The Supreme Court on Monday, October 26, ruled that a Committee of Creditors (CoC) cannot withdraw its approval of a resolution plan after the plan has been submitted to the National Company Law Tribunal (NCLT) for approval, merely because the corporate debtor's financial position improved in the intervening period, LiveLaw reported.

Source: LiveLaw

A bench of Justice J.B. Pardiwala and Justice K. Vinod Chandran affirmed the National Company Law Appellate Tribunal's (NCLAT) decision declining to accept the CoC's withdrawal, in an appeal filed by Bank of India and other financial creditors (Bank of India & Ors. v. S.M. Kamal Pasha & Ors.). "The improved profitability alone cannot be a reason to refuse approval if the Resolution Plan meets the requirements under sub-section (2) of Section 30," the court observed, Taxscan reported.

Source: Taxscan

Rs 172.55 croreValue of the approved resolution plan (yaani about Rs 1.73 billion)
Rs 30 crore to Rs 165 croreRise in the debtor's opening balance while approval was pending
Section 30(2), IBCThe test a plan must meet for approval

The CoC had approved a resolution plan of Rs 172.55 crore submitted by a consortium of successful resolution applicants at a time when the debtor's toll-collection business was weak, partly due to the COVID-19 pandemic. While the plan awaited approval, delays pushed the company's opening balance from about Rs 30 crore to about Rs 165 crore, and the creditors argued that implementing the plan would give the successful applicant a windfall, seeking withdrawal and a fresh round of bids, Jurishour reported.

Source: Jurishour

The court held that an approved plan binds both the CoC and the successful resolution applicant, and clarified that its other observations were preliminary and should not determine the NCLT's final decision. It asked the tribunal to consider the plan-approval application together with the holding company's application and decide them as expeditiously as possible, keeping in mind the delay already caused.