Approval of resolution plan

Related judgements & precedents

These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.

1. Ghanashyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited

   Supreme Court of India 13 Apr 2021 Binding (Supreme Court) Reportable Civil Appeal No. 8129 of 2019

   Court's Decision & Legal Precedent

   Judgement of Main Case order-14.pdf 2021-04-13. CA 8129/2019 (with UltraTech Nathdwara / Monnet Ispat / Electrosteel). B.R. Gavai J. REPORTABLE. DATE-CHECK false positive (CIRP admission 03.08.2017 and plan dates 2018 in the facts); body is the named s.31 clean-slate reportable. Isolates IBC 31(1): once the AA approves a resolution plan it binds all creditors including the Central Government, any State Government or local authority; the 2019 amendment to s.31 is clarificatory; dues not part of the approved plan stand extinguished. Map insolvency-bankruptcy-code-2016 31 cited only. Do not pad IBC 7 (already filled) or 30 (filled this pass by Sashidhar).

   On this section: An IBC 31 approved resolution plan binds the Central and State Governments and local authorities; claims not in the plan, including statutory dues, stand extinguished (Ghanashyam Mishra).

   Read the full order on eCourts India

2. Moser Baer Karamchari Union Thr. President Mahesh Chand Sharma vs Union of India

   Supreme Court of India 02 May 2023 Binding (Supreme Court) Reportable (2023) 5 SCC 1

   Court's Decision & Legal Precedent

   The Insolvency and Bankruptcy Code 2016 represents an organic evolution of insolvency law through a consultative process involving multiple committees and expert bodies. The waterfall mechanism under Section 53 of IBC, which ranks workmen's dues for 24 months preceding liquidation commencement date pari passu with secured creditors who relinquish security, is a carefully balanced framework that adequately protects workmen's interests while promoting revival of insolvent companies and maximizing asset value for all stakeholders. This framework is not arbitrary or violative of Articles 14 and 21 of the Constitution. The two regimes - liquidation under Companies Act 2013 and liquidation under IBC - deal with different situations and cannot be compared for constitutional purposes. In economic legislation, courts should defer to legislative judgment unless the exercise of legislative judgment appears to be palpably arbitrary. The sacrifices required from workmen under IBC are not manifestly unjust or arbitrary, and the exclusion of Provident Fund, Pension Fund and Gratuity Fund from liquidation estate, combined with the 24-month protection and Regulation 21A safeguards, adequately protect workmen's dues.

   On this section: Approval of resolution plan binding on all stakeholders

   Read the full order on eCourts India

3. Mahendra Kumar Rajpal vs Ministry of Corporate Affairs

   Supreme Court of India 21 May 2021 Binding (Supreme Court) Reportable

   Court's Decision & Legal Precedent

   The Central Government, acting under Section 1(3) of the Insolvency and Bankruptcy Code, 2016, has the power to bring into force different provisions of the Code at different times for different categories of persons. The 2018 Amendment Act, by creating personal guarantors as a distinct category in Section 2(e) and mandating the NCLT as the adjudicating authority in Section 60, provided sufficient legislative guidance for the Central Government to selectively apply the Code to personal guarantors to corporate debtors. The notification dated 15.11.2019 is a valid exercise of conditional legislation, not an instance of excessive delegation or impermissible legislative exercise. Personal guarantors, though individuals, are intrinsically connected to corporate debtors and warrant unified adjudication before the NCLT. The approval of a corporate resolution plan does not discharge the personal guarantor's liability, which remains enforceable as an independent contractual obligation under the Indian Contract Act, 1872.

   On this section: Binding effect of approved resolution plan on all stakeholders including guarantors

   Read the full order on eCourts India

4. Raman Prakash Mangla vs Anuj Jain

   Supreme Court of India 24 Mar 2021 Binding (SC) Reportable

   Court's Decision & Legal Precedent

   The Adjudicating Authority has limited jurisdiction in approving a resolution plan, circumscribed by Sections 30(2) and 31 of the Insolvency and Bankruptcy Code, 2016. The Authority cannot interfere with the commercial aspects of the decision taken by the Committee of Creditors. If the Adjudicating Authority finds shortcomings in the resolution plan vis-à-vis the specified parameters of keeping the corporate debtor as a going concern, maximizing the value of its assets, and taking care of interests of all stakeholders, it must send the plan back to the Committee of Creditors for reconsideration, not modify the plan itself. Payment to dissenting financial creditors must be in monetary terms, not in kind or through transfer of equity or land. Once homebuyers as a class vote in favor of a resolution plan through their authorized representative, individual homebuyers cannot challenge the plan as dissenting creditors or aggrieved persons. The INR 750 crores deposited by the holding company pursuant to Supreme Court orders in Chitra Sharma is the property of the holding company, not the corporate debtor, and cannot be appropriated by the corporate debtor or the resolution applicant.

