# EBIX SINGAPORE PRIVATE LIMITED v. COMMITTEE OF CREDITORS OF EDUCOMP SOLUTIONS LIMITED & ANR

- **Citation:** [2021] 14 S.C.R. 321
- **Court:** Supreme Court of India
- **Decided:** 2021-09-13
- **Case number:** Civil Appeal No. 3224 of 2020
- **Bench:** Dr Dhananjaya Y. Chandrachud, M. R. Shah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ebix-singapore-private-limited-v-committee-of-creditors-of-educomp-solutions-35364
- **Pages:** 182

## Headnote

Insolvency and Bankruptcy Code, 2016 - ss.5(26), 7, 9, 10,
12, 23, 25, 30, 31, 60(5), 61 & 74(3) - National Company Law
Tribunal Rules, 2016 - r.11 - Insolvency and Bankruptcy Board of
India (Insolvency Resolution Process For Corporate Persons)
regulations, 2016 - regn. 36A, 36B and 39 - Whether withdrawals
or modifications by successful Resolution Applicants are permissible
under IBC - Held: The framework, as it stands, only enables
withdrawals from the CIRP process by following the procedure
detailed in Section 12A of the IBC and Regulation 30A of the CIRP
Regulations and in the situations recognized in those provisions -
Enabling withdrawals or modifications of the Resolution Plan at
the behest of the successful Resolution Applicant, once it has been
submitted to the Adjudicating Authority after due compliance with
the procedural requirements and timelines, would create another
tier of negotiations which will be wholly unregulated by the statute
- Since the 330 days outer limit of the CIRP u/s. 12(3) of the IBC,
including judicial proceedings, can be extended only in exceptional
circumstances, this open-ended process for further negotiations or
a withdrawal, would have a deleterious impact on the Corporate
Debtor, its creditors, and the economy at large as the liquidation
value depletes with the passage of time - A failed negotiation for
modification after submission, or a withdrawal after approval by
the CoC and submission to the Adjudicating Authority, irrespective
of the content of the terms envisaged by the Resolution Plan, when
unregulated by statutory timelines could occur after a lapse of time,
as is the case in the present appeals - Permitting such a course of
action would either result in a down-graded resolution amount of
the Corporate Debtor and/or a delayed liquidation with depreciated
assets which frustrates the core aim of the IBC - If the legislature in
A
B
C
D
E
F
G
H
322
SUPREME COURT REPORTS
[2021] 14 S.C.R.
its wisdom, were to recognize the concept of withdrawals or
modifications to a Resolution Plan after it has been submitted to the
Adjudicating Authority, it must specifically provide for a tether under
the IBC and/or the Regulations - These are matters for legislative
policy - In the present framework, even if an impermissible
understanding of equity is imported through the route of residual
powers or the terms of the Resolution Plan are interpreted in a
manner that enables the appellants' desired course of action, it is
wholly unclear on whether a withdrawal of a CoC-approved
Resolution Plan at a later stage of the process would result in the
Adjudicating Authority directing mandatory liquidation of the
Corporate Debtor - Pertinently, this direction has been otherwise
provided in Section 33(1)(b) of the IBC when an Adjudicating
Authority rejects a Resolution Plan under Section 31 - In this
context, the existing insolvency framework in India provides no
scope for effecting further modifications or withdrawals of CoCapproved Resolution Plans, at the behest of the successful Resolution
Applicant, once the plan has been submitted to the Adjudicating
Authority - A Resolution Applicant, after obtaining the financial
information of the Corporate Debtor through the informational
utilities and perusing the IM, is assumed to have analyzed the risks
in the business of the Corporate Debtor and submitted a considered
proposal - A submitted Resolution Plan is binding and irrevocable
as between the CoC and the successful Resolution Applicant in terms
of the provisions of the IBC and the CIRP Regulations.
Insolvency and Bankruptcy Code, 2016 - Res judicata -
Applicability of - Held: The prayer for withdrawal of the Resolution
Plan in the First Withdrawal Application was not substantial and
one that the Court was bound to grant, since it was contingent upon
a re-evaluation, which in itself was contingent upon receiving the
information sought in prayers (i) and (ii) - Since the latter two
contingencies never arose, th

## Text

_Characters 0–39,926 of 408,918. This is a partial read: ask again with offset=39926 for what follows._

A
B
C
D
E
F
G
H
321
[2021] 14 S.C.R.321
321
EBIX SINGAPORE PRIVATE LIMITED
v.
COMMITTEE OF CREDITORS OF EDUCOMP SOLUTIONS
LIMITED & ANR.
