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No scope for renegotiations of resolution plan pursuant to its approval by CoC under I & B Code: SC
A Division bench of the Hon’ble Supreme Court comprising of Justices Dr. Dhananjaya Y. Chandrachud and M. R. Shah in the case of Committee of Creditors of AMTEK Auto Limited through Corporation Bank v. Dinkar T. Venkatasubramanian and Others, REED 2021 SC 02550 held that there is no scope for negotiations of the resolution plan after its approval by the Committee of Creditors (CoC) under the Insolvency and Bankruptcy Code 2016, and any attempt to renege from the terms of the resolution plan post its approval must be disallowed.
In this case, the Committee of Creditors of AMTEK Auto Limited (Corporate Debtor) initiated a contempt petition against the successful resolution applicant - Deccan Value Investors LP (DVI). Further, an order seeking rectification of the order dated 18 June 2020 of the Supreme Court was filed by DVI.
After a protracted and complicated resolution process, the resolution plan submitted by DVI was approved by the CoC on 11 February 2020. The Supreme Court vide order dated 8 June 2020 relegated the matter to the National Company Law Tribunal (“NCLT”) for decision under section 31 of the IBC within 15 days. Thereafter, DVI filed an application before the Supreme Court seeking extension of time for approval of the resolution plan by the NCLT so as to enable DVI to renegotiate the resolution plan in light of the effect on the business due to the COVID-19 Pandemic. By order dated 18 June, 2020 the Apex Court rejected the application, against which DVI has sought the present appeal.
Meanwhile, NCLT approved the resolution vide order dated 9 July 2020 following which the erstwhile Resolution Professional and CoC sought DVI’s participation in implementation of the resolution plan. DVI resisted the implementation stating that it intended to challenge the approval of the resolution plan before the NCLAT, leading to the institution of the present Contempt Petition by the Corporate Debtor.
With respect to the Contempt Petition, the Supreme Court noted that although DVI’s conduct was not bona fide, it has to remain circumspect in invoking contempt jurisdiction as setting up an untenable plea should not in itself invite penal consequences under contempt law. Accordingly, the Apex Court dismissed the Contempt Petition filed by the Corporate Debtor. The court also recorded DVI’s statement that it shall not invoke plea of force majeure in the proceedings before NCLAT.
In regard to the DVI’s application for rectification/ clarification of order dated 18 June 2020 the Supreme Court held that upon approval of a resolution plan by the CoC under section 30(4) of the IBC, the role of the Adjudicating Authority under section 31(1) of the IBC is limited to ensure that the resolution plan meets the requirements provided in section 30(2) and determining if the resolution plan has provisions for its effective implementation. Hence, there is no scope for the renegotiation of the resolution plan after the approval of the resolution plan by the CoC. Thus, the court declined to entertain DVI’s application for rectification/ clarification.