Non-implementation of an approved resolution plan can trigger liquidation, forfeiture of performance security, and rejection of bank guarantee relief.

An approved resolution plan that remained unimplemented because the successful resolution applicant failed to infuse equity, assume management, and comply with the implementation schedule justified liquidation under the Insolvency and Bankruptcy Code, 2016. The Tribunal applied the statutory consequence for contravention of an approved plan and noted the Committee of Creditors' support for liquidation. It also held that performance security stood forfeited where the plan was not implemented in accordance with its terms and schedule. However, a request to restrain encashment of bank guarantees was declined because the concerned banks and recipients had not been impleaded, leaving the applicant to file a proper application.

---

---

Issues: (i) whether liquidation of the corporate debtor could be ordered on account of non-implementation and contravention of the approved resolution plan; (ii) whether the performance security furnished by the successful resolution applicant was liable to be forfeited; (iii) whether the prayer to restrain encashment of bank guarantees could be granted in the absence of the concerned banks and recipients being impleaded.

Issue (i): whether liquidation of the corporate debtor could be ordered on account of non-implementation and contravention of the approved resolution plan.

Analysis: The approved resolution plan was found to have remained unimplemented despite substantial delay, with failure to infuse equity, take over management, and comply with the implementation schedule. In these circumstances, the statutory scheme under section 33(3) of the Insolvency and Bankruptcy Code, 2016 was applied to hold that once an approved resolution plan is contravened, liquidation may follow on application by a person prejudicially affected. The Tribunal also treated strict adherence to the Code as mandatory and relied on the fact that the Committee of Creditors had overwhelmingly resolved to seek liquidation.

Conclusion: Liquidation of the corporate debtor was ordered in favour of the petitioner.

Issue (ii): whether the performance security furnished by the successful resolution applicant was liable to be forfeited.

Analysis: Regulation 36B(4A) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 provides that performance security stands forfeited if the successful resolution applicant fails to implement the approved resolution plan in accordance with its terms and implementation schedule. As the resolution applicant had not implemented the plan, the condition for forfeiture was satisfied.

Conclusion: The performance security of Rs. 5 crore was directed to stand forfeited, in favour of the petitioner.

Issue (iii): whether the prayer to restrain encashment of bank guarantees could be granted in the absence of the concerned banks and recipients being impleaded.

Analysis: The concerned banks and recipients of the bank guarantees were not before the Tribunal. The relief could not be granted behind their back without affording them an opportunity of hearing. The Tribunal therefore declined to adjudicate that prayer on merits and left liberty to move a proper application.

Conclusion: The prayer was not granted.

Final Conclusion: The application was allowed in part, liquidation was ordered, a liquidator was appointed, the performance security was forfeited, and the remaining prayer relating to bank guarantees was declined for want of necessary parties.

Ratio Decidendi: Once an approved resolution plan is contravened by non-implementation of its material terms, liquidation may be ordered under section 33(3) of the Insolvency and Bankruptcy Code, 2016, and the performance security stands forfeited where the resolution applicant fails to implement the plan in accordance with the approved schedule.

---