2023 (5) TMI 1082 - AT - Insolvency and Bankruptcy

Supreme Court Upholds Resolution Plan despite Applicant Ineligibility

The Supreme Court held that the Resolution Applicant was ineligible under Section 29A but did not interfere with the approval of the Resolution Plan due ... Implementation of the approved Resolution Plan - exclusion of three years and nine months (after resolution plan approved) - no interim order passed by the Hon’ble Supreme Court staying the implementation of the Plan - HELD THAT:- Even before approval of the Resolution Plan by the CoC, the issue of ineligibility of Resolution Applicant was raised and against the order of the Adjudicating Authority, declaring the Resolution Applicant eligible, Appeals were filed by Punjab National Bank and RBL Bank, which Appeals were withdrawn on 23.03.2018 by an order of the Appellate Tribunal. Thereafter, Plan was approved on 18.04.2018. After approval of the Plan by the Adjudicating Authority, again a set of litigation was initiated by the Lenders, including the SBI. Four Appeals were filed challenging the Plan approval order. In the Appeal, which was filed by the Lenders against the Plan approval order, there was order passed by this Appellate Tribunal that decision regarding approval or rejection of the Plan, shall not be taken without leave of the Appellate Tribunal. Ultimately, the Appeals were dismissed by the Appellate Tribunal on 16.08.2019. The fact that the Financial Creditors right from the very beginning, even before approval of the Resolution Plan have been raising ineligibility issue in respect of the Resolution Applicant and after approval of the Plan several Appeals were been filed by the Lenders themselves, challenging the approval order contending that Resolution Applicant is ineligible. When Lenders themselves were challenging the approval of the Plan, it is reasonable to comprehend that Lenders were not keen to implement the Plan. The Resolution Applicant has initiated contempt proceedings in which also subsequently the Adjudicating Authority while disposing of the contempt application directed the SBI to implement the Resolution Plan. The Hon’ble Supreme Court in its order dated 18.01.2022 [2022 (1) TMI 811 - SUPREME COURT] made it clear that Resolution Plan has to be implemented as the Corporate Debtor being a on-going concern and Promoters have infused over Rs.63 crores. The Hon’ble Supreme Court also noticed that interest of over 23,000 shareholders and thousands of employees have to be taken care of. The observations made by the Hon’ble Supreme Court is clear and categorical that Plan is required to be implemented. Present is not a case where Resolution Plan has been modified by the Adjudicating Authority. The Adjudicating Authority vide order dated 11.03.2022 has already granted extension by the impugned order for the period from 18.04.2018 to 18.01.2022, which period was taken in the litigation initiated by the Lenders themselves. It is also relevant to notice that while approving the Resolution Plan on 18.04.2018, the Adjudicating Authority has granted exclusion of 106 days. The Hon’ble Supreme Court in its judgment has approved the exclusion on account of litigation and proceedings. In the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, under Regulation 39, sub-regulation (9), a creditor is allowed to apply to Adjudicating Authority for direction in case there is any non-implementation of the Resolution Plan. At no point of time, the Appellant made an application praying for any direction to the Resolution Applicant towards implementation of the Plan alleging any non-implementation - The Lenders and Banks are obliged to discharge their obligations as per the Resolution Plan. The fact that directions have been issued to the Appellant, cannot mean that Resolution Applicant is not to perform its obligation as per the Resolution Plan. The learned Counsel for the Resolution Applicant has undertaken to perform all its obligations under the Plan as and when it arises according to the Resolution Plan. Recording the aforesaid statement of the Resolution Applicant, there is no ground to interfere with the impugned order passed by the Adjudicating Authority, which order is clearly in aid of implementation of the Resolution Plan. The implementation of the Resolution Plan being obligation and duty of all stake holders as per the scheme of the IBC, as observed above, the Resolution Applicant shall also carry out its obligation under Resolution Plan promptly, while the Lenders will discharge their obligations in the Plan and as per directions issued in the impugned order by the Adjudicating Authority. Appeal dismissed. Issues Involved:1. Eligibility of the Resolution Applicant under Section 29A of the Insolvency and Bankruptcy Code, 2016.2. Implementation of the approved Resolution Plan.3. Exclusion of the period from 18.04.2018 to 18.01.2022 from the implementation timeline.4. Alleged non-cooperation by the Resolution Applicant in forensic audit.5. Directions issued by the Adjudicating Authority to the State Bank of India (SBI).Summary:Eligibility of the Resolution Applicant:The issue of the eligibility of the Resolution Applicant under Section 29A was raised and contested multiple times. Initially, the Adjudicating Authority declared the Resolution Applicant eligible, which was challenged by Punjab National Bank and RBL Bank. The appeals were withdrawn, and the Resolution Plan was subsequently approved on 18.04.2018. Further appeals were filed by several banks, including SBI, challenging the eligibility of the Resolution Applicant. The Hon'ble Supreme Court, in its judgment dated 18.01.2022, held that the Resolution Applicant was ineligible under Section 29A but did not interfere with the order approving the Resolution Plan, noting that the Corporate Debtor was an ongoing concern and the Resolution Applicant had infused Rs.63 crores.Implementation of the Approved Resolution Plan:The Adjudicating Authority directed SBI and other lenders to take steps for the implementation of the approved Resolution Plan by executing working capital consortium documents, issuing bank guarantees, letters of credit, and necessary certificates. The Hon'ble Supreme Court emphasized the importance of implementing the Resolution Plan considering the interests of over 23,000 shareholders and thousands of employees, and the ongoing projects of public importance undertaken by the Corporate Debtor.Exclusion of the Period from 18.04.2018 to 18.01.2022:The Adjudicating Authority excluded the period from 18.04.2018 to 18.01.2022 from the implementation timeline of the Resolution Plan, citing the series of litigations initiated by the lenders themselves. The Hon'ble Supreme Court approved the exclusion of the period on account of pending litigation, recognizing that the exclusion was just and fair given the circumstances.Alleged Non-Cooperation by the Resolution Applicant in Forensic Audit:SBI contended that the Resolution Applicant did not cooperate in the forensic audit, which was necessary for the implementation of the Resolution Plan. The Resolution Applicant argued that the forensic audit was not part of the Resolution Plan and that previous forensic audits conducted by empaneled auditors found no adverse findings. The Hon'ble Supreme Court noted that the issue of forensic audit stood addressed.Directions Issued by the Adjudicating Authority to SBI:The Adjudicating Authority issued specific directions to SBI to implement the approved Resolution Plan, including executing necessary documents and issuing required certificates. The directions were deemed necessary to ensure the implementation of the Resolution Plan, and the Hon'ble Supreme Court upheld these directions, emphasizing the obligation of all stakeholders to implement the Resolution Plan.Conclusion:The appeal filed by SBI was dismissed, and the directions issued by the Adjudicating Authority were upheld. The Hon'ble Supreme Court highlighted the importance of implementing the Resolution Plan to ensure the Corporate Debtor's continuation as an ongoing concern and protect the interests of stakeholders. The Resolution Applicant was directed to carry out its obligations under the Resolution Plan promptly, along with the lenders.