2023 (12) TMI 1072 - AT - Insolvency and Bankruptcy

Validity of approved Resolution Plan - Appellant submitted that the Adjudicating Authority has erroneously allowed the Application seeking Liquidation on the ground that the Appellant had not adhered to the terms of the Resolution Plan - HELD THAT - Admittedly there were several rounds of discussions held and the Appellant sent a letter dated 12.08.2021 where it sought for modification for the repayment Plan promising to deposit Rs.25 Crores in a no-lien account and a balance 15 Crores within three weeks from the date of approval - there are force in the contention of the Learned Counsel for the First Respondent that though the other CoC members, SBI and IDBI, did not accept the modified payment terms, the First Respondent being the majority voting shareholder of the CoC accepted the modified payment terms way back on 29.09.2021, but the Appellant did not comply with the terms and hence, no further opportunities are required to be given. It is evident from the record that though almost two and half years has lapsed from the date of approval of the Plan and several opportunities were given to the Appellant and the modified payment terms were also accepted by the First Respondent, even then the Appellant did not pay the required amount of Rs. 83.07Cr by November 2021. Therefore, the contention of the Learned Counsel for the Appellant that if the Appellant is allowed to manage the Corporate Debtor Company, the Appellant shall repay the money to the Bank in a short period , is untenable, specifically having regard to the fact that the Plan was approved way back in 2019, IBC is a time-bound process, and several opportunities were given for implementation of the original Plan as well as the modified Plan. Keeping in view the law laid down by the Hon ble Apex Court in EBIX SINGAPORE PRIVATE LIMITED VERSUS COMMITTEE OF CREDITORS OF EDUCOMP SOLUTIONS LIMITED ANR., KUNDAN CARE PRODUCTS LIMITED VERSUS MR AMIT GUPTA AND ORS. AND SEROCO LIGHTING INDUSTRIES PRIVATE LIMITED VERSUS RAVI KAPOOR RP FOR ARYA FILAMENTS PRIVATE LIMTIED ORS. 2021 (9) TMI 672 - SUPREME COURT , wherein the Hon ble Apex Court has clearly emphasised the importance of adhering to strict timelines, keeping in view the scope and objective of the Code - In the instant case as the Appellant / SRA could not implement the Resolution Plan within the specified time, the Adjudicating Authority has rightly, as provided for under Section 33 of the Code, allowed application filed by the Monitoring Committee of Scott Garments and Canara Bank respectively, seeking Liquidation. Appeal dismissed.

Summary

Issues involved:
The issues involved in the judgment are the erroneous allowance of liquidation by the Adjudicating Authority, challenges to the implementation of the Resolution Plan, modification sought in the Plan, failure to comply with payment terms, and the delay in repayment.

Aggrieved by Impugned Order:
The Appellant challenged the Impugned Order allowing Liquidation of the Corporate Debtor Company, M/s. Linen Art Pvt. Ltd., under Section 61 of the Insolvency and Bankruptcy Code, 2016. The Appellant contended that the Adjudicating Authority erred in initiating Liquidation based on non-adherence to the terms of the Resolution Plan, which was under challenge in a separate proceeding before the Tribunal.

Resolution Plan Modification:
The Resolution Plan was approved in 2019, and the Appellant sought modifications citing a fresh assessment requiring an increase in payout. Despite efforts to modify the Plan and deposit funds, delays were attributed to the Respondent Bank's actions. The Appellant expressed willingness to repay amounts and manage the Corporate Debtor Company efficiently.

Failure to Comply with Payment Terms:
The First Respondent highlighted the Appellant's failure to deposit the required amount within specified timelines, leading to a resolution for Liquidation. Despite repeated communications and opportunities given, the Appellant did not fulfill payment obligations, causing delays and non-compliance with the Plan.

Liquidation Order:
The Adjudicating Authority allowed Liquidation based on the Appellant's prolonged non-compliance with payment terms and failure to implement the Resolution Plan within the stipulated time. Citing the importance of adhering to strict timelines under the Insolvency and Bankruptcy Code, the Authority dismissed the Appeal, upholding the Liquidation orders filed by the Monitoring Committee of Scott Garments and Canara Bank.

Conclusion:
The judgment dismissed the Appeal, emphasizing the Appellant's persistent failure to meet payment obligations and implement the Resolution Plan, leading to Liquidation as per Section 33 of the Code. The decision was based on the need to adhere to timelines and the objectives of the Code, as highlighted in relevant legal precedents.