   On this section: Approval of resolution plan by Adjudicating Authority

   Read the full order on eCourts India

5. Sanjay Singal vs Union of India

   Supreme Court of India 21 May 2021 Binding (SC) Reportable

   Court's Decision & Legal Precedent

   The impugned notification dated 15.11.2019 bringing into force provisions of the Insolvency and Bankruptcy Code, 2016 only in so far as they relate to personal guarantors to corporate debtors is a valid exercise of power conferred by Section 1(3) of the Code. The Central Government acted within its constitutional powers in selectively applying Code provisions to personal guarantors as a distinct category of individuals, as this classification was created by Parliament through the 2018 Amendment Act which amended Section 2(e) and Section 60 to provide unified adjudication of corporate debtors and personal guarantors before the NCLT. The notification does not constitute impermissible delegation of legislative power or excessive modification of statutory provisions, but rather operationalizes the Parliamentary intent to treat personal guarantors differently from other individuals due to their intrinsic connection with corporate debtors. Approval of a resolution plan relating to a corporate debtor does not operate to discharge the liabilities of personal guarantors to such corporate debtors, as the guarantor's liability is co-extensive with the principal debtor and continues notwithstanding involuntary discharge of the principal debtor by operation of law.

   On this section: Approved resolution plan binding on corporate debtor, employees, members, creditors, guarantors and other stakeholders

   Read the full order on eCourts India

6. Lalit Kumar Jain vs Union of India

   Supreme Court of India 21 May 2021 Binding (SC) Reportable

   Court's Decision & Legal Precedent

   The Central Government, in exercise of powers conferred by Section 1(3) of the Insolvency and Bankruptcy Code, 2016, has authority to bring into force different provisions of the Code at different times for different categories of persons, including personal guarantors to corporate debtors. The 2018 Amendment Act, by creating distinct classification of personal guarantors under Section 2(e) and amending Section 60, provided sufficient parliamentary guidance for such selective application. The impugned notification, which brings into force provisions of Part III of the Code only in relation to personal guarantors to corporate debtors, is valid exercise of power conferred by Section 1(3) and does not amount to excessive delegation or modification of Code provisions. Furthermore, approval of a resolution plan for a corporate debtor does not discharge the personal guarantee liabilities of guarantors, as such liabilities arise from independent contracts of guarantee and are not discharged by involuntary discharge of principal debtor by operation of law.

   On this section: Approved resolution plan binding on corporate debtor, employees, members, creditors, guarantors and other stakeholders; does not discharge guarantor liability

   Read the full order on eCourts India

7. Rajesh Gupta vs Nbcc (india) LTD

   Supreme Court of India 24 Mar 2021 Binding (SC) Reportable

   Court's Decision & Legal Precedent

   The Adjudicating Authority's jurisdiction in approving a resolution plan is limited to verifying compliance with the mandatory requirements specified in Section 30(2) of the Insolvency and Bankruptcy Code, 2016. The Authority cannot modify the commercial terms of a resolution plan approved by the Committee of Creditors by the requisite majority (66% or more of voting share). If the Authority finds that the resolution plan does not meet the specified parameters (keeping corporate debtor as going concern, maximizing asset value, protecting stakeholder interests), it must remit the plan back to the Committee of Creditors for reconsideration rather than modifying it itself. The commercial wisdom of the Committee of Creditors is non-justiciable and cannot be interfered with by the Adjudicating Authority or Appellate Authority on equitable or quantitative grounds. Dissenting financial creditors must receive payment in monetary terms (cash) equivalent to their liquidation value, not in kind through equity or land transfers. The INR 750 crores deposited by the holding company JAL pursuant to Supreme Court orders in the Chitra Sharma case remains the property of JAL and cannot be treated as an asset of the corporate debtor JIL for purposes of the resolution plan. Homebuyers as a class are bound by the decision of their authorized representative in the Committee of Creditors under Section 25A(3A), and individual homebuyers cannot maintain separate challenges to the resolution plan. The Insolvency and Bankruptcy Code prevails over the Real Estate (Regulation and Development) Act, 2016 in case of conflict, though both statutes must be interpreted harmoniously. Concession Agreements with statutory authorities are not statutory contracts and their material terms cannot be modified without the consent of the other contracting party. Security interests not avoided under Section 43 of the Code cannot be unilaterally extinguished through a resolution plan.

