Supreme Court rules lenders cannot withdraw an approved insolvency resolution plan

The Supreme Court on 26 October 2026 held that a committee of creditors, once it has approved a resolution plan under the Insolvency and Bankruptcy Code, 2016, cannot withdraw that approval after the plan is placed before the National Company Law Tribunal (NCLT) for confirmation. The appeal was filed by six lenders led by Bank of India against an order of the National Company Law Appellate Tribunal (NCLAT), and the court declined to interfere with that order.

What Happened

According to the judgment, the lenders had approved a resolution plan for a company whose business is toll collection on National Highway 45, at a time when its finances had been hit by the Covid-19 pandemic. Implementation was delayed by a stay granted in earlier proceedings before the Supreme Court. The lenders argued that the plan offered a resolution amount of Rs 172.55 crore when the company had an opening balance of Rs 30 crore, and that the balance had since risen to Rs 165 crore, giving the successful bidder a windfall, and sought to withdraw their approval and invite fresh bids. The NCLT allowed the withdrawal; the NCLAT rejected it.

The court held that a withdrawal is possible only until the committee approves the plan. Once the approved plan is before the NCLT, the court said, neither the insolvency application nor the plan can be withdrawn, and the plan binds both the lenders and the successful bidder.

What It Means

Two applications now go to the NCLT: one to confirm the plan, and another from the company's holding company, which has offered a one-time settlement (a negotiated repayment) to end the insolvency process. The court asked the NCLT to take them up together and decide as quickly as possible, after verifying the company's current financial position and cash balance against the terms of the plan. It said improved profitability alone cannot be a reason to refuse approval if the plan meets the requirements of Section 30(2). Apart from the binding nature of the plan, the court said its observations are prima facie and need not govern the NCLT's final decision.

For banks and other creditors, the ruling means that once they vote to approve a resolution plan, they cannot withdraw that approval while it awaits the tribunal's confirmation.

Source: Supreme Court judgment