A step back: reconsideration of the resolution plan by the CoC
Insolvency and Bankruptcy Code, 2016 (“Code”) was enacted inter-alia with an aim to resolve and reorganise the corporate debtor’s insolvency in a timely manner for maximisation of value of its assets. To accomplish the objectives laid down under the Code, a comprehensive step-by-step process is provided right from the moment of default till its realisation.
One of the most crucial stages in the entire corporate
insolvency resolution process (“CIRP”) is the approval of the resolution
plan by the Committee of Creditors ("CoC”) as the same is a
deciding factor of how the insolvency of the corporate debtor would be
resolved. While considering a resolution plan, the CoC considers several
factors and after exercising its commercial wisdom, approves or rejects a
resolution plan. Only after the assent of the CoC by voting of not less than
sixty-six percent of voting shares, the resolution plan is approved in terms of
Section 30(4) of the Code. The Hon’ble Supreme Court in Ebix
Singapore Pvt. Ltd. v. Committee of Creditors of Educomp Solutions Ltd (1)
held that once a resolution plan is approved by the CoC, it is inter-se binding
between the CoC and the Successful Resolution Applicant. (“SRA”)
Pursuant to the approval of the CoC, an application under
Section 31 of the Code is required to be made to the Adjudicating Authority (“AA”)
viz., the National Company Law Tribunal. (“NCLT”). The NCLT upon being
satisfied that the approved plan aligns with the objectives and criteria laid
down under Section 30(2) of the Code, will approve the resolution plan, which
would then become binding upon the corporate debtor and its employees,
creditors, guarantors, and other stakeholders involved in the resolution plan.
However, if the same is not in terms of Section 30(2) of the Code, the NCLT has
the power to reject the resolution plan. It is only after the approval of the
resolution plan by the NCLT, that it attains finality.
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