(Civil Appeal No. 3224 of 2020)
SEPTEMBER 13, 2021
[DR DHANANJAYA Y. CHANDRACHUD AND
M. R. SHAH, JJ.]
Insolvency and Bankruptcy Code, 2016 - ss.5(26), 7, 9, 10,
12, 23, 25, 30, 31, 60(5), 61 & 74(3) - National Company Law
Tribunal Rules, 2016 - r.11 - Insolvency and Bankruptcy Board of
India (Insolvency Resolution Process For Corporate Persons)
regulations, 2016 - regn. 36A, 36B and 39 - Whether withdrawals
or modifications by successful Resolution Applicants are permissible
under IBC - Held: The framework, as it stands, only enables
withdrawals from the CIRP process by following the procedure
detailed in Section 12A of the IBC and Regulation 30A of the CIRP
Regulations and in the situations recognized in those provisions -
Enabling withdrawals or modifications of the Resolution Plan at
the behest of the successful Resolution Applicant, once it has been
submitted to the Adjudicating Authority after due compliance with
the procedural requirements and timelines, would create another
tier of negotiations which will be wholly unregulated by the statute
- Since the 330 days outer limit of the CIRP u/s. 12(3) of the IBC,
including judicial proceedings, can be extended only in exceptional
circumstances, this open-ended process for further negotiations or
a withdrawal, would have a deleterious impact on the Corporate
Debtor, its creditors, and the economy at large as the liquidation
value depletes with the passage of time - A failed negotiation for
modification after submission, or a withdrawal after approval by
the CoC and submission to the Adjudicating Authority, irrespective
of the content of the terms envisaged by the Resolution Plan, when
unregulated by statutory timelines could occur after a lapse of time,
as is the case in the present appeals - Permitting such a course of
action would either result in a down-graded resolution amount of
the Corporate Debtor and/or a delayed liquidation with depreciated
assets which frustrates the core aim of the IBC - If the legislature in
A
B
C
D
E
F
G
H
322
SUPREME COURT REPORTS
[2021] 14 S.C.R.
its wisdom, were to recognize the concept of withdrawals or
modifications to a Resolution Plan after it has been submitted to the
Adjudicating Authority, it must specifically provide for a tether under
the IBC and/or the Regulations - These are matters for legislative
policy - In the present framework, even if an impermissible
understanding of equity is imported through the route of residual
powers or the terms of the Resolution Plan are interpreted in a
manner that enables the appellants' desired course of action, it is
wholly unclear on whether a withdrawal of a CoC-approved
Resolution Plan at a later stage of the process would result in the
Adjudicating Authority directing mandatory liquidation of the
Corporate Debtor - Pertinently, this direction has been otherwise
provided in Section 33(1)(b) of the IBC when an Adjudicating
Authority rejects a Resolution Plan under Section 31 - In this
context, the existing insolvency framework in India provides no
scope for effecting further modifications or withdrawals of CoCapproved Resolution Plans, at the behest of the successful Resolution
Applicant, once the plan has been submitted to the Adjudicating
Authority - A Resolution Applicant, after obtaining the financial
information of the Corporate Debtor through the informational
utilities and perusing the IM, is assumed to have analyzed the risks
in the business of the Corporate Debtor and submitted a considered
proposal - A submitted Resolution Plan is binding and irrevocable
as between the CoC and the successful Resolution Applicant in terms
of the provisions of the IBC and the CIRP Regulations.
Insolvency and Bankruptcy Code, 2016 - Res judicata -
Applicability of - Held: The prayer for withdrawal of the Resolution
Plan in the First Withdrawal Application was not substantial and
one that the Court was bound to grant, since it was contingent upon
a re-evaluation, which in itself was contingent upon receiving the
information sought in prayers (i) and (ii) - Since the latter two
contingencies never arose, the NCLT did not apply its mind to the
prayer for withdrawal independently - When it filed the Second
Withdrawal Application, it was dismissed on a technical ground and
not on its merits - When a revised Third Withdrawal Application
was filed, the NCLT then adjudicated it on its merits and allowed it
- Hence, since the NCLT did not adjudicate Resolution applicant
'E' prayer for withdrawal of their Resolution Plan on its merits while
dismissing the First Withdrawal Application, the opportunity to seek
A
B
C
D
E
F
G
H
323
the relief was not available to resolution applicant 'E' in a real
sense - Therefore, the finding of the NCLAT on this issue is reversed
and hold that resolution applicant 'E' Third Withdrawal Application
was not barred by res judicata.
Disposing of the appeals, the Court
HELD: 1. A reading together of the UNCITRAL Guide and
the BLRC Report clarifies, in no uncertain terms, that the
procedure designed for the insolvency process is critical for
allocating economic coordination between the parties who partake
in, or are bound by the process. This procedure produces
substantive rights and obligations. For instance, the composition
of the CoC, the method and percentage of its voting, the timelines
for CIRP, the obligation on the RP to file specific forms after
every stage of the process and the obligation to explain to the
Adjudicating Authority reasons for any deviations from the
timeline while submitting a Resolution Plan, and other such
procedural requirements create a mechanism which tightly
structures the conduct of all participants in the insolvency
process. This process invariably has an impact on the conduct of
the Resolution Applicant who participates in the process and
consents to be bound by the RFRP and the broader insolvency
framework. An analysis of the framework of the statute and
regulations provides an insight into the dynamic and
comprehensive nature of the statute. Upholding the procedural
design and sanctity of the process is critical to its functioning.
