2021 (7) TMI 219 - AT - Insolvency and Bankruptcy

NCLAT overturns Adjudicating Authority order, emphasizes IBC compliance, natural justice

The National Company Law Appellate Tribunal set aside the Adjudicating Authority's order due to legal infirmities and lack of a reasoned explanation. The ... Seeking reconsideration of an already approved Resolution Plan - Seeking to send approved Resolution Plan back to ‘Committee of Creditors’ for reconsideration - forfeiture of amount already paid - HELD THAT:- This ‘Tribunal’ pertinently points out that the ‘Appellants’ before this ‘Tribunal’ reiterates that they remain committed to the ‘Resolution Plan’ and as a matter of fact, as on date, according to the Learned Counsel for the ‘Appellants’, all amounts were paid, which fact is not disputed on the side of 1st Respondent/‘Resolution Professional’. This ‘Tribunal’ taking note of the fact that all the amounts were paid by the ‘Appellants’ (as informed by the Learned Counsel for the ‘Appellants’) application passed by the ‘Adjudicating Authority’ (National Company Law Tribunal, Hyderabad Special Bench Court-1) inter alia to the effect that, “it is prima facie clear that successful resolution applicant had paid first instalment and dragged on the matter till date without implementing the plan or without making payment. The approval of the plan, which has already been approved by the bench on 18.12.2019 and which was modified on 15.07.2020, requires reconsideration by the CoC. In view of the same entire Resolution Plan is remitted back to the CoC for fresh consideration and amounts paid by the successful resolution applicant is to be forfeited and CoC may consider the matter a fresh. Hence the order.” is of the earnest opinion that the said order is not in accordance with law, considering the fact that the ‘Adjudicating Authority’ had exceeded its jurisdiction besides cannot suo motto direct the reconsideration of an already approved ‘Resolution Plan’ because of the fact that after the approval of the ‘Resolution Plan’ the ‘Committee of Creditors’ become ‘functus officio’. This ‘Tribunal’ is of the considered view that the ‘Adjudicating Authority’ had passed an illegal ‘Impugned Order’ while it directed these ‘Committee of Creditors’ to forfeit the amounts already paid to a sizeable extent - the matter is remitted back to the ‘Adjudicating Authority’ (National Company Law Tribunal, Hyderabad Bench) for passing necessary reasoned orders ‘de novo’ keeping in mind the object and spirit of the Insolvency and Bankruptcy Code and ‘in accordance with law’ - Appeal allowed. Issues involved:- Dispute over the implementation of a resolution plan- Allegations of non-compliance by the successful resolution applicant- Direction by the Adjudicating Authority to reconsider the resolution plan- Forfeiture of amounts paid by the resolution applicant- Challenge to the legality of the Adjudicating Authority's order- Jurisdiction of the Adjudicating Authority post-approval of resolution planDetailed Analysis:1. Dispute over the implementation of a resolution plan:The Adjudicating Authority observed that the successful resolution applicant failed to implement the approved resolution plan fully, leading to a delay in payments and non-compliance issues. This resulted in the matter being remitted back to the Committee of Creditors (CoC) for fresh consideration.2. Allegations of non-compliance by the successful resolution applicant:The Resolution Professional filed an application stating that the resolution plan had not been fully implemented by the successful resolution applicant, causing delays and non-payment issues. The Adjudicating Authority found that the successful resolution applicant had only paid the first installment and had not proceeded with further payments or plan implementation.3. Direction to reconsider the resolution plan and forfeiture of amounts:The Adjudicating Authority directed the CoC to reconsider the entire resolution plan due to non-compliance issues. Additionally, the amounts already paid by the successful resolution applicant were ordered to be forfeited, and the CoC was instructed to review the matter afresh.4. Challenge to the legality of the Adjudicating Authority's order:The Appellants challenged the legality of the Adjudicating Authority's order, arguing that it exceeded its jurisdiction by directing the CoC to reconsider an already approved resolution plan. They contended that the order to forfeit the substantial amounts already paid was illegal.5. Jurisdiction of the Adjudicating Authority post-approval of resolution plan:The Appellants argued that after the approval of the resolution plan, the CoC and Resolution Professional became functus officio, and the Adjudicating Authority could not direct reconsideration of the plan. They highlighted that the Insolvency and Bankruptcy Code provides for liquidation in case of plan failure, and the CoC cannot reconsider an approved plan.Conclusion:The National Company Law Appellate Tribunal set aside the Adjudicating Authority's order, citing legal infirmities and lack of a reasoned explanation. The matter was remitted back to the Adjudicating Authority for fresh consideration in accordance with the Insolvency and Bankruptcy Code, emphasizing the importance of natural justice and providing opportunities for all parties to present their arguments. The appeal was allowed without costs, and the Adjudicating Authority was directed to pass reasoned orders in line with the law and the spirit of the Code.