Waiver & Acquiescence vis-à-vis Kalpraj Dharamshi v. Kotak Investment Advisors – By Reema Jain

Waiver & Acquiescence vis-à-vis Kalpraj Dharamshi v. Kotak Investment Advisors

By Reema Jain, Law student at Symbiosis Law School, Hyderabad


The Insolvency and Bankruptcy Code 2016 (Code) restructured India’s failing Insolvency Resolution regime. The Bankruptcy Law Reform Committee (BLRC) noted that prior to the enactment of the Code, the lenders could recover merely 20% of their debt on a Net Present Value basis. This stemmed from an arrangement where the rights of the creditors in insolvency resolution were negligible. A critical understanding of this system would imply that lending in India was concentrated towards large companies, as their probability of failure was relatively lesser. Therefore, identifying these pitfalls, the Code envisaged a “creditor-in-control” mechanism where as soon as a default occurs, the creditors take control of the management to assess the most viable course of action.


Post the admission of insolvency claim under Sections 7, 9 or 10 of the Code, an Interim Resolution Professional (IRP) is appointed. In adherence to Section 21 of the Code, the Committee of Creditors (CoC) is formed. It must be noted that post the enactment of the Code, this Committee has become the central part of the Resolution Process. In K. Sashidhar v. Indian Overseas Bank [2019] ibclaw.in 08 SC, it has been held that the decisions taken by the CoC in the exercise of their commercial wisdom, are not justiciable in the court of law. Further, as per Regulation 36 of the CIRP Regulations 2016 (Regulations), the Resolution Professional must publish an Information Memorandum. Based on this Memorandum, an invitation of Expression of Interest (EoI) is made within 75 days of the commencement of CIRP to the prospective Resolution Applicants. The Resolution Applicants must submit the Resolution Plans within the stipulated time and subject to Section 29A of the Code, these plans are submitted to CoC. The Process Memorandum lays down the procedure of CIRP and the submission of the Resolution Plan is subject to such procedure.


In the case of Kalpraj Dharamshi v. Kotak Investment Advisors (2021) ibclaw.in 40 SC, Ricoh India Limited (Corporate Debtor) submitted an Application under Section 10 to the Adjudicating Authority, The Application was admitted on 9th April 2018, and successively five Form G were notified. Each Form G prescribed a last date for submitting the Resolution Plan.  The last Form G was notified on 11th December 2018 and prescribed the last date for submission of Resolution Plan as 8th January 2019. Kotak Investment Advisors (Respondent) submitted the Plan within the stipulated time and Kalpraj (Appellant) submitted the Plan after the stipulated time had passed on 27th January 2019.

In an e-mail dated 29th January 2019, the Respondent objected to the acceptance of the Appellant’s Resolution Plan as it was submitted after the valid period of submission had lapsed. Despite the e-mail, the Resolution Plan of the Appellant was placed before the CoC. This Plan gained the maximum majority and was placed before the Adjudicating Authority for approval in accordance with Section 31 of The Code. In light of this, the Respondent filed an objection against the approval of the impugned Plan before NCLT.


The NCLT held that the CoC exercised their commercial wisdom in approving the said Plan and therefore rejected the plea of the Respondent. However, no stay was passed on the implementation of the Plan. The Respondent filed an appeal in NCLAT, where the contentions of the Respondent were held valid. Resultantly, NCLAT instructed the Resolution Professional to start the process afresh. The Appellants, therefore, raised an Appeal in the Hon’ble Supreme Court. It was contended by the Appellants that the Respondent had exclusively waived away all the claims in the Covering Letter that it submitted along with the Plan. It was mentioned in Clause 1.0, that the Respondent had waived all the claims that arose in the Resolution Plan Process. As a result of this, it was estopped from claiming any breach on the part of the Resolution Professional. Further, the Respondent had submitted the Revised Plans despite knowing that the Appellant was still a part of the process. Therefore, it was contended that, the Respondent had acquiesced to the participation of the Appellant and therefore is incapable of objecting at this juncture. However, the following instrumental moot questions were answered by this judicial pronouncement:

1.) Whether the signature on the Covering Letter waiving away the right to raise claims is binding on the Respondent?