The interpretative task of the Adjudicating Authority, Appellate
Authority, and even this Court, must be cognizant of, and allied
with that objective. The UNCITRAL Guide has echoed this
position by noting the interplay between the procedural design
of the insolvency law.
Any claim seeking an exercise of the Adjudicating
Authority's residuary powers under Section 60(5)(c) of the IBC,
the NCLT's inherent powers under Rule 11 of the NCLT Rules
2016 or even the powers of this Court under Article 142 of the
Constitution must be closely scrutinized for broader compliance
with the insolvency framework and its underlying objective. The
adjudicating mechanisms which have been specifically created
by the statute, have a narrowly defined role in the process and
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD.
A
B
C
D
E
F
G
H
324
SUPREME COURT REPORTS
[2021] 14 S.C.R.
must be circumspect in granting reliefs that may run counter to
the timeliness and predictability that is central to the IBC. Any
judicial creation of a procedural or substantive remedy that is
not envisaged by the statute would not only violate the principle
of separation of powers, but also run the risk of altering the
delicate coordination that is designed by the IBC framework and
have grave implications on the outcome of the CIRP, the economy
of the country and the lives of the workers and other allied parties
who are statutorily bound by the impact of a resolution or
liquidation of a Corporate Debtor. [Paras 97-98][422-D-H; 423C-E]
2. The IBC provides a roadmap for the entire CIRP in
Chapter II of Part II. This process is tightly regulated to include,
inter alia, timelines of the CIRP specified by Section 12, duties of
the RP to provide adequate information to propose a Resolution
Plan in Section 29 and restrictions on who can be a Resolution
Applicant in Section 29A.
Once a Resolution Applicant submits a Resolution Plan
under sub-Section (1) of Section 30, the RP must assess whether
it conforms with all the requirements of sub-Section (2). Having
satisfied itself, the RP under sub-Section (3) must then present
those Resolution Plans to the CoC which fulfill the criteria under
sub- Section (2). The CoC will then proceed to decide on the
approval of the Resolution Plan, with a majority vote of sixty-six
percent, after satisfying itself that the requirements under subSection (4) have been met, including testing the Resolution Plan
for its feasibility and viability. A Resolution Applicant may attend
this meeting of the CoC under sub-Section (5), but it does not
have a right to vote unless it is also a financial creditor. The
Resolution Plan approved by the CoC under sub-Section (4) is
then placed by the RP before the Adjudicating Authority for its
approval under sub-Section (6).
 Other than the IBC, the process is also regulated by the
CIRP Regulations created under the IBC. Regulation 37 provides
an illustration of the solutions which can be proposed in a
Resolution Plan. Regulation 38 provides for the mandatory
contents of a Resolution Plan, which are similar to the preconditions mentioned in Section 30(2) of the IBC. Regulation 39
A
B
C
D
E
F
G
H
325
provides for the process of approval of a Resolution Plan by the
CoC, and under sub-Regulation (3), the CoC has to evaluate every
Resolution Plan based on an "evaluation matrix" it has come up
with under Regulation 5(ha).
Having briefly taken an overview of the process, we now
understand that there are broadly three stages: (i) the first stage
is prior to and ends with the approval of the Resolution Plan by
the CoC; (ii) the second stage is the interim period between the
Resolution Plan's approval by the CoC and before its confirmation
by the Adjudicating Authority; and (iii) the third stage is after the
approval of the Resolution Plan by the Adjudicating Authority. In
the first stage, the relationship between the parties is explicitly
governed by the provisions of the IBC - such as the right of a
prospective Resolution Applicant to seek the IM and RFRP upon
submission of its EOI, which may have been rejected by the RP
(as it happened in the K's Appeal). In the third stage, the same
holds true since Section 31(1) makes the Resolution Plan binding
upon all the stakeholders and its violation will attract a penalty
under Section 74 of the IBC. However, what we are assessing
right now is the interim second stage between both of those. To
understand the relationship of the parties therein, it becomes
important to understand the exact "nature" of the Resolution
Plan after it has been submitted to the Adjudicating Authority
and before it has been approved under Section 31(1). [Paras 101103][424-D; 427-C-H; 428-A-C]
3. The determination of the nature of the Resolution Plan
would help us establish the source of the legal force of the
Resolution Plan - whether it is the statute, i.e., the IBC or the
law of contract. The insolvency process, as governed by the IBC,
does not merely structure the conduct of all the participants in
the process after finalization and approval of a Resolution Plan
by a CoC, but also the conduct stemming from the very first steps
of inviting prospective Resolution Applicants. The RP, with the
approval of the CoC62, invites prospective Resolution Applicants
through an RFRP. Once an unconditional EOI has been received
from prospective Resolution Applicants who are otherwise
eligible under Section 29A, the RP prepares an IM as per the
provisions of Section 29 which furnishes all relevant information
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD.
