Appellant's resolution plan rejected for failing to submit required 20% Performance Bank Guarantee worth Rs.72.72 crores despite multiple reminders

NCLAT Principal Bench dismissed appellant's appeal for non-compliance with Performance Bank Guarantee (PBG) submission requirements. Despite multiple reminders, appellant failed to deposit PBG worth 20% of bid consideration (Rs.72.72 crores) within stipulated timeframe as mandated by RFRP provisions. CoC supported rejection, stating non-compliance raised concerns about appellant's trustworthiness for project implementation. Adjudicating Authority properly rejected resolution plan approval application after considering all aspects. NCLAT found no violation of natural justice principles and upheld the decision. However, tribunal granted appellant two weeks to submit fresh resolution plan before Resolution Professional for consideration alongside other received plans in ongoing CIRP proceedings.

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Issues Involved:
1. Non-compliance with submission of Performance Bank Guarantee (PBG) by the Appellant.
2. Jurisdiction and authority of the Adjudicating Authority and Committee of Creditors (CoC) regarding the approval and rejection of Resolution Plans.
3. Eligibility of the State of Arunachal Pradesh and THDC to submit a Resolution Plan.
4. Alleged violation of principles of natural justice in the hearing process.

Detailed Analysis:

1. Non-compliance with Submission of Performance Bank Guarantee (PBG):
The core issue revolves around the Appellant's failure to submit the Performance Bank Guarantee (PBG) as required under Clause 1.9.3 of the Request for Resolution Plan (RFRP). The RFRP mandated the Successful Resolution Applicant to furnish a PBG equivalent to 20% of the bid consideration within two business days of the CoC's approval. Despite numerous reminders from the Resolution Professional (RP) from 2018 to 2023, the Appellant did not comply. The CoC, in its meeting on 04.05.2023, discussed this non-compliance and decided not to object to the applications filed by the State of Arunachal Pradesh and THDC due to the Appellant's breach of its obligations. The Adjudicating Authority found the Appellant's non-compliance as a valid ground to reject the Resolution Plan approval application.

2. Jurisdiction and Authority of Adjudicating Authority and CoC:
The Appellant argued that the CoC could not withdraw from an approved Resolution Plan, citing the Supreme Court's judgment in "Ebix Singapore Private Limited vs. Committee of Creditors of Educomp Solutions Limited & Anr." However, the Adjudicating Authority did not withdraw the approval; rather, it rejected the application for approval due to the Appellant's failure to submit the PBG. The Tribunal clarified that the addition of Regulation 36B (4-A) post-dated the RFRP, but the RFRP itself required the PBG, rendering the Appellant's argument moot.

3. Eligibility of the State of Arunachal Pradesh and THDC to Submit a Resolution Plan:
The Appellant contended that the State of Arunachal Pradesh and THDC were not part of the CIRP and thus could not submit a Resolution Plan. The Tribunal noted that their eligibility arose only after the Appellant's plan was rejected due to non-compliance. The Adjudicating Authority directed the issuance of a fresh Expression of Interest (EoI), allowing all interested parties, including the State of Arunachal Pradesh and THDC, to submit their plans.

4. Alleged Violation of Principles of Natural Justice:
The Appellant claimed that its intervention application (IA No.3163 of 2023) was not heard, violating principles of natural justice. The Tribunal found this claim unsubstantial, as the intervention application became inconsequential after the rejection of the Appellant's plan approval application. The Adjudicating Authority had provided the Appellant the opportunity to submit a new Resolution Plan in response to the fresh EoI.

Conclusion:
The Tribunal upheld the Adjudicating Authority's decision, affirming that the Appellant's failure to submit the PBG justified the rejection of its Resolution Plan. It granted the Appellant two weeks to submit a new Resolution Plan, which would be considered alongside others received in the CIRP process. The appeal was dismissed, with the Tribunal emphasizing the need for timely and compliant submissions to progress the resolution process effectively.

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