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SUPREME COURT OF INDIA
Dhananjaya Y Chandrachud, M R Shah, JJ.
Kridhan Infrastructure Pvt. Ltd. (Now known as Krish Steel and Trading Pvt. Ltd) - Appellant
Versus
Venkatesan Sankaranarayan & Ors. - Respondents
Civil Appeal No 3299 of 2020
Decided On : 01-03-2021
Insolvency and Bankruptcy Code 2016 - Section 33 - NCLAT Rules, 2016 - Rule 11 – Appeal - Seeking liquidation of Corporate Debtor - Appellant submitted a Resolution Plan for a company by name of Tecpro Systems Limited which was undergoing Corporate insolvency Resolution Process under Insolvency and Bankruptcy Code 2016 - Resolution Plan was approved by Committee of Creditors with a majority of 89.92% - Resolution Plan was approved by National Company Law Tribunal - Appellant accordingly deposited an amount of Rs 5 Crores in an Escrow Account of Corporate Debtor - However, appellant did not fulfil its further obligations, including equity infusion, under Resolution Plan despite numerous opportunities over a period of six months - CoC voted, by a majority of 99.28%, for liquidation of Corporate Debtor as a result of failure of appellant to implement Resolution Plan – Held, appellant will be unable to raise funds from Term Lenders who are insisting that status of Company should change from a company under liquidation to an active status - Order of liquidation has not been set aside. Ultimately, what request of appellant reduces itself to, is that it would raise funds on a mortgage of assets of Company and unless Company is brought out of liquidation, it would not be in a position to raise funds - This is unacceptable. At this stage, order of liquidation has only been stayed, but a final view was, thus, to be taken by this Court. Sufficient opportunities were granted to appellant earlier during pendency of proceedings both before NCLT and NCLAT. orders of NCLT and NCLAT make it abundantly clear that despite grant of sufficient time, appellant has not been able to comply with terms of Resolution Plan - Despite passage of almost five months, appellant has not been able to deposit an amount of Rs 50 crores - To allow such proceedings to lapse into an indefinite delay will plainly defeat object of statute - A good faith effort to resolve a corporate insolvency is a preferred course - However a resolution applicant must be fair in its dealings as well. appellant has failed to abide by its obligations - In that view of matter, Court see no reason or justification to entertain Civil Appeal any further - Consequence envisaged under order of this Court shall accordingly ensue in terms of forfeiture of amount of Rs 20 crores - As a consequence of this order, management shall revert to liquidator for taking steps in accordance with law – Appeal dismissed.
JUDGMENT :
Dhananjaya Y Chandrachud, J
1. This appeal arises from an order of the National Company Law Appellate Tribunal1[“NCLAT”] dated 8 September 2020.
2. The appellant submitted a Resolution Plan for a company by the name of Tecpro Systems Limited2[“Corporate Debtor”] which was undergoing the Corporate insolvency Resolution Process under the Insolvency and Bankruptcy Code 20163[“IBC”]. The Resolution Plan was approved by the Committee of Creditors4[“CoC”] on 8 March 2019 with a majority of 89.92%. The Resolution Plan was approved by the National Company Law Tribunal5[“NCLT”] on 15 May 2019. The appellant accordingly deposited an amount of Rs 5 Crores in an Escrow Account of the Corporate Debtor. However, the appellant did not fulfil its further obligations, including equity infusion, under the Resolution Plan despite numerous opportunities over a period of six months. On 11 November 2019, the CoC voted, by a majority of 99.28%, for the liquidation of the Corporate Debtor as a result of the failure of the appellant to implement the Resolution Plan. On 16 January 2020, the NCLT allowed the liquidation of the Corporate Debtor to proceed. The order of the NCLT was upheld by the NCLAT. Among other things, the NCLAT noted that the appellant had failed to implement the Resolution Plan for a period of over eight months and, hence, declined to exercise its jurisdiction pursuant to its inherent power under Rule 11 of the NCLAT Rules, 2016.
3. When the appeal came before this Court on 9 October 2020, a statement was made on behalf of the appellant that an amount of Rs 50 crores would be deposited on or before 10 January 2021. Liquidation under the IBC is a matter of last resort. Bearing this in mind, and in view of the solemn statement made by Senior Counsel for the appellant, an opportunity was granted to the appellant. Accordingly, the following order was passed:
2. We have heard Dr Abhishek Manu Singhvi, Senior counsel in support of the appeal. Ms Meenakshi Arora, Senior counsel appears on behalf of Edelweiss Asset Reconstruction Company Limited (EARC), a financial creditor, who had appeared before the National Company Law Appellant Tribunal. EARC has supported the appellant. Mr Ashish Makhija, learned counsel appears on behalf of the liquidator to oppose the appeal and support the order of the National Company Law Appellate Tribunal.
3. The corporate insolvency resolution process (CIR process) was initiated against the Corporate Debtor on 7 August 2017. The Resolution Plan submitted by the appellant was approved on 30 April 2018 by the Committee of Creditors (CoC). The Resolution Plan was approved by the NCLT on 15 May 2019. The NCLT was thereafter moved on the ground that the Resolution Plan had not been implemented by the appellant. Hence an application was filed under Section 33 of the Insolvency and Bankruptcy Code 2016 seeking liquidation of the Corporate Debtor. This was allowed by the NCLT by its order dated 16 January 2020.
4. After the appellant filed an appeal before the NCLAT on 3 February 2020, an opportunity was granted to them to file an affidavit indicating the time frame for compliance of the Resolution Plan. On 25 February 2020, a meeting took place between the member of the erstwhile CoC, the appellant and the liquidator. A revised time line was agreed upon, under which the appellant was to make a payment upfront of Rs 15 crores within seven days of the order of the NCLAT, which was liable to be forfeited if the appellant failed to make the balance upfront payment of Rs 50 crores within three months thereafter.
5. The appellant filed an affidavit before the NCLAT on 2 March 2020 apprising it of the understanding which had been arrived at on the above terms. On 29 July 2020, the NCLAT permitted the appellant to deposit Rs 15 crores in an escrow account to be specified by the lenders of the erstwhile CoC, within ten days. It is not in dispute that the appellant has in compliance with the order of the NCLAT, dep
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