A
B
C
D
E
F
G
H
326
SUPREME COURT REPORTS
[2021] 14 S.C.R.
of the Corporate Debtor to enable prospective Resolution
Applicants to make an informed decision, before proposing a
Resolution Plan. As a consequence of the IBC and its regulations,
prospective Resolution Applicants, who are not disqualified under
Section 29A, propose drafts of their Resolution Plans. The RP
examines the Resolution Plan against the contours of Section
30(2) and submits only the eligible plans to the CoC63. Prior to
the IBBI (CIRP) (Fourth Amendment) Regulations 2020, which
now requires the CoC to vote on all Plans simultaneously after
recording its deliberations on the feasibility and viability of each
Plan, Regulation 39(3) earlier enabled the CoC to approve a
Resolution Plan with "such modifications as it deems fit". This
meant that the prospective Resolution Applicants and the CoC
would indulge in several rounds of negotiations, within a strict
time-frame, to arrive at a mutually agreeable Resolution Plan
which was then subject to voting by the CoC. Subsequent to the
voting, the RP would submit the plan to the Adjudicating Authority
along with receipt of the PBG and a compliance certificate in the
form of Form H. Each of the stages detailed above correspond to
several rights and obligations on all parties that are specifically
created by the statute. [Para 105][428-H; 429-A-E]
4. If this court were to hold that CoC-approved Resolution
Plans are indeed contracts, their provisions would still have to
conform to the statutory provisions of the IBC. However, such
an interpretation would entail that CoC-approved Resolution
Plans are at the intersection of the IBC and the Contract Act.
This would mean that certain principles of contract law, for
example those relating to discharge, penalties, remedies and
damages would become applicable to CoC- approved Resolution
Plans. For instance, in the United States, plans confirmed by courts
have been characterized as contracts, whose breach can even
give rise to contractual remedies. In In re Hoffinger Indus, Inc65,
a bankruptcy court in Arkansas has held that "a confirmed plan
should be enforceable and amenable to damages between
contractually bound parties." Indeed, it has been argued before
us that Resolution Plans should be enforced through the
contractual remedy of specific performance. Further, a
determination that Resolution Plans are contracts in the period
A
B
C
D
E
F
G
H
327
between approval by the CoC and the approval of the Adjudicating
Authority would require us to analyse whether all elements of
contract formation have been satisfied, including the question of
whether the acceptance of the Resolution Plan by the CoC fulfils
the criteria laid down under Section 7 of the Contract Act or
whether the conditionality of seeking approval from the
Adjudicating Authority makes the Resolution Plan a contingent
contract. Our intent of laying down the consequences of our
determination of Resolution Plans as contracts is to highlight the
importance of ascertaining the nature of a CoC-approved
Resolution Plan, prior to its approval by the Adjudicating
Authority.
The text of the IBC does not specify whether Resolution
Plans at the second stage of the process, i.e., in the intervening
period of submission to and approval by the Adjudicating
Authority, are pure contracts. As noted previously, by
specifications such as eligibility for resolution applicants, the
contents of the IM and duties of the RP to prospective Resolution
Applicants and statutory procedures on timelines and voting,
strictly govern the insolvency process even prior to the
submission of the Plan to the Adjudicating Authority. The CoC,
who the appellants allege is in the nature of a free contracting
party, is governed by the binding principles of the statute with
regard to the contents and nature of the statutory plan that it
approves under Section 30(4) and even its own composition.
Section 30(4) provides that the consent of all the members
of the CoC, though a unanimous vote is not required and a sixtysix per cent vote is sufficient for approval of a resolution plan.
The constitution of the CoC is based on specific scenarios
envisaged in the statute and accounts for varying compositions,
based on factors such as the nature and quantum of debt owed.
For example, if it comprises of operational creditors alone, the
percentage of debt owed between the operational and financial
creditors and other such variables impact voting thresholds inter
se members of the CoC. A sixty-six per cent vote of the CoC is
required to approve a Resolution Plan. The dissenting creditors
are deemed to have given their approval and are bound by the
decision of the majority of the CoC. The dissenting creditors are
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD.
A
B
C
D
E
F
G
H
328
SUPREME COURT REPORTS
[2021] 14 S.C.R.
bound as a result of the statutory provision and not because they
have actually consented to be parties to such an arrangement.
Other elements governing the Resolution Plan indicate that the
entire process from initiation and leading up to its acceptance by
the CoC takes place within the framework of the IBC. In addition,
the IBC provides penalties for non-compliance with the
Resolution Plan after its approval under Section 31 and forfeiture
of the PBG for failing to implement the Resolution Plan or
contributing to the failure of its implementation. The violation of
the terms of the Resolution Plan does not give rise to a claim of
damages, rather it leads to prosecution and imposition of
punishment under Section 74 of the IBC. On the contrary, a CoC's
withdrawal of the CIRP under Section 12A is coupled with a
requirement of payment of CIRP costs, but no damages are
statutorily payable to the Resolution Applicant, irrespective of
the stage of the withdrawal.
