NCLAT overturns liquidation order when resolution plan delayed by Supreme Court stay under Section 33 IBC

NCLAT set aside NCLT's liquidation order of corporate debtor where resolution plan implementation was stalled due to SC's interim stay orders. Tribunal held that liquidation grounds under Section 33 IBC were not satisfied as delay was attributable to judicial stay, not successful resolution applicant's default. Court ruled that time period under judicial stay should be excluded from 18-month implementation timeline. Financial creditor cannot unilaterally seek liquidation without stakeholder discussions when plan exists but implementation is judicially restrained. Appeal allowed, matter remanded to exclude stayed period from implementation timeline.

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Issues Involved:
1. Exclusion of time for implementation of the resolution plan.
2. Extension of time for implementation of the resolution plan.
3. Liquidation of the Corporate Debtor.

Issue-wise Detailed Analysis:

1. Exclusion of Time for Implementation of the Resolution Plan:
The appeal arises from the order dated 22.11.2023 by the Adjudicating Authority (NCLT, Mumbai Bench-I) which declared the implementation of the resolution plan by the Successful Resolution Applicant (SRA) as failed and ordered liquidation of the Corporate Debtor. The SRA contended that the resolution plan approved on 15.04.2021 took into account ongoing litigations and provided an 18-month timeframe for implementation. However, due to the stay orders by the Delhi High Court and subsequently by the Supreme Court, the SRA was unable to implement the plan. The SRA sought exclusion of time from 13.12.2021 (when the Supreme Court granted an interim stay) until the date of filing the I.A. No. 266 of 2023 from the 18 months’ timeframe provided for the implementation of the resolution plan.

2. Extension of Time for Implementation of the Resolution Plan:
The SRA also prayed for an extension of the period for implementing the resolution plan until 30 days from the final disposal of the matter pending before the Supreme Court. The SRA argued that the delay in implementation was due to the stay orders and not due to any fault on their part. The Adjudicating Authority, however, dismissed the SRA’s application for exclusion of time and allowed the Financial Creditor’s application for liquidation, citing the delay and the ongoing litigation as reasons.

3. Liquidation of the Corporate Debtor:
The Financial Creditor (Axis Bank) sought liquidation of the Corporate Debtor due to non-implementation of the resolution plan within the stipulated timeframe. The Adjudicating Authority approved the liquidation, reasoning that the ongoing litigation was causing a stalemate in the resolution process, which was jeopardizing the interests of the Financial Creditor. The SRA contended that liquidation should be the last resort and that they were ready to implement the plan once the stay orders were vacated. The SRA also argued that the Adjudicating Authority’s order for liquidation during the subsistence of the Supreme Court’s stay order undermined the jurisdiction of the Apex Court.

Judgment:
The Appellate Tribunal found merit in the appeal and set aside the impugned order allowing liquidation of the Corporate Debtor. The Tribunal directed the Adjudicating Authority to allow exclusion of time from 13.12.2021 for the implementation of the resolution plan as long as the interim order of the Supreme Court remains in operation. The Tribunal emphasized that the implementation of the resolution plan was contingent upon the vacation of the stay orders and that the delay was not due to any fault of the SRA. The Tribunal also noted that liquidation should be considered as a last resort and that the Financial Creditor’s application for liquidation was premature given the circumstances. Both parties were given the liberty to approach the Supreme Court for an early hearing of the matter to ensure timely resolution of the Corporate Debtor.

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