In Sanjay Dave v. Andhra Bank Ltd. & Ors. (Civil Appeal Nos. 12264-12266 of 2024, decided on May 27, 2026), the Supreme Court of India adjudicated a critical corporate insolvency dispute concerning the finality of Committee of Creditors (CoC) approved resolution plans and the boundaries of a Successful Resolution Applicant’s (SRA) liability under the Insolvency and Bankruptcy Code, 2016 (IBC). The appeal was preferred by Sanjay Dave—the Promoter/Director of the Micro, Small, and Medium Enterprise (MSME) Corporate Debtor, M/s. Oracle Home Textiles Limited—against an order of the National Company Law Appellate Tribunal (NCLAT) which had upheld a liquidation order and the forfeiture of his Rs. 1 crore Earnest Money Deposit (EMD).
The Supreme Court dismissed the appeals, affirming that once a resolution plan is approved by the CoC, the SRA cannot indirectly backtrack or demand fresh modifications by label-shaming transaction documents like Letters of Intent (LoIs) as “conditional”. Invoking the doctrines of estoppel and approbate and reprobate, the Apex Court ruled that structural risks—such as ongoing third-party litigation or staff salary liabilities—had been explicitly accepted by the appellant during CoC meetings. Consequently, his failure to submit a performance guarantee amounted to a calculated attempt to renege from the plan, justifying the absolute forfeiture of the EMD and reinforcing the unassailable primacy of the CoC’s commercial wisdom to force mandatory liquidation.
1. Factual Matrix & Procedural History
- The Resolution Baseline: The Corporate Insolvency Resolution Process (CIRP) against M/s. Oracle Home Textiles Limited was admitted on August 9, 2018. The appellant, a Promoter/Director of the MSME Corporate Debtor, submitted a Resolution Plan pursuant to an explicit window allowed under the Code. On May 10, 2021, the appellant was notified that his final plan had been approved by the CoC with an overwhelming 99.90% voting majority.
- The Friction over LoIs: On May 23, 2021, the Resolution Professional (RP) issued a Letter of Intent (LoIs). The appellant vehemently objected to specific clauses in this and subsequent LoIs, characterizing them as “conditional”:
- The Prospective Applicants Clause: The LoI stipulated that the plan’s approval was subject to orders reserved by the NCLT regarding pending applications filed by third-party Prospective Resolution Applicants (PRAs).
- The Labor Risk Clause: The LoI incorporated a provision shifting all past and operational financial risks/costs stemming from court cases filed by staff, employees, or workers exclusively onto the SRA.
- Forfeiture and Deadlock: Because the appellant refused to sign the LoIs and failed to deposit a Performance Bank Guarantee (PBG), the RP issued consecutive revised LoIs. Upon final non-compliance with the third LoI, the RP officially forfeited the appellant’s EMD of Rs. 1,00,00,000/- (Rupees One Crore) on August 2, 2021.
- The Shift to Liquidation: As the CIRP statutory timeline expired on February 21, 2023, without a viable implemented plan, the CoC voted in its 33rd meeting with a 99.61% majority to push the Corporate Debtor into liquidation. The NCLT dismissed the appellant’s applications against the forfeiture/LoI clauses and allowed the liquidation, a decision subsequently upheld in its entirety by the NCLAT on October 29, 2024.
2. Legal Issues & Institutional Determinations
A. The Illusion of Conditional Letters of Intent (Issue I)
The appellant argued that forcing an SRA to accept a plan contingent upon third-party litigation outcomes or open-ended legal hazards made the transaction legally conditional. The Supreme Court flatly rejected this premise:
- The Primacy of Judicial Decrees: Justice K.V. Viswanathan observed that stating an LoI is subject to a judicial body’s final order is merely a reflection of the rule of law. Even if left unwritten, any final plan remains structurally subservient to prevailing judicial determinations unless overturned by a superior appellate forum.
