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2021 (5) TMI 574 - Tri - Insolvency and BankruptcyLiquidation of Corporate Debtor - Section 60 (5) of the Insolvency and Bankruptcy Code, 2016, as amended and Rule 11 of the National Company Law Tribunal, Rules, 2016 - HELD THAT - Though the Resolution Plan was approved by the NCLT on 25.11. 2019, till date the Resolution Applicant has deliberately failed to implement the Resolution Plan. Aggrieved by the order of the Steering Committee, the Resolution Applicant filed an appeal before the Hon'ble NCLAT and NCLAT did not agree with the submissions of the Resolution Applicant, dismissed the appeal and confirmed the order of this bench dated 18.02.2020. The Resolution Applicant blatantly violated NCLT order dated 18.02.2000 and the Hon'ble NCLAT order dated 25.06.2020. From the records it appears that the total value of the Resolution Plan is approx. ₹ 900/- crores out of which ₹ 420 crores to be upfront payment and ₹ 480 crores by issuing NCDs and the Resolution Applicant failed to bring in even 5% of the plan amount. CoC permitted the Resolution Applicant to submit performance security of ₹ 42 crores with balance of ₹ 48 crores to be deposited within 90 days of the CoC's approval. However, till date the Resolution Applicant has failed to deposit the balance amount. As per I B code if no Resolution Plan is approved by the COC/Adjudicating Authority within the prescribed timeline, the extended timeline the natural corollary, automatic next step is only Liquidation of the Corporate Debtor therefore in the instant case the Adjudicating Authority did not satisfy to grant additional time to complete the resolution process as prayed for instead this Adjudicating Authority is completely satisfied to pass an order for Liquidation of the Corporate Debtor - The entire CIRP process has been carried out by exercising the Commercial Wisdom of the COC therefore the failure to implement the plan by the successful Resolution Applicant after carrying out the required due diligence, various approval process including valuation matrix, financial matrix etc therefore there is no need to grant additional time to start the process once again. Considering the above facts and background we are of the considered view that in the interest of all stake holders it is better to order for liquidation of the Corporate Debtor and the process may be completed at the earliest and in the liquidation the Corporate Debtor may be sold as a going concern among various other methods provided in I B code. Since time is essence, maximisation of value of assets of the Corporate Debtor is primary object of I B Code, we direct the Monitoring Agency, the Steering Committee, COC to carry out the Liquidation process in accordance with I B code as well as the Rules, Regulations prescribed there under and we hereby appoint the Applicant Mr. Abhijit Guhathakurta as Liquidator and he is directed to complete the Liquidation Process in accordance with Law - The initiation of liquidation process against the Corporate Debtor is allowed. Application allowed.
Issues Involved:
1. Failure to implement the approved Resolution Plan by the Resolution Applicant. 2. Request for modification of the approved Resolution Plan by the Resolution Applicant. 3. Forfeiture of performance security by the Committee of Creditors (CoC). 4. Request to reinstate the Committee of Creditors and invite fresh Resolution Plans. 5. Decision on liquidation of the Corporate Debtor. Issue-wise Detailed Analysis: 1. Failure to Implement the Approved Resolution Plan: The Resolution Applicant failed to implement the Resolution Plan approved by the NCLT on 25.11.2019, despite multiple orders and directions. The Resolution Applicant was required to make an upfront payment of ?420 crores within 30 business days from the approval date, which expired on 10.01.2020. The Resolution Applicant did not comply, leading to serious concerns about non-compliance. 2. Request for Modification of the Approved Resolution Plan: The Resolution Applicant repeatedly sought amendments to the approved Resolution Plan, which the Monitoring Agency and the Steering Committee denied. The modifications suggested included changes to upfront consideration, deferred consideration, and other significant terms. The Steering Committee rejected these unilateral modifications, emphasizing that the approved Resolution Plan could not be altered without the consent of a large number of stakeholders. 3. Forfeiture of Performance Security by the Committee of Creditors (CoC): Due to the Resolution Applicant's failure to implement the Resolution Plan, IDBI Bank, representing the CoC members, forfeited part of the performance security of ?42 crores. The NCLT upheld this action, stating that the Resolution Applicant had willfully contravened the terms of the approved Resolution Plan and the respective orders of the NCLT and NCLAT. 4. Request to Reinstate the Committee of Creditors and Invite Fresh Resolution Plans: The Applicant sought directions to reinstate the CoC and the Resolution Professional to invite fresh Resolution Plans, arguing that the Corporate Debtor had ongoing projects and a cash flow, making it a viable concern. However, the NCLT found this request unconvincing, noting that only two entities had submitted plans initially, and the CoC had exercised its commercial wisdom in approving the plan of Royale Partners Investment Fund Limited. 5. Decision on Liquidation of the Corporate Debtor: The NCLT concluded that since the Resolution Applicant failed to implement the plan and no new Resolution Plan was likely to be approved within the prescribed timeline, the natural corollary was liquidation. The NCLT ordered the liquidation of the Corporate Debtor, appointing Mr. Abhijit Guhathakurta as the Liquidator. The liquidation process was to be carried out in accordance with the I&B Code and relevant regulations, with the Corporate Debtor to be sold as a going concern if possible. Order: The NCLT rejected the IA 1623 of 2020 in CP 1832 of 2017 and directed the initiation of the liquidation process against the Corporate Debtor. The Liquidator was instructed to issue public notices, cease the moratorium under Section 14 of the I&B Code, and manage the liquidation process with full cooperation from the Corporate Debtor's personnel. The liquidation order also served as a notice of discharge for the officers, employees, and workmen of the Corporate Debtor, except for continued business operations during the liquidation process. The judgment emphasized the importance of adhering to the approved Resolution Plan without unilateral modifications and upheld the principle that failure to implement the plan leads to liquidation.
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