2024 (7) TMI 1260 - AT - Insolvency and Bankruptcy

Doctrine of necessity - Seeking stay of order directing liquidation of the Corporate Debtor and the appointment of the liquidator, in order to enable the Appellant to deposit the balance amount into the liquidation account of the Corporate Debtor - directing the liquidator to put on hold the liquidation proceedings was rejected - HELD THAT - Looking at the concept of the doctrine of necessity , which has to be read in accordance with the provisions contained under section 60(5) of I B Code, 2016, it provides for meeting out such inevitable circumstances in form of the powers vested with the Tribunals and particularly the NCLT as referred to in sub-section (5) of section 60 of I B Code, 2016, to pass any appropriate order for fruitfully disposing of any application or proceedings in order to meet the purpose of CIRP, as against the Corporate Debtor. In the instant case owing to the Resolution Plan which was submitted by the Appellant and approved by NCLT, the Corporate Debtor was expected to revive back in and to reach the status of being a going concern. When the provisions contained under section 60 sub-section (5) of I B Code, 2016, it starts with a non-obstinate clause, that means it has an overriding effect to any of the provisions to the contrary, of the Code as contained therein and that the exercise of inherent powers have been vested with the Tribunal to carry out the exceptions in order to meet out the objective of the Code in order to avoid liquidation and to enable the Corporate Debtor to transition into position of being a going concern. In that eventuality, though admittedly the law is not in favour of the Appellant, because he has not put a challenge to the order of appointment of liquidator, but since the liquidator himself supports the contention of the Appellant, the Appellant is granted a last opportunity to deposit the amount, which is to be positively deposited within a period of one month and if the said deposit is not made by the Appellant within the aforesaid time frame, the relaxation which has been granted to the Appellant in the light of the provisions contained under section 60(5) of I B Code, 2016, will automatically lapse and it will open for the liquidator to seek for an appropriate alternate buyer by resorting to the procedure prescribed under law. Appeal disposed off.

Summary

Issues:
1. Impugned Order rejecting IA seeking stay of liquidation order.
2. Compliance with Resolution Plan deposit requirements.
3. Invocation of doctrine of necessity under section 60(5) of I & B Code.

Issue 1: Impugned Order rejecting IA seeking stay of liquidation order

The Appellant, the Successful Resolution Applicant of the Corporate Debtor, challenged the Impugned Order of 10.05.2024, which rejected his IA seeking a stay on the liquidation order. The Appellant argued that the rejection was arbitrary, lacked proper reasoning, and denied him a fair hearing. The Resolution Plan had a condition for the Appellant to deposit a specific amount, which he failed to comply with, leading to liquidation proceedings initiated by the Respondents. Despite efforts to deposit the balance amount, the Appellant's IA was rejected, prompting the appeal.

Issue 2: Compliance with Resolution Plan deposit requirements

The Appellant, as the Resolution Applicant, had deposited a partial amount as per the Resolution Plan approved by NCLT. However, he failed to deposit the balance amount within the stipulated time frame, leading to the initiation of liquidation proceedings. The Appellant cited unavoidable circumstances for the delay and provided undertakings to deposit the balance amount, which he could not fulfill. The rejection of his IA seeking to deposit the balance amount and stay the liquidation proceedings was a key point of contention in the appeal.

Issue 3: Invocation of doctrine of necessity under section 60(5) of I & B Code

The Tribunal invoked the doctrine of necessity under section 60(5) of I & B Code to address the unique circumstances of the case. Despite the general principle that once a liquidation order is passed, no further consideration is typically given, the Tribunal considered the Appellant's plea in light of the overriding effect of section 60(5). The Tribunal emphasized the objective of CIRP to revive the Corporate Debtor as a going concern and granted the Appellant a final opportunity to deposit the balance amount. This decision was based on the absence of alternative Resolution Plans and the need to avoid liquidation, aligning with the provisions of the Code.

This detailed analysis of the judgment highlights the key issues surrounding the rejection of the IA, compliance with the Resolution Plan deposit requirements, and the application of the doctrine of necessity under section 60(5) of the I & B Code.