1. Resolution Plan implementation under IBC — Dispute over cash infusion versus bank guarantee adjustment — Failure to meet payment obligations and conditions precedent. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 )
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2024 Supreme(SC) 1006
SUPREME COURT OF INDIA
Dr. Dhananjaya Y. Chandrachud, CJI., J.B. Pardiwala, Manoj Misra, JJ.
State Bank of India & Ors. – Appellants
VERSUS
The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch & Anr. – Respondents
Civil Appeal Nos. 5023-5024 of 2024 With Civil Appeal Nos. 12220-12221 of 2024
Decided On : 07-11-2024
Advocates appeared:
For the Appellant(s) : Mr. N. Venkataraman, A.S.G. Mr. Sanjay Kapur, AOR Mr. Devesh Dubey, Adv. Ms. Divya Singh Pundir, Adv. Mr. Arjun Bhatia, Adv. Ms. Mahima Kapur, Adv. Mr. Vikas Mehta, Adv. Mr. Mayan Prasad, Adv. Ms. Anshula Vijay Kumar Grover, AOR Mr. Saurav Baveja, Adv. Ms. Nitika Grover, Adv. Mr. Lenpithang Sithlou, Adv. Mr. Nishant Anshul, Adv.
For the Respondent(s): Mr. Mukul Rohatgi, Sr. Adv. Mr. Gopal Sankarnarayanan, Sr. Adv. Mr. Debmalya Banerjee, Adv. Ms. Pooja Mahajan, Adv. Mr. Kartik Bhatnagar, Adv. Mr. Ashish Vats, Adv. Mr. Rohan Sharma, Adv. Ms. Arveena Sharma, Adv. Ms. Shruti Pandey, Adv. Ms. Apurva, Adv. Mr. Agastya Shelat, Adv. Ms. Trisha Chandran, Adv. Mr. Tushar Srivastava, Adv. Ms. Tanya Srivastava, Adv. Ms. Aastha Prasad, Adv. M/S. Karanjawala & Co., AOR Mr. S. Niranjan Reddy, Sr. Adv. Mr. Rajendra Barot, Adv. Dr. Dhirajkumar Totala, Adv. Mr. Suharsh Sinha, Adv. Mr. Nishant Upadhyay, Adv. Mr. Navneet R., AOR Mr. Ankit Pal, Adv. Mr. Ajay Raj, Adv. Ms. Vasudha Jain, Adv. Ms. Palak Arora, Adv. Ms. Alankrita Sinha, Adv. Mr. Ritin Rai, Sr. Adv. Ms. Petrushka Dasgupta, Adv. Mr. Mridul Yadav, Adv. Ms. Pallavi Pratap, AOR Mr. N. Venkataraman, A.S.G. Mr. Sanjay Kapur, AOR Mr. Devesh Dubey, Adv. Mr. Surya Prakash, Adv. Ms. Divya Singh Pundir, Adv. Ms. Mahima Kapur, Adv. Ms. Isha Virmani, Adv. Mrs. Shubhra Kapur, Adv. Mr. Pawanshree Agrawal, AOR
For the Appellant(s) : Mr. N. Venkataraman, A.S.G. Mr. Sanjay Kapur, AOR Mr. Devesh Dubey, Adv. Ms. Divya Singh Pundir, Adv. Mr. Arjun Bhatia, Adv. Ms. Mahima Kapur, Adv. Mr. Vikas Mehta, Adv. Mr. Mayan Prasad, Adv. Ms. Anshula Vijay Kumar Grover, AOR Mr. Saurav Baveja, Adv. Ms. Nitika Grover, Adv. Mr. Lenpithang Sithlou, Adv. Mr. Nishant Anshul, Adv.
