Lenders cannot pull back a resolution plan they approved because the debtor got richer, Supreme Court holds
Justice J.B. Pardiwala and Justice K. Vinod Chandran rule that once a Committee of Creditors approves a plan and sends it to the NCLT, neither the CoC nor the applicant can withdraw it, and send the Rs 172.55 crore toll-road plan back for a decision on its merits.
A committee of six lenders approved a Rs 172.55 crore resolution plan for a toll-collection company when the business was reeling from the pandemic and had Rs 30 crore in the bank. Years of litigation later, with the company run by a resolution professional and its cash balance up to Rs 165 crore, the same lenders voted unanimously to withdraw the plan and invite fresh bids. On 26 October 2026 the Supreme Court held that the Insolvency and Bankruptcy Code gives them no such power. A bench of Justice J.B. Pardiwala and Justice K. Vinod Chandran, in a judgment written by Justice Vinod Chandran, ruled that the rule laid down in Ebix Singapore for successful resolution applicants applies squarely to the Committee of Creditors: once the CoC approves a plan and it is placed before the adjudicating authority, there can be no withdrawal, either of the insolvency application or of the approved plan. The Court declined to interfere with the NCLAT order that had sent the plan back to the NCLT for a decision, and asked the tribunal to decide quickly.
A plan approved in a pandemic, stalled by a promoter and overtaken by the balance sheet
The corporate debtor collected tolls on National Highway 45. Its business took a beating during COVID-19, and that is when the financial creditors, led by Bank of India as the applicant under Section 7 of the IBC, approved a resolution plan submitted by a consortium of the first and second respondents, S.M. Kamal Pasha among them. The plan carried a resolution amount of Rs 172.55 crore against an opening balance of Rs 30 crore. The resolution professional filed IA No. 1505 of 2021 before the NCLT for confirmation of the plan.
Confirmation did not come. The company’s erstwhile promoter, its holding company and the fourth respondent in the appeal, took the dispute to the Supreme Court in an earlier round and obtained a stay. By the time the Court dismissed that special leave petition, the company’s opening balance had climbed to Rs 165 crore under the resolution professional’s management. The Court, in dismissing the promoter’s petition, permitted the holding company to raise all its pleas before the adjudicating authority. The holding company then filed IA No. 1679 of 2025, offering a one-time settlement to the creditors and asking that the corporate insolvency resolution process itself be abandoned.
The lenders took a different exit. The CoC unanimously resolved to withdraw its approval of the plan, and the resolution professional applied to the NCLT on its behalf. The ground was that the company’s improved finances would hand the successful resolution applicant a windfall, since it would now have to bring in far less fresh money than the plan contemplated. The CoC wanted a fresh Form G issued inviting new expressions of interest. The NCLT allowed the withdrawal.
The NCLAT reversed it. Relying on Ebix Singapore (P) Ltd. v. Committee of Creditors of Educomp Solutions Ltd. (2022) and State Bank of India v. Consortium of Murari Lal Jalan and Florian Fritsch (2025), it held the withdrawal application violated the IBC and that the CoC had no jurisdiction to decide on withdrawal of the plan. It revived IA No. 1505 of 2021, directed the NCLT to consider the holding company’s IA No. 1679 of 2025 as well, and allowed the successful resolution applicant to raise its own contentions. The six CoC members appealed.
Windfall for the bidder, or opportunism by the banks
Gopal Sankarnarayan, senior counsel for the lenders, put the case on the IBC’s governing principle of maximising the value of the debtor’s assets for the benefit of its creditors. The plan had been priced when the company was tottering. With the balance at Rs 165 crore, the bidder’s fresh infusion would shrink and the creditors would be left with the original haircut when they could now recover much more. The commercial wisdom of the CoC is given primacy under the Code, and this, he said, was a fit case for withdrawal. He relied on Kalyani Transco v. Bhushan Power and Steel Ltd. (2026) for the proposition that the CoC does not cease to exist on approval of a plan but survives until the disbursals under it are complete.
