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2024 (7) TMI 195 - AT - Insolvency and BankruptcyLiquidation of Corporate Debtor - exclusion of time period of eighteen months for implementation of the resolution plan - extension of time for implementation of the resolution plan - scope of relevant clauses of the Basic Assumptions contained in the resolution plan - HELD THAT - The Adjudicating Authority has been persuaded to believe that there has been a logjam in the whole resolution process due to the ongoing litigation which was jeopardising the interest of the Financial Creditor and hence in their considered view, liquidation order can be passed in these circumstances - The Adjudicating Authority while passing the impugned order has been clearly persuaded to conclude that implementation of the plan of the SRA was contingent upon the outcome of the litigation proceedings and/or vacation of stay order, and to avoid further jeopardy to the interests of the Financial Creditor arising out of the stalemate in the whole resolution process, liquidation was very much an exercisable option. In the present facts of the case, the ad interim stay of the orders of the Hon'ble Delhi High Court by the Hon ble Apex Court undisputedly continues to subsist. For this reason alone, indisputably the assets of the Corporate Debtor have not been effectively made over the SRA. That being the case, there is no doubt that the interim orders of the Hon ble Supreme Court have led to a complete embargo and stalled the ongoing resolution proceedings. Clause 8 of the 'Basic Assumptions' provides for discussion between the Appellant and RP and Respondent No. 2 regarding further course of action in case the plan is not implemented within 18 months. The discussion regarding the further course of action contemplated by the plan could only be interpreted to mean discussion regarding implementation of the plan and not liquidation of the Corporate Debtor. Merely, because extending the 18 months period would allegedly go against the commercial interests of the Financial Creditor is not a convincing and persuasive ground for the Respondent No. 2 to unilaterally press for liquidation without any deliberations and discussions with the other stakeholders. On seeing the statutory construct of the IBC, it is Section 33 of the IBC which outlines the grounds for liquidation of a Corporate Debtor. In terms of Section 33(1)(a) of IBC, where the Adjudicating Authority, before the expiry of the CIRP period or maximum period permitted for completion of the CIRP under Section 12 of the IBC, does not receive a resolution plan under Section 30(6) of the IBC, initiation of liquidation can be allowed by Adjudicating Authority. This is not applicable in the present case since a resolution plan is already in place - Admittedly, in the present factual matrix, there is no such non-compliance or default or failure attributable on the part of the SRA in the plan implementation for the Corporate Debtor to be subjected to liquidation. There is nothing on record which have been placed by the Respondents to show any breaches on the part of the SRA in implementing the plan. Hence, Section 33(1)(b) of IBC is also not attracted. In the present case, the implementation is yet to commence in view of the fetters placed by the ad interim stay orders of the Hon ble Supreme Court for which no fault can be pinned on the SRA. Thus, when none of the pre-requisite conditions required to be fulfilled before undertaking liquidation process are met, in such circumstances, the Financial Creditor cannot use the forum of the Adjudicating Authority to force liquidation of the Corporate Debtor - It is also settled law that when a higher court grants a stay which stalls the implementation of the resolution plan, the said period can well be excluded from the time period given for implementation of the resolution plan. The impugned order allowing liquidation of the Corporate Debtor set aside - the Adjudicating Authority directed to allow exclusion of time from 13.12.2021 sought for implementation of the resolution plan - appeal allowed.
Issues Involved:
1. Exclusion of time for implementation of the resolution plan. 2. Extension of time for implementation of the resolution plan. 3. Liquidation of the Corporate Debtor. Issue-wise Detailed Analysis: 1. Exclusion of Time for Implementation of the Resolution Plan: The appeal arises from the order dated 22.11.2023 by the Adjudicating Authority (NCLT, Mumbai Bench-I) which declared the implementation of the resolution plan by the Successful Resolution Applicant (SRA) as failed and ordered liquidation of the Corporate Debtor. The SRA contended that the resolution plan approved on 15.04.2021 took into account ongoing litigations and provided an 18-month timeframe for implementation. However, due to the stay orders by the Delhi High Court and subsequently by the Supreme Court, the SRA was unable to implement the plan. The SRA sought exclusion of time from 13.12.2021 (when the Supreme Court granted an interim stay) until the date of filing the I.A. No. 266 of 2023 from the 18 months’ timeframe provided for the implementation of the resolution plan. 2. Extension of Time for Implementation of the Resolution Plan: The SRA also prayed for an extension of the period for implementing the resolution plan until 30 days from the final disposal of the matter pending before the Supreme Court. The SRA argued that the delay in implementation was due to the stay orders and not due to any fault on their part. The Adjudicating Authority, however, dismissed the SRA’s application for exclusion of time and allowed the Financial Creditor’s application for liquidation, citing the delay and the ongoing litigation as reasons. 3. Liquidation of the Corporate Debtor: The Financial Creditor (Axis Bank) sought liquidation of the Corporate Debtor due to non-implementation of the resolution plan within the stipulated timeframe. The Adjudicating Authority approved the liquidation, reasoning that the ongoing litigation was causing a stalemate in the resolution process, which was jeopardizing the interests of the Financial Creditor. The SRA contended that liquidation should be the last resort and that they were ready to implement the plan once the stay orders were vacated. The SRA also argued that the Adjudicating Authority’s order for liquidation during the subsistence of the Supreme Court’s stay order undermined the jurisdiction of the Apex Court. Judgment: The Appellate Tribunal found merit in the appeal and set aside the impugned order allowing liquidation of the Corporate Debtor. The Tribunal directed the Adjudicating Authority to allow exclusion of time from 13.12.2021 for the implementation of the resolution plan as long as the interim order of the Supreme Court remains in operation. The Tribunal emphasized that the implementation of the resolution plan was contingent upon the vacation of the stay orders and that the delay was not due to any fault of the SRA. The Tribunal also noted that liquidation should be considered as a last resort and that the Financial Creditor’s application for liquidation was premature given the circumstances. Both parties were given the liberty to approach the Supreme Court for an early hearing of the matter to ensure timely resolution of the Corporate Debtor.
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