Implementation, Withdrawal and Failure of Resolution Plans

Approval of a resolution plan is not the end of an insolvency; it is the start of its implementation. The successful resolution applicant must pay creditors, take over management and obtain approvals, often over months or years. Some applicants have tried to withdraw or renegotiate after approval, and some have simply failed to perform. This note explains how plans are implemented and supervised, why applicants cannot walk away, and what follows when a plan fails.

1. Implementation and Supervision

• Contents of the plan. Every plan must provide for its implementation and supervision (section 30(2)(d)) and set out its term and implementation schedule (Regulation 38(2)); the NCLT approves it only if it has provisions for effective implementation (proviso to section 31(1))
• Monitoring committee. Plans commonly establish a monitoring committee of creditors' representatives, the applicant and often the former resolution professional; under the 2025 amendments, the committee of creditors must consider constituting one, and it files quarterly reports with the NCLT.
• Approvals. The applicant must obtain approvals required under other laws within one year of approval or the period stated in the plan (section 31(4)), and CCI approval before the plan is filed with the NCLT after 2026 (Topic 44)
• Performance security. The request for resolution plans requires the successful applicant to furnish a performance security, which is forfeited if the applicant fails to implement the plan or contributes to its failure (Regulation 36B)

Figure 1: Mechanisms for implementation

2. No Withdrawal after Approval

• Ebix Singapore v Committee of Creditors of Educomp Solutions, 2021. Decided on 13 September 2021, the Supreme Court held that a resolution applicant cannot withdraw or modify its plan after the committee has approved it, whether or not the NCLT has yet approved it.
• Reasoning. The Code contains no provision allowing withdrawal or modification by the applicant at that stage; a resolution plan is not a mere contract to which doctrines such as frustration or the contingencies of the Contract Act can be applied; and allowing withdrawal would undermine the time-bound process, the committee's choice and the confidence of other bidders.
• Contrast with section 12A. Withdrawal of the CIRP itself under section 12A is a different matter, governed by the 90 per cent approval of the committee and barred after the first invitation for plans from 2026 (Topic 20)

Figure 2: Two leading cases after approval

3. Failure of a Plan

Figure 3: When implementation fails

• Section 33(3). Where the corporate debtor contravenes the provisions of an approved resolution plan, any person other than the corporate debtor whose interests are prejudicially affected by the contravention may apply to the NCLT for a liquidation order.
• Section 33(4). If the NCLT determines that the corporate debtor has contravened the plan, it passes a liquidation order (Topic 53)
• Forfeiture. The applicant's performance security is forfeited, and amounts already paid are dealt with in liquidation as the NCLT directs.
• Penalties. Section 74 earlier made contravention of an approved plan an offence; the 2026 Amendment omitted the criminal penalties in sections 74 and 76 as part of its shift to civil penalties, with section 235A providing for monetary penalties (Topic 76)

4. Jet Airways, 2024

• Background. The NCLT approved the plan of the consortium of Murari Lal Jalan and Florian Fritsch for Jet Airways in June 2021, but the airline never resumed operations; the consortium failed to make the required payments, and the NCLAT repeatedly extended time and adjusted the performance guarantee against the payments.
• Holding. In State Bank of India v Consortium of Murari Lal Jalan and Florian Fritsch, decided on 7 November 2024, the Supreme Court found that the plan had not been implemented for about five years, set aside the NCLAT's order, directed forfeiture of the performance bank guarantee of 150 crore rupees, and used its powers under Article 142 to order liquidation of Jet Airways.
• Lessons. The Court criticised the tribunals for allowing the timelines of the Code to be ignored, stressed that performance security must not be adjusted against plan payments, and highlighted the need for strict monitoring of implementation.

5. Designing Plans That Work

These experiences have shaped practice. Committees now examine the source of funds and the financial capacity of bidders more closely, insist on larger upfront payments, require adequate performance security, set clear conditions precedent and timelines, and establish monitoring committees with reporting duties. Regulation 38(1B) also requires a plan to disclose whether the applicant or its related parties have failed to implement any earlier plan, so that past defaulters can be identified.

6. Frequently Asked Questions

Can a resolution applicant withdraw its plan after the CoC approves it because market conditions changed?

No. In Ebix Singapore (2021), the Supreme Court held that there is no provision for withdrawal or modification by the applicant after the committee's approval, and contractual doctrines such as frustration do not apply.

What happens if the successful applicant does not pay creditors as promised?

Any person prejudicially affected may apply to the NCLT under section 33(3), and if the NCLT finds a contravention, it orders liquidation under section 33(4). The applicant's performance security is forfeited.

Why did the Supreme Court order liquidation of Jet Airways directly?

Because the approved plan had not been implemented for about five years and further delay would only destroy value. The Court used its powers under Article 142 to end the process, rather than remitting the matter for further proceedings.

7. Related Topics

• Topic 35: Information Memorandum, Valuation and Invitation of Plans. Performance security.
• Topic 42: Section 31. Approval and its effects.
• Topic 53: Section 33. Initiation of liquidation.