Nidhesh Gupta, senior counsel for the resolution applicant, leaned on Ebix Singapore. A plan binds both sides once the CoC approves it: the applicant cannot wriggle out because the debtor’s position has worsened, and the CoC cannot walk away because it has improved. The improvement, he said, was already contemplated in the plan, and had the company been handed over within the Code’s timelines, the revenue it generated in the meantime would have gone into the applicant’s coffers with no extra benefit to the lenders. Permitting withdrawal at the CoC’s instance would let financial creditors shift their stance whenever a better deal appeared, which is not commercial wisdom. He also argued specifically against any use of Article 142 on these facts.
Nikhhil Nayyar, senior counsel for the holding company, said that if the sanctioned OTS affirmed by the CoC were implemented, everyone would gain: the CIRP could close and the company would emerge as a profitable, cash-surplus going concern. Its present finances, he submitted, supported not only an exit from insolvency but a feasible route to paying the admitted creditors in full in addition to the OTS. The Supreme Court in the earlier round had specifically directed that the holding company’s request be considered, and that request was now before the NCLT.
What Ebix Singapore decided, and why it binds the CoC too
The Court went through Ebix in detail. That judgment dealt with three successful resolution applicants in three insolvencies. Ebix wanted out of the Educomp plan because of CBI and SFIO investigations into the debtor’s pre-insolvency affairs; the Court found the applicant immune from prosecution and called the plea a red herring. Seroco pleaded frustration of contract from an economic slowdown; the Court held that common law remedies such as frustration or force majeure were not available to make a plan voidable. Only in Kundan Care’s appeal, where the applicant and the CoC jointly sought modification because of uncertainty over a power purchase agreement, did the Court grant one-time relief under Article 142.
Ebix identified three stages in the process: before and up to CoC approval, the interim period between CoC approval and confirmation by the adjudicating authority, and the period after confirmation. The present case, like Ebix, sat in the second stage. The Court recalled Ebix’s reasoning that a resolution plan is not a typical contract. Its binding force comes from the Code, not the Contract Act, even before the NCLT confirms it. Under Section 30(4) a 66 per cent vote approves a plan and binds dissenting creditors who never consented. The Code punishes non-implementation by prosecution under Section 74 and forfeiture of the performance bank guarantee, not by damages. And when a CoC withdraws from a CIRP under Section 12A, Regulation 30A requires only payment of insolvency costs, with no compensation to the applicant for the time and money it has sunk in. Ebix held that the binding effect prevents the CoC or the applicant from reneging after the plan is approved by vote, that the NCLT cannot second-guess the parties’ commercial wisdom or direct unilateral modification, and that the framework provides no scope for modifications or withdrawals of CoC-approved plans at the applicant’s behest.
The bench then took the step the case required. Although Ebix arose from withdrawal sought by the applicant, the dictum, it held, applies squarely to the CoC. The framework provides no route for withdrawal at the CoC’s behest either.
Section 12A is not a licence to withdraw after approval
The lenders’ strongest statutory hook was Section 12A, which on its face lets an applicant withdraw the insolvency application with the approval of 90 per cent of the CoC’s voting share. Regulation 30A of the CIRP Regulations channels that power: before the CoC is constituted, through the interim resolution professional; afterwards, through the IRP or RP, with reasons required if the application comes after the invitation for expressions of interest under Regulation 36A. The Court observed that the regulation cannot be read as cutting down a statutory power, since that is not within the rule-making authority’s domain. It cited Glas Trust Company LLC v. Byju Raveendran (2024), which held that Section 12A and Regulation 30A lay down an exhaustive procedure for withdrawal at four stages, from before admission to after expressions of interest are received. But none of that answered whether the remedy survives the CoC’s approval of a plan.
