SC bars creditors from withdrawing insolvency plan over improved finances

The Supreme Court on Monday ruled that lenders cannot withdraw an approved insolvency resolution plan merely because a company’s financial position has improved, potentially limiting creditors’ ability to seek better commercial terms.

A division bench of Justices J.B. Pardiwala and K. Vinod Chandran declined to interfere with the National Company Law Tribunal’s (NCLT) order rejecting the committee of creditors’ (CoC) attempt to withdraw the resolution plan for TD Toll Road Pvt. Ltd, a subsidiary of Reliance Infrastructure Ltd.

The bench remarked that under the Insolvency and Bankruptcy Code (IBC), neither the CoC nor the resolution applicant can withdraw the approved resolution merely by stating that certain developments have made the transaction less attractive.

"We are of the opinion that the withdrawal of an application can only be till the CoC approves the plan, and after it is placed before the Adjudicating Authority, there can be no withdrawal either of the application or the approved resolution plan," stated the order seen by Mint.

The ruling provides greater certainty to resolution applicants, who commit capital and furnish bank guarantees while awaiting approval of their plans, said Anoop Rawat, partner and national practice head for insolvency and restructuring at the law firm Shardul Amarchand Mangaldas & Co.

“Bidders commit capital, provide bank guarantees and wait through long approval periods. They need to know that the price agreed will not be reopened because the business later recovers,” he said.

Although commercial wisdom protects the CoC from judicial scrutiny, that does not empower them to reconsider their own approved plan, according to Yash Dhruva, a partner at MDP Legal Advocates and Solicitors.

“The CoC cannot invoke its commercial wisdom afresh to undo that decision… commercial wisdom protects the CoC’s decision from judicial second-guessing, but does not give it an indefinite right to reconsider its own approved decision,” said Dhruva.

Mukesh Chand, senior counsel at Economic Laws Practice, said instances of the CoC seeking to withdraw an approved resolution plan are rare. However, “the ruling would certainly put an end to the reopening of resolution plans, as it places the CoC and other stakeholders on an equal footing with the resolution applicant regarding the binding nature of the plan,” he said.

TD Toll Road’s financials deteriorated during the covid-19 pandemic. A ₹172.55 crore resolution plan was subsequently approved, while the company had a cash balance of about ₹30 crore.

The CoC, comprising six lenders, including Bank of India, Canara Bank, Union Bank of India, UCO Bank and Punjab National Bank, unanimously sought to withdraw the plan and invite fresh bids, arguing that the company’s improved financial position could yield better recoveries.

The lenders argued that by the time the litigation concluded, the company's balance had risen to ₹165 crore, giving the resolution applicant a substantial financial advantage.

The NCLT had allowed the resolution professional to withdraw the application seeking approval of the plan. However, the National Company Law Appellate Tribunal set aside the order, holding that the CoC had no authority to withdraw its approval of the resolution plan after it had been submitted to the NCLT.

While referring the case back to the NCLT, the court remarked that it must examine the corporate debtor’s current financial position while considering the resolution plan. Making it clear that improved profitability cannot be the only reason to reject an approved plan that met all statutory requirements.

Under the IBC, a resolution plan approved by the CoC and subsequently by the NCLT is binding on the corporate debtor, its employees, members, creditors and other stakeholders.

Mint's queries emailed to the resolution professional of TD Toll, along with Punjab National Bank, Union Bank and Canara Bank, remained unanswered.

“The improved profitability alone cannot be a reason to refuse approval if the resolution plan meets the requirements under sub-section (2) of Section 30,” said the Supreme Court order.

The ruling comes amid persistent delays in insolvency proceedings, with prolonged litigation and multiple legal challenges resulting in value erosion and uncertainty in outcomes. A report by the Insolvency and Bankruptcy Board of India (IBBI) marking a decade of the IBC said ongoing corporate insolvency resolution processes averaged 713 days as of March 2025, with around 78% exceeding the 270-day threshold.

The Economic Survey 2025-26 also highlighted nearly 30,600 cases pending before the NCLT as of March 2025, underscoring the challenges in ensuring the timely resolution of stressed companies.

“Value maximization remains an important objective of the IBC, but it cannot be used to continually reopen an approved resolution process merely because a better commercial outcome may subsequently have become possible,” Dhurva said.

Yash Tiwari is a Mumbai-based journalist who reports on corporate and regulatory developments, with a focus on court-driven policy shifts and the intersection of law and public policy. He has been in the profession for two years. Before joining Mint, he worked at NDTV Profit as an assistant producer on the TV desk while also reporting, gaining experience across television and print journalism and combining reporting with production expertise.<br><br> Born in Kolkata, a city he remains deeply connected to, Yash has a keen interest in the technicalities of Indian law and aims to decode complex legal developments in a clear and accessible manner for readers. He is a graduate of the Asian College of Journalism, Chennai, where he completed his postgraduate diploma in journalism.<br><br> He closely follows politics and government policies, and has covered several state elections as a freelance journalist. His work is driven by the idea of making law less intimidating and more understandable for the general public.<br><br> When not at work, Yash can be found playing cricket, revisiting classic matches, or engaging in conversations about the evolving landscape of law and policy in India.

Krishna Yadav is a Senior Correspondent at Mint, based in New Delhi, and part of the corporate bureau. He joined the newsroom as a trainee in 2023 and quickly grew into his current role. He writes on legal and regulatory developments in corporate India, with a focus on insolvency, taxation, company law, and policy. His reporting includes tracking and breaking key legal stories from the Supreme Court, Delhi High Court, NCLT, and NCLAT.<br><br>With a background in law, Krishna is known for simplifying complex legal developments into clear, accessible stories for readers. His work focuses on trends in corporate law and policy that affect businesses. This ranges from explaining tax disputes—like whether coconut hair oil is edible—to writing on why celebrities are seeking personal rights protection. He closely tracks India’s insolvency system, covering issues such as creditor losses, gaps in the process, and challenges in how the framework works in practice.<br><br>Krishna also tracks developments within law firms—covering hiring trends, how firms help companies navigate global challenges, and how the legal industry is adapting to artificial intelligence. Beyond legal reporting, he has written long-form pieces, including on-ground coverage of the 2024 general elections, capturing the scale and logistics of polling across India.<br><br>Outside work, he enjoys travelling, exploring new places, and reading about geopolitics and history.

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