2024 (7) TMI 192 - AT - Insolvency and Bankruptcy

Liquidation of Corporate Debtor - whether the Appellant has failed to implement the Resolution Plan approved by the Adjudicating Authority on 25.03.2024 and whether the company being not active, the Appellant could not infuse the share capital for payments to the creditors as per the Resolution Plan? HELD THAT - The Appellant after having failed to make infusion of any amount as per the Resolution Plan and make payment as per timelines has offered to deposit entire remaining amount of Rs.29.34 Crores into an Escrow Account, which deposit is also made subject of fulfilment of condition as noted. The sequence of events indicate that the Successful Resolution Applicant has clearly failed to implement the Resolution Plan and the ground that fund cannot be infused since status of company was not made active is not sufficient to absolve the liability of the Appellant to implement the plan. It is also relevant to notice that the Resolution Applicant before the Adjudicating Authority at the time of approval of the plan has prayed for waivers which prayer was not granted by the Adjudicating Authority by order dated 25.03.2021. When the Adjudicating Authority expressly refused to grant any reliefs and concessions, as prayed, the plan was to be implemented by the Successful Resolution Applicant and Appellant cannot be heard to say that unless the Registrar of Companies change the status of the Corporate Debtor into active implementation of plan cannot proceed further. It is also relevant to notice that when no waiver was granted to the Successful Resolution Applicant and there was no challenge to the order of the Adjudicating Authority approving the Resolution Plan, the order dated 25.03.2021 has become final and plan as approved by the Adjudicating Authority along with refusal to grant any waiver and relief was liability of the SRA to implement and it was binding on the SRA. The Adjudicating Authority in the impugned order has considered all the aspects of the matter. The Adjudicating Authority rightly observed that the applications filed by the Corporate Debtor clearly indicates the mindset of the SRA that the plan is conditional and it shall be implemented only after the status of the Corporate Debtor is updated on MCA Portal. When the Resolution Plan has not been implemented by the SRA, there was no option left with the Adjudicating Authority except for direction for liquidation. The Adjudicating Authority has rightly passed the order for liquidation under Section 33 Sub-section (3) read with Section 33(1)(b) of the I B Code. After directing for liquidation, the Adjudicating Authority has also not committed any error in dismissing different applications filed by the Appellant. Present is a case where the Appellant s case is that he having not been able to infuse the fund by share capital, the implementation of plan cannot begin, which submission has been noted and rejected - appellant is not entitled to any relief - appeal dismissed.

Summary

Issues Involved:
1. Failure to Implement the Resolution Plan
2. Conditional Payment and Infusion of Funds
3. Liquidation of the Corporate Debtor
4. Extension of Timelines for Payment
5. Legal and Procedural Compliance

Detailed Analysis:

1. Failure to Implement the Resolution Plan:
The primary issue revolved around the failure of the Successful Resolution Applicant (SRA) to implement the Resolution Plan approved by the Adjudicating Authority on 25.03.2021. The SRA did not make any payments as required under the plan within the stipulated timelines. Despite being given multiple opportunities, the SRA failed to deposit the resolution money in the escrow account, leading to the conclusion that the SRA had contravened the approved Resolution Plan.

2. Conditional Payment and Infusion of Funds:
The SRA argued that it could not infuse the necessary funds as share capital because the status of the Corporate Debtor was not changed to 'active' by the Registrar of Companies. The Adjudicating Authority found this argument unconvincing, stating that the payment of resolution money was independent of the conditions put forth by the SRA. The SRA's insistence on conditional payment linked to the change of status and other approvals was rejected, as the plan was approved unconditionally.

3. Liquidation of the Corporate Debtor:
Given the SRA's failure to implement the Resolution Plan, the Adjudicating Authority directed the liquidation of the Corporate Debtor. The decision was based on the non-implementation of the plan despite the SRA being given ample opportunities to comply. The liquidation was ordered under Section 33 Sub-section (3) read with Section 33(1)(b) of the Insolvency and Bankruptcy Code (I&B Code).

4. Extension of Timelines for Payment:
The SRA sought an extension of the timelines for payment, arguing that the delay in obtaining necessary approvals affected the implementation of the plan. However, the Adjudicating Authority noted that the Resolution Plan itself allowed for an extended moratorium of up to six months in case of delays, which had already been exceeded. The Tribunal held that the timelines could not be indefinitely extended, especially when the SRA had failed to make any payments within the initial 180 days or the extended period.

5. Legal and Procedural Compliance:
The SRA's applications for various waivers and concessions, including the change of status of the Corporate Debtor and clarity on the applicability of amended provisions of the Securities Contracts (Regulations) Rules, 1959, were not granted by the Adjudicating Authority. The Tribunal emphasized that the SRA was bound by the terms of the approved Resolution Plan and could not introduce new conditions for its implementation. The Adjudicating Authority had expressly refused to grant any reliefs or concessions, and the SRA's failure to challenge this decision meant it was final and binding.

Conclusion:
The appeals were dismissed, affirming the Adjudicating Authority's decision to liquidate the Corporate Debtor due to the SRA's failure to implement the Resolution Plan. The Tribunal found no merit in the SRA's arguments for conditional payment and the need for further extensions, emphasizing that the SRA had ample opportunity to comply with the plan but failed to do so. The decision underscores the importance of adhering to the terms of the approved Resolution Plan and the limited scope for introducing new conditions post-approval.