCLT has “no jurisdiction” to entertain such a plea once the plan is
approved by the COC.
 Kundan Care Products Ltd. v. Mr. Amit Gupta & Ors.4(dated 30th September, 2020):
The Appellant had filed an application before the NCLT seeking withdrawal of its
resolution plan on the basis that the resolution plan had become commercially unviable
and thus incapable to be implemented because of repetitive delays in concluding the
CIRP of the Corporate Debtor.
Decision in this case-
1
(Company Appeal (AT) (Ins.) No. 75/2018
2
I.A. 1679 of 2019 in C.P. No. (IB)-940(ND)/2018
3
Company Appeal (AT) (Insolvency) No. 203 of 2020.
4
Company Appeal (AT) (Insolvency) No. 653 of 2020
 I. In order to maintain the sanctity of the resolution process, it becomes essential that
the resolution plan of the Appellant which has been approved by the CoC of the
Corporate Debtor, is not permitted to be withdraw.
II. It was further held by the NCLAT that the Appellant cannot at an advanced stage into
the CIRP of the Corporate Debtor seek withdrawal of its resolution plan and wriggle
out of its obligations imposed under the resolution plan which has already been
approved by the CoC.
III. IBC does not have a provision permitting the Appellant to seek withdrawal of its
resolution plan.
IV. The terms of the resolution plan binds the Appellant.
V. The Appellant is prevented from wriggling out of its liabilities basis the principle of
estoppel by conduct;
VI. The Appellant being permitted to withdraw the resolution plan freely at such a
belated stage will amount to the stakeholders of the Corporate Debtor in a devasted
state.

Analysis of the provisions in IBC with respect to the present issue

 An analysis of the IBC reveals that it contains no provision which imposes a ban, bar or
prohibition, express or implied, for withdrawal or modification of a plan after the CoC
has granted the approval, nor any provision to compel specific performance of a plan. It
is silent on these aspects and no such prohibition or compulsion should be interpreted
through judicial pronouncements.
 Section 60(5)(c)5 of IBC which is a non-obstante provision bestows NCLT with the
jurisdiction to adjudicate upon any question of law or facts, arising out of or in relation to
the insolvency resolution or liquidation proceeding.
 Rule 116 of National Company Law Tribunal Rules, 2016 saves the powers of the
tribunal to make such orders which further the ends of the justice.

5
Notwithstanding anything to the contrary contained in any other law for the time being in force, the National
Company Law Tribunal shall have jurisdiction to entertain or dispose of any question of priorities or any question of
law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate
debtor or corporate person under this Code.
6
Nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the Tribunal to make such
orders as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal.
Importance of Viability of the Resolution Plan

 Section 30(2)(d) of the IBC mandates that a plan ‘must’ contain provisions for its
implementation and enforcement. Under Section 30(4), the CoC is mandated to satisfy
itself of the plan’s ‘viability’ before approving it. Similarly, the proviso to sub-section (1)
of Section 31 mandates the NCLT to ensure that the plan is capable of ‘effective
implementation’ before according its approval. Thus, far from prohibiting the
withdrawal/modification of a plan, IBC imposes a duty on the NCLT to reject a plan that
has subsequently become unfeasible or unviable after CoC’s approval. 
 In re Mount Carbon7: In order to attain approval, a plan should encompass a reasonable
prospect of success and must be workable, and the prospect of success of the plan would
be calculated from a projection of reasonable income and expense.
 Deccan Value Investors L.P. & Anr. v. Deustche Bank AG & Ors8(dated 27th
September, 2019): It was held that the Code neither invests the power or jurisdiction on
the NCLT to compel specific performance of a plan by an unwilling resolution applicant;
the scheme of the IBC mandates the acceptance of only a viable and lawful
resolution plan being executed at the hands of a willing resolution applicant; and the
fact that a resolution plan is to be approved by the CoC only after being satisfied that it is
feasible and viable, clearly concludes that if a plan is not viable or fit for implementation,
or is based on incorrect assumptions, which would lead to its failure and the eventual
death of the corporate debtor, it cannot be approved by the NCLT in exercise of its
power under section 31 of the Code.

COVID-19 vis-à-vis impact upon the RA: Example of a situation when the resolution plan
becomes unviable

 Sunil Kumar Agarwal RP of DIGJAM Ltd. v. Suspended Board of Directors of

DIGJAM Ltd. & Ors.9(dated 27th May, 2020): NCLT, Ahmedabad had permitted
modifications in the resolution plan after CoC's approval, at the resolution applicant's
request, on account of the COVID-19 crisis. A resolution applicant's “impossibility” to

7
242 B.R. 18 (Bankr, D. Colo. 1999)
8
MA Nos. 1272/2018 & 956/2018 in C.P. No. 1555 (IB)/MB/2017
9
IA 144/2020 in CP (IB) 594/NCLT/AHM/2018
 implement the resolution plan amidst Covid19, would ordinarily be based on a monetary
inability or difficulty. It is not possible to foresee every future consequence of COVID-19
and there can be more cases of resolution applicants pleading inability to implement
resolution plans on other grounds.
 Prospective resolution applicants are likely to be discouraged from coming forward to
present their plans, especially when the CoCs display a reluctant approach to accept
conditional or contingent plans.