The CoC even with the requisite majority, while approving
the Resolution Plan must consider the feasibility and viability of
the Plan and the manner of distribution proposed, which may take
into account the order of priority amongst creditors as laid down
in sub-section (1) of section 53 of the IBC. The CoC cannot
approve a Resolution Plan proposed by an applicant barred under
Section 29A of the IBC. Regulation 37 and 38 of the CIRP
Regulations govern the contents of a Resolution Plan.
Furthermore, a Resolution Plan, if in compliance with the mandate
of the IBC, cannot be rejected by the Adjudicating Authority and
becomes binding on its approval upon all stakeholders - including
the Central and State Government, local authorities to whom
statutory dues are owed, operational creditors who were not a
part of the CoC and the workforce of the Corporate Debtor who
would now be governed by a new management. Such features of
a Resolution Plan, where a statute extensively governs the form,
mode, manner and effect of approval distinguishes it from a
traditional contract, specifically in its ability to bind those who
have not consented to it. In the pure contractual realm, an
agreement binds parties who are privy to the contract. In the
context of a resolution Plan governed by the IBC, the element of
privity becomes inapplicable once the Adjudicating Authority
confirms the Resolution Plan under Section 31(1) and declares it
A
B
C
D
E
F
G
H
329
to be binding on all stakeholders, who are not a part of the
negotiation stage or parties to the Resolution Plan. In fact, a
commentator has noted that the purpose of bankruptcy law is to
actually solve a specific 'contracting failure' that accompanies
financial distress. Such a contracting failure arises because
"financial distress involves too many parties with strategic
bargaining incentives and too many contingencies for the firm
and its creditors to define a set of rules of every scenario." Thus,
insolvency law recognizes that parties can take benefit of such
'incomplete contract' to hold each other up for their individual
gain. In an attempt to solve the issue of incompleteness and the
hold-up threat, the insolvency law provides procedural protections
i.e., "the law puts in place guardrails that give the parties room
to bargain while keeping them from taking position that veer
toward extreme hold up. [Paras 107-110][430-C-G; 431-A-H; 432A-G]
5. While the above observations were made in the context
of a scheme that has been sanctioned by the Court, the Resolution
Plan even prior to the approval of the Adjudicating Authority is
binding inter se the CoC and the successful Resolution Applicant.
The Resolution Plan cannot be construed purely as a 'contract'
governed by the Contract Act, in the period intervening its
acceptance by the CoC and the approval of the Adjudicating
Authority. Even at that stage, its binding effects are produced by
the IBC framework. The BLRC Report mentions that "[w]hen
75% of the creditors agree on a revival plan, this plan would be
binding on all the remaining creditors". The BLRC Report also
mentions that, "the RP submits a binding agreement to the
Adjudicator before the default maximum date". We have further
discussed the statutory scheme of the IBC in Sections I and J of
this judgement to establish that a Resolution Plan is binding inter
se the CoC and the successful Resolution Applicant. Thus, the
ability of the Resolution Plan to bind those who have not consented
to it, by way a statutory procedure, indicates that it is not a typical
contract.
The BLRC Report, which furnished the first draft of the
IBC and elaborated on the aims behind the overhaul of the
insolvency regime, refers to a CoC- approved Resolution Plan
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD.
A
B
C
D
E
F
G
H
330
SUPREME COURT REPORTS
[2021] 14 S.C.R.
as a 'binding contract' in one instance and refers to it as a 'binding
agreement' in other instances. The report also refers to a CoCapproved Resolution Plan as a 'financial arrangement', 'revival
plan' or a 'solution'. The interchangeability of the terms -
'agreement', 'contract', 'financial arrangement', 'revival plan' and
'solution' indicates that there is no clear intention of the BLRC
in characterizing the nature of the Resolution Plan as a contract.
The binding effect of the Resolution Plan has the consequence of
preventing the CoC or the Resolution Applicant to renege from
its terms after the plan has been approved by the CoC through a
voting mechanism. The fleeting mention of a 'binding contract'
on one occasion in the BLRC Report (which was a pre- legislative
text that underwent subsequent modifications by the Legislature)
to indicate the binding nature of the Resolution Plan and the finality
of negotiations once it is approved by the CoC, does not establish
the legal nature of the document, especially when it is not
complemented by the text and design of the IBC.
