The Insolvency and Bankruptcy Code framework continues to face legal scrutiny regarding whether financial creditors can alter their stance after approving a rescue package. In a landmark ruling, the Supreme Court addressed whether a Committee of Creditors can seek the withdrawal of a resolution plan solely because the corporate debtor’s financial position improved during prolonged litigation.
The case arose from Civil Appeal No. 12045 of 2026, dated October 26, 2026, involving Bank of India and other appellants against S.M. Kamal Pasha and respondents. The core dispute centered on whether the Committee of Creditors could abandon an approved resolution plan to invite fresh expressions of interest via a new Form-G.
Background and Legal Journey
The corporate debtor entered the corporate insolvency resolution process after its toll collection business suffered setbacks during the pandemic. A consortium submitted a resolution plan offering a specific financial payout, which the Committee of Creditors approved by the requisite majority. However, extensive delays occurred due to pending litigation and judicial stays.
During this interim period, the corporate debtor accumulated substantial cash reserves under the management of the resolution professional. Realizing the corporate debtor’s financial health had substantially improved, the creditors sought to withdraw their approval. Their argument relied on maximizing asset value, claiming that executing the original plan would grant the successful resolution applicant an undue windfall. Simultaneously, the holding company proposed a one-time settlement to clear dues in full and exit the insolvency process entirely.
The National Company Law Appellate Tribunal rejected the withdrawal plea, prompting an appeal to the apex court.
The Supreme Court Verdict
The Court upheld the binding nature of a resolution plan once approved by the creditors. Referencing established jurisprudence such as Ebix Singapore, the bench reiterated that the statutory framework does not permit parties to arbitrarily renege on their commitments.
The Court observed that improvements in a company’s financial standing during the implementation phase do not automatically invalidate a binding agreement. Permitting creditors to withdraw approved plans based on shifting financial fortunes would introduce commercial uncertainty and compromise the discipline mandated by the insolvency legislation.
Ultimately, the Court declined to interfere with the appellate directive requiring the adjudicating authority to evaluate both the pending confirmation application and the alternative settlement proposal. The tribunal must assess whether the original plan satisfies statutory compliance parameters without letting isolated profitability metrics serve as the sole ground for rejection.
5 Focus Keywords:
- Resolution Plan
- Committee of Creditors
- Insolvency and Bankruptcy Code
- Supreme Court of India
- Corporate Insolvency Resolution Process
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