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TMI Blog2022 (10) TMI 888X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is the only option in the facts of the present case. It is well settled and reiterated from time to time by the Hon ble Supreme Court that all steps shall be taken to revive the Corporate Debtor and the liquidation is always a last resort. The provision of the Code contemplates filing of a complaint by Board or the Central Government or any person authorized by the Government in this behalf. It is true that Adjudicating Authority while exercising jurisdiction under the Code is not required to return any finding of an offence within the meaning of Section 74, sub-section (3). It is a prerogative of the Special Court under Section 236 to try an office and award punishment if any - The observations made by the Adjudicating Authority has to be read only for the purpose of sending the copy of the order to the Board for consideration for filing a complaint and order of the Adjudicating Authority cannot be treated to any direction to initiate action under Section 74, sub-section (3), which is in the domain of the Board and Central Government as per the statutory Scheme of the Code. Appeal disposed off. - Company Appeal (AT) (Insolvency) No. 683 of 2022 - - - Dated:- 21-10-202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tituting the erstwhile CoC of the Corporate Debtor. (iv) Although, two Financial Creditors had filed an Appeal before this Tribunal challenging the approved Resolution Plan, but this Tribunal did not stay the implementation of the Resolution Plan. (v) In the Meeting of the Monitoring Committee, it was repeatedly stated on behalf of the Appellant that they shall be depositing the amount as per Resolution Plan. (vi) The Chairman of the Monitoring Committee filed an IA No.1275 of 2020 stating about the subsequent events after the approval of the Resolution Plan and praying for forfeiture of Performance Bank Guarantee and praying for certain other reliefs. After filing the aforesaid Application, in the reply affidavit dated 27.01.2021, the Appellant requested that time be granted till 30.01.2021 to fulfill its obligation under the approved Resolution Plan owing to difficulty caused by Covid-19 pandemic. (vii) The Adjudicating Authority on 25.02.2021 directed the Appellant to file an affidavit within two weeks clearly indicting the detailed steps and time frame and stages within which payment envisaged under the approved Resolution Plan will be paid. In reply to it, an affid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Shri Sanjiv Sen, learned Senior Counsel for the Appellant, Shri Abhijeet Sinha, learned Counsel for Respondent No.1 and Shri Indranil Ghosh, learned Counsel for Respondent No.2. 5. The learned Counsel for the Appellant challenging the impugned order contends that impugned order passed by the Adjudicating Authority is contrary to the Scheme of IBC. It is submitted that there is no power upon the Adjudicating Authority for issuing any order to restart the CIRP afresh in respect of the Corporate Debtor for which Resolution Plan has already been approved by the Adjudicating Authority. It is submitted that Respondent No.1, who is Chairman of the Monitoring Committee has no locus to file I.A. No.1275 of 2020. The Respondent No.1 being erstwhile RP of Corporate Debtor could not be prejudicially affected by the delay of non-implementation of the Resolution Plan and therefore, did not have locus to file an Application under Section 33, sub-section (3) of the Code. The Adjudicating Authority was required to try the Application as one under Section 33, sub-section (3) of the Code and only order, which could have been passed was an order of liquidation. The Adjudicating Authority was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng failed to implement the Plan, Performance Bank Guarantee was liable to be forfeited as per the Regulation 36-B(4-A) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ( CIRP Regulations ). The Appellant having failed to implement the approved Resolution Plan cannot be heard in saying that Corporate Debtor be put to liquidation. The Corporate Debtor is a going concern, which has been efficiently being run by the erstwhile Resolution Professional, who is now the Chairman of the Monitoring Committee. The Corporate Debtor, who is a going concern, cannot be sent to liquidation. The Appellant who failed to implement the Resolution Plan and has got forfeited its Performance Bank Guarantee deserves to be prosecuted under Section 74(3) of the Code and cannot be heard in saying as to how the Corporate Debtor should be run. It is submitted that in the facts of the present case where Corporate Debtor is being run as a going concern, no error has been committed by the Adjudicating Authority directing for restart of CIRP to revive the Corporate Debtor. It is submitted that in pursuance of subsequent