Belated Modification of an Approved Resolution Plan Is Not Maintainable, Even by Dissenting Secured Financial Creditors
- REEDLAW
- 52 minutes ago
- 6 min read
REEDLAW Legal News Network reports: In a significant reaffirmation of the principle of finality in corporate insolvency resolution, the National Company Law Appellate Tribunal held that once a Resolution Plan is duly approved under the Insolvency and Bankruptcy Code, its terms become final and binding on all stakeholders, leaving no scope for any creditor, including a dissenting Secured Financial Creditor, to seek belated modification of the distribution mechanism contained therein.
The Appellate Tribunal, Principal Bench, comprising Justice Yogesh Khanna (Judicial Member) and Mr. Ajai Das Mehrotra and Mr. Arun Baroka (Technical Members), while adjudicating a batch of two Company Appeals, held that the approval of a Resolution Plan brings the corporate insolvency resolution process to a stage of legal finality. It was observed that any attempt by a creditor to reopen or alter the distribution framework at a subsequent stage would undermine the sanctity of the approved plan and the time-bound structure of the Code, and therefore, a belated application seeking modification, even by a dissenting Secured Financial Creditor, was not legally maintainable.
The Appeal had been filed under Section 61 of the Insolvency and Bankruptcy Code, 2016, challenging the dismissal of an interlocutory application by which the Appellant, a Secured Financial Creditor who had either abstained from voting or dissented from the Resolution Plan, sought parity in distribution of the resolution value with other assenting Secured Financial Creditors. The Appellant contended that discrimination in payment solely on the basis of voting behaviour was impermissible and contrary to Section 30(2)(b)(ii) read with Explanation I of the Code, which mandated fair and equitable distribution. Reliance had been placed on Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta and Others, REEDLAW 2019 SC 11505, to argue that equitable treatment must be accorded within the same class of creditors, and that dissent or abstention could not be punished by relegating creditors merely to liquidation value. The Appellant also relied upon Central Bank of India v. Resolution Professional of the Sirpur Paper Mills Limited and Others, REEDLAW 2018 NCLAT Del 09533, and RBL Bank Limited v. Sical Logistics Limited and Others, REEDLAW 2025 NCLAT Chn 03581, to contend that discrimination among similarly situated Secured Financial Creditors offended the object of the Code. It was asserted that the Adjudicating Authority had passed a cryptic order and failed to examine the statutory obligation of ensuring fairness, relying mechanically on Ghanashyam Mishra and Sons private Limited Through The Authorised Signatory v. Edelweiss Asset Reconstruction Company Limited Through The Director and Others, REEDLAW 2021 SC 04534, which, according to the Appellant, was inapplicable as no fresh claim was being raised but only equitable redistribution was sought.
The Respondents, including the Successful Resolution Applicant, the Corporate Debtor, and other Financial Creditors, raised a preliminary objection to the maintainability of the Appeal. It was contended that the Resolution Plan had been approved by the Adjudicating Authority on 27.03.2019 and had attained finality, no appeal having been preferred within the statutory period. The application seeking modification of the payment structure was filed more than two and a half years after such approval and was therefore grossly belated. The Respondents relied upon Ghanashyam Mishra and Sons private Limited Through The Authorised Signatory v. Edelweiss Asset Reconstruction Company Limited Through The Director and Others, REEDLAW 2021 SC 04534 to reiterate that once a Resolution Plan was approved under Section 31, all claims stood frozen and the plan became binding on all stakeholders. They also placed reliance on Jaypee Kensington Boulevard Apartments Welfare Association and Others v. NBCC (India) Limited and Others, REEDLAW 2021 SC 03527, and Facor Alloys Limited and Another v. Bhuvan Madan Resolution Professional of Ferro Alloys Corporation Limited and Others, REEDLAW 2020 NCLAT Del 11545, to submit that the Code only mandated payment of liquidation value to dissenting Financial Creditors and any payment beyond that was entirely within the commercial wisdom of the Committee of Creditors. Further reliance was placed on National Spot Exchange Limited v. Anil Kohli, Resolution Professional for Dunar Foods Limited, REEDLAW 2021 SC 09526, to emphasise that limitation under Section 61(2) of the Code was strict and beyond the prescribed period no appeal could be entertained.
The Appellate Tribunal observed that the Resolution Plan had been approved by the Committee of Creditors in 2018 and by the Adjudicating Authority in 2019, and that the Appellant had approached the Adjudicating Authority only in September 2021, seeking modification of the payment structure. It was held that such an application was hopelessly belated and amounted, in substance, to a disguised challenge to the Resolution Plan itself. The Tribunal noted that even though the Appellant claimed not to be assailing the Resolution Plan, the reliefs sought, including modification of the distribution mechanism, execution of addendum agreements, and stay of implementation, effectively sought to unsettle a plan that had already attained finality. The Tribunal reiterated that under Ghanashyam Mishra and Sons private Limited Through The Authorised Signatory v. Edelweiss Asset Reconstruction Company Limited Through The Director and Others, REEDLAW 2021 SC 04534, the Resolution Plan stood frozen upon approval and no stakeholder could be permitted to reopen or reconfigure its terms by indirect means.
The Tribunal further held that the Appeal itself was barred by limitation under Section 61(2) of the Code, having been filed beyond the permissible period without any application for condonation of delay and without showing sufficient cause. It observed that the Appellant, being a Financial Creditor, was fully aware of the approval and implementation of the Resolution Plan, and yet had chosen to remain silent for several years, thereby acquiescing in its terms. The attempt to invoke jurisdiction through an interlocutory application was held to be an impermissible device to circumvent the statutory limitation framework. The Tribunal also referred to Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta and Others, REEDLAW 2019 SC 11505 (para 129) to underline that there was no residual equity jurisdiction in the Adjudicating Authority or the Appellate Tribunal to interfere with the commercial wisdom of the Committee of Creditors so long as the plan complied with the minimum statutory requirements.
The Tribunal concluded that permitting modification of the distribution mechanism at such a belated stage would introduce uncertainty for the Successful Resolution Applicant, disrupt an already implemented Resolution Plan, and undermine the sanctity and finality attached to approved plans under the Code. It was found that the Appellant was estopped from seeking any relief, having failed to challenge the approval order within the statutory period. The Appeal was therefore held to be not maintainable both on the ground of limitation and on the ground that it sought, in effect, to reopen a concluded Resolution Plan.
Accordingly, the Appeal was dismissed as not maintainable, all connected applications were disposed of, and no interference was warranted with the order of the Adjudicating Authority.
Mr. Ravi Raghunath, Ms. Rathina Maravarnani and Mr. Namanjeet Singh Bhatia, Advocates, represented the Appellant.
Mr. Malak Bhatt and Ms. Samridhi, Advocates, appeared for the Respondent No. 2.
Mr. Dhruv Dewan, Advocate, appeared for the Respondent No. 4.
Mr. Rajeev Kumar Panda, Advocate, appeared for the Respondent No. 1.
Mr. Siddharth Sangal and Ms. Richa Mishra, Advocates, appeared for the Respondent No. 5.
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