2019 (3) TMI 1809 - AT - Insolvency and Bankruptcy

Appellate Tribunal Upholds Liquidation Order for Non-Compliance with Resolution Plans

The Appellate Tribunal upheld the order of liquidation passed by the Adjudicating Authority, emphasizing the mandatory nature of such orders in cases of ... Failure to make payment of dues in terms with the resolution plan - Appellant submitted that instead of passing order of liquidation, the Adjudicating Authority should have taken steps for revival of the Corporate Debtor by accepting other plan - HELD THAT:- Such submission cannot be accepted. In the situation where a Resolution Applicant succeeds as Corporate Debtor but if fails to comply its assurance in terms of the resolution plan, what step is to be taken has been already been laid down in Sub-section (3) of Section 33 of the I&B Code - the Adjudicating Authority had no option but to pass order of liquidation and could not have resorted to revival of the Corporate Debtor by taking fresh resolution plans. Issues:1. Corporate Insolvency Resolution Process and approval of resolution plan.2. Failure of Successful Resolution Applicant to comply with the resolution plan.3. Application for liquidation filed by a Financial Creditor.4. Appeal by the erstwhile Promoter and Ex Managing Director against the order of liquidation.Issue 1: Corporate Insolvency Resolution Process and approval of resolution planThe Corporate Insolvency Resolution Process was initiated against the Corporate Debtor, and M/s Ace Star Properties Pvt. Ltd. emerged as the Successful Resolution Applicant. Another entity, M/s Siddharth Credit & Investment Pvt. Ltd., was to provide financial support to the Successful Resolution Applicant. The resolution plan submitted by them was approved by the Adjudicating Authority, following which the Corporate Debtor was taken over by M/s Ace Star Properties Pvt. Ltd.Issue 2: Failure of Successful Resolution Applicant to comply with the resolution planAfter the takeover, the Successful Resolution Applicant, M/s Ace Star Properties Pvt. Ltd., failed to fulfill its obligations as per the approved resolution plan. Subsequently, M/s J M Financial Asset Reconstruction Company Ltd., a Financial Creditor, filed an application before the Adjudicating Authority seeking liquidation of the Corporate Debtor due to the non-compliance by the Successful Resolution Applicant.Issue 3: Application for liquidation filed by a Financial CreditorThe Financial Creditor's application for liquidation was based on the contravention of the approved resolution plan by the Corporate Debtor, which led to prejudicial effects on the interests of the concerned parties. The Adjudicating Authority, in response to this application, issued an order for the liquidation of the Corporate Debtor on 11th December, 2018.Issue 4: Appeal by the erstwhile Promoter and Ex Managing Director against the order of liquidationThe erstwhile Promoter and Ex Managing Director of the Corporate Debtor filed an appeal challenging the order of liquidation. The Appellant argued that instead of liquidation, steps should have been taken for the revival of the Corporate Debtor by considering alternative plans. However, the Appellate Tribunal, considering the provisions of the Insolvency and Bankruptcy Code, held that in cases where a Successful Resolution Applicant fails to comply with the resolution plan, the Adjudicating Authority is bound to pass an order of liquidation as prescribed under Section 33(3) of the Code.In conclusion, the Appellate Tribunal upheld the order of liquidation passed by the Adjudicating Authority, emphasizing the mandatory nature of such orders in cases of non-compliance with approved resolution plans by Successful Resolution Applicants.