2024 (1) TMI 899 - AT - Insolvency and Bankruptcy

Resolution plan implementation gets 8-month extension as liquidation deemed last resort under IBC

Union Bank of India Versus Resolution Applicant of M/s. Bheema Cements Limited Consortium of Fortuna Engi tech and Structurals (India) Pvt. Ltd., Prasanna Sai Raghuveer Kandula, And Murgud Vincom Private Limited, G. MadhusudhanRao, M/s. JM Financial Asset Reconstruction And Resolution Applicant of M/s. Bheema Cements Limited, Prasanna Sai Raghuveer Kandula, And Murgud Vincom Private Limited Versus G. Madhusudhan Rao, M/s. JM Financial Asset Reconstruction Company Limited, Union Bank of India

The NCLAT Chennai granted an extension of more than 8 months for implementing a resolution plan under the Insolvency and Bankruptcy Code, 2016. The ... Seeking extension of time for implementation of the Plan - seeking relaxation of timelines of a period more than 8 months to implement the Resolution Plan - HELD THAT:- Having regard to the scope and objective of Insolvency and Bankruptcy Code, 2016, to avoid Companies going into Liquidation, as Liquidation of the Corporate Debtor should be a matter of last resort; that the IBC recognizes a wider public interest in resolving corporate insolvencies and its object is not the mere recovery of monies due and outstanding; that the Successful Resolution Applicant has indicated its bona fide, at least prima facie at the present stage, to complete the implementation of the `Resolution Plan’; and therefore, this `Tribunal’ is of the considered view that powers under Rule 11, can be exercised in the facts of this matter and the aforenoted Proposal given by the Successful Resolution Applicant, be accepted. Appeal disposed off. Issues involved: Company Appeal challenging extension of time for implementation of Plan, seeking relaxation of timelines, delay in restoration of power supply, modification of Impugned Order, Proposal for payment terms, acceptance of Proposal by parties, directions for payment schedule, agreement on payment terms with JM Financial Asset Reconstruction Company Ltd.Issue 1 - Extension of time for implementation of Plan:The Company Appeal was filed challenging the Impugned Order granting an 8-month extension for implementation of the Plan. Another Appeal sought relaxation of timelines for more than 8 months due to non-restoration of power supply to the Corporate Debtor till intervention of the Apex Court in a Civil Appeal.Issue 2 - Delay in restoration of power supply:The Adjudicating Authority observed no change in the situation regarding the Restoration of Power Supply to the Corporate Debtor from the previous Order, as the power connection had not been restored by the Southern Power Distribution Company of Telangana Limited.Issue 3 - Modification of Impugned Order:The Resolution Applicant argued for an additional 18 months to implement the Plan, seeking exclusion of the period till disposal of the pending Civil Appeal before the Apex Court and modification of the Impugned Order.Issue 4 - Proposal for payment terms:During the proceedings, the Resolution Applicant filed a Proposal for payment terms, including full payment to Union Bank of India by a specified date and installment payments to other parties, citing delays in restoration of power and necessary approvals for the delay in the case.Issue 5 - Acceptance of Proposal and directions for payment schedule:Upon inquiry, Union Bank of India accepted the Proposal, leading to directions for full payment to the Bank by a specified date, installment payments to JM Financial Asset Reconstruction Company Ltd, and equal quarterly installments for the remaining amount due under the Resolution Plan.Issue 6 - Agreement on payment terms with JM Financial Asset Reconstruction Company Ltd:Although JM Financials did not file an Appeal, they agreed to the installment payments proposed by the Resolution Applicant but requested 1/4th of the amount due to be paid within a specified timeframe.Conclusion:The Tribunal accepted the Proposal given by the Successful Resolution Applicant, directing payment schedules for various parties involved. The importance of avoiding liquidation, recognizing wider public interest, and the bona fide intentions of the Resolution Applicant were considered in making the decision. Breach of payment terms would lead to dismissal of the Appeal by the Resolution Applicant and allowance of the Appeal by Union Bank of India, with the option to seek an Order of Liquidation.