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of <h1>NCLAT upholds resolution plan implementation despite lapsed Air Operation Certificate and missed deposit deadline</h1> The NCLAT upheld the Adjudicating Authority's order dated 13.01.2023 confirming that the Successful Resolution Applicant (SRA) fulfilled condition ... Approval of Resolution Plan - completion of condition precedents provided in Clause 7.6.1 of the Resolution Plan or not - sufficient grounds have been made by the Appellant to set aside the order or not - lapse of Air Operation Certificate granted by DGCA on 20.05.2022 - sufficient grounds have been made out to direct for liquidation of the Corporate Debtor or not - way forward towards implementation of the Resolution Plan. Whether on 20.05.2022 the Successful Resolution Applicant has completed all the condition precedents provided in Clause 7.6.1 of the Resolution Plan? - Whether condition precedents as under Clause 7.6.1 of the Resolution Plan were not achieved by the Successful Resolution Applicant as contended by the Appellant? - Whether the order dated 13.01.2023 passed by the Adjudicating Authority is unsustainable and sufficient grounds have been made by the Appellant to set aside the order? - Whether due to lapse of Air Operation Certificate granted by DGCA on 20.05.2022, as on date the Successful Resolution Applicant cannot implement the Resolution Plan? - HELD THAT:- The Air Operation Certificate was very well in operation on the date when implementation application was filed by the SRA before the Adjudicating Authority as well as on the date when order was passed by the Adjudicating Authority i.e. 13th January, 2023 hence no infirmity can be found in the findings of the Adjudicating Authority that condition 7.6.1(d) was fulfilled. The Air Operation Certificate was operative and granted till 19th May, 2023 and during this period SRA was not permitted to commence his operations because of challenge by the Appellant to fulfilment of the conditions precedent. The Order dated 13th January, 2023 passed by the Adjudicating Authority upholding the fulfilment of conditions precedent has been challenged by the Appellant in these Appeals and during pendency of these Appeals, MC Lenders did not take any steps nor discharge their part of obligation under the resolution plan hence it cannot be said that it was due to lapse of SRA that Air Operation Certificate could not be operationalised. SRA was always ready to operationalise its air operations but was not permitted by the Appellant. The submission of the Appellant cannot be accepted that due to lapse of air operation certificate during pendency of these Appeals before this Tribunal, it can be held that conditions precedent as required under 7.6.1.(a) was not fulfilled. There is no infirmity in the order dated 13th January, 2023 passed by the Adjudicating Authority holding that conditions precedent for commencement of the air operation by the SRA were fulfilled. Whether direction of the Hon’ble Supreme Court permitting the Successful Resolution Applicant to infuse Rs.150 crore by 31.01.2024 was in reference to the offer made by the Appellant vide Affidavit dated 16.08.2023? - Whether the Successful Resolution Applicant having not been able to infuse Rs. 150 Crores by 31.01.2024 as directed by the Hon’ble Supreme Court vide its judgment dated 18.01.2024, the plan has failed and cannot be implemented by the Successful Resolution Applicant? - Whether sufficient grounds have been made out to direct for liquidation of the Corporate Debtor under Section 33 Sub-clause (3) in these Appeals? - HELD THAT:- The direction to deposit INR 150 crores by 31.01.2024 was only in relation to offer submitted by the Appellant by affidavit dated 16.08.2023. The learned Counsel for the Appellant – Shri N. Venkataraman, ASG as well as Shri Tushar Mehta, SG have contended that SRA having failed to deposit INR 150 crores, there is breach committed by SRA to the Resolution Plan and this Tribunal may pass an order for liquidation of the Corporate Debtor under Section 33, sub-section (3) of the IBC. The consequence of non-deposit of INR 150 crores by the SRA by 31.01.2024, is that SRA was not entitled to take any benefit of the offer, which was given by the Appellant by affidavit dated 16.08.2023. Hence, the undertaking given by the Appellant to