No Backdoor Exit from a CoC-Approved Plan: The Supreme Court on “Conditional” Letters of Intent
In Sanjay Dave v. Andhra Bank Ltd., the Supreme Court holds that a successful resolution applicant cannot manufacture “conditionality” out of standard Letter-of-Intent stipulations to renege from a plan the Committee of Creditors has already approved — and reaffirms that a CoC may resolve to liquidate at any time before plan confirmation.
1. Citation
Sanjay Dave v. Andhra Bank Ltd. & Ors., 2026 INSC 580 (SC), Civil Appeal Nos. 12264–12266 of 2024, decided 27 May 2026.
2. Bench
Two-Judge Bench: Justice K.V. Viswanathan (lead author) and Justice Vipul M. Pancholi. The judgment was authored by Viswanathan, J. There is no separate concurring or dissenting opinion — Pancholi, J. concurred without a separate note.
3. Facts
The CIRP of the corporate debtor, M/s Oracle Home Textiles Limited, was admitted on 9 August 2018, and the appellant — the promoter/director of the corporate debtor — submitted a resolution plan with NCLT permission, which the Committee of Creditors (CoC) approved on 10 May 2021 with 99.90% votes. Successive Letters of Intent (23 May, 23 June and 23 July 2021) were issued, each stating that the plan was subject to the outcome of pending applications by prospective resolution applicants (PRAs) and placing the risk of staff/worker litigation on the successful resolution applicant (SRA). The appellant refused to accept the LoIs on the ground that they were “conditional,” whereupon the Resolution Professional forfeited his ₹1,00,00,000 (one crore) Earnest Money Deposit under RFRP clause 1.9.4 on 2 August 2021. With no valid plan and the CIRP having ended on 21 February 2023, the CoC voted to liquidate (99.61%) on 5 June 2023; the NCLT allowed liquidation and dismissed the appellant’s applications, and the NCLAT affirmed on 29 October 2024.
4. Issues
- Whether the stipulation that the LoI/plan was “subject to the outcome of the pending applications” of the PRAs rendered the LoI conditional, entitling the appellant to renege from the CoC-approved plan.
- Whether the clause placing the risk and cost of staff/employee/worker litigation on the SRA rendered the LoI conditional.
- Whether reducing the performance-guarantee period from forty-five days (27th CoC meeting, 6 May 2021) to seven days (third LoI, 23 July 2021) was contrary to the CoC resolution.
- Whether the forfeiture of the ₹1 crore EMD under RFRP clause 1.9.4 was valid.
- Whether the CoC’s decision to liquidate under Section 33, before confirmation of a resolution plan, was contrary to law.
5. Arguments
Appellant. All three LoIs were conditional and therefore contrary to the Code and to the plan submitted — the subjection to PRA orders, the underwriting of staff/worker litigation risk, and the unilateral reduction of the PBG window from 45 to 7 days each made the LoI conditional; and the liquidation under Section 33 ought not to have been approved.
Respondents. The appellant participated in the CoC meetings, was fully aware of the pending PRA litigation, and had expressly agreed to the impugned conditions; the 45-day relaxation was a COVID-era concession that had long expired by 23 July 2021; the EMD forfeiture flowed from RFRP clause 1.9.4 on non-acceptance; and the liquidation was a non-justiciable exercise of CoC commercial wisdom. No amicus or intervenor appeared.
6. Held
The appeals were dismissed in their entirety. The Court held that the appellant’s case “is bereft of any merit,” reasoning that the LoI being subject to the outcome of the pending PRA applications would not make it conditional:
On the appellant’s conduct, the Court held he “cannot be allowed to approbate and reprobate” (para 28), and:
The EMD forfeiture was upheld — “we find no illegality in the RP forfeiting the EMD of Rs.1,00,00,000/-” (para 34). On liquidation, the Court found “no fault can be found with the process” under the Explanation to Section 33(2) (para 39), and held that the fora below “rightly refused to interfere in the well-informed commercial decision of the CoC to reject the plan… and liquidate the CD, which was approved with a voting percentage of 99.61%” (para 42). All interim orders were vacated and the Liquidator directed to proceed; no order as to costs (paras 43–45).
