Failed resolution plan leads to liquidation under Section 33 after multiple missed payment deadlines

NCLAT Chennai dismissed an appeal challenging liquidation order after resolution plan failure. The appellant sought modification of repayment terms, promising Rs.25 crores in no-lien account and Rs.15 crores within three weeks. Despite majority creditor accepting modified terms in September 2021, appellant failed to pay required Rs.83.07 crores by November 2021. Court noted two-and-half years elapsed since 2019 plan approval with multiple opportunities given. NCLAT emphasized IBC's time-bound nature and strict timeline adherence per SC precedents, ruling adjudicating authority correctly allowed liquidation application under Section 33 of IBC.

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Issues involved:
The issues involved in the judgment are the erroneous allowance of liquidation by the Adjudicating Authority, challenges to the implementation of the Resolution Plan, modification sought in the Plan, failure to comply with payment terms, and the delay in repayment.

Aggrieved by Impugned Order:
The Appellant challenged the Impugned Order allowing Liquidation of the Corporate Debtor Company, M/s. Linen Art Pvt. Ltd., under Section 61 of the Insolvency and Bankruptcy Code, 2016. The Appellant contended that the Adjudicating Authority erred in initiating Liquidation based on non-adherence to the terms of the Resolution Plan, which was under challenge in a separate proceeding before the Tribunal.

Resolution Plan Modification:
The Resolution Plan was approved in 2019, and the Appellant sought modifications citing a fresh assessment requiring an increase in payout. Despite efforts to modify the Plan and deposit funds, delays were attributed to the Respondent Bank's actions. The Appellant expressed willingness to repay amounts and manage the Corporate Debtor Company efficiently.

Failure to Comply with Payment Terms:
The First Respondent highlighted the Appellant's failure to deposit the required amount within specified timelines, leading to a resolution for Liquidation. Despite repeated communications and opportunities given, the Appellant did not fulfill payment obligations, causing delays and non-compliance with the Plan.

Liquidation Order:
The Adjudicating Authority allowed Liquidation based on the Appellant's prolonged non-compliance with payment terms and failure to implement the Resolution Plan within the stipulated time. Citing the importance of adhering to strict timelines under the Insolvency and Bankruptcy Code, the Authority dismissed the Appeal, upholding the Liquidation orders filed by the Monitoring Committee of Scott Garments and Canara Bank.

Conclusion:
The judgment dismissed the Appeal, emphasizing the Appellant's persistent failure to meet payment obligations and implement the Resolution Plan, leading to Liquidation as per Section 33 of the Code. The decision was based on the need to adhere to timelines and the objectives of the Code, as highlighted in relevant legal precedents.

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