withdraw Company Appeal in STATE BANK OF INDIA & ORS. VERSUS THE CONSORTIUM OF MURARI LAL JALAN AND MR. FLORIAN FRITSCH & ANR. [2023 (5) TMI 1084 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] as well as Appeal STATE BANK OF INDIA AND ORS. JC FLOWERS ASSET RECONSTRUCTION PRIVATE LTD. AND PUNJAB NATIONAL BANK VERSUS THE CONSORTIUM OF MR MURARI LAL JALAN AND MR FLORIAN FRITSCH AND ANR [2024 (1) TMI 1021 - SUPREME COURT] was not to happen. On failure to comply with the offer made by Appellant by affidavit dated 16.08.2023, both the Appeals pending in this Tribunal are now to be decided on merits. The submission of the Appellant that non-deposit of INR 150 crores leads to failure of Resolution Plan, cannot be accepted. The consequence of non-deposit of INR 150 crores is that these Appeals have to be heard on merits and the question, which has arisen in the Appeal has to be decided regarding compliance of conditions precedent by the SRA by 20.05.2022 - Further submission of the Appellant that this Tribunal may exercise jurisdiction under Section 33, sub-section (3) in directing liquidation of the Corporate Debtor due to non-compliance of deposit of INR 150 crores also cannot be accepted. For passing an order under Section 33, sub-section (3), there has to be adjudication that Resolution Plan approved by the Adjudicating Authority has been contravened by the Successful Resolution Applicant. The direction of Hon’ble Supreme Court permitting the Successful Resolution Applicant to infuse INR 150 crores by 31.01.2024 was in reference to offer made by Appellant in affidavit dated 16.08.2023 - The Successful Resolution Applicant having not been able to infuse funds by 31.01.2024 as directed by Hon’ble Supreme Court vide its judgment dated 18.01.2024, it cannot be held that Resolution Plan has failed and cannot be implemented by the SRA - No grounds have been made out to direct the liquidation of Corporate Debtor under Section 33, sub-section (3) in these Appeals. What are the way forward towards implementation of the Resolution Plan? - HELD THAT:- The implementation of Plan and revival of the business of the Corporate Debtor does not only generate revenue for making of the payments as contemplated in Resolution Plan, but is important for making payments to workers and employees. The workers and employees are waiting for their payments of provident fund, gratuity and other dues as per the Resolution Plan for last more than three years. Non-implementation of the Plan shall have direct effect on the dues of workers and employees, which need to be avoided. The implementation of Resolution Plan is a collaborative process, which require positive action from all the parties, including the MC Lenders. The implementation of the Resolution Plan not only revives the Corporate Debtor, but it brings along with revival, new employment, generation of revenues etc. By non-implementation of the Plan, direct sufferers are the workers and employees, who have not received the payments. It is true that Lenders are entitled to take steps for protection of their amount, but that is not the only object of the IBC. The Lenders to protect their own financial interest cannot ignore the primary object of revival of the Corporate Debtor and payments to other stake holders, including workmen and employees, who are entitled for their payments along with Financial Creditors. The Lenders by not taking positive steps for implementation of the Plan have not only adversely affected the interest of the SRA, but have also created circumstances, so that workmen and employees be not paid. The impugned order passed by Adjudicating Authority is upheld - Monitoring Committee and MC Lenders as well as SRA are directed to take steps for creation of charge over the Dubai Property No.1, Dubai Property No.2 and Dubai Property No.3 within a period of 30 days from today. The SRA to bear all necessary expenses for creation of necessary charge - Performance Bank Guarantee of INR 150 crores, which is lying with the Monitoring Committee/ MC Lenders, shall be adjusted towards the first tranche payment of INR 350 crores as INR 200 crores have already been paid by the SRA. By adjustment of PBG as per the Resolution Plan, the first tranche of payment of INR 350 crores shall be completed - Steps shall be taken for re-constitution of the shares as per