NCLAT sets aside order on EBIX pulling out of Educomp Solutions resolution plan

A two-member bench of the appellate tribunal set aside the order passed by the National Company Law Tribunal (NCLT) allowing EBIX to withdraw the bid, which was approved by a majority of 75.36 per cent of the Committee of Creditors and was pending for approval. Allowing the appeal filed by the Committee of Creditors (CoC) of Educomp Solutions, the NCLAT said EBIX had accepted the conditions of the resolution plan and after that, it is not open for them to take a “topsy turvy” stance and withdraw the approved plan.

The National Company Law Appellate Tribunal (NCLAT) has set aside an NCLT order that allowed EBIX Singapore PTE to withdraw its resolution plan for Educomp Solutions after being selected by the lenders. A two-member bench of the appellate tribunal set aside the order passed by the National Company Law Tribunal (NCLT) allowing EBIX to withdraw the bid, which was approved by a majority of 75.36 per cent of the Committee of Creditors and was pending for approval.

Allowing the appeal filed by the Committee of Creditors (CoC) of Educomp Solutions, the NCLAT said EBIX had accepted the conditions of the resolution plan and after that, it is not open for them to take a “topsy turvy” stance and withdraw the approved plan. “… This court holds that the Adjudicating Authority (NCLT) after approval of the ‘Resolution Plan’ by the CoC had no jurisdiction to entertain or to permit the withdrawal application filed by the 1st Respondent/’Resolution Applicant,” said the NCLAT bench comprising Justice Venugopal M and Kanthi Narahari. Earlier, passing an order on January 2, 2020, the Delhi-based Principal bench of the NCLT had allowed EBIX to withdraw its resolution plan with a cost of Rs 1 lakh to be paid by it, in the corpus of the Educomp Solutions.

Besides, the NCLT had also extended the Corporate Insolvency Resolution Process (CIRP) period for the Educomp Solutions further by 90 days from November 16, 2019. In its order, the NCLT had said though the withdrawal of the resolution plan at this advance stage has caused great prejudice to the creditors and stakeholders but it may be the case of compelling an “unwilling and reluctant resolution applicant to implement the plan” which may lead to uncertainty. "An unwilling and reluctant resolution applicant, who has withdrawn his resolution plan, neither can put the corporate debtor back to its feet nor the effective implementation of its resolution plan can be ensured,” said NCLT on January 2, 2020. This was challenged by the lenders before NCLAT contending that NCLT had wrongly allowed the plea of withdrawal of ‘Resolution Plan’ beyond its jurisdiction. Moreover, over the plea of delay in CIRP, the lenders said that it was not in the hands of ‘Committee of Creditors. EBIX had contended that the validity of the approved resolution plan was only six months. After the lapse of more than 18 months from the date of submission of the ‘Resolution Plan and 27 months from the CIRP commencement date, the application for its approval was still pending before the NCLT on September 10, 2019.

Rejecting it, the NCLAT said EBIX even after the expiry of six months had proceeded with the approval of the ‘Resolution Plan’. “During the period from August 2018 till January 2019 when the orders were reserved by the NCLT on the approval application, EBIX took part and, therefore, by any stretch of the imagination, it cannot be said that the validity of the ‘approved plan’ was only six months period and such plea is not well-founded,” said NCLAT.

According to the NCLAT, when the order was reserved by the NCLT then a litigant cannot take advantage of the delay. “… granting the relief of withdrawal of ‘Resolution Plan’ with costs and resultantly allowing the aforesaid CA No… partly specifying the terms therein with costs of Rs. 1 lakh to be paid by the 1st Respondent/’Resolution Applicant’ are clearly unsustainable in law and accordingly, they are set aside in furtherance of substantial cause of justice. Resultantly, the present Appeal succeeds,” said NCLAT..