orders of the Adjudicatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led by Respondent No.1 after the Resolution Applicant failed to make upfront payment as per the Resolution Plan within the time allowed in the Plan. Following were the reliefs sought in I.A. No.1275 of 2020: (i) The Resolution Plan of the Resolution Applicant/ Respondent approved by the learned Adjudicating Authority by its order dated October 21, 2019 be cancelled, discharged, rescinded and abrogated; (ii) The bank guarantees furnished by the respondent as morefully described in paragraph 9 hereof be invoked and the amounts in respect thereof be forfeited; (iii) Appropriate directions be given on the respondent and/ or the persons in the management and control thereof to ensure effective invocation and forfeiture of the bank guarantees described in paragraph 8 hereof furnished by respondent; (iv) Notice of this application be served upon the officers and the persons in the management and control of the respondent as more fully and particularly described in paragraph 45 hereof; (v) The officers and/ or the persons in the management and control of the respondent more fully and particularly described in paragraph 45 hereof be directed to disclose the names an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be allowed to withdraw from Resolution Plan. In paragraph 161 of the judgment, following has been held: 161. In the wake of the COVID-19 Pandemic, several resolution plans remained pending before the adjudicating authorities due to the lockdown and significant barriers to securing a hearing. An Ordinance was swiftly promulgated on 5-6-2020 which imposed a temporary suspension of initiation of CIRP under Sections 7, 9 and 10 IBC for defaults arising for six months from 25-3-2020 (extendable by one year). This was followed by an amendment through the IBC (Second Amendment) Act, 2020 on 23-9-2020 which provided for a carve-out for the purpose of defaults arising during the suspended period. The delays on account of the lockdown were also mitigated by the IBBI (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2020, which inserted Regulation 40-C on 20-4-2020, with effect from 29-3-2020, and excluded such delays for the purposes of adherence to the otherwise strict timeline. Recently, the IBC (Amendment) Ordinance, 2021 was promulgated with effect from 4-4-2021 providing certain directions to preserve businesses of MSMEs and a fast-track insolve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the terms of the Plan, the performance security shall stand forfeited. The Hon ble Supreme Court in Ebix Singaporei (supra) in paragraph 164 of the judgment has also laid down following: ..the plan after acceptance by the CoC. Regulation 36-B(4-A) requires the furnishing of a performance security which will be forfeited if a resolution applicant fails to implement the plan. This is collected before the adjudicating authority approves the plan. Notably, the Regulations also direct forfeiture of the performance security in case the resolution applicant contributes to the failure of implementation , which could potentially include any attempts at withdrawal of the plan. 14. The learned Counsel for Respondent No.1 is right in his submission that the consequence of failure to implement is forfeiture of Performance Bank Guarantee as has been statutorily provided by CIRP Regulations 36-B(4-A). The Appellant cannot be heard in saying that the aforesaid amount of Performance Bank Guarantee be returned to him. 15. The learned Counsel for the Appellant relied on judgment of the Hon ble Supreme Court in Kailash Nath Associates vs. Delhi Development Authority and Ant. (2015) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unilaterally extend the time for payment under Section 63 of the Contract Act as the time for payment is not for DDA's own benefit but for the benefit of the appellant. The present case would be covered by two judgments of the Supreme Court. In Citi Bank N.A. v. Standard Chartered Bank [(2004) 1 SCC 12] , this Court held: (SCC p. 35, para 50) 50. Under Section 63, unlike Section 62, a promisee can act unilaterally and may (i) dispense with wholly or in part, or (ii) remit wholly or in part, the performance of the promise made to him, or (iii) may extend the time for such performance, or (iv) may accept instead of it any satisfaction which he thinks fit. 16. The present is a case where Performance Bank Guarantee was given by the Appellant to implement the Resolution Plan approved as per the Code. The forfeiture of the Performance Bank Guarantee in the CIRP Regulations is statutory requirement. The judgment of Kailash Nath relied by the learned Counsel for the Appellant does not come to any aid to the Appellant in the facts of present case. 17. Now we come to the submission of learned Counsel for the Appellant that only option which was ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the corporate debtor has contravened the provisions of the resolution plan, it shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1). 