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TMI Blog2024 (7) TMI 195X X X X Extracts X X X X X X X X Extracts X X X X ..... r, and to avoid further jeopardy to the interests of the Financial Creditor arising out of the stalemate in the whole resolution process, liquidation was very much an exercisable option. In the present facts of the case, the ad interim stay of the orders of the Hon'ble Delhi High Court by the Hon ble Apex Court undisputedly continues to subsist. For this reason alone, indisputably the assets of the Corporate Debtor have not been effectively made over the SRA. That being the case, there is no doubt that the interim orders of the Hon ble Supreme Court have led to a complete embargo and stalled the ongoing resolution proceedings. Clause 8 of the 'Basic Assumptions' provides for discussion between the Appellant and RP and Respondent No. 2 regarding further course of action in case the plan is not implemented within 18 months. The discussion regarding the further course of action contemplated by the plan could only be interpreted to mean discussion regarding implementation of the plan and not liquidation of the Corporate Debtor. Merely, because extending the 18 months period would allegedly go against the commercial interests of the Financial Creditor is not a convincing and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with Ms. Shally Bhasin, Mr. Chaitanya Sagaya, Mr. Prateek Yadav, Ms. Rachna Dubey, Advocates for R-2 JUDGMENT ( Hybrid Mode ) [ Per : Barun Mitra , Member ( Technical ) ] The present appeal filed under Section 61 of Insolvency and Bankruptcy Code 2016 ( IBC in short) by the Appellant arises out of the Order dated 22.11.2023 (hereinafter referred to as Impugned Order ) passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench-I) in I.A. No. 266 of 2023 filed by the Successful Resolution Applicant seeking exclusion of time from 13.12.2021 till date of filing the I.A. from the time period of eighteen months provided in the resolution plan and for extension of time for implementation of the resolution plan alongwith and I.A. 1290 of 2023 filed by the Financial Creditor-Axis Bank seeking liquidation of the Corporate Debtor in CP (IB) No. 4071/MB/2018. By the same impugned order, the Adjudicating Authority disposed of both the I.A.s in a combined manner declaring that the implementation of the resolution plan of the Successful Resolution Applicant has failed and ordered liquidation of the Corporate Debtor. Aggrieved by this impugned order, the Successful Resoluti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d been admitted into CIRP, the Corporate Debtor filed E.A. No. 861 of 2019 to seek modification of the orders dated 13.11.2018 and 27.09.2019 to the extent that restraint placed on them from transferring their assets be eliminated so that resolution of the Corporate Debtor could take place. It was submitted that the Hon ble Delhi High Court in its orders dated 15.01.2020, after acknowledging the ongoing moratorium, simply observed that no further orders are required to be passed. 5. However, as per the resolution plan of the SRA, it was possible for the SRA to effectively take over the assets of the Corporate Debtor to implement the resolution plan only after the orders of injunction by the Hon ble High Court of Delhi was modified or vacated. Since the resolution plan provided that the plan was to be implemented after vacation of the orders of the Hon ble Delhi High Court dated 13.11.2018 and 27.09.2019, the Resolution Professional ( RP in short) of the Corporate Debtor filed E.A. No. 898 of 2021 before Hon ble Delhi High Court seeking vacation of the above two orders. The Hon ble Delhi High Court on 28.10.2021 vacated the said orders and stated that such restraint would not apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided for commencement of the implementation of the resolution plan. In the alternative, the SRA prayed for an extension of the period for implementing the resolution plan by extending it until 30 days from the final disposal of the matter pending before the Hon ble Supreme Court. 9. It was also added that while on the one hand the SRA had approached the Adjudicating Authority vide I.A. No. 266 of 2023 seeking to exclude time for implementation of the resolution plan, on the other hand, the Respondent No. 2-Financial Creditor had approached the Adjudicating Authority vide I.A. No. 1290 of 2023 seeking liquidation of the Corporate Debtor stating grounds of non- implementation of resolution plan by the SRA. The Adjudicating Authority dismissed I.A. No. 266 of 2023 and allowed I.A. No. 1290 of 2023 approving liquidation of the Corporate Debtor. Pursuant to orders passed in I.A. No. 1290/2023, the Liquidator appointed by the Adjudicating Authority took into custody and control all assets, properties being the custodian of the Corporate Debtor. 10. It is the case of the Appellant that non-implementation of the plan resulting from the imposition of stay by the Hon ble Apex Court cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh the resolution plan was contingent upon vacation of the stay orders passed by the Hon ble Delhi High Court and the Hon ble Supreme Court, nevertheless, one cannot be unmindful that there was an overriding clause as outlined in paragraphs 6 and 8 of the Basic Assumptions in the resolution plan of the SRA which provided for a hard-stop period of 18 months. Highlighting these clauses enshrined in the Basic Assumptions which provided for a time span of 18 months from the date of approval of the resolution plan to implement the same, it was submitted that the said time frame of 18 months was exhaustive and inclusive of the entire time-period that could be taken for vacation of the court orders to implement the plan. The very fact that the SRA had approached the Adjudicating Authority for seeking extension and/or exclusion of time for implementation of the resolution plan also shows that the Appellant was pretty much aware of the hard-stop period of 18 months contemplated under the resolution plan for its implementation in case of the possibility of the stay orders not being vacated. 