Binding resolution plan breach led to liquidation, while retrospective forfeiture of deposit as performance security was rejected.
A resolution applicant's failure to make the ordered upfront payment and implement a binding approved resolution plan was treated as breach of the plan, and the later objection that payment had to be linked to an equity share offer letter was rejected as belated and inconsistent with the plain meaning of upfront payment. Because the corporate insolvency process had already run its course and the plan could not be implemented, the plan was cancelled and the corporate debtor was directed into liquidation. The tribunal also held that a later-amended performance-security provision could not be applied retrospectively to forfeit a deposit that had not originally been stipulated as performance security, so forfeiture of the deposit was refused.
Issues: (i) whether the successful resolution applicant's failure to make the ordered upfront payment and implement the approved resolution plan justified cancellation of the plan and liquidation of the corporate debtor; (ii) whether the amount of Rs. 50 crore deposited by the successful resolution applicant could be forfeited as performance security.
Issue (i): whether the successful resolution applicant's failure to make the ordered upfront payment and implement the approved resolution plan justified cancellation of the plan and liquidation of the corporate debtor
Analysis: The approved resolution plan had become binding, and the earlier appellate direction required the resolution applicant to make the upfront payment within the stipulated time. The applicant failed to comply even after extension of time. The tribunal held that the later attempt to qualify the upfront payment by insisting on an equity share offer letter could not be accepted, as the objection was raised belatedly and was inconsistent with the plain meaning of upfront payment. The applicant's non-compliance amounted to breach and contravention of the approved plan. Since the corporate insolvency resolution process had already run its course and the resolution applicant was unable to implement the plan, the tribunal found that liquidation had to follow.
Conclusion: The resolution plan was cancelled and the corporate debtor was directed into liquidation.
Issue (ii): whether the amount of Rs. 50 crore deposited by the successful resolution applicant could be forfeited as performance security
Analysis: The relevant regulatory provision for forfeiture of performance security was introduced by amendment after approval of the resolution plan. The committee of creditors had not required performance security when the plan was approved. Treating the deposited amount as forfeitable performance security in these circumstances would amount to giving the amendment retrospective effect and imposing a penalty for a pre-amendment plan. The tribunal therefore declined to treat the deposit as performance security for forfeiture purposes.
Conclusion: Forfeiture of the Rs. 50 crore deposit as performance security was not allowed.
Final Conclusion: The approved resolution plan failed, liquidation was ordered, and the request to forfeit the deposit as performance security was rejected.
Ratio Decidendi: A resolution applicant's failure to comply with a binding direction to make upfront payment under an approved resolution plan justifies cancellation of the plan and liquidation, but a later-amended performance-security regime cannot be applied retrospectively to forfeit a deposit not originally stipulated as performance security.
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