NCLAT grants extension for resolution plan payments despite fourth tranche default, rules adjudicating authority has jurisdiction without CoC approval

NCLAT allowed appeal challenging rejection of extension application for resolution plan payments. Corporate debtor's resolution applicant, an IIT Mumbai M.Tech with three decades experience in boiler manufacturing, had paid first three tranches timely but defaulted on fourth tranche due April 2023. Resolution plan included litigation recoveries as funding source expecting Rs.1040.85 lakhs recovery. NCLAT held adjudicating authority has jurisdiction to grant payment timeline extensions without CoC concurrence, and extension doesn't constitute plan modification. Lower court's rejection based on lack of CoC approval was erroneous and unsustainable, order set aside with extension granted.

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Issues Involved:
1. Challenge to the order allowing liquidation of the Corporate Debtor.
2. Dismissal of the application seeking extension of timeline for payment under the approved Resolution Plan.

Summary:

1. Challenge to the Order Allowing Liquidation of the Corporate Debtor:
The Appellant, a Successful Resolution Applicant (SRA), challenged the order dated 04.01.2024 by the National Company Law Tribunal (NCLT), Mumbai Bench-I, which allowed the State Bank of India's (SBI) application (IA No.4034 of 2023) for liquidation of the Corporate Debtor due to default in payment of the fourth tranche under the approved Resolution Plan. The Appellant had paid the first three tranches totaling Rs.692.27 lakhs but defaulted on the fourth tranche due in April 2023. The SRA argued that the delay was due to unforeseen circumstances in ongoing litigations, which were sources of fund recovery as per the Resolution Plan.

2. Dismissal of the Application Seeking Extension of Timeline for Payment Under the Approved Resolution Plan:
The Appellant's application (IA No.483 of 2023) for an extension of the payment timeline was dismissed by the NCLT on the grounds that the Committee of Creditors (CoC), consisting solely of SBI, did not agree to the extension. The Appellant contended that the extension was necessary due to delays in litigation recoveries and proposed alternative funding sources, including the sale of the Shirwal Factory, which was permissible under the Resolution Plan. The NCLT, however, held that the extension of timelines would amount to a modification of the Resolution Plan, which is not within its jurisdiction without CoC's concurrence.

Tribunal's Findings:
The Tribunal found that the extension of the timeline for payment does not constitute a modification of the Resolution Plan. It cited precedents, including the judgment in Tricounty Premier Hearing Service Inc. vs. State Bank of India and Ors., which established that the Adjudicating Authority has the jurisdiction to extend payment timelines under a Resolution Plan. The Tribunal also noted that the Resolution Plan itself allowed for the sale of assets as an alternative funding source.

Conclusion:
The Tribunal set aside the NCLT's order dated 04.01.2024 in IA No.4034 of 2023 and allowed IA No.483 of 2023, granting the following:
(a) Extension of time for payment of the fourth and fifth tranches till 15.04.2024.
(b) Permission for the Appellant to sell the Shirwal Factory as per Clause 5.1.2.12 of the Resolution Plan, with the proceeds to be used for the fourth and fifth tranche payments and the balance earmarked for the sixth tranche.
(c) Extension of time for payment of the sixth tranche till 15.04.2025.
(d) Any balance payment after 15.04.2024 will carry interest at the prevalent rate by SBI, effective from 16.04.2024.

The Tribunal emphasized that the implementation of the Resolution Plan is a collaborative process requiring positive actions from all parties, including Financial Creditors.

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