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2024 (4) TMI 1014 - AT - Insolvency and BankruptcyLiquidation of the Corporate Debtor - Application seeking extension of timeline for making the payments under the approved Resolution Plan dismissed - HELD THAT - The Resolution Plan indicates that Resolution Applicant is a technocrat entrepreneur, who is a M. Tech from Indian Institute of Technology (IIT), Mumbai and holds more than three decades of experience in the field of Boilers and Thermal systems related equipment s design and manufacturing. In his Resolution Plan, the Appellant claimed completion of various projects and detailed the potential and technologies developed by the CD. As per the Resolution Plan, the amount was to be paid in six tranches. There is no dispute that first three tranches were paid in time and the fourth tranche, which was due on 15.04.2023, could not be paid and fifth tranche also became due in October 2023. It is relevant to notice certain clauses of the Resolution Plan, which contains the sources of fund. Para 5.1.2 refers to Sources of funds and one of the items, which was mentioned at Item 10 in table funds for Resolution is Recoveries from Litigation, from which it was expected that between 18-24 months Rs.51.40 lakhs would be recovered and total recovery was expected to be Rs.1040.85 lakhs. The Adjudicating Authority has jurisdiction to grant extension of timeline in making the payment in a Resolution Plan and the view of the Adjudicating Authority that granting of extension of the timeline is modification of the terms of the Resolution Plan is not a correct view. Further, for extension of timeline it is not necessary that CoC should express its concurrence, only then the Adjudicating Authority can exercise its jurisdiction. The jurisdiction is there with the Adjudicating Authority in appropriate case. Granting extension of time in payment as per Resolution Plan for implementation of the Resolution Plan, appropriate jurisdiction is always vested with the Adjudicating Authority to pass appropriate order. The Adjudicating Authority committed error in rejecting application filed by the Appellant seeking extension of time for payment, on the wrong premise that since the CoC has not approved the extension, the extension cannot be granted. The extension of time in payment is not the modification of the Plan - the order passed by the Adjudicating Authority rejecting application filed by the Appellant is unsustainable and is set aside. The Appellant is entitled for extension of sometime under the Resolution Plan, so as to ensure that the Plan is fully implemented and complied with - application allowed.
Issues Involved:
1. Challenge to the order allowing liquidation of the Corporate Debtor. 2. Dismissal of the application seeking extension of timeline for payment under the approved Resolution Plan. Summary: 1. Challenge to the Order Allowing Liquidation of the Corporate Debtor: The Appellant, a Successful Resolution Applicant (SRA), challenged the order dated 04.01.2024 by the National Company Law Tribunal (NCLT), Mumbai Bench-I, which allowed the State Bank of India's (SBI) application (IA No.4034 of 2023) for liquidation of the Corporate Debtor due to default in payment of the fourth tranche under the approved Resolution Plan. The Appellant had paid the first three tranches totaling Rs.692.27 lakhs but defaulted on the fourth tranche due in April 2023. The SRA argued that the delay was due to unforeseen circumstances in ongoing litigations, which were sources of fund recovery as per the Resolution Plan. 2. Dismissal of the Application Seeking Extension of Timeline for Payment Under the Approved Resolution Plan: The Appellant's application (IA No.483 of 2023) for an extension of the payment timeline was dismissed by the NCLT on the grounds that the Committee of Creditors (CoC), consisting solely of SBI, did not agree to the extension. The Appellant contended that the extension was necessary due to delays in litigation recoveries and proposed alternative funding sources, including the sale of the Shirwal Factory, which was permissible under the Resolution Plan. The NCLT, however, held that the extension of timelines would amount to a modification of the Resolution Plan, which is not within its jurisdiction without CoC's concurrence. Tribunal's Findings: The Tribunal found that the extension of the timeline for payment does not constitute a modification of the Resolution Plan. It cited precedents, including the judgment in Tricounty Premier Hearing Service Inc. vs. State Bank of India and Ors., which established that the Adjudicating Authority has the jurisdiction to extend payment timelines under a Resolution Plan. The Tribunal also noted that the Resolution Plan itself allowed for the sale of assets as an alternative funding source. Conclusion: The Tribunal set aside the NCLT's order dated 04.01.2024 in IA No.4034 of 2023 and allowed IA No.483 of 2023, granting the following: (a) Extension of time for payment of the fourth and fifth tranches till 15.04.2024. (b) Permission for the Appellant to sell the Shirwal Factory as per Clause 5.1.2.12 of the Resolution Plan, with the proceeds to be used for the fourth and fifth tranche payments and the balance earmarked for the sixth tranche. (c) Extension of time for payment of the sixth tranche till 15.04.2025. (d) Any balance payment after 15.04.2024 will carry interest at the prevalent rate by SBI, effective from 16.04.2024. The Tribunal emphasized that the implementation of the Resolution Plan is a collaborative process requiring positive actions from all parties, including Financial Creditors.
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