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2020 (10) TMI 548 - SC - Insolvency and BankruptcyLiquidation of Corporate Debtor - Section 33 of the Insolvency and Bankruptcy Code 2016 - HELD THAT - Liquidation of the Corporate Debtor should be a matter of last resort. The IBC recognizes a wider public interest in resolving corporate insolvencies and its object is not the mere recovery of monies due and outstanding. The appellant has indicated its bona fides, at least prima facie at the present stage, by unconditionally agreeing to subject itself to the forfeiture of an amount of ₹ 20 crores, which has been deposited by it, in the event that it fails to comply with the requirement of depositing an additional amount of ₹ 50 crores within a period of three months in terms of the understanding that was arrived at on 25 February 2020. In order to enable the appellant to have one final opportunity to do so, we direct that the appellant shall, in order to demonstrate its bona fides deposit an amount of ₹ 50 crores upfront in terms of the understanding which was arrived at on 25 February 2020. The following interim directions are issued (i) The operation of the impugned order of the NCLAT dated 8 September 2020, is stayed; (ii) The appellant shall, in order to demonstrate its ability to implement the Resolution Plan and in compliance with the understanding arrived at on 25 February 2020 deposit an amount of ₹ 50 crores, on or before 10 January 2021; and (iii) The auction of the properties of the Corporate Debtor shall remain stayed in the meantime. The appeal shall be listed on 12 January 2021.
Issues involved:
1. Approval and implementation of the Resolution Plan 2. Liquidation process under the Insolvency and Bankruptcy Code 2016 3. Compliance with payment obligations by the appellant 4. Bona fides of the appellant and the public interest in resolving corporate insolvencies Issue 1: Approval and implementation of the Resolution Plan The corporate insolvency resolution process (CIR process) was initiated against the Corporate Debtor, and the Resolution Plan submitted by the appellant was approved by the Committee of Creditors (CoC) and the National Company Law Tribunal (NCLT). However, a subsequent application was filed under Section 33 of the Insolvency and Bankruptcy Code 2016 seeking liquidation of the Corporate Debtor due to alleged non-implementation of the Resolution Plan by the appellant. Issue 2: Liquidation process under the Insolvency and Bankruptcy Code 2016 Following the NCLT's order allowing the liquidation application, the appellant appealed before the National Company Law Appellate Tribunal (NCLAT). The NCLAT dismissed the appeal and upheld the order of liquidation, leading to the appellant's request for a final opportunity to comply with the payment obligations to avoid liquidation. Issue 3: Compliance with payment obligations by the appellant The appellant agreed to make an upfront payment of a specified amount within a designated timeframe as part of an understanding reached on a certain date. The appellant complied with the initial deposit requirement but faced challenges in meeting the subsequent payment obligations, leading to the forfeiture of the deposited amount if the full payment was not made within the stipulated period. Issue 4: Bona fides of the appellant and public interest in resolving corporate insolvencies Recognizing the importance of avoiding liquidation as a last resort and the broader public interest in resolving corporate insolvencies, the Court directed the appellant to demonstrate its commitment by depositing a significant amount upfront within a specified deadline. This direction aimed to ensure the appellant's bona fides and ability to implement the Resolution Plan, with the auction of the Corporate Debtor's properties staying temporarily halted. In conclusion, the Court stayed the operation of the NCLAT's order, requiring the appellant to deposit a substantial sum to show its willingness to comply with the agreed terms. The appeal was scheduled for further proceedings to monitor the appellant's adherence to the payment obligations and the implementation of the Resolution Plan.
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