the Resolution Plan forthwith. (5) Out of the first tranche payment of INR 350 crores, payments shall be made to the workmen and employees and the creditors as per the Resolution Plan, including the payment of CIRP cost as per the Resolution Plan, which payment shall be completed within 60 days from the date of this judgment - The SRA shall submit an Application for re-issue of Air Operation Certificate which may be obtained within 90 days from the date of this judgment - closing date shall be 90th day from the date of this judgment, on which date, handing over of the Corporate Debtor to the SRA by the Monitoring Committee shall be completed. Application disposed off. Issues Involved:1. Whether the Successful Resolution Applicant (SRA) completed all condition precedents on 20.05.2022.2. Whether condition precedents as per Clause 7.6.1 of the Resolution Plan were achieved by the SRA.3. Whether the order dated 13.01.2023 by the Adjudicating Authority is sustainable.4. Impact of the lapse of the Air Operation Certificate on the implementation of the Resolution Plan.5. Whether the direction of the Supreme Court to infuse Rs.150 crores by 31.01.2024 was based on the Appellant's affidavit dated 16.08.2023.6. Consequences of the SRA's failure to infuse Rs.150 crores by 31.01.2024.7. Grounds for directing the liquidation of the Corporate Debtor under Section 33(3).8. Way forward towards implementation of the Resolution Plan.Summary:Issue 1, 2, 3, and 4:The Tribunal upheld the order dated 13.01.2023 by the Adjudicating Authority, confirming that the SRA completed all condition precedents on 20.05.2022. The conditions included validation of the Air Operator Certificate (AOC) by DGCA and MoCA, submission and approval of the business plan, slots allotment approval, international traffic rights clearance, and approval of demerger of ground handling business. Despite the lapse of the AOC, it was valid when the order was passed, and the lapse was due to the Lenders' obstructionist attitude.Issue 5, 6, and 7:The Supreme Court's direction to infuse Rs.150 crores by 31.01.2024 was based on the Appellant's affidavit dated 16.08.2023. The SRA's failure to infuse the amount does not lead to the failure of the Resolution Plan or liquidation of the Corporate Debtor. The Tribunal rejected the Appellant's contention that non-deposit of Rs.150 crores should lead to liquidation, stating that the Appeals must be decided on merits.Issue 8: Way Forward1. Exclusion of Time: The Tribunal directed exclusion of time till the date of the judgment for achieving the implementation of the Resolution Plan.2. Documentation of Security of Dubai Property: The Lenders and SRA were directed to complete the creation of charge over Dubai properties within 30 days, with SRA bearing all expenses.3. Completion of Payment of Rs.350 Crores: The Tribunal held that SRA completed the first tranche payment of Rs.350 crores by adjusting the Rs.150 crores PBG.4. Share Reconstitution: Steps for share reconstitution as per the Resolution Plan were directed to be completed forthwith.5. First Tranche Payment to Creditors: The Chairman of the Monitoring Committee was directed to make disbursement of the first tranche payment to creditors, including workmen and employees, within 30 days after the creation of security.6. Workmen Dues: The SRA undertook to make payment of Rs.12 crores towards provident fund dues upfront along with payments under the Plan.7. AOC: The SRA was directed to apply for re-issue of the AOC, with the DGCA and MoCA instructed to expedite the process.8. Closing Date: The closing date was set as the 90th day from the judgment, on which the Corporate Debtor would be handed over to the SRA.Role of MC Lenders:The Tribunal criticized the Lenders for their obstructionist attitude and failure to take positive steps for the implementation of the Resolution Plan, emphasizing the need for a collaborative approach to ensure the revival of the Corporate Debtor and the payment of dues to workmen and employees.Conclusion:The Tribunal disposed of the Appeals by upholding the order dated 13.01.2023, directing steps for the creation of security, adjustment of PBG, share reconstitution, and payment to creditors and workmen, setting a closing date for the handover of the Corporate Debtor to the SRA.
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