For the Respondent(s): Mr. Mukul Rohatgi, Sr. Adv. Mr. Gopal Sankarnarayanan, Sr. Adv. Mr. Debmalya Banerjee, Adv. Ms. Pooja Mahajan, Adv. Mr. Kartik Bhatnagar, Adv. Mr. Ashish Vats, Adv. Mr. Rohan Sharma, Adv. Ms. Arveena Sharma, Adv. Ms. Shruti Pandey, Adv. Ms. Apurva, Adv. Mr. Agastya Shelat, Adv. Ms. Trisha Chandran, Adv. Mr. Tushar Srivastava, Adv. Ms. Tanya Srivastava, Adv. Ms. Aastha Prasad, Adv. M/S. Karanjawala & Co., AOR Mr. S. Niranjan Reddy, Sr. Adv. Mr. Rajendra Barot, Adv. Dr. Dhirajkumar Totala, Adv. Mr. Suharsh Sinha, Adv. Mr. Nishant Upadhyay, Adv. Mr. Navneet R., AOR Mr. Ankit Pal, Adv. Mr. Ajay Raj, Adv. Ms. Vasudha Jain, Adv. Ms. Palak Arora, Adv. Ms. Alankrita Sinha, Adv. Mr. Ritin Rai, Sr. Adv. Ms. Petrushka Dasgupta, Adv. Mr. Mridul Yadav, Adv. Ms. Pallavi Pratap, AOR Mr. N. Venkataraman, A.S.G. Mr. Sanjay Kapur, AOR Mr. Devesh Dubey, Adv. Mr. Surya Prakash, Adv. Ms. Divya Singh Pundir, Adv. Ms. Mahima Kapur, Adv. Ms. Isha Virmani, Adv. Mrs. Shubhra Kapur, Adv. Mr. Pawanshree Agrawal, AOR
The adjustment of a Performance Bank Guarantee against a tranche payment is impermissible under the IBC, 2016, leading to liquidation if the Resolution Plan is not timely implemented.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 – Sections 30(2)(e) and 33(3) – Performance Bank Guarantee (PBG) – Adjustment of PBG of Rs. 150 Crore against first tranche payment of Rs. 350 Crore was impermissible under the terms of the Resolution Plan and Regulation 36B(4A) – Non-payment of airport dues and workmen's dues led to the conclusion that the Resolution Plan had failed – Corporate Debtor directed to be liquidated. (Paras 1, 25, 129, 187)
(B) Conditions Precedent – The SRA failed to fulfill the Conditions Precedent as stipulated in the Resolution Plan, leading to the invocation of the PBG and subsequent liquidation of the Corporate Debtor. (Paras 91, 125, 144)
(C) Timeliness – The timely implementation of the Resolution Plan is crucial under the IBC, 2016, and unnecessary delays can lead to liquidation. (Paras 150, 154)
Judgement Key Points
Key Points: - The judgment centers on whether adjusting the PBG against the first tranche payment was permissible under the Resolution Plan and IBC regulations. (!) (!) (!) (!) - It evaluates whether non-implementation of the Resolution Plan by the SRA can lead to liquidation under Section 33(3) IBC, 2016. (!) (!) (!) - It discusses whether timely implementation of the Resolution Plan is an objective or requirement under IBC 2016 and related timelines/extensions. (!) (!) (!) - The Court clarifies that the Lender’s Affidavit terms cannot override the Plan, and that PBGs must adhere to Regulation 36B(4A) and RFRP/Plan provisions. (!) (!) (!) (!) (!) - It addresses whether the Supreme Court’s directions to deposit Rs. 150 Crore cash by 31.01.2024 were binding and whether failure to deposit triggers liquidation. (!) (!) (!) - It considers propriety of the NCLAT’s conclusions regarding airport dues, PF/Gratuity, and other CPs, and whether these findings were perverse or lawful. (!) (!) (!) - The decision ultimately directs liquidation under Article 142 due to failure to implement, and upholds that Plan modification or withdrawal post-approval is not permitted. (!) (!) (!)
Question 1?
Question 2?
Question 3?
Legal Category Hierarchy
- insolvency and bankruptcy law
- practice and procedure
Table of Contents
2. Whether performance bank guarantee can be adjusted against cash infusion — Whether non-implementation of resolution plan necessitates liquidation — Dispute over fulfillment of conditions precedent. (Para 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56 , 57 , 58 , 59 , 60 , 61 , 62 , 63 , 64 , 65 , 66 , 67 , 68 , 69 , 70 , 71 , 72 , 73 , 74 , 75 , 76 , 77 , 78 , 79 , 80 , 81 , 82 , 83 )
3. PBG adjustment violates RFRP and Regulation 36B(4A) — Infusion requires cash payment — Repeated failure to meet extended timelines constitutes breach of resolution plan. (Para 85 , 86 , 87 , 88 , 89 , 90 , 91 , 92 , 93 , 94 , 95 , 96 , 97 , 98 , 99 , 100 , 101 , 102 , 103 , 104 , 105 , 106 , 107 , 108 , 109 , 110 , 111 , 112 , 113 , 114 , 115 , 116 , 117 , 118 , 119 , 120 , 121 , 122 , 123 , 124 , 125 , 126 , 127 , 128 , 129 , 130 , 131 , 132 , 133 , 134 , 135 , 136 , 137 , 138 , 139 , 140 , 141 , 142 , 143 , 144 , 145 , 146 , 147 , 148 , 149 , 150 , 151 , 152 , 153 , 154 , 155 , 156 , 157 , 158 , 159 , 160 , 161 , 162 , 163 , 164 , 165 )
4. Performance bank guarantees cannot be set off against cash infusion obligations — Failure to implement an approved resolution plan justifies liquidation under Section 33(3), IBC. (Para 100 , 104 , 105 , 116 , 143 , 148 )
5. NCLAT order set aside — Corporate Debtor directed into liquidation — Infused funds forfeited and performance bank guarantee encashable. (Para 186 , 187 , 188 , 189 )
6. Can a Performance Bank Guarantee (PBG) be adjusted against the cash infusion required under a Resolution Plan?
No. PBGs are intended to ensure implementation and cannot be set off against the consideration offered, especially when the RFRP and Regulation 36B(4A) require the PBG to remain active until full implementation. (Para 100 , 104 , 105 , 111 )