   On this section: Approval of resolution plan by Adjudicating Authority; limited to verification of compliance with Section 30(2) requirements

   Read the full order on eCourts India

8. Vodafone Idea LTD vs Union of India Department of Telecommunications through Its Secretary

   Supreme Court of India 01 Sep 2020 Binding (Supreme Court) - Landmark Decision with Substantial Judicial Impact Reportable

   Court's Decision & Legal Precedent

   The primary ratio decidendi are: (1) Spectrum constitutes a natural resource held by the government in sovereign trust and cannot be treated as property owned by corporate debtors subject to insolvency proceedings merely due to right to use granted under license; the question requires NCLT examination within two months as it is a substantial jurisdictional issue affecting the validity of insolvency proceedings initiated by telecom companies; (2) In spectrum sharing arrangements, the sharing operator has no liability for the original licensee's predecessor AGR dues as the sharing operator merely obtains right to use additional spectrum alongside its own spectrum - each operator remains liable only for AGR dues arising from spectrum it holds; (3) In spectrum trading arrangements, the buyer's liability for seller's predecessor AGR dues is determined by the Trading Guidelines - if entire spectrum is traded, buyer assumes seller's known past dues; if only partial spectrum is traded, buyer has no predecessor dues liability; any dues discovered after trade date are recoverable from buyer or seller jointly or severally at government discretion; (4) AGR dues determined by the Supreme Court judgment dated October 24, 2019 are final, binding and not subject to reassessment or fresh disputes; telecom operators must pay the determined amount through installment schedule without room for contesting the calculation; (5) The government as licensor retains sovereign privilege over spectrum allocation under Telegraph Act Section 4 and can enforce contractual conditions precedent (particularly payment of dues) before permitting license transfers or spectrum trading, notwithstanding IBC moratorium provisions, as these are conditions precedent to the right itself rather than post-right enforcement.

   On this section: Provides that approved resolution plans bind government entities; question whether government approval is binding or merely approval of implementation

   Read the full order on eCourts India

9. Tata Teleservices LTD vs Union of India through Its Secretary

   Supreme Court of India 01 Sep 2020 Binding - Supreme Court Division Bench Judgment on Civil Appeal/Application Reportable

   Court's Decision & Legal Precedent

   The core ratio decidendi is: (1) Spectrum is a natural resource held by Government under exclusive privilege per Section 4 of Telegraph Act, granted to licensees subject to contractual conditions including payment of AGR dues. While the question of whether spectrum can be subjected to IBC proceedings involves significant jurisdictional issues to be examined by NCLT, it is clear that AGR dues accumulated over nearly 20 years must be paid in full by all telecom service providers without dispute or reassessment. (2) Payment of these dues aggregating Rs. 1,43,271.74 crores (as calculated by Court) shall be made in 10 equal yearly installments commencing from April 1, 2021 to March 31, 2031, with 10% due by March 31, 2021. This represents modification of Government's proposal for 20-year timeline as inappropriate given the sovereign nature of spectrum rights. (3) For telecom service providers sharing spectrum under 2015 Guidelines, each operator remains liable for AGR dues proportionate to spectrum held; sharing operator bears no liability for past dues of original licensee. (4) For spectrum trading, seller must clear all pre-trading dues; buyer liable for post-trading dues except those discovered later and unknown at trading date, recoverable jointly or severally at Government's discretion. (5) All telecom service providers must pay dues without any reduction, waiver, or relief other than the approved 10-year installment schedule with NPV protection. No dispute, reassessment, or recalculation is permitted. Default in payment results in automatic interest, penalty and interest on penalty, and constitutes contempt of court. (6) The question of whether spectrum can be subjected to insolvency proceedings is a jurisdictional matter for NCLT to decide within two months, examining whether such proceedings constitute bona fide attempts at revival or subterfuge to avoid AGR payment.

   On this section: Resolution plan binding on corporate debtor and Government; parties debated whether resolution plan can override Government's contractual rights regarding spectrum

   Read the full order on eCourts India

10. Bharti Airtel LTD vs Union of India through Secretary

    Supreme Court of India 01 Sep 2020 Binding (Supreme Court) with Substantial Persuasive and Precedential Value for F Reportable Reported in Supreme Court Records as M.A. (D) No. 9887 of 2020 in C.A. Nos. 63286399 of 2015

    Court's Decision & Legal Precedent

    Spectrum, being a scarce recognized natural resource held in public trust by the Central Government under its exclusive privilege granted by Section 4 of the Indian Telegraph Act, 1885, cannot be treated as property owned by a corporate debtor and therefore cannot be subjected to insolvency proceedings under the Insolvency and Bankruptcy Code, 2016. A telecom licensee possesses only contractual usage rights over spectrum granted under the license agreement, not ownership rights. These contractual rights, being under agreement with a third party (the Government) retaining interest, fall outside the definition of 'assets' under Section 18 of the IBC as per the Explanation to that section. Accordingly, spectrum cannot be transferred in resolution plans or subject to resolution proceedings, and statutory Guidelines for Spectrum Sharing and Trading issued by the Department of Telecommunications must be adhered to. However, the jurisdictional question of whether spectrum can be subjected to insolvency proceedings and whether AGR dues are operational dues under the IBC requires consideration by the National Company Law Tribunal before any further determination.

    On this section: Resolution plan binding on corporate debtor and creditors, but subject to compliance with statutory guidelines. Court considered whether guidelines for spectrum trading override IBC provisions.

    Read the full order on eCourts India

The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.