NCLAT Chennai grants final opportunity to deposit balance amount under section 60(5) IBC 2016 using doctrine of necessity

NCLAT Chennai applied doctrine of necessity under section 60(5) of IBC 2016 to grant appellant a final opportunity to deposit balance amount into corporate debtor's liquidation account within one month. Despite appellant not challenging liquidator's appointment, tribunal exercised inherent powers with overriding effect to avoid liquidation and enable corporate debtor to become going concern. Liquidator supported appellant's contention. If deposit not made within timeframe, relaxation will lapse and liquidator may seek alternate buyer through prescribed procedure. Appeal disposed.

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Issues:
1. Impugned Order rejecting IA seeking stay of liquidation order.
2. Compliance with Resolution Plan deposit requirements.
3. Invocation of doctrine of necessity under section 60(5) of I & B Code.

Issue 1: Impugned Order rejecting IA seeking stay of liquidation order

The Appellant, the Successful Resolution Applicant of the Corporate Debtor, challenged the Impugned Order of 10.05.2024, which rejected his IA seeking a stay on the liquidation order. The Appellant argued that the rejection was arbitrary, lacked proper reasoning, and denied him a fair hearing. The Resolution Plan had a condition for the Appellant to deposit a specific amount, which he failed to comply with, leading to liquidation proceedings initiated by the Respondents. Despite efforts to deposit the balance amount, the Appellant's IA was rejected, prompting the appeal.

Issue 2: Compliance with Resolution Plan deposit requirements

The Appellant, as the Resolution Applicant, had deposited a partial amount as per the Resolution Plan approved by NCLT. However, he failed to deposit the balance amount within the stipulated time frame, leading to the initiation of liquidation proceedings. The Appellant cited unavoidable circumstances for the delay and provided undertakings to deposit the balance amount, which he could not fulfill. The rejection of his IA seeking to deposit the balance amount and stay the liquidation proceedings was a key point of contention in the appeal.

Issue 3: Invocation of doctrine of necessity under section 60(5) of I & B Code

The Tribunal invoked the doctrine of necessity under section 60(5) of I & B Code to address the unique circumstances of the case. Despite the general principle that once a liquidation order is passed, no further consideration is typically given, the Tribunal considered the Appellant's plea in light of the overriding effect of section 60(5). The Tribunal emphasized the objective of CIRP to revive the Corporate Debtor as a going concern and granted the Appellant a final opportunity to deposit the balance amount. This decision was based on the absence of alternative Resolution Plans and the need to avoid liquidation, aligning with the provisions of the Code.

This detailed analysis of the judgment highlights the key issues surrounding the rejection of the IA, compliance with the Resolution Plan deposit requirements, and the application of the doctrine of necessity under section 60(5) of the I & B Code.

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