Certain stages of the CIRP resemble the stages involved
in the formation of a contract. Echoes of the process involved in
the formation of a contract resonate in the steps antecedent to
the approval of a Resolution Plan such as: (i) the issuance of an
RFRP may be equated to an invitation to offer; (ii) a Resolution
Plan can be considered as a proposal or offer; and (iii) the approval
by the CoC may be similar to an acceptance of offer. The terms of
the Resolution Plan contain a commercial bargain between the
CoC and Resolution Applicant. There is also an intention to create
legal relations with binding effect. However, it is the structure of
the IBC which confers legal force on the CoC-approved
Resolution Plan. The validity of the Resolution Plan is not
premised upon the agreement or consent of those bound (although
as a procedural step the IBC requires sixty-six percent votes of
creditors), but upon its compliance with the procedure stipulated
under the IBC. [Paras 112-114][433-D-G; 434-A-F]
6. The above observations were in the context of a PPA
entered into under the provisions of Electricity Supply Act 1948.
Section 43-A(1) of the Act stipulated that the generating company
may enter into a contract with the Electricity Board. Thus, the
A
B
C
D
E
F
G
H
331
judgement pre-supposes the existence of a subsisting contract.
The controversy in the case was whether the PPA could be
characterized as a statutory contract. To say that a Resolution
Plan is a statutory contract, we must first consider whether the
IBC envisages the CoC-approved Resolution Plan as a contract.
There is no provision under the IBC referring to a Resolution
Plan as a contract, unlike Section 43-A(1) of the Electricity Supply
Act 1948 which mentions that a contract may be entered into
between the concerned parties. The legal force of a Resolution
Plan arises due to the framework provided under the IBC. The
mechanisms of the IBC provide sufficient guidance on the conduct
of all participants in the process and the binding effect of the
CoC- approved Resolution Plan is evidenced by the execution of
a PBG furnished by the successful Resolution Applicant, in
compliance with the CIRP Regulations. This PBG is returnable
once the Adjudicating Authority approves the Resolution Plan
under Section 31 and makes it binding on all stakeholders.
Therefore, the IBC and its regulations institute sufficient
safeguards to ensure the binding effect of a CoC-approved
Resolution Plan. In our discussion in Sections I and J below, we
further elaborate on the nature of a CoC-approved Resolution
Plan and the code of conduct that is permissible by the statutory
framework. [Para 116][435-G-H; 436-A-D]
7. The lack of an apparent international consensus on the
issue of whether instruments like CoC-approved Resolution Plans
are contracts, prior to the Court's sanction, is also attributable
to the peculiarity of the insolvency regime in each jurisdiction.
This Court will have to be wary of transplanting international
doctrines that are evolved as responses to the specific features
of a jurisdiction's insolvency regime, without identifying an
analogous framework in our insolvency regime.
The absence of any specific provision in the IBC or the
regulations referring to a CoC-approved Resolution Plan as a
contract and the lack of clarity in the BLRC report regarding the
nature of such a Resolution Plan, constrains us from arriving at
the conclusion that CoC-approved Resolution Plans will be
governed by the Contract Act and common law principles
governing contracts, save and except for the specific prohibitions
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD.
A
B
C
D
E
F
G
H
332
SUPREME COURT REPORTS
[2021] 14 S.C.R.
and deeming fictions under the IBC. Regulation 39(3) of CIRP
regulations, as it stood before the IBBI (CIRP) (Fourth
Amendment) Regulations 2020 and applicable to the three
appellants before us, enabled a framework where a draft
Resolution Plan would involve several rounds of negotiations and
revisions between the Resolution Applicant and the CoC, before
it is approved by the latter and submitted to the Adjudicating
Authority. However, this statutorily-enabled room for commercial
negotiation is not enough to over-power the other elements of
regulation that detract from the view that CoC-approved
Resolution Plans are contracts. CoC-approved Resolution Plans,
before the approval of the Adjudicating Authority under Section
31, are a function and product of the IBC's mechanisms. Their
validity, nature, legal force and content is regulated by the
procedure laid down under the IBC, and not the Contract Act.
The voting by the CoC also occurs only after the RP has verified
the contents of the Resolution Plan and confirmed that it meets
the conditions of the IBC and the regulations therein. The
amended Regulation 39(3) further regulates the conduct of the
CoC on voting on Resolution Plans and has introduced the
requirement of simultaneous voting. The IBBI's Discussion
Paper issued on 27 August 2021 has invited comments on
regulating the process on revisions that can be made to resolution
plans submitted to the CoC. These developments bolster the
conclusion that the mechanism prior to submission of a CoCapproved resolution plan is subject to continuous procedural
scrutiny by the IBC and cannot be considered as a simple
contractual negotiation between two parties. Section J below
details how a common law remedies of withdrawal or modification
on account of frustration or force majeure are not applicable to
CoC- approved Resolution Plans owing to the nature of the IBC.
