2021 (9) TMI 993 - AT - Insolvency and Bankruptcy

Liquidation of the Corporate Debtor - non-implementation of the Resolution Plan - whether the prayer of the Appellant with regard to liquidating the Corporate Debtor ought to have considered or not? - HELD THAT - The Ld. Adjudicating Authority observed that the Tribunal (NCLT) cannot either order Liquidation or to direct the refund of the EMD, as the Tribunal has become Functus Officio after approval of the Resolution Plan with the consent of both the parties. Admittedly the CIRP was initiated on 20th September 2019. 270 days completed on 23rd August 2020 and 330 days completed by the end of October 2020. The Application filed by the Appellant bearing MA No.186/KOB/2020 in the month of November 2020 i.e., after completion of 330 days - The fact is that the 330 days have been completed and the Respondent did not implement the plan and filed an Application before the Ld. Adjudicating Authority bearing IA No. 16/2021 praying the Tribunal to permit the Respondent/Applicant in IA No. 16/2021 to withdraw the Resolution Plan and set aside the Order of the Ld. Adjudicating Authority dated 10th September 2020 whereby the plan of the Respondent/Applicant was approved. Having observed by the Ld. Adjudicating Authority that it cannot recall the Order of approval of the Resolution Plan and cannot direct the refund of the EMD and having rejected the Application filed by the Respondent bearing IA No. 16/2021, the Ld. Adjudicating Authority ought to have considered the prayer as made by the Appellant with regard the passing of Liquidation Order in view of non-implementation of the Resolution Plan by the Resolution Applicant and completion of 330 days. If 330 days completes and the Resolution Applicant failed to implement the plan, the Adjudicating Authority ought to have passed the Order of Liquidation as per the provision of the I B Code, 2016 - This Tribunal is not going into the aspect with regard to the forfeiture of the performance security and withdrawal of the plan. This Tribunal comes to a conclusion that 330 days have expired and upon non-implementation of the plan by the Resolution Applicant, the Adjudicating Authority ought to have passed the Order of Liquidation of the Corporate Debtor - Appeal allowed.

Summary

Issues Involved:
1. Challenge to the Order of Adjudicating Authority dismissing applications for liquidation.
2. Non-implementation of the approved Resolution Plan by the Successful Resolution Applicant.
3. Request for withdrawal of the Resolution Plan and refund of Performance Guarantee.
4. Adjudicating Authority's power to order liquidation post-approval of the Resolution Plan.
5. Applicability of Section 33 of the Insolvency and Bankruptcy Code, 2016 for liquidation.

Detailed Analysis:

1. Challenge to the Order of Adjudicating Authority Dismissing Applications for Liquidation:
The present Appeal was filed challenging the Order passed by the Adjudicating Authority (NCLT, Kochi Bench) in MA No.186/KOB/2020 and IA(IBC)/16/KOB/2021, wherein the applications for liquidation of the Corporate Debtor were dismissed. The Appellant argued that the Adjudicating Authority should have ordered the liquidation of the Corporate Debtor due to the non-implementation of the Resolution Plan by the Successful Resolution Applicant.

2. Non-implementation of the Approved Resolution Plan by the Successful Resolution Applicant:
The Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor was initiated on 20th September 2019. The Resolution Plan submitted by the Resolution Applicant was approved by the Committee of Creditors (CoC) and later by the Adjudicating Authority on 10.09.2020. The Respondent was required to make specific payments within stipulated timelines, which were not adhered to. The Respondent sought additional time for payment and eventually requested the withdrawal of the Resolution Plan and refund of the Performance Guarantee of ?25,00,000, citing RBI guidelines and SARFAESI Act 2002.

3. Request for Withdrawal of the Resolution Plan and Refund of Performance Guarantee:
The Respondent's request for withdrawal of the Resolution Plan was discussed in the Monitoring Committee Meetings and it was resolved that the approved Resolution Plan could not be withdrawn. The Respondent's application for withdrawal of the Resolution Plan and refund of the Performance Guarantee was dismissed by the Adjudicating Authority, which stated that the Tribunal had become functus officio after the approval of the Resolution Plan.

4. Adjudicating Authority's Power to Order Liquidation Post-Approval of the Resolution Plan:
The Adjudicating Authority observed that it could not recall its own Orders or direct the refund of the EMD after the approval of the Resolution Plan. The Tribunal noted that the Adjudicating Authority should have considered the Appellant's prayer for liquidation due to the non-implementation of the Resolution Plan and completion of 330 days since the initiation of CIRP.

5. Applicability of Section 33 of the Insolvency and Bankruptcy Code, 2016 for Liquidation:
Section 33(3) of the I&B Code, 2016 allows for a liquidation order if the approved Resolution Plan is contravened. The Tribunal determined that the Appellant rightly moved the application under Section 60(5) read with Section 33 of the I&B Code, 2016, as the Respondent failed to implement the plan. The Tribunal directed the Adjudicating Authority to pass an Order of Liquidation for the Corporate Debtor, as the mandatory 330-day period for completion of the insolvency resolution process had expired without implementation of the Resolution Plan.

Conclusion:
The Tribunal concluded that the Adjudicating Authority should have passed an Order of Liquidation due to the non-implementation of the Resolution Plan within the stipulated 330-day period. The Impugned Order dated 10.02.2021 was set aside to the extent that the Adjudicating Authority is directed to pass an Order of Liquidation as per Section 33(3) and 33(4) of the I&B Code, 2016. The Appeal succeeded in part, with no orders as to costs.