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2025 (3) TMI 436 - AT - IBCInvocation of the Performance Bank Guarantee (PBG) - failure to implement the plan within the timeline as allowed - HELD THAT - In the Monitoring Committee meeting held on 19.03.2024 it was noticed that SRA was obliged to make the payment within 90 days of the effective date - SRA was obliged to pay Rs.100 crore within 90 days. Adjudicating Authority in the impugned order has also noticed that SRA has failed to deposit the amount within 90 days as per the resolution plan. The invocation of Bank Guarantee with the UBI on 08.04.2024 was taken which was noticed and Adjudicating Authority has observed that with consent of majority lenders of the corporate debtor the Bank Guarantee was invoked. Letter dated 08.04.2024 invoking the Bank Guarantee itself clearly mentions that SRA failed to implement the approved resolution plan. Although the appellant has referred to filing of the application by the UBI to recall of the approval order and filing of the appeal by the SBI it is relevant to notice that even after dismissal of the appeal on 13.02.2024 and rejection of IA filed by the UBI on 10.11.2023 no amount was infused by the SRA. The litigation which was initiated with respect to approval of the resolution plan could not be a reason to appellant to not adhere to the timelines as provided in the resolution plan regarding the infusion of fund upfront payment of Rs.100 crore which was required to be paid within 90 days admittedly has not been paid by the SRA. Effective date having been achieved on 25.07.2023 it is not even contested - Invocation of PBG was on the reason that SRA failed to implement the plan. Adjudicating Authority has rightly rejected the submission of the appellant that invocation was not in accordance with the law. When the plan is not implemented by SRA PBG can be statutorily invoked which is the statutory scheme as delineated by Regulation 36B(4A) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016. It is noticed that appellant before the Adjudicating Authority as well as before this Tribunal has submitted that appellant is still ready to deposit amount when the appellant has failed to deposit the amount within the timeline it is not open for the appellant to deposit the amount at the stage when the application was filed or in the hearing of the appeal. Consequences of non-adhering to the timelines in the resolution plan cannot be reversed after considerable lapse of time and specially when not even first tranche of payment has been made by the SRA. Conclusion - i) SRA not only failed to make the Upfront payment as required under the approved Resolution Plan but also failed to take any real steps even after the dismissal of appeals by Hon ble NCLAT. ii) The CIRP process has to be completed in a timeline and timeline of the CIRP process has to be adhered by all including the SRA. iii) Timely implementation of the resolution plan is also one of the underlying objectives of the IBC. Thus no grounds have been made out to interfere with the order impugned in these appeals - Appeals dismissed.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
ISSUE-WISE DETAILED ANALYSIS 1. Invocation of the Performance Bank Guarantee (PBG) The legal framework involves the provisions under the Insolvency and Bankruptcy Code, 2016, particularly Regulation 36B(4A) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The regulation allows for the forfeiture of a performance security if the resolution applicant fails to implement the approved resolution plan. The Court interpreted that the invocation of the PBG was justified as the SRA failed to implement the resolution plan. The evidence showed that despite the approval of the plan, the SRA did not make the required payments within the stipulated timeline. The invocation of the PBG was a decision taken by the majority of the lenders, indicating a collective agreement on the SRA's failure. The appellant's argument that the PBG was not properly invoked was rejected. The Court noted that the SRA had not taken any substantial steps towards implementing the plan even after the dismissal of appeals by the National Company Law Appellate Tribunal (NCLAT). 2. Failure to Implement the Resolution Plan The resolution plan required the SRA to infuse Rs.100 crore within 90 days from the effective date. The evidence presented showed that the SRA did not adhere to this timeline. The Court found that the SRA's failure to make the upfront payment and take real steps towards implementation justified the invocation of the PBG. The Court dismissed the appellant's claim that ongoing litigation caused uncertainty, preventing the implementation of the plan. It was noted that there was no interim order restraining the SRA from implementing the plan, and the appellant's failure to act was unjustifiable. 3. Rejection of the Appellant's Application and Re-initiation of CIRP The Court upheld the Adjudicating Authority's decision to reject the appellant's application challenging the invocation of the PBG and to allow the re-initiation of CIRP. The Court emphasized the importance of adhering to timelines in the CIRP process, as delays could lead to the depreciation of the corporate debtor's assets. The appellant's request for an extension of time was also rejected. The Court noted that the appellant had not provided a specific timeframe for making the required payments and had only made a conditional offer to implement the plan. 4. Restoration of CIRP The Court concluded that the restoration of CIRP was appropriate given the SRA's failure to implement the plan. The decision to restore CIRP was supported by the need to adhere to the timelines and ensure the corporate debtor's assets were not further diminished. SIGNIFICANT HOLDINGS The Court held that the invocation of the PBG was justified due to the SRA's failure to implement the resolution plan. It emphasized the importance of adhering to timelines in the CIRP process and rejected the appellant's request for an extension of time. The restoration of CIRP was deemed appropriate, aligning with the statutory framework and objectives of the Insolvency and Bankruptcy Code, 2016. Verbatim Quotes of Crucial Legal Reasoning: "SRA not only failed to make the Upfront payment as required under the approved Resolution Plan but also failed to take any real steps even after the dismissal of appeals by Hon'ble NCLAT." "The CIRP process has to be completed in a timeline and timeline of the CIRP process has to be adhered by all, including the SRA." "Timely implementation of the resolution plan is also one of the underlying objectives of the IBC." The Court concluded that no grounds were present to interfere with the impugned order, leading to the dismissal of the appeals. The decision underscores the necessity of timely action and compliance with statutory requirements in insolvency proceedings.
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