CoC Cannot Withdraw Approved Resolution Plan Over Improved Cash Balance

Finality Under the bankruptcy and insolvency code

The Supreme Court rejected that attempt. It held that a committee of creditors cannot withdraw approval of a resolution plan before confirmation by the Tribunal merely because the corporate debtor's finances have improved in the interim. Once a vote has taken place and approval has been granted after due deliberation, the approval binds the process. Later accretion in cash, without more, does not give lenders a right to resile.

The reasoning is tied to how the insolvency and bankruptcy code 2016 India structures decision-making. The Code gives the power to assess viability and feasibility, and to choose between competing plans, to creditors. That power is wide. Courts have repeatedly said they do not sit in appeal over commercial wisdom. But width is not the same as freedom to keep reopening the choice. The vote is the moment of decision. The Tribunal's confirmation is a check for legal compliance, not an invitation to renegotiate price while the file moves from one forum to another.

If withdrawal were allowed on the ground that cash went up, no approved plan would ever be safe. Every delay would become a reason to reprice. Applicants would be asked to pay more simply because the process took longer. That would punish the very party that had stayed with the process, while rewarding delay.

Why the Windfall Argument Failed

The windfall point had surface appeal. Rs.30 crore turning into Rs.165 crore looks like a gift to the incoming owner. The Court did not accept that framing. Cash collected during the corporate insolvency resolution process is part of the corporate debtor's assets. It was always going to vest in a manner dealt with by the plan. The resolution applicant had priced risk, delay, turnaround cost, and payment to creditors on the basis of the invitation, evaluation matrix, and information memorandum available at the time of bidding.

To call the later balance a windfall ignores that the applicant also bore the risk of the opposite movement. Toll income can fall. Roads can close. Collection contracts can face disputes. Maintenance and staff costs continue. If cash had fallen from Rs.30 crore to Rs.5 crore during the same period, the applicant could not have asked for a discount on the ground that the economics had worsened. The bargain cuts both ways. The Court's answer keeps symmetry. You cannot keep the benefit of finality when values fall and discard it when values rise.

There is also a problem of responsibility for delay. The record in this matter pointed to implementation delays, including appellate proceedings, during which the cash grew while under the resolution professional. The successful applicant did not engineer that delay to enrich itself. To make the applicant pay for time lost in litigation would be to transfer the cost of systemic slowness to a private bidder. The judgment refuses that transfer.

Approval Means Approval Before NCLT Nod

A large part of the lenders' case turned on timing. They argued that since the Tribunal had not yet confirmed the plan under the Code, approval was still provisional and could be taken back. The Court drew a clear line between the act of approval and the act of confirmation. They are separate steps, performed by separate bodies, for separate purposes.

Approval reflects commercial judgment. Confirmation tests whether the plan meets statutory requirements, respects the priority scheme, provides for dissenting creditors as required, and does not contravene law. The Tribunal does not have a general power to send a compliant, approved plan back for re-auction because a better price might now be available. By the same logic, lenders cannot use the gap between those two steps as a window to withdraw for reasons of price regret.

This protects the integrity of voting. Voting in large insolvencies involves meetings, negotiations, technical evaluation, and often hard compromises between banks with different exposures. Once that process closes, third parties act on it. The resolution applicant arranges funds, gives undertakings, and prepares to take over management. Bank guarantees may be kept alive. Employees and contractors adjust expectations. Allowing a pullback at the last stage would waste that reliance and make future bidders cautious about participating at all.

Indian insolvency practice has seen repeated attempts to reopen approved plans when a new bidder appears with a higher figure or when asset values move. Courts have pushed back where the only reason is higher value. The present ruling follows that thread. Higher cash in hand, standing alone, is not a ground to treat an approved plan as if it were only a draft.

What Lenders and Bidders Must Do Now

For banks and financial creditors, the message is direct. Price the cash variable at the time of voting. If a plan leaves future accruals to the applicant, build that assumption into the evaluation. If lenders want cash accruals above a threshold to be shared or to be used for additional payouts, that term must be written into the request for resolution plans and reflected in the plan itself. It cannot be implied later because the balance looks large.

Resolution professionals carry part of this work. Cash management during the resolution period needs transparent reporting, so that voting takes place on current figures and with clear treatment of cash generated till the transfer date. Where collection businesses or other cash-rich operations are involved, the information memorandum and plan terms should state plainly who gets interim accruals and how they will be adjusted on closing. Clarity at the start removes room for second thoughts at the end.

For resolution applicants, the ruling gives comfort on bid sanctity. A bid made in good faith, evaluated fairly, and approved by the required majority will not be reopened only because the debtor's bank account grew while courts took time. That comfort matters for funding. Lenders to the applicant, investors, and sureties need to know that the price will hold through the confirmation stage unless a true legal defect emerges.

The Tribunal and appellate forum also get a narrower, cleaner task. On confirmation, the question remains whether the plan complies with the Code, not whether the creditors could have obtained more by waiting. If a plan is compliant and was approved properly, it should move to implementation. If there is fraud, material irregularity, or breach of mandatory provisions, those remain valid grounds for interference. A bigger cash balance is not in that category.

The plan in this case, valued at about Rs.172.55 crore for the National Highway-45 toll business, now stands on its approval without the cloud of withdrawal for cash accretion from about Rs.30 crore to about Rs.165 crore. The creditors will take under the approved terms, and the applicant will take the business with its cash as provided in that plan, subject to confirmation.