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2020 (1) TMI 1389 - Tri - Insolvency and BankruptcySeeking an order for annulment of the Resolution Plan approved - forfeiture of the Performance Security - liquidation of the Corporate Debtor under section 33(1) of the Insolvency and Bankruptcy Code, 2016 - seeking discharge of the erstwhile Resolution Professional for the purposes of Liquidation - seeking appointment of Mr. Ramchandran Subramanian, as the Liquidator for the Corporate Debtor - seeking direction that the Bank Guarantees submitted by the Corporate Debtor should not be encashed - HELD THAT - Admittedly the resolution applicant has failed to adhere to any of their timelines for equity infusion even after a period of about 8 months since approval of the resolution plan. There is force in the contention that the respondents have repeatedly failed to honour their own commitments and there was delay in infusion of equity, upfront payment and taking control of the management of the Corporate Debtor, which has threatened the going concern status of the corporate debtor severely - Adherence to statutory requirement has to be in toto. When the language of the Code is clear and explicit the Adjudicating Authority must give effect to it whatever may be the consequences - In view of non-implementation of the approved resolution plan by Resolution Applicant; Liquidation has to follow in terms of the provisions of section 33(3) of the Code. Seeking forfeiture of performance guarantee - Regulation 36B (4A) of CIRP Regulations - HELD THAT - Regulation 36B (4A) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 clearly provides that performance security shall stand forfeited if the resolution applicant fails to implement the approved resolution plan in accordance with the terms of the plan and its implementation schedule. Therefore, as the respondent resolution applicant has failed to implement the approved resolution plan, the performance guarantee of ₹ 5 Crore furnished by the respondent resolution applicant stands forfeited in terms of Regulation 36B (4A) of CIRP Regulations. Seeking restraint on the encashment of the bank guarantees executed by the corporate debtor - HELD THAT - The concerned banks and the recipients of the performance guarantees have not been made party. This prayer, therefore, cannot be considered at the back of the recipients of the bank guarantees without giving opportunity of hearing to them. The liquidator, however, is given liberty to file proper application on the self-same issue, if so advised. The company application is partly allowed by ordering liquidation of the corporate debtor, namely Tecpro Systems Limited in the manner laid down in the Chapter III of Part II of the Insolvency and Bankruptcy Code, 2016 along with the directions issued.
Issues Involved:
1. Annulment of the approved Resolution Plan. 2. Forfeiture of Performance Security. 3. Liquidation of the Corporate Debtor. 4. Discharge of the erstwhile Resolution Professional. 5. Appointment of a new Liquidator. 6. Non-encashment of Bank Guarantees. Issue-wise Detailed Analysis: 1. Annulment of the Approved Resolution Plan: The application was filed under Section 60(5) read with Section 33 of the Insolvency and Bankruptcy Code, 2016. The Resolution Professional sought the annulment of the Resolution Plan approved on 15-5-2019 due to non-compliance and non-implementation by the successful Resolution Applicant, M/s. Kridhan Infrastructures Private Limited. The Tribunal noted that the Resolution Applicant failed to infuse equity funds and take control of the management, leading to a significant delay of about 8 months. The Committee of Creditors (CoC) resolved to liquidate the Corporate Debtor due to the inordinate delay and non-compliance. 2. Forfeiture of Performance Security: The Tribunal addressed the prayer for forfeiture of the Performance Security of ?5 Crore provided by the Resolution Applicant. Regulation 36B (4A) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 mandates that performance security shall be forfeited if the Resolution Applicant fails to implement the approved plan. The Tribunal upheld this regulation and ordered the forfeiture of the ?5 Crore performance guarantee. 3. Liquidation of the Corporate Debtor: The Tribunal ordered the liquidation of the Corporate Debtor, Tecpro Systems Limited, under Section 33(1) of the Insolvency and Bankruptcy Code, 2016. The CoC had passed a resolution with a 99.28% majority for liquidation due to the non-implementation of the Resolution Plan. The Tribunal cited Section 33(3) of the Code and the precedent set by the Hon'ble NCLAT in Yavar Dhala v. JM. Financial Asset Reconstruction Co. Ltd., emphasizing that liquidation must follow upon the failure of the Resolution Applicant to implement the plan. 4. Discharge of the Erstwhile Resolution Professional: The Tribunal ordered the discharge of the erstwhile Resolution Professional for the purposes of liquidation. The CoC had authorized the Resolution Professional to file for liquidation and take necessary steps to annul the Resolution Plan. 5. Appointment of a New Liquidator: The Tribunal appointed Mr. Ramchandran Subramanian as the Liquidator for the Corporate Debtor, as proposed by the CoC. The Liquidator was directed to issue a Public Announcement and proceed with the liquidation process as per the Insolvency and Bankruptcy Code, 2016, and relevant regulations. 6. Non-encashment of Bank Guarantees: The Tribunal noted the prayer to restrain the encashment of bank guarantees submitted by the Corporate Debtor. However, as the concerned banks and recipients were not made parties to the application, this prayer could not be considered. The Liquidator was given liberty to file a proper application on this issue if advised. Conclusion: The Tribunal ordered the liquidation of Tecpro Systems Limited, appointed a new Liquidator, and directed the forfeiture of the ?5 Crore performance guarantee. The Tribunal also provided detailed directions for the liquidation process, including the issuance of a Public Announcement, investigation of financial affairs, and submission of a Preliminary Report within seventy-five days. The application was partly allowed, and the Tribunal disposed of C.A. 2683 (PB)/2019 in IB-197 (PB)/2017 accordingly.
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