7. What is the legal interpretation of the term infusion of funds in the context of a Resolution Plan?
Infusion of funds is interpreted as payment in cash and cannot be substituted by the adjustment of a performance bank guarantee. (Para 30 , 122 )
8. Does the failure of a Successful Resolution Applicant to implement an approved Resolution Plan lead to liquidation?
Yes. Under Section 33(3) of the IBC, if an approved resolution plan is contravened by the corporate debtor or SRA, the Adjudicating Authority may order liquidation. (Para 143 , 144 )
9. Is the timely implementation of a Resolution Plan a recognized objective of the IBC?
Yes. Time and speed are essence to prevent value destruction of assets and ensure the survival of the corporate debtor as a going concern. (Para 150 , 151 , 154 )
10. Can an approved Resolution Plan be modified or altered by the stakeholders after approval by the Adjudicating Authority?
No. Once approved under Section 31(1), the plan is binding and irrevocable; the Adjudicating Authority lacks the power to allow withdrawals or modifications. (Para 114 , 115 , 116 )
JUDGMENT :
J.B. PARDIWALA, J.
For convenience of exposition, this judgment is divided into the following parts: -
| INDEX | |
| A. | FACTUAL MATRIX |
| B. | SUBMISSIONS ON BEHALF OF THE APPELLANTS i. Issue No.1: Adjustment of PBG of Rs. 150 Crore towards the first tranche payment ii. Issue No. 2: Non-payment of Airport dues iii. Issue No. 3: Non-payment of Workmen and Employees’ dues iv. Issue No. 4: Achievement of Effective Date v. Issue No. 5: Non-fulfilment of Conditions Precedent |
| C. | SUBMISSIONS ON BEHALF OF THE RESPONDENTS |
| D. | ISSUES FOR DETERMINATION |
| E. | ANALYSIS i. Whether the Performance Bank Guarantee (PBG) could have been adjusted against the first tranche payment which was to be made under the Resolution Plan, within 180 days from the Effective Date in contravention of the order of this Court dated 18.01.2024, the terms of the Resolution Plan and the provisions of law? a. Whether the Conditions Precedent were fulfilled by Respondent No.1/SRA and the Effective Date was fixed at 20.05.2022? b. Whether the NCLAT could have directed the Performance Bank Guarantee (PBG) to be adjusted against the first tranche payment which was to be made within 180 days of the Effective Date? I. The adjustment of the PBG was impermissible under the terms of the Resolution Plan read with Regulation 36B(4A) of the 2016 Regulations II. The Lender’s Affidavit dated 16.08.2023 did not impose conditions which were different from the terms of the Resolution Plan. Error! Bookmark not defined. ii. Whether the non-implementation of the Resolution Plan by the SRA necessarily leads to the consequence of liquidation as under Section 33(3) of the IBC, 2016? a. Whether Respondent No.1/SRA had failed to implement the Resolution Plan on non-payment of the Airport Dues as per the terms of the Resolution Plan? b. Whether Respondent No.1/SRA could be said to have failed to implement the Resolution Plan on account of the non-payment of workmen and employees’ dues as per the terms of the Resolution Plan and the order of the NCLT dated 21.10.2022 which was confirmed y the order dated 31.01.2023 of this Court? c. Whether there were sufficient grounds before the NCLAT to hold that Respondent No.1/SRA had contravened the terms of the approved Resolution Plan and that the Corporate Debtor must be directed to be liquidated under Section 33(3) of the IBC, 2016? iii. Whether the timely implementation of the Resolution Plan is also one of the objectives of the IBC, 2016? |
| F. | SHORTCOMINGS AND SUGGESTIONS TO THE IBC, 2016. |
| G. | CONCLUSION |
1. These appeals arise from the judgment and order dated 12.03.2024 passed by the National Company Law Appellate Tribunal (hereinafter, the “NCLAT”) in Company Appeal (AT) (INS) 129-130 of 2023 filed by the Appellant herein by which the NCLAT dismissed the appeal and upheld the order dated 13.01.2023 passed by the National Company Law Tribunal (hereinafter, the “NCLT”). The order of the NCLT held that Respondent No.1 had fulfilled all the Conditions Precedent as stipulated in the Resolution Plan. The NCLAT further issued several directions including a direction that the Performance Bank Guarantee of Rs. 150 Crore (hereinafter, the “PBG”) could be adjusted towards the first tranche payment of Rs. 350 Crore which was to be made by Respondent No.1.
A. FACTUAL MATRIX
2. The NCLT vide its order dated 20.06.2019 in C.P. 2205 (IB)/ (MB)/ 2019 admitted the application for initiation of Corporate Insolvency Resolution Process (hereinafter, the “CIRP”) filed by State Bank of India (hereinafter, “SBI”) in respect of Jet Airways (India) Limited (hereinafter, the “Corporate Debtor”) in accordance with Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter, the “IBC, 2016”). The total admitted claim of the Financial Creditors was Rs. 7800 Crore (approx.). Pursuant to the aforesaid Order, Mr. Ashish Chhaw