Similarly, the whole host of remedies such as liquidated and
unliquidated damages, restitution, novation and frustration, unless
specifically provided by the IBC, are not available to a successful
Resolution Applicant whose Plan has been approved by the CoC
and is awaiting the approval of the Adjudicating Authority. The
Insolvency Law Committee Report of February 2020 has
recommended the CIRP process to mandate Resolution Plans to
provide for the apportionment of the profit or loss accrued by the
A
B
C
D
E
F
G
H
333
Corporate Debtor during the CIRP. These reports are periodically
commissioned by the parliament to review the functioning of the
Code and suggest amendments. However, if the intention was to
view a CoC- approved Resolution Plan as a contract, the principles
of unjust enrichment would have been sufficient to address the
issue and an amendment may not be considered necessary. A
Resolution Applicant, as a third party partaking in the insolvency
regime, seeks to acquire the business of the Corporate Debtor
without the entirety of its debts, statutory liabilities and avoiding
certain transactions with third parties. These benefits are a
function of the coercive mechanisms of the IBC which enable a
third party to acquire the assets of a Corporate Debtor without
its liabilities, for a negotiated amount of the debt that is owed by
the Corporate Debtor. Typically, resolution amounts envisage
payment of a fraction of debt that is owed to the creditors and the
business is acquired as a going concern with its employees. The
Resolution Plan is drafted in a way that it is implementable in the
future and brings about a quietus to the CIRP. Enabling Resolution
Applicants to seek remedies that are not specified by the IBC,
by seeking recourse to the Contract Act would be antithetical to
the IBC's insolvency regime. The elements of contractual
interpretation can be relied upon to construe the language of the
terms of the Resolution Plan, in the event of a dispute, but not to
re-fashion and distort the mechanism of the IBC altogether. This
Court in Laxmi Pat Surana v. Union Bank of India has held that
the IBC is a self-contained Code. Thus, importing principles of
any other law or a statute like the Contract Act into the IBC
regime would introduce unnecessary complexity into the working
of the IBC and may lead to protracted litigation on considerations
that are alien to the IBC. To give an example, the CoC can forfeit
the PBG furnished by the successful Resolution Applicant under
certain circumstances in terms of the RFRP and Resolution Plan
including, inter alia, on the ground that the Resolution Applicant
has failed to implement the resolution or has contributed to its
failure. Regulation 36B (4A) of CIRP regulations provides for
the furnishing of such performance security once the plan is
approved by creditors. The Regulations do not provide that the
performance security has to be a reasonable estimate of loss as
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD.
A
B
C
D
E
F
G
H
334
SUPREME COURT REPORTS
[2021] 14 S.C.R.
is expected of penalty clauses under contract law, rather the
explanation provides that the performance security should be of
"such nature, value, duration and source, as may be specified in
the request for resolution plans with the approval of the
committee, having regard to the nature of resolution plan and
business of the corporate debtor". Further, in the event that the
CoC enters into a settlement with the Corporate Debtor and
withdraws from the CIRP under Section 12A, Regulation 30A
provides for only payment of insolvency costs and not
compensation or damages to Resolution Applicant for investing
time and money in the process. The parties may resort to invoking
principles of frustration or force majeure to evade implementation
of the Resolution Plan leading to unnecessary litigation. This
Court in Amtek Auto (supra), had curbed a similar attempt by a
successful Resolution Applicant who had relied on a force majeure
clause in its Resolution Plan to seek a direction compelling the
CoC to negotiate a modification to its Resolution Plan. The Court
held that there was no scope for negotiations between the parties
once the Resolution Plan has been approved by the CoC. Thus,
contractual principles and common law remedies, which do not
find a tether in the wording or the intent of the IBC, cannot be
imported in the intervening period between the acceptance of
the CoC and the approval by the Adjudicating Authority. Principles
of contractual construction and interpretation may serve as
interpretive aids, in the event of ambiguity over the terms of a
Resolution Plan. However, remedies that are specific to the
Contract Act cannot be applied, de hors the over-riding principles
of the IBC. [Paras 124-125][440-D-G; 441-A-E; 442-A-G; 443A-E]
8. The statutory framework governing the CIRP seeks to
create a mechanism for resolving insolvency in an efficient,
comprehensive and timely manner. The IBC provides a detailed
linear process for undertaking CIRP of the Corporate Debtor to
minimize any delays, uncertainty in procedure and disputes. The
roles and responsibilities of the important actors in the CIRP are
clearly defined under the IBC and its regulations. In Innoventive
Industries Ltd v. ICICI Bank a three judge Bench of this Court
observed that "one of the important objectives of the Code is to
bring the insolvency law in India under a single unified umbrella
with the object of speeding up of the insolvency process".
A
B
C
D
E
F
G
H
335
Recently, in Gujarat Urja (supra) a three judge Bench of this Court
observed that a "delay in completion of the insolvency
proceedings would diminish the value of the debtor's assets and
hamper the prospects of a successful reorganization or liquidation.
