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 to the ongoing nature of the Corporate Debtor. The Court emphasized the importance of implementing the Plan for the benefit of shareholders, employees, and ongoing projects. The exclusion of the period from 18.04.2018 to 18.01.2022 from the implementation timeline was approved due to pending litigation. The Court upheld directions to SBI for Plan implementation and dismissed SBI's appeal, stressing the obligation of all stakeholders to ensure Plan execution.

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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 The appeals were withdrawn, and the Resolution Plan was subsequently approved on 18.04.2018.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.

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