The National Company Law Appellate Tribunal (NCLAT) has said that once a resolution plan for a debt-ridden company is approved by the lenders, the successful bidder cannot be permitted to withdraw its offer.
A three-member NCLAT bench said the sanctity of the resolution process has to be maintained and such withdrawal by a successful bidder ‘frustrates’ the entire exercise of Corporate Insolvency Resolution Process.
Moreover, there is also no express provision in the Insolvency & Bankruptcy Code to allow any successful resolution applicant to ‘stage a U-turn’, it added.
“We are of the considered opinion that the sanctity of resolution process has to be maintained and the resolution applicant whose resolution plan has been approved by Committee of Creditors cannot be permitted to withdraw its Resolution Plan,” the bench headed by Acting Chairman Justice B.L. Bhat said. The NCLAT further said even under the Insolvency & Bankruptcy Code, there is no express provision for allowing any successful resolution applicant to “stage a U-turn” and withdraw its bids, after being selected by the CoC.
“Provision for submission of a Performance Bank Guarantee by a resolution applicant while submitting its resolution plan, as required under the amended provisions of IBBI [Insolvency Resolution Process of Corporate Persons] Regulations, 2016 is a step in this direction, but may not be deterrent enough to prevent a Successful Resolution Applicant from taking a U-turn,” the NCLAT said.