For the success of an insolvency regime, it is necessary that
insolvency proceedings are dealt with in a timely, effective and
efficient manner". The stipulation of timelines and a detailed
procedure under the IBC ensures a timely completion of CIRP
and introduces transparency, certainty and predictability in the
insolvency resolution process. The UNCITRAL Guide also states
that the insolvency law of a jurisdiction should be transparent
and predictable. [Para 143][458-G-H; 459-A-C]
9. Judicial restraint must not only be exercised while
adjudicating upon the constitutionality of the statute relating to
economic policy but also in matters of interpretation of economic
statutes, where the interpretative maneuvers of the Court have
an effect of transgressing into the law-making power of the
legislature and disturbing the delicate balance of separation of
powers between the legislature and the judiciary. Judicial restraint
must be exercised in such cases as a matter of prudence, since
the court neither has the necessary expertise nor the power to
hold consultations with stakeholders or experts to decide the
direction of economic policy. A court may be inept in laying down
a detailed procedure for exercise of the power of withdrawal or
modification by a successful Resolution Applicant without
impacting the other procedural steps and the timelines under
the IBC which are sacrosanct. Thus, judicial restraint must be
exercised while intervening in a law governing substantive
outcomes through procedure, such as the IBC. In this case, if
Resolution Applicants are permitted to seek modifications after
subsequent negotiations or a withdrawal after a submission of a
Resolution Plan to the Adjudicating Authority as a matter of law,
it would dictate the commercial wisdom and bargaining strategies
of all prospective Resolution Applicants who are seeking to
participate in the process and the successful Resolution
Applicants who may wish to negotiate a better deal, owing to
myriad factors that are peculiar to their own case. The broader
legitimacy of this course of action can be decided by the legislature
alone, since any other course of action would result in a flurry of
EBIX SINGAPORE PVT. LTD. v. COMMITTEE OF CREDITORS OF
EDUCOMP SOLUTIONS LTD.
A
B
C
D
E
F
G
H
336
SUPREME COURT REPORTS
[2021] 14 S.C.R.
litigation which would cause the delay that the IBC seeks to
disavow.
The IBC is silent on whether a successful Resolution
Applicant can withdraw its Resolution Plan. However, the
statutory framework laid down under the IBC and the CIRP
Regulations provide a step-by-step procedure which is to be
followed from the initiation of CIRP to the approval by the
Adjudicating Authority. Regulation 40A describes a modeltimeline for the CIRP that accounts for every eventuality that
may arise between the commencement of the CIRP and approval
of the Resolution Plan by the Adjudicating Authority, including
the different stages for pressing a withdrawal of the CIRP under
Section 12A. Even a modification to the RFRP is envisaged by
the CIRP Rules and is subject to a timeline. The absence of any
exit routes being stipulated under the statute for a successful
Resolution Applicant is indicative of the IBC's proscription of
any attempts at withdrawal at its behest. The rule of casus omissus
is an established rule of interpretation, which provides that an
omission in a statute cannot be supplied by judicial construction.
The treatise further discusses that a departure from this
rule is only allowed in cases where words have been accidently
omitted or the omission has an effect of making any part of the
statute meaningless. Further, only such words can be supplied to
the statute which would have certainly been inserted by the
Parliament, had the omission come to its notice.
In the wake of the COVID-19 pandemic, several
Resolution Plans remained pending before Adjudicating
Authorities due to the lockdown and significant barriers to
securing a hearing. An Ordinance was swiftly promulgated on 5
June 2020 which imposed a temporary suspension of initiation of
CIRP under Sections 7, 9 and 10 of the IBC for defaults arising
for six months from 25 March 2020 (extendable by one year).
This was followed by an amendment through the IBC (Second
Amendment) Act 2020 on 23 September 2020 which provided
for a carve-out for the purpose of defaults arising during the
suspended period. The delays on account of the lockdown were
also mitigated by the IBBI (Insolvency Resolution Process for
Corporate Persons) (Third Amendment) Regulations 2020, which
A
B
C
D
E
F
G
H
337
inserted Regulation 40C on 20 April 2020, with effect from
29 March 2020, and excluded such delays for the purposes of
adherence to the otherwise strict timeline. Recently, the IBC
(Amendment) Ordinance 2021 was promulgated with effect from
04 April 2021 providing certain directions to preserve businesses
of MSMEs and a fast-track insolvency process. There has been
a clamor on behalf of successful Resolution Applicants who no
longer wish to abide by the terms of their submitted Resolution
Plans that are pending approval under Section 31, on account of
the economic slowdown that impacted every business in the
country. However, no legislative relief for enabling withdrawals
or re- negotiations has been provided, in the last eighteen months.
In the absence of any provision under the IBC allowing for
withdrawal of the Resolution Plan by a successful Resolution
Applicant, vesting the Resolution Applicant with such a relief
through a process of judicial interpretation would be
impermissible. Such a judicial exercise would bring in the evils
which the IBC sought to obviate through the back-door.[Paras
146-147][464-D-H; 465-A-D, F; 466-C-H]
10.