14. It was further contended that the resolution plan also contemplated that timely action was imperat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2019 restricted the Corporate Debtor from, inter-alia disposing off, alienating, assets encumbering or otherwise parting with possession of any assets except in ordinary course of business. Further, the Hon ble High Court of Delhi has in IA 14554/2018In the HC Matter passed on order dated 13.11.2018 in IA 14554/2018 and has thereby: directed the Corporate Debtor/agents to neither transfer, nor create any third-party interest in the immovable properties owned by the said entitles/agents. (b) In the light of the aforesaid, there may be an impediment in implementing the resolution plan for the Corporate Debtor until the Interim orders dated 13.11.2018 and 27.09.2019 ( Stay Order ) are vacated or modified appropriately, allowing the resolution plan to take effect or the proceedings reach final conclusion in favour of CD. (c) It has been informed that the RP, on behalf of the Corporate Debtor, has already filed an application being EA No. 861/2019 in OMP (EFA) (Comm) No. 6/2016 before the Hon ble Delhi Court seeking vacation or modification of Stay Orders. (d) It is clarified that vacation or modification of the Stay Orders shall mean that the Stay Orders are either vacated or modified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets for disposal to the RP/COC/Resolution Applicant either by way of vacation or modification of the Stay Orders or otherwise, in the manner specified in paragraph 4 above. 6. It is understood that accordingly, the implementation of the Resolution Plan will only follow vacation or modification of Stay Orders by the Hon ble High Court of Delhi or any Higher Court in the manner provided in paragraph 4 above. The Resolution Applicant submits that, if the Stay Orders are not vacated/modified by the Hon ble High Court of Delhi or any Higher Court, as the case may be, only then shall the present Resolution by Plan lapse and the Bid Bond Guarantee and/or performance guarantee furnished by the Resolution Applicant shall be duly returned to the Resolution Applicant. The Resolution Applicant shall not be held responsible for lapse of such plan and the same will not treated as a case of non-performance of the resolution plan by the Resolution Applicant. 8. In the event, the implementation of the plan does not start within 18 months from the date of approval of the Resolution Plan by NCLT, the RA will mutually discuss with RP and secured financial creditor of the Corporate Debtor regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Application noting that the execution proceedings cannot continue against the Corporate Debtor till the continuance of the moratorium by operation of law. 14. In view of the above, the Resolution Plan would be implemented once the stay orders are vacated or modified to allow such implementation. It is also understood that in case the implementation of the Resolution Plan does not commence within 18 (eighteen) months from the date of its approval by this Tribunal, the Resolution Applicant would discuss the further course of action with the Applicant and CoC. Any proposal/agreement not to extend the term of the implementation of Resolution Plan at that stage shall not be treated as non-implementation of the Plan. ( Emphasis supplied ) Having perused the above orders of the Adjudicating Authority approving the resolution plan we also notice that the same not having been challenged, the same had acquired finality thereby vesting a right in favour of the SRA to acquire the Corporate Debtor. The contention of the SRA therefore is that the same vested right therefore cannot be taken away except in accordance with law, that is only if non-compliance of requirements specified under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nkyo Co. Ltd. We are in agreement with Axis Bank Limited that the implementation of the plan is contingent upon the outcome of these proceedings or vacation of stay order, and this has caused stalemate in the whole Resolution process, which is jeopardising the interest of the Financial Creditor. Accordingly, we are of considered view that a Liquidation Order can be passed in the present matter in terms of Section 33(1)(a)/33(3) of the Code, as the Corporate Debtor can be sold as going concern in that process also. It will not serve the purpose to wait endlessly. ( Emphasis supplied ) 23. Quite clearly, the core ground for filing IA 1290 of 2023 by the Respondent No. 2 is not for any default or failure on the part of the Appellant in the implementation of the plan but on account of delay in the pendency of the proceedings before the Hon'ble Supreme Court. This is also borne out from I.A. No. 1290 of 2023 wherein it was pleaded by the Respondent No. 2 as extracted below: 14. That there has been a lapse of over 21 months since the approval of the resolution plan by this Hon'ble Tribunal, and even after several applications filed for early hearing before the Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding implementation of the plan and not liquidation of the Corporate Debtor. Merely, because extending the 18 months period would allegedly go against the commercial interests of the Financial Creditor is not a convincing and persuasive ground for the Respondent No. 2 to unilaterally press for liquidation without any deliberations and discussions with the other stakeholders. It is also pertinent to note that the pendency of proceedings before the Hon'ble Supreme Court is not at the instance of the Appellant but at the instance of a third party, namely, Daiichi and therefore the Appellant cannot be made to suffer nor can the Corporate Debtor be placed under liquidation because final orders are yet to be passed by the Hon'ble Supreme Court in the matter. 26. This brings us to the contention of the Respondent No. 2 that in terms of Regulation 39(9) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 that a creditor who is aggrieved by non-implementation of resolution plan may seek the directions of the Adjudicating Authority. We entirely agree that the said Regulations gives the creditor the liberty to seek directions but we do not agree t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Financial Creditor cannot use the forum of the Adjudicating Authority to force liquidation of the Corporate Debtor. In any case, when there is a stay ordered by the Hon ble Apex Court on any transfer, direct or indirect, on the assets of the Corporate Debtor, we have serious doubts on whether the Corporate Debtor can be sold as a going concern in the liquidation process without the stay order being vacated/ modified. It is also settled law that when a higher court grants a stay which stalls the implementation of the resolution plan, the said period can well be excluded from the time period given for implementation of the resolution plan. 28. In the light of the foregoing discussions, we find merit in the appeal. We set aside the impugned order allowing liquidation of the Corporate Debtor. We further direct the Adjudicating Authority to allow exclusion of time from 13.12.2021 sought for implementation of the resolution plan as long as the interim order of the Hon ble Supreme Court remains in operation. Both parties shall have the liberty to also approach the Hon ble Supreme Court to seek early hearing of the matter in the interest of timely resolution of the Corporate Debtor. No co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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