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IBC: Not Mandatory For Resolution Plan To Match Liquidation Value And Approved Resolution Plan Can't Be Withdrawn Under S12A

In Civil Appeal No.4242/2019, Maharashtra Seamless Ltd v Padmanabhan Venkatesh, appeal was filed before the Supreme Court against order of NCLAT by which the Resolution Applicant (MSL) was directed to modify the resolution plan on the ground that it was below the liquidation value of the corporate debtor and that the operational creditors were not treated at par with the financial creditors.

Rejecting the order of the NCLAT, the Supreme Court held that there is no provision in the Code or Regulations under which the bid of any Resolution Applicant has to match liquidation value arrived at in the manner provided in Clause 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The object behind prescribing such valuation process is to assist the CoC to take decision on a resolution plan properly. Once, a resolution plan is approved by the CoC, the statutory mandate on the Adjudicating Authority under Section 31(1) of the Code is to ascertain that a resolution plan meets the requirement of sub-sections (2) and (4) of Section 30 thereof. 

The Court opined that the Appellate Authority has  proceeded on equitable perception rather than commercial wisdom. On the face of it, release of assets at a value 20% below its liquidation value arrived at by the valuers seems inequitable. But the Court ought to cede ground to the commercial wisdom of the creditors rather than assess the resolution plan on the basis of quantitative analysis. Such is the scheme of the Code.

On the issue of the successful resolution applicant seeking withdrawal from the plan under Section 12A of IBC by citing financial difficulties, the Court said that the exit route prescribed in Section 12-A is not applicable to a Resolution Applicant. The procedure envisaged in the said provision only applies to applicants invoking Sections 7, 9 and 10 of the code. In this case, having appealed against the NCLAT order with the object of implementing the resolution plan, Resolution Applicant cannot be permitted to take a contrary stand in an application filed in connection with the very same appeal. 


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