Supreme Court Rules CoC's Mandate Continues Till Resolution Plan Implementation
Supreme Court Rules CoC's Mandate Continues Till Resolution Plan Implementation
Introduction
The Supreme Court has held that the Committee of Creditors (CoC) under the Insolvency and Bankruptcy Code, 2016 (IBC) does not become functus officio merely upon the approval of a resolution plan by the Adjudicating Authority. The Court ruled that the CoC continues to have a role until the resolution plan is fully implemented or an order of liquidation is passed.
Factual Background
The case involved JSW Steel and Bhushan Power and Steel Ltd, where the erstwhile promoters of Bhushan Power and Steel Ltd argued that the CoC becomes functus officio after the NCLT approves the resolution plan.
Procedural Background
The matter reached the Supreme Court through an appeal filed by Kalyani Transco against the order of the NCLT. The Supreme Court was tasked with determining whether the CoC continues to exist after the approval of a resolution plan by the Adjudicating Authority.
Issues
1. Role of CoC After Approval of Resolution Plan: Whether the CoC becomes functus officio after the approval of a resolution plan by the Adjudicating Authority.
2. Continuing Interest of CoC: Whether the CoC has a continuing interest in the process until the resolution plan is implemented or liquidation is ordered.
Contentions of the Parties
Erstwhile Promoters' Contention: The erstwhile promoters of Bhushan Power and Steel Ltd argued that the CoC ceases to exist after the NCLT approves the resolution plan.
CoC's Contention: The Solicitor General of India argued that the CoC continues to exist until the resolution plan is fully implemented or any challenge to its approval attains finality.
Reasoning & Analysis
The Bench comprising Chief Justice of India BR Gavai, Justice K Vinod Chandran and Justice NV Anjarai relied on the Explanation to Clause 2 of Regulation 18 of the IBBI (CIRP) Regulations, which expressly empowers the CoC to hold meetings till either the resolution plan is approved under Section 31(1) of the IBC or an order for liquidation is passed under Section 33. The Court observed that accepting the contention that the CoC ceases to exist after finalization of the resolution plan would lead to an "anomalous situation" where creditors would be left "high and dry" if the resolution plan fails to take off for any reason.
Implications
The Supreme Court's decision clarifies that the CoC continues to exist until the resolution plan is implemented or liquidation is ordered. This ensures that the CoC can take necessary steps to realize its dues from the corporate debtor in case the resolution plan fails to take off for any reason.
Conclusion
The Supreme Court's ruling in this case highlights the importance of the CoC's role in the insolvency resolution process. The decision ensures that the CoC can continue to take necessary steps to protect the interests of creditors until the resolution plan is fully implemented or liquidation is ordered.
