NCLT rejects modification request, orders liquidation, emphasizing plan compliance

The NCLT rejected the Resolution Applicant's request for modification of the approved Resolution Plan and the reinstatement of the Committee of Creditors. Due to the Applicant's failure to implement the plan, the NCLT ordered the liquidation of the Corporate Debtor, appointing a Liquidator to oversee the process in accordance with the I&B Code. The decision highlighted the significance of complying with approved plans and the consequence of non-compliance leading to liquidation.

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Issues Involved:
1. Failure to implement the approved Resolution Plan by the Resolution Applicant.
2. Request for modification of the approved Resolution Plan by the Resolution Applicant.
3. Forfeiture of performance security by the Committee of Creditors (CoC).
4. Request to reinstate the Committee of Creditors and invite fresh Resolution Plans.
5. Decision on liquidation of the Corporate Debtor.

Issue-wise Detailed Analysis:

1. Failure to Implement the Approved Resolution Plan:
The Resolution Applicant failed to implement the Resolution Plan approved by the NCLT on 25.11.2019, despite multiple orders and directions. The Resolution Applicant was required to make an upfront payment of Rs. 420 crores within 30 business days from the approval date, which expired on 10.01.2020. The Resolution Applicant did not comply, leading to serious concerns about non-compliance.

2. Request for Modification of the Approved Resolution Plan:
The Resolution Applicant repeatedly sought amendments to the approved Resolution Plan, which the Monitoring Agency and the Steering Committee denied. The modifications suggested included changes to upfront consideration, deferred consideration, and other significant terms. The Steering Committee rejected these unilateral modifications, emphasizing that the approved Resolution Plan could not be altered without the consent of a large number of stakeholders.

3. Forfeiture of Performance Security by the Committee of Creditors (CoC):
Due to the Resolution Applicant's failure to implement the Resolution Plan, IDBI Bank, representing the CoC members, forfeited part of the performance security of Rs. 42 crores. The NCLT upheld this action, stating that the Resolution Applicant had willfully contravened the terms of the approved Resolution Plan and the respective orders of the NCLT and NCLAT.

4. Request to Reinstate the Committee of Creditors and Invite Fresh Resolution Plans:
The Applicant sought directions to reinstate the CoC and the Resolution Professional to invite fresh Resolution Plans, arguing that the Corporate Debtor had ongoing projects and a cash flow, making it a viable concern. However, the NCLT found this request unconvincing, noting that only two entities had submitted plans initially, and the CoC had exercised its commercial wisdom in approving the plan of Royale Partners Investment Fund Limited.

5. Decision on Liquidation of the Corporate Debtor:
The NCLT concluded that since the Resolution Applicant failed to implement the plan and no new Resolution Plan was likely to be approved within the prescribed timeline, the natural corollary was liquidation. The NCLT ordered the liquidation of the Corporate Debtor, appointing Mr. Abhijit Guhathakurta as the Liquidator. The liquidation process was to be carried out in accordance with the I&B Code and relevant regulations, with the Corporate Debtor to be sold as a going concern if possible.

Order:
The NCLT rejected the IA 1623 of 2020 in CP 1832 of 2017 and directed the initiation of the liquidation process against the Corporate Debtor. The Liquidator was instructed to issue public notices, cease the moratorium under Section 14 of the I&B Code, and manage the liquidation process with full cooperation from the Corporate Debtor's personnel. The liquidation order also served as a notice of discharge for the officers, employees, and workmen of the Corporate Debtor, except for continued business operations during the liquidation process.

The judgment emphasized the importance of adhering to the approved Resolution Plan without unilateral modifications and upheld the principle that failure to implement the plan leads to liquidation.

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