A resolution plan was approved. Then the buyer tried to back out. The Supreme Court said: No.

A company's rescue plan was approved. The buyer then tried to escape. The Supreme Court had one message.

Amtek Auto Limited, a giant in auto parts manufacturing, was bleeding cash. In July 2017, its creditors dragged it to the National Company Law Tribunal (NCLT — the special court for corporate insolvencies) to start the Corporate Insolvency Resolution Process (CIRP — the legal procedure to revive or liquidate a distressed company). A buyer emerged: Liberty House Group. Its plan was approved by creditors and the tribunal in July 2018. Then Liberty House did something that would set off a chain of litigation lasting over three years. It simply never paid. It walked away from its own approved plan.

When the first buyer vanished

Liberty House's default was not just a broken contract. It was a fraud on the entire insolvency process, which is built on the promise that once a plan is approved, money follows. The creditors — banks and financial institutions — were left stranded. Their only option was to go back to the NCLT and beg for a second chance at resolution instead of being forced into liquidation (selling off the company's assets piece by piece).

The NCLT bench in Chandigarh had admitted the CIRP on 24 July 2017. A year later, on 25 July 2018, that same bench had approved Liberty's plan. Now, on 13 February 2019, the creditors returned. They filed an application under Section 60(5) read with Section 74(3) of the Insolvency and Bankruptcy Code (IBC — the law governing corporate insolvency), seeking reconstitution of the Committee of Creditors (COC — the group of lenders who decide the fate of a distressed company). The tribunal partially allowed their application. But the creditors wanted more: they wanted a fresh chance at resolution, not liquidation.

The COC appealed to the National Company Law Appellate Tribunal (NCLAT — the appellate court for insolvency cases). On 16 August 2019, the NCLAT delivered a blow. It dismissed the appeal, refused to exclude the time lost in litigation, and virtually ordered liquidation. The typed order, crisp and final, must have felt like a death sentence for the creditors.

The Supreme Court stepped in on 6 September 2019. It issued notice and stayed the liquidation. The company had a second chance. The court directed the COC to reconsider a plan from another investor: Deccan Value Investors (DVI), a foreign fund. DVI submitted its plan. The COC approved it with a 70% majority. The NCLT gave its final nod on 9 July 2020. The rescue of Amtek Auto seemed back on track.

Then DVI did the exact same thing Liberty House had done.

The buyer who wanted to run

DVI tried to back out. It raised force majeure claims — arguing that some extraordinary event outside its control made performance impossible. The force majeure letter, typed on crisp letterhead, argued that the pandemic made its promise impossible. It attempted to re-negotiate the terms of the plan it had itself proposed and gotten approved. The creditors were back in the same nightmare: a second approved plan, a second buyer refusing to honour it.

The NCLAT dismissed DVI's appeal against the plan approval on 16 April 2021. DVI then approached the Supreme Court. But the Supreme Court had already been watching this case closely. It had intervened earlier to stop the company from being pushed into liquidation after Liberty House's default. Now it saw a pattern.

Why the court refused to let go

The bench of Justice M.R. Shah and Justice Sanjiv Khanna had a simple, brutal question: If every approved resolution plan can be abandoned by the buyer, what is the point of the IBC?

When DVI's lawyer stood to argue force majeure, the bench observed that the timeline under Section 12 of the IBC — the provision that sets a strict time limit for completing the entire resolution process — had already been stretched far beyond its limits. Originally, the Code mandated 180 days, extendable by another 90 days. A 2019 amendment inserted a proviso (an additional condition) making 330 days the absolute outer limit, counting from the date the insolvency process started. The court noted that while this timeline could be relaxed in "peculiar circumstances" involving litigation, "any further delay in implementation of an already approved resolution plan defeats the very object and purpose of the IBC."

The court also invoked Section 60(5) of the IBC (the NCLT's broad power to decide all questions of law or fact arising out of the insolvency process) and Section 74(3) (punishment for contravention of the Code's provisions). The message was clear: the insolvency process is not a playground where buyers can walk in, get a plan approved, and then walk out.

The courtroom fell silent as the bench read out its reasoning. The entire resolution process must be completed within the period stipulated under Section 12 of the IBC, the court declared. Any deviation would defeat the object and purpose of providing such time limit. While time limits may be condoned in peculiar circumstances involving litigation, further delay in implementation of an already approved resolution plan defeats the very object and purpose of the IBC. Resolution of the financial affairs of a distressed company is the primary aim of the IBC, and maximisation of the value of assets of the Corporate Debtor is embedded in the Code. A failure or infirmity on the part of a resolution applicant ought not to undermine this primary objective.

The court's reasoning was deliberate and layered. It traced the procedural journey from the very beginning: the CIRP initiated under Section 7 of the IBC on 24 July 2017; the approval of Liberty's plan on 25 July 2018; Liberty's default that forced the COC to seek reconstitution on 13 February 2019; the NCLAT's dismissal on 16 August 2019 that virtually ordered liquidation; the Supreme Court's intervention on 6 September 2019 that stayed liquidation and directed reconsideration of DVI's plan; the NCLT's approval of DVI's plan on 9 July 2020; and the NCLAT's dismissal of DVI's appeal on 16 April 2021. At every stage, the court noted, the process was stretched by parties who had themselves sought approval. The force majeure argument was the final straw — the court rejected it outright, holding that DVI could not use an external event to escape a plan it had voluntarily submitted and gotten approved.

The court also emphasised that the proviso to Section 12 — the 330-day mandatory timeline inserted by the 2019 amendment — was not a mere suggestion. It was a statutory command. While the court acknowledged that litigation could justify some delay in completing the CIRP, it drew a sharp distinction between the resolution process itself and the implementation of an already approved plan. Once a plan is approved, the court held, any further delay in implementation defeats the very object and purpose of the IBC. A resolution applicant cannot hide behind force majeure or re-negotiation demands to avoid its obligations.

Rs. 500 crore and four weeks

The Supreme Court's order was the kind that makes boardrooms go silent. It directed DVI to deposit Rs. 500 crores — the amount it was supposed to pay under its own plan. The money would be transferred directly to the lenders and financial creditors as per the approved resolution plan. And the court ordered all parties connected with the implementation — including the Implementation and Monitoring Committee (IMC — the body overseeing the plan's execution) — to complete the entire process within four weeks.

The court warned that any lapse in compliance would be viewed "seriously." The appeal was disposed of. DVI's attempt to escape had failed.

What this means for every insolvency deal

This judgment sends a signal that cuts across every boardroom in India. A resolution applicant cannot treat an approved plan as a letter of intent that can be withdrawn. Once the creditors and the tribunal say yes, the buyer is locked in. The Supreme Court has the power to force implementation — and it will use it.

THE PLAY: If you submit a resolution plan and it gets approved, you must complete the deal — the Supreme Court will order you to deposit the full amount and finish within weeks, not years.

The court ended where it began: with a company's rescue plan, a buyer who tried to run, and a bench that refused to let the IBC become a dead letter.