18. The present is a case where Application, which was filed by Respondent No.1 being I.A. No.1275 of 2020 was not confine to Section 33 alone. The Memo of the Application itself mentions following: An Application under Sections 12, 60(5) and 74 of the Insolvency and Bankruptcy Code, 2016 read with Rule 11 of the National Company Law Tribunal Rules 2016 and in the alternative under Sections 33 and 34 of the Insolvency and Bankruptcy Code, 2016. 19. The Application filed by Respondent No.1, thus, was a composite application invoking various provisions of the Code including Rule 11 of the NCLT Rules, 2016. 20. Section 33, sub-section (3) uses the expression may make an application to the Adjudicating Authority for liquidation order . The Application which was filed by Respondent No.1 was as noted above not being confine to Section 33, sub-section (3), rather prayer for liquidation was an alternative prayer. The Adjudicating Authority was not prohibited from exercise o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent case, we are not persuaded to accept the submission of the learned Counsel for the Appellant that only option available to the Adjudicating Authority was to direct for liquidation. Liquidation could have been one of the orders, which is contemplated in the facts of the present case, but it cannot be held that liquidation is the only option in the facts of the present case. It is well settled and reiterated from time to time by the Hon ble Supreme Court that all steps shall be taken to revive the Corporate Debtor and the liquidation is always a last resort. 23. We may further notice that the Appellant, who has failed to implement the approved Resolution Plan and whose security has been forfeited has now no concern with the Corporate Debtor. The Adjudicating Authority having found the Resolution Plan failed to be implemented, Appellant cannot decide the further course of action of the Corporate Debtor and insist that Corporate Debtor must be liquidated. The Appellant is not a stakeholder of the Corporate Debtor. Hence, submission of learned Counsel for the Appellant that only option available to the Adjudicating Authority was to direct the liquidation has to be rejected. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have been completed much earlier and no case is made out to exclude any period, we hold that the Adjudicating Authority has no other option but to pass order of liquidation. 25. The observations made by this Tribunal in the above case can be said to be observation which were confined to the facts of that case. The observations made in paragraph 39 itself indicates that a request can be made to the Adjudicating Authority to allow the RP or Committee of Creditors to call for a fresh Resolution Plan. This Tribunal in paragraph 39 held that no case is made out to exclude any period, hence Adjudicating Authority had no option, but to pass order of liquidation. The observations made in paragraphs 38 and 39 itself indicate that in appropriate case, the Adjudicating Authority can be approached for fresh/ revised Resolution Plan. The above judgment of this Tribunal cannot be held to lay down any proposition that when Resolution Plan has failed to be implemented, no other option is available except to direct the liquidation. The judgment cannot be read to lay down any such broad ratio. We have noticed the specific features in the facts of present case including the Corporate Debtor be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... knowingly and wilfully contravenes any of the terms of such resolution plan or abets such contravention, such corporate debtor, officer, creditor or person shall be punishable with imprisonment of not less than one year, but may extend to five years, or with fine which shall not be less than one lakh rupees, but may extend to one crore rupees, or with both. 29. The keywords in Section 74, sub-section (3) is that when the Corporate Debtor or any of its officers or creditors or any person on whom the approved Resolution Plan is binding under Section 31, knowingly and willfully, contravenes any of the terms of such Resolution Plan or abets such contravention, such persons shall be punishable .. . Section 236 of the Code provides for Trial of offences by Special Court . Section 236, sub-section (2) provides as follows: 236 (2) No Court shall take cognizance of any offence punishable under this Act, save on a complaint made by the Board or the Central Government or any person authorised by the Central Government in this behalf. 30. The provision of the Code contemplates filing of a complaint by Board or the Central Government or any person authorized by the Government i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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