2) Whether the Respondent’s submission of Revised Plans, despite the knowledge that the Appellant was competing with it amounts to acquiescence?

Therefore, in its absolute wisdom, the Hon’ble Supreme Court relied on its decision in Central Inland v. Brojo Nath, where it was held that courts must not enforce an unreasonable contract. Therefore, even if it is understood that the Respondent waived away its right to raise claims, emphasis must be laid on the understanding that there was unequal bargaining power and the court must not enforce a contract, where the free will of the party is absent.

 Further, it was held that the Respondent had no choice barring the choice to accept the conditions laid down in the Covering Letter. It was further observed in the aforementioned judgment that the principle of unequal bargaining power in normal circumstances does not apply to commercial transactions where the parties are giant business corporations. However, it is worth noting that the Resolution Professional is merely the facilitator of the CIRP; therefore, any contract between the Resolution Applicant and Resolution Professional cannot be reduced to a commercial transaction.

It is also relevant to note that a waiver or acquiescence is not the failure of a party to raise an objection. In fact, a waiver can be implied only if the party had full knowledge of the relevant facts and consented not to raise an objection. However, the Respondent promptly sent an e-mail to the Resolution Professional and therefore exercised his right in the instant matter. Further, the Appellants argued that Kotak Bank, which wholly owns the Respondent, submitted to accept the Plan submitted by the Appellants; therefore, the Respondent is estopped by acquiescence to proceed further. This contention runs contrary to the ratio in Vodafone International v. Union of India (Civil Appeal No. 733 of 2012), where it was held that the wholly-owned subsidiary and the holding company are separate legal entities. Therefore, the Respondent was not bound by the decision of its holding company.

Furthermore, the Respondent’s participation despite the knowledge of the Appellant’s participation was prompted by lack of option; therefore, it cannot fall under the ambit of acquiescence. The Respondent was faced with the risk of being declared ineligible unless he submitted the Revised Plan. As a Financial Creditor of the Corporate Debtor, the Respondent was under the pressing need to restructure the Corporate Debtor in the most viable manner. In light of these contentions, it was held that the Respondent was not estopped from raising claims on the grounds of waiver and acquiescence.


It has been noted in Innoventive Industries v. ICICI Bank [2017] ibclaw.in 02 SC, that the legislative object and intent behind the enactment of the Code was to restructure and revive the Corporate Debtor in a time-bound manner. It is of paramount importance to adhere to the timelines laid down to bar the minimization of the value of the assets. Therefore, it was justified for the Respondent to file an objection. However, it must be noted that despite recording and accepting that the Respondent was not estopped from raising an objection, ultimately, the Supreme Court allowed the Appeal of the Appellants on the grounds that the CoC exercised its commercial wisdom and approved the Plan of the Appellant. However, in absolute critique, this sets a harmful precedent as it gives unchartered power to the CoC.

A Discussion Paper by the Insolvency and Bankruptcy Board of India (IBBI) discusses elaborately the need to regulate the power of the CoC in light of the understanding that they are the custodian of public trust during CIRP. It was further observed in Essar Steel v. Satish Kumar Gupta [2019] ibclaw.in 07 SC that CoC takes decisions based on ground realities. While the role of CoC is instrumental, it must be noted that the transfer of excessive power may go against the spirit of the Code.


It must be reiterated that as observed in Umesh Saraf v. Tech India Engineers (2020) ibclaw.in 307 NCLAT, the Code is a beneficial legislation. The entire process must be aimed at bringing the Corporate Debtor back on its feet. Therefore, by reaffirming that Respondent had the right to object to the participation of the Appellant, the Apex Court has accommodated the time-bound spirit of the Code.

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