2018 (12) TMI 653 - Tri - Insolvency and Bankruptcy

Upfront payment of at least one third of the total payment to the Financial Creditors as per the approved Resolution Plan - Resolution Applicant not infused any funds into the company despite the Resolution Plan contemplation - Held that - If at all this company is to be saved from falling into the liquidation, it is very much essential on the part of the Resolution Applicant to deposit the amount as prayed by the Resolution Professional, therefore, this Bench hereby directs the Resolution Applicant to deposit, within five days from hereof, an amount of ₹ 334 Crores, which is one third of payment that has to be paid to the financial creditors into the Corporate Debtor Account which will lie in Escrow as Security for performance of the obligations of the Respondents in implementing the approved Resolution Plan and will be adjusted against the total payment of ₹ 1060crore to be paid by R1 within 30 days from 17.09.2018 as per the Resolution Plan, or else, the RP is at liberty to take up further course of action in accordance with law.

Summary

Issues: Failure to infuse funds into the company as per the approved resolution plan.

Analysis:
1. The Resolution Applicant failed to infuse the upfront payment of ?1,060 Crores into the company within 30 days from the approval of the Resolution Plan, leading to the Resolution Professional filing an application seeking direction against the Applicant for immediate implementation of the plan and depositing ?334 Crores as security for performance obligations.

2. The Resolution Applicant, along with other directors, was responsible for the implementation of the Resolution Plan, as highlighted in the application filed by the Resolution Professional.

3. A previous order was passed to constitute an interim Monitoring Committee to oversee the functions of the Corporate Debtor due to the lack of response from the Applicant regarding fund infusion.

4. Despite assurances made in the Resolution Plan, the Resolution Applicant did not fulfill the promise of bringing in the upfront payment within the stipulated time frame, causing concerns about the company's financial stability.

5. The Monitoring Committee discussed the need for the Resolution Applicant to deposit at least one third of the total payment to the Financial Creditors into an Escrow Account to safeguard the company's operations and financial commitments.

6. The Bench directed the Resolution Applicant to deposit ?334 Crores within five days as security for implementing the approved Resolution Plan, failing which further legal actions would be pursued by the Resolution Professional.

7. The Resolution Applicant's failure to adhere to the Resolution Plan's financial commitments posed a risk of the company collapsing, emphasizing the critical importance of timely fund infusion for the company's survival and avoiding liquidation.

8. The Resolution Applicant's delay in responding and seeking modifications instead of fulfilling the financial obligations outlined in the approved Resolution Plan raised concerns about the company's future viability and the need for immediate action to protect the interests of all stakeholders involved.