"Can't Call LoI 'Conditional' to Escape CoC-Approved Resolution Plan": Supreme Court Upholds Liquidation After SRA Failed to Comply With Letter of Intent [Read Order]

The Supreme Court recently held that a Successful Resolution Applicant (SRA) cannot avoid a CoC-approved resolution plan by claiming that the Letter of Intent (LoI) was conditional. The court observed that merely stating in the LoI that the resolution plan would be subject to the outcome of pending proceedings before the NCLT did not make the LoI conditional.

The case arose after Sanjay Dave, whose resolution plan had been approved by the Committee of Creditors with 99.90% voting share, refused to accept the Letters of Intent issued by the Resolution Professional. He argued that the LoIs were conditional because they stated that the approval of the resolution plan was subject to the outcome of applications filed by prospective resolution applicants that were pending before the NCLT.

The Bench of Justice K.V. Viswanathan and Justice Vipul M. Pancholi observed that the appellant was fully aware of the pending proceedings and had participated in several CoC meetings where these issues were discussed. The Court pointed out that the appellant could not later object to a condition which was already within his knowledge.

The court explained that even if such a clause had not been mentioned in the LoI, any final order passed by a competent judicial authority would still be binding. As such, mentioning the pendency of the proceedings in the LoI did not create a conditional approval of the resolution plan.

The court further observed that the appellant had agreed to the relevant conditions during the CoC meetings and could not be allowed to accept the benefits of the process and later challenge the same conditions. It explained that such conduct amounted to approbating and reprobating, which is not permissible in law.

In view of these findings, the Supreme Court held that the appellant could not call the LoI "conditional" to escape from the obligations arising out of the CoC-approved resolution plan and dismissed the appeals.

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