7. Ratio Decidendi
A CoC-approved resolution plan is binding and irrevocable as between the CoC and the SRA. An SRA cannot manufacture “conditionality” out of LoI stipulations — particularly those merely subjecting the plan to the Adjudicating Authority’s eventual order, or allocating known litigation risk — that were within the SRA’s knowledge and to which the SRA expressly assented, in order to indirectly withdraw from a plan it cannot withdraw from directly.
Where the SRA reneges and the CoC, in its commercial wisdom, resolves to liquidate under Section 33(2) (read with its post-16.08.2019 Explanation) before confirmation of the plan, that decision is non-justiciable and the Adjudicating Authority must pass the liquidation order. The discussion of acquiescence and of the approbate-and-reprobate / election doctrine is applied as the operative ground.
8. Significance for IBC Practitioners
9. Earlier Law Engaged
All precedents are affirmed and applied — none overruled. The judgment extends this settled line to the specific fact pattern of an LoI labelled “conditional” by the SRA.
| Precedent | Treatment | Proposition / Para |
|---|---|---|
| Ebix Singapore Pvt. Ltd. v. CoC of Educomp Solutions Ltd., (2022) 2 SCC 401 | Affirmed | Irrevocability / binding nature of CoC-approved plans (paras 166, 167, 172, 221, 223; incl. AMTEK Auto) |
| K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 | Affirmed | Non-justiciability of CoC commercial wisdom (para 52) |
| Manish Kumar v. Union of India, (2021) 5 SCC 1 | Affirmed | Section 33 liquidation (para 101) |
| Chairman, SBI v. M.J. James, (2022) 2 SCC 301 | Affirmed | Doctrine of acquiescence (para 39) |
| Nagubai Ammal v. B. Shama Rao, AIR 1956 SC 593 / (1956) SCR 451 | Affirmed | Approbate and reprobate / election |
| Rajasthan State Industrial Development & Investment Corp. v. Diamond & Gem Development Corp., (2013) 5 SCC 470 | Affirmed | Estoppel by election; “blow hot–blow cold” (paras 15–16) |
10. Open Questions
The judgment deliberately does not lay down a general test distinguishing a genuinely conditional LoI (which an SRA might legitimately resist) from a permissible one — it decides only that, on these facts of express prior assent, the LoI was not conditional. It leaves open how an SRA should validly object to a truly objectionable LoI condition where there is no contemporaneous assent, and whether an LoI condition not flowing from the approved plan/CoC discussion (cf. the proviso to RFRP clause 1.9.4 protecting against “additional terms stipulated by the CoC”) would bar forfeiture.
The interaction between Section 12(3)’s 330-day outer limit and a delayed liquidation following an SRA default is noted (via the Ebix extract) but not independently developed. Likely next litigation: whether specific LoI/RFRP clauses constitute “additional terms” within the clause 1.9.4 proviso, and SRA challenges premised on the absence of recorded consent in CoC minutes.
11. Citations — Verification Status
- Verified Ebix Singapore, (2022) 2 SCC 401; K. Sashidhar, (2019) 12 SCC 150 (para 52); Manish Kumar, (2021) 5 SCC 1 (para 101); M.J. James, (2022) 2 SCC 301 (para 39); Rajasthan State Industrial Development Corp., (2013) 5 SCC 470 (paras 15–16).
- Verified Section 33(2) and its Explanation (commencement 16.08.2019) cross-checked against the bare Act. The “270 days (outer limit)” wording in the K. Sashidhar extract is a faithful quotation from that 2019 judgment and pre-dates the current 330-day outer limit in Section 12(3) — a quotation artefact, not an error.
- Refined Nagubai Ammal v. B. Shama Rao — primary citation is AIR 1956 SC 593 / (1956) SCR 451. Prefer these over the “(1956) 1 SCC 698” reprint reference used in the judgment, or pair both.
- Pending Confirm the eventual SCC / SCR print citation for the present judgment (2026 INSC 580) once reported.