- Prior Knowledge: Corporate records and CoC minutes established that the appellant was physically present during meetings where the PRAs’ claims were debated. He could not pretend to be taken by surprise to escape a binding business commitment.
B. The Doctrine of Approbate and Reprobate (Issue II)
The Court deeply evaluated the appellant’s conduct across successive CoC assemblies:
- Explicit Acquiescence: Relying on State Bank of India v. M.J. James (2022), the Court defined acquiescence as a direct or silent assent where a party stands by and confirms an arrangement, thereby abandoning alternate equitable choices.
- Blowing Hot and Cold Prohibited: Regarding the shifting of staff and worker liability risks, the minutes of the 27th CoC meeting clearly recorded that the bank representatives explicitly informed the appellant that labor cost variations were his calculated risk, and the appellant had recorded his unambiguous agreement to the same. Under Nagubai Ammal v. B. Shama Rao (1956) and RIICO v. Diamond & Gem Development Corp. (2013), a commercial entity cannot accept the beneficial components of an approved transaction and subsequently attempt to dismantle its binding parts to extract separate advantages.
C. Absolute Irrevocability of CoC-Approved Plans (Issue III)
The Court used this dispute to re-emphasize the foundational boundaries laid down in Ebix Singapore Pvt. Ltd. v. CoC of Educomp Solutions Ltd. (2022):
- No Post-Approval Retractions: Once the CoC exercises its commercial wisdom and approves a resolution plan, the SRA is completely precluded from raising subsequent observations or pushing for modified terms. The submission of a plan signals that the resolution applicant has thoroughly analyzed structural data and market vulnerabilities.
- Protection of Timelines: Allowing an applicant to renegotiate or orchestrate an exit based on tactical clauses would introduce an unregulated tier of negotiations, destroying asset values and stultifying the strict statutory outer limit of 330 days mandated under Section 12(3) of the IBC. The Court labeled the appellant’s objections a clear “subterfuge” and a clever ploy designed to bypass the absolute ban on direct plan withdrawals.
D. Validity of EMD Forfeiture and Liquidation Thresholds (Issue IV)
- Contractual Enforcement: The Request For Resolution Plan (RFRP) under clause 1.9.4 explicitly empowers the lender to forfeit the EMD if the successful applicant misses the timeline to submit a performance guarantee or defaults on regulatory milestones. Because the appellant sat on his hands during relaxed timelines (a 45-day COVID-pandemic extension which eventually shrank back to the standard 7 days upon non-compliance), the RP’s forfeiture of the Rs. 1 crore was entirely sound and legal.
- Paramount Nature of Commercial Wisdom: Citing Manish Kumar v. Union of India (2021) and Sashidhar v. Indian Overseas Bank (2019), the Court reiterated that Section 33(2) and its 2019 Explanation grant the CoC the absolute, unreviewable legislative right to ring the death knell of a Corporate Debtor and mandate liquidation at any stage before a plan’s final judicial affirmation. This collective business choice is completely non-justiciable.
3. Final Directives and Decretal Orders
The Supreme Court rejected the appeals with the following definitive mandates:
- Appeals Dismissed: Civil Appeal Nos. 12264-12266 of 2024 are dismissed for being entirely devoid of legal merit.
- Forfeiture and Orders Upheld: The separate concurrent findings of the NCLT and NCLAT validating the forfeiture of the Rs. 1,00,00,000/- EMD and rejecting the appellant’s applications are affirmed.
- Vacation of Interim Protections: All historical interim stay orders operational against the insolvency or liquidation proceedings stand formally vacated.
- Liquidation Enforcement: The Respondent No. 3 (Liquidator) is directed to proceed immediately with the remaining statutory phases of the liquidation of M/s. Oracle Home Textiles Limited in strict compliance with the timelines of the Code.
- Costs: The matter stands disposed of with no order as to costs.
2026 INSC 580
Sanjay Dave V. Andhra Bank Ltd. & Ors. (D.O.J. 27.05.2026)
