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2022 (1) TMI 713 - AT - Insolvency and BankruptcyImplementation of approved Resolution Plan - delay because of the time for litigation and in making initial payments as required in the approved Resolution Plan - grant of more time for extension of CIRP for invitation of fresh EOIs or liquidation of the Corporate Debtor in the event the Respondent No. 1 is found in default of implementation of the Resolution Plan - HELD THAT - Effective implementation of the Successful Resolution Plan started only after 5.4.2019 when Hon ble Supreme Court dismissed the appeal of former promoter/directors of the Corporate Debtor. It is quite apparent that the bank guarantee submitted by Respondent No. 1 was not enforced properly because it was not submitted in SWIFT mode. Respondent No. 1 has claimed that it is not responsible for non-enforceability of the Bank guarantee because it was due to the international banking practices. While bank guarantees were submitted later they were not to the satisfaction of monitoring agency. Moreover Respondent No. 1 failed to take steps towards implementation of the Resolution Plan which included payment of CIRP costs and workmen dues and infusion of cash. The issue of non-adherence of the timelines in accordance with the Approved Resolution Plan is quite apparent. The failure to provide valid bank guarantee in terms of Section 5 clause 12 (ii) of the Approved Resolution Plan to the satisfaction of the monitoring agency and the financial creditors is also a major default. Since the approved Resolution Plan is under implementation since its approval on 28.2.2018 the moot point is whether the Successful Resolution Applicant is serious about implementation of the plan - the Successful Resolution Applicant has claimed to be unsecured Financial Creditor of the Corporate Debtor and therefore has interest in maintaining the Corporate Debtor as a going concern. The Appellants Edelweiss and SBI are also interested that the Corporate Debtor continues to be a going concern and have therefore urged that its resolution should be attempted rather than put it in liquidation. Under section 33(3) where the resolution plan approved by the Adjudicating Authority is contravened by the concerned Corporate Debtor any person other than the Corporate Debtor whose interests are prejudicially affected by such contravention may make an application to the Adjudicating Authority for liquidation order - In the present case the Approved Resolution Plan has been alleged to be contravened by the Successful Resolution Applicant and therefore an application could have been made to the Adjudicating Authority for liquidation. In the present case no such application for liquidation has been made by the Appellants or any other stakeholder but on the contrary the Appellants (and also the financial creditors)have sought the re-initiation of CIRP and invitation of fresh EOIs after its (CIRP s) extension by 90 days. There is no express provision regarding re-initiation of CIRP in the IBC. In partial modification of the Impugned Order it is directed that an enforceable bank guarantee of 10 crores as is required to be submitted under the Approved Resolution Plan should be submitted by the Successful Resolution Applicant within 30 days of this order. The payments as are already overdue in the Approved Resolution Plan should be done by the Successful Resolution Applicant within two months of this order. In case 10 crores has been deposited with the Corporate Debtor by the Successful Resolution Applicant in lieu of the bank guarantee that amount will be either adjusted against the pending amounts to be paid by the Successful Resolution Applicant or refunded to him within a period of 30 days. Appeal disposed off.
Issues Involved:
1. Default in implementing the Successful Resolution Plan. 2. Request for extension of CIRP for inviting fresh EOIs or liquidation of the Corporate Debtor. Issue-wise Detailed Analysis: 1. Default in implementing the Successful Resolution Plan: The appellants claimed that the Successful Resolution Applicant (Respondent No. 1) failed to implement the Resolution Plan approved on 28.2.2018, causing financial damage to stakeholders and financial creditors. Specific defaults included not paying dues, failing to furnish a valid bank guarantee, and not adhering to the timeline for implementing the Resolution Plan. The Adjudicating Authority's Impugned Order gave Respondent No. 1 an additional two weeks to deposit ?10 crores instead of providing a bank guarantee, which was a core requirement under the approved Resolution Plan. The Appellant State Bank of India (SBI) highlighted that the bank guarantee issued by Banque De Luxembourg was declared "non-effective," and Respondent No. 1 failed to provide a valid bank guarantee via SWIFT. Despite several communications and opportunities, Respondent No. 1 did not comply with the requirements, leading to the appellants seeking re-initiation of CIRP and reinstating the previous Resolution Professional. The Respondent No. 1 argued that litigation delays due to appeals in NCLAT and the Supreme Court justified the delay in implementation. They also claimed to have deposited ?10 crores in the Corporate Debtor's account in lieu of the bank guarantee, which remained with the Corporate Debtor. 2. Request for extension of CIRP for inviting fresh EOIs or liquidation of the Corporate Debtor: The appellants argued that the Adjudicating Authority's order amounted to a modification of the Approved Resolution Plan, which is not permissible. They cited several judgments to support their claim that the plan cannot be altered post-approval. They also argued that liquidation should be avoided to prevent corporate death, emphasizing the need for re-initiating the CIRP to invite fresh EOIs. Respondent No. 1 contended that the only permissible course of action for non-implementation of the Approved Resolution Plan under IBC is liquidation. They argued that the bonafide of the Successful Resolution Applicant was established, and they had an interest in the successful resolution of the Corporate Debtor. Judgment: The Tribunal observed that the effective implementation of the Successful Resolution Plan started only after the Supreme Court dismissed the appeal on 5.4.2019. The failure to provide a valid bank guarantee and other payments were significant defaults. The Tribunal noted that the Corporate Debtor was a going concern with surplus cash and decided that liquidation should be avoided. The Tribunal directed that an enforceable bank guarantee of ?10 crores should be submitted by the Successful Resolution Applicant within 30 days. Additionally, overdue payments as per the Approved Resolution Plan should be made within two months. If ?10 crores had already been deposited with the Corporate Debtor, it would be adjusted against pending amounts or refunded within 30 days. The appeals were disposed of with no order as to costs.
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