Ebix Singapore Pvt. Ltd. v. Committee of Creditors of Educomp Solutions Ltd. (2021)

There is a gap in the Code's timetable: the period between the committee of creditors approving a plan and the Adjudicating Authority approving it. A successful applicant whose bid has become unattractive in the meantime will want out, and will argue that the plan is just a contract, that it has not yet been made binding by the Tribunal, and that ordinary contractual remedies apply. Ebix closes the gap. It is the decision that fixes the character of a resolution plan as a statutory instrument rather than a contract, and it defines the limits of what the Tribunal may do when asked for a remedy the Code does not provide.

A resolution plan had been approved by the committee of creditors and submitted to the Adjudicating Authority, but had not yet been approved by it. The successful resolution applicant sought to withdraw the plan, or to modify it, relying on the intervening delay and on contractual principles.

• The resolution plan, even prior to the approval of the Adjudicating Authority, is binding inter se the committee of creditors and the successful resolution applicant. The plan cannot be construed purely as a contract governed by the general law of contract in the period between its acceptance by the committee and its approval by the Adjudicating Authority. Its defining feature is its ability to bind those who have not consented to it, through implementation of the plan.
• The existing insolvency framework provides no scope for effecting further modifications or withdrawals of resolution plans approved by the committee of creditors, at the behest of the successful resolution applicant, once the plan has been submitted to the Adjudicating Authority. A submitted resolution plan is binding and irrevocable as between the committee and the applicant.
• There is no scope for negotiations between the parties once the plan has been approved by the committee. Contractual principles and common law remedies which do not find a tether in the wording or the intent of the Code cannot be imported into the intervening period between the committee's acceptance and the Tribunal's approval.

The plan is not a contract because it does not behave like one. A contract binds those who agree to it; a resolution plan binds dissenting creditors, operational creditors who never voted, employees, guarantors and governments. That effect is conferred by statute and can be explained only by statute. An instrument which derives its binding force from the Code must take its rules — including its rules about variation and withdrawal — from the Code as well.

The Code provides no such rule for the applicant. It has an exit route from the process, but that is available to applicants invoking ss. 7, 9 and 10, and not to a resolution applicant. The absence is not an oversight to be filled by the general law; it is a choice, and the reason for it is the timetable. If plans could be renegotiated or abandoned while awaiting approval, every delay before the Tribunal would become a bargaining opportunity, the value the committee accepted would erode, and the process would have no end. The Tribunal cannot supply the missing remedy because it has no equity jurisdiction and is bound by the provisions of the Code.

1. On the nature of a resolution plan, give the three propositions in order: binding inter se before approval; not purely a contract; binding and irrevocable once submitted.
2. Use the reason, not just the rule — the plan binds non-consenting parties, and only a statute can do that.
3. On the powers of the Adjudicating Authority, use this as the third pillar of Unit 4 beside the public law limit and the contract-termination limit: the Tribunal may not import remedies the Code does not contain.
4. Distinguish withdrawal by an applicant from withdrawal of the proceeding. Section 12A withdrawal is for those who invoked ss. 7, 9 or 10; and before the committee is constituted, a party may apply to the Tribunal, which may allow or disallow withdrawal or settlement in its inherent jurisdiction.
5. What it does not decide. It does not decide what happens where the plan becomes impossible to perform, nor does it give the committee a power to modify.

The intervening period has since been regulated by amendment rather than left to the courts. Section 31 now carries a proviso permitting the Adjudicating Authority, on the resolution professional's application with the approval of not less than sixty-six per cent. of the voting share of the committee of creditors, to first approve the implementation of the plan and to approve the manner of distribution within thirty days thereafter; a proviso allowing the Authority to give the committee notice to rectify defects before rejecting a plan; and a new sub-section requiring an order under s. 31(1) or (2) within thirty days. Section 30(4) now also requires the committee to record reasons for its approval, and s. 61 requires the Appellate Tribunal to dispose of an appeal within three months. The delay that made this litigation possible is the thing the amendments attack.