IBC | Successful Resolution Applicant Cannot Renege From Approved Plan By Citing Pending Litigations Or Letter Of Intent Conditions: Supreme Court

"A submitted resolution plan is binding and irrevocable as between the CoC and the successful resolution applicant in terms of the provisions of IBC and the CIRP Regulations... Enabling withdrawals or modifications at the behest of the successful resolution applicant would create another tier of negotiations which will be wholly unregulated by the statute," Supreme Court, in a significant ruling dated May 27, 2026, held that a Successful Resolution Applicant (SRA) cannot avoid the implementation of a Committee of Creditors (CoC) approved plan by characterizing the Letter of Intent (LoI) as "conditional."

A bench of Justice K.V. Viswanathan and Justice Vipul M. Pancholi observed that stipulations in an LoI making the plan subject to pending judicial orders or existing litigation risks do not grant the SRA a right to renege. The court emphasized that once the CoC approves a plan, the SRA is prohibited from further negotiations and must act in a time-bound manner to implement the proposal.

The Corporate Insolvency Resolution Process (CIRP) of M/s. Oracle Home Textiles Limited commenced in 2018, and the appellant, a promoter of the MSME entity, submitted a resolution plan that was approved by the CoC with a 99.90% majority. Subsequently, the Resolution Professional (RP) issued Letters of Intent (LoI) which the appellant refused to accept, contending they were "conditional" as they were subject to the outcome of pending applications by other prospective applicants and staff litigations. Following the appellant's failure to submit a Performance Bank Guarantee and accept the LoI, the CoC voted for liquidation with a 99.61% majority, and the appellant’s Earnest Money Deposit (EMD) of Rs. 1 Crore was forfeited.

The primary question before the court was whether stipulations in an LoI making the approval subject to pending judicial orders or liability risks make the LoI "conditional," thereby allowing the SRA to withdraw from the plan. The court was also called upon to determine if the CoC’s decision to liquidate the Corporate Debtor, following the SRA’s default in implementing an approved plan, was legally sustainable under Section 33 of the IBC.

Stipulations Regarding Judicial Orders Do Not Make LoIs Conditional

The Supreme Court found that the appellant’s objection to clauses making the LoI subject to pending NCLT orders was "bereft of any merit." The bench noted that even if such a stipulation was not explicitly mentioned, any resolution plan would ultimately be subject to the final decision of the Adjudicating Authority. The court held that such a clause is merely a recognition of the legal reality and does not render the LoI "conditional" in a manner that allows an applicant to back out.

The bench observed that the appellant was well aware of the ongoing litigations regarding other prospective resolution applicants through various CoC meetings. The court noted that it was "unjust" for the appellant to insist that his plan be considered in isolation from the judicial proceedings to which the RP and CoC were privy.

"The stipulation about the LoI being subject to the outcome of the pending applications of PRA would not make the LoI conditional for the appellant to renege from the plan."

SRA Cannot Be Allowed To Approbate And Reprobate

The court invoked the doctrine of "approbate and reprobate," noting that the appellant had participated in CoC meetings where these conditions were discussed and had initially agreed to them. The bench characterized the appellant's subsequent objections as a "subterfuge" and a "clever ploy" to shift the blame onto the CoC for his own unwillingness to take the plan forward.

Referring to the minutes of the 27th and 29th CoC meetings, the bench pointed out that the appellant had expressly agreed to take the risk of staff and worker litigations as a "calculated risk" configured into his plan. The court held that having knowingly accepted the benefits and the framework of the process, the appellant was estopped from denying the binding effect of those terms.

"The device adopted by the appellant was an indirect attempt to renege from the plan. It was a clear subterfuge... This clever ploy has rightly been scotched by the fora below."

Binding Nature Of CoC-Approved Resolution Plans

Relying on the precedent in Ebix Singapore Private Limited vs. CoC of Educomp Solutions Limited, the court reiterated that there is no scope for negotiations or withdrawals after the CoC has approved a resolution plan. The bench emphasized that the IBC architecture is designed for a swift, time-bound process and allowing SRAs to modify plans post-approval would lead to an unregulated and deleterious tier of negotiations.

The court noted that an SRA is assumed to have analyzed all business risks before submitting a considered proposal. Consequently, the plan remains binding and irrevocable as between the CoC and the SRA, with the only remaining conditionality being the formal approval by the Adjudicating Authority under Section 31 of the IBC.

"A submitted resolution plan is binding and irrevocable as between the CoC and the successful resolution applicant in terms of the provisions of IBC and the CIRP Regulations."

CoC’s Power To Liquidate Under Section 33 Is Absolute

The court upheld the CoC's decision to liquidate the Corporate Debtor under Section 33(2) of the Code. The bench explained that the CoC is statutorily empowered to decide on liquidation at any time before the confirmation of the resolution plan. This decision, the court held, falls within the "paramount commercial wisdom" of the CoC and is generally not amenable to judicial review.

The bench further clarified that where an SRA "lulls the CoC to believe" it will comply and then reneges, the CoC is justified in resolving to liquidate the company to realize money for claimants. The court noted that under the current framework, if a resolution plan is not implemented or is rejected due to the SRA’s default, initiation of liquidation becomes "inevitable and mandatory."

"The legislature, consciously, has not provided any ground to challenge the 'commercial wisdom' of the individual financial creditors or their collective decision before the adjudicating authority. That is made non-justiciable."

The Supreme Court dismissed the appeals, confirming that the appellant’s failure to accept the LoIs and provide the performance guarantee justified the forfeiture of the Rs. 1 Crore EMD. The court upheld the orders of the NCLT and NCLAT, directing the Liquidator to proceed with the liquidation of M/s. Oracle Home Textiles Limited in accordance with the Code. The bench concluded that allowing such "artifices" by SRAs would cause the entire architecture of the IBC to crumble.

Date of Decision: 27 May 2026