Failed Resolution Plans: Withdrawal, Breach, Section 33(3)

Approval is not the end of the story. Resolution applicants sometimes try to walk away when markets turn, and some approved plans are never implemented. Questions test whether an applicant can withdraw, what a prejudiced creditor can do when the plan is breached, what the NCLT may order after 2026, and how the performance security and penalties work. The Jet Airways case shows what happens when tribunals let timelines slide.

1. The Law in Brief

Figure 1: Can the applicant withdraw?

• No withdrawal. A resolution applicant cannot withdraw or modify its plan after the committee approves it (Ebix Singapore, 2021)
• Contravention, section 33(3) and (4). Any person other than the corporate debtor whose interests are prejudicially affected by a contravention of the approved plan may apply to the NCLT, which passes a liquidation order if it finds a contravention or, under a 2026 proviso, may reinstate the CIRP.
• Security and penalty. The performance security is forfeited where the applicant fails to implement the plan (Regulation 36B); section 67B(3), inserted in 2026, imposes a penalty of at least one lakh rupees, up to one crore rupees or 20 per cent of the plan payout, whichever is higher.

2. Can a Resolution Applicant Withdraw after CoC Approval?

• Issue. Whether a resolution applicant may withdraw or modify its plan after approval by the committee but before approval by the NCLT.
• Law. In Ebix Singapore v Committee of Creditors of Educomp Solutions (2021), the Supreme Court held that the Code contains no provision allowing withdrawal or modification by the applicant after the committee's approval, whether or not the NCLT has approved it. A resolution plan is not a mere contract, and doctrines such as frustration under the Contract Act do not apply. Allowing withdrawal would undermine the time-bound process and the confidence of other bidders.
• Application. The committee approved EF Ltd's plan in March 2026. Rising prices are a commercial risk that bidders assume.
• Conclusion. EF Ltd can neither withdraw nor reduce its offer. If it fails to implement the plan after approval, its performance security is liable to forfeiture and section 33(3) proceedings may follow.

3. What Happens When an Approved Plan Is Breached?

• Issue. The remedies for contravention of an approved plan and the orders the NCLT may pass after 2026.
• Law. Under section 33(3), any person other than the corporate debtor whose interests are prejudicially affected by a contravention of the plan may apply to the NCLT. Under section 33(4), if the NCLT finds a contravention it passes a liquidation order, and a 2026 proviso allows it instead to reinstate the CIRP if it deems fit. The performance security is forfeited where the applicant fails to implement the plan, and section 67B(3) provides for a monetary penalty.
• Application. LM Bank is prejudiced by the missed instalment, so its application is maintainable. Non-payment of a scheduled instalment is a contravention. The committee's division bears on whether reinstating the process would preserve more value than liquidation.
• Conclusion. If the NCLT finds the contravention established, it may order liquidation or, after 2026, reinstate the CIRP so that a new plan can be sought. It may also direct forfeiture of the performance security and impose a penalty under section 67B(3). Brief extensions may be allowed only within the plan's terms, not indefinitely.

Figure 2: Consequences of contravening an approved plan

4. What Did the Jet Airways Case Decide?

• Issue. Whether tribunals may indefinitely extend implementation and adjust the performance security against plan payments, and what the Supreme Court may do.
• Law. In State Bank of India v Consortium of Murari Lal Jalan and Florian Fritsch (2024), the Jet Airways case, the Supreme Court found that the plan had not been implemented for about five years, set aside the NCLAT's order, held that the performance guarantee could not be adjusted against plan payments, directed its forfeiture, and used Article 142 to order liquidation, criticising the tribunals for disregarding the Code's timelines.
• Application. The facts mirror Jet Airways: prolonged non-implementation, repeated extensions and adjustment of the guarantee.
• Conclusion. The Supreme Court may set aside the extensions, direct forfeiture of the ₹150 crore guarantee, and order liquidation under Article 142. After 2026, the NCLT should act earlier under section 33(3) and (4), with the option of reinstating the CIRP.

5. Is Breach of a Plan Still an Offence after 2026?

• Issue. The consequences of failing to obtain approvals required under the plan, and whether criminal proceedings lie under section 74 after 2026.
• Law. Section 31(4) requires the resolution applicant to obtain approvals under other laws within one year of approval or the period in the plan, whichever is later. Failure is a contravention that may be raised under section 33(3). The 2026 Amendment omitted section 74, which had made contravention of a plan an offence, while saving prosecutions pending on commencement, and replaced it with a civil penalty under section 67B(3)
• Application. The new owner has not even applied after fourteen months, beyond the one-year period. The complaint under section 74 was filed after the provision was omitted.
• Conclusion. The criminal complaint under section 74 is not maintainable. The creditor's application under section 33(3) may proceed, and the NCLT may order liquidation, reinstate the CIRP, direct forfeiture of security and impose a penalty under section 67B(3)

6. Frequently Asked Questions

Can the corporate debtor itself apply under section 33(3)?

No. The application must be by a person other than the corporate debtor whose interests are prejudicially affected.

Who supervises implementation?

The mechanism in the plan, usually a monitoring committee; after 2026, section 30(2)(d) requires the plan to provide for implementation and supervision.

Is the plan a contract between the applicant and the creditors?

No. Ebix (2021) held that it is a statutory instrument approved under the Code, not a contract to which the Contract Act's contingencies apply.

7. Related Topics

• Topic 45: Implementation and Failure of Plans. After approval.
• Topic 53: Section 33. Liquidation and restoring the CIRP.
• Topic 121: Preferential Transactions. Avoidance and the look-back.