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2024 (5) TMI 16 - AT - Insolvency and BankruptcyLiquidation of the Corporate Debtor - SRA has not made the payments within the timeline allowed under the Resolution Plan for the upfront payments - Section 33(3) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - When the CoC had already been taken a decision in its Meeting dated 08.07.2022 against the liquidation, there are no reason for Respondent No.1 to file the Application against majority decision. The key words in sub-section (3) of Section 33 are resolution plan approved by the Adjudicating Authority is contravened by the concerned corporate debtor . Thus, contravention by the SRA was to be proved - There is no material on the record to indicate that Respondent No.1, who has filed IA No.2767 of 2022 has brought into the notice of the Adjudicating Authority about the Resolution dated 02.12.2022. It is clear that Respondent No.1 having not brought on the record, the subsequent events, i.e., Resolution dated 02.12.2022, where it has participated and voted against the Resolution, clearly indicate that Respondent No.1 intended to obtain order of liquidation by concealing relevant facts. As noted above, Respondent No.1 in his Application has also not impleaded CoC, SRA or RP, whereas an order was sought by Respondent No.1 for liquidation. When the Adjudicating Authority directed the RP by order dated 04.05.2022 to convene the Meeting of CoC to take a decision, as to whether Corporate Debtor be liquidated or not, the decision taken by the CoC was a commercial decision of the CoC, i.e., not to liquidate the Corporate Debtor and the said commercial decision was not required to be interfered by the Adjudicating Authority by the impugned order directing for liquidation. The legal position that extension of time is not modification of the Resolution Plan is well settled and that fact that whether the time is extended for one month or one year, does not change the legal position. The time extension for payment of amount as per the Resolution Plan is not modification of the Plan. The very basis of order passed by Adjudicating Authority that not to liquidate the Corporate Debtor would lead to modification of the Resolution Plan is fallacious and unsustainable. The SRA having already deposited the amount along with interest @ 10% in the form of fixed deposit before the largest Financial Creditor as permitted by Resolution dated 02.12.2022 by the Financial Creditors, the RP shall proceed to distribute the amount to the Financial Creditors as per the Resolution Plan and decision of the Financial Creditors dated 02.12.2022, from the amounts already deposited by the SRA. The impugned order is set aside - appeal allowed.
Issues Involved:
1. Whether the extension of the timeline for payment by the Successful Resolution Applicant (SRA) constitutes a modification of the Resolution Plan. 2. Whether the Adjudicating Authority erred in directing liquidation despite the Committee of Creditors (CoC) deciding against it. 3. Whether the application for liquidation by Respondent No.1 was valid without impleading the CoC, RP, or SRA. 4. Whether the Adjudicating Authority failed to consider the subsequent decision of the Financial Creditors granting an extension to the SRA. Summary of Judgment: Issue 1: Extension of Timeline as Modification of Resolution Plan The learned Senior Counsel for the Appellants argued that the extension of the timeline for payment by the SRA does not amount to a modification of the Resolution Plan. The Adjudicating Authority's view that such an extension constitutes a modification was deemed erroneous. The Tribunal referenced previous judgments, such as Tricounty Premier Hearing Service Inc. vs. State Bank of India, to support the stance that extending payment timelines does not modify the Resolution Plan. Issue 2: CoC Decision Against Liquidation The Adjudicating Authority had earlier directed the RP to convene a CoC meeting to decide on liquidation. In the meeting held on 08.07.2022, the CoC, with a 59.73% vote share, decided against liquidation. This decision was not challenged and became final. The Tribunal held that the Adjudicating Authority erred in ignoring this commercial decision of the CoC, which should not have been interfered with. Issue 3: Validity of Application Without Impleading CoC, RP, or SRA Respondent No.1 filed IA No.2767 of 2022 without impleading the CoC, RP, or SRA, against whom contravention was alleged. The Tribunal noted that the application was filed without giving an opportunity to these parties to respond, which was improper. The Adjudicating Authority proceeded without issuing notice or granting an opportunity to the CoC and SRA, which was a procedural lapse. Issue 4: Consideration of Subsequent Decision by Financial Creditors The Financial Creditors, in a meeting on 02.12.2022, decided to grant further time to the SRA to make payments as per the revised timeline. This decision was approved by 69.04% of the vote shares. Respondent No.1, who participated in this meeting and voted against the extension, did not bring this subsequent decision to the notice of the Adjudicating Authority. The Tribunal found that Respondent No.1's failure to disclose this relevant fact indicated an intent to obtain a liquidation order by concealing material information. Conclusion: The Tribunal allowed the appeals, set aside the impugned order dated 13.02.2023 directing liquidation, and dismissed IA No.2767 of 2022. It was held that the SRA had already deposited the required amount along with interest, and the RP was directed to distribute the amount to the Financial Creditors as per the Resolution Plan and the decision of the Financial Creditors dated 02.12.2022.
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