To answer it the Court read Section 12A with Section 31 and Section 30(2). Section 31 requires the adjudicating authority to be satisfied that the plan approved by the CoC under Section 30(4) meets the requirements of Section 30(2), which ensures that insolvency costs are paid first and that creditors receive the higher of what they would get in liquidation under Section 53 or what the plan allots them in the Section 53 order of priority. Explanation I to Section 30(2) requires fair and equitable distribution, a question the NCLT must consider at confirmation. Explanation II applies the amended sub-section (2) to every plan not yet approved or rejected by the adjudicating authority, which is this plan’s position. Read together, the Court held, withdrawal of the application is possible only until the CoC approves the plan; once it is placed before the adjudicating authority, “there can be no withdrawal either of the application or the approved Resolution Plan”.
The Court also dealt with Kalyani Transco, on which the lenders relied. That case did hold that the CoC has a vital interest in the plan which continues until it is actually implemented, and that the CoC does not become functus officio on approval. But the Court pointed to the rider in Regulation 18 of the CIRP Regulations: the RP may convene CoC meetings until the plan is approved under Section 31(1) or liquidation is ordered, but decisions at such meetings shall not affect the plan submitted before the adjudicating authority. In Kalyani Transco itself, the plan approved by the CoC on 15 October 2018 and submitted to the NCLT on 14 February 2019 survived investigations against promoters and attachment of the debtor’s properties, was approved by the NCLAT on 17 February 2020 and implemented after a 97.25 per cent CoC vote of 26 February 2021 fixed the deadline. The Court found that Clause 3 of that plan allowed neither modification nor withdrawal and was not open-ended at the applicant’s discretion. The CoC’s continued existence, the bench held, does not detract from the essential binding nature of a plan it has approved.
Delay, the PBG and the two applications still waiting at the NCLT
The Court quoted paragraph 224 of Ebix, which recognised that long delays in approving plans affect their implementation and the commercial assessment parties make, and recalled the Standing Committee on Finance report for 2020-21 that traced delays to slow admission of CIRPs, late unsolicited bids after the original bidder becomes public, and layered appeals to the NCLAT and the Supreme Court. Here, the bench said, the delay came from the stay this Court itself had granted in the promoter’s earlier petition.
It also noted the asymmetry the lenders’ course would create. If a CoC with a 90 per cent majority withdraws under Section 12A, the only consequence is that it pays the CIRP costs. If a successful applicant fails to implement an approved plan, it faces forfeiture of its performance bank guarantee and prosecution under Section 74. This applicant had furnished its PBG long ago and was keeping it alive at considerable expense, which the Code would not reimburse if the plan were never approved.
The Court did not dismiss the lenders’ argument out of hand. It called compelling the contention that if the NCLT cannot second-guess a 66 per cent CoC approval, it equally cannot second-guess a unanimous CoC vote for a fresh Form G, and said that the feasibility of revival and the risk of defeating value maximisation require consideration by the NCLT. But the applicant’s answer had to be weighed too: the turnaround was contemplated in the plan, and the income generated by the company’s operations would have been the applicant’s had it been handed over on time. Nor could the Court ignore the applicant’s charge that the CoC had turned turtle not out of commercial wisdom but out of “shortsighted opportunism revealing institutionalized rapacity”.
Two applications are now pending before the NCLT: the resolution professional’s application for approval of the plan and the holding company’s application to implement an OTS and end the CIRP. The NCLT, the Court directed, must consider them with the satisfaction Section 31(1) demands, that the plan meets Section 30(2), and must do so after verifying the company’s financial position as it stands today, with the cash balance set against the terms of the plan. “The improved profitability alone cannot be a reason to refuse approval” if the plan satisfies Section 30(2). The bench said that apart from its holding on the binding nature of the plan as between the CoC and the applicant, its observations were prima facie and need not govern the NCLT’s final decision.
Order
The Court declined to interfere with the NCLAT’s order, which had found the CoC without jurisdiction to withdraw its approval but had directed every contention of the successful resolution applicant and the holding company to be considered by the NCLT. It requested the NCLT to take up IA No. 1505 of 2021 and IA No. 1679 of 2025 together and decide them as expeditiously as possible, reckoning the delay already caused. The appeal was disposed of. Pending applications, if any, were rejected.