NCLAT upholds order directing lenders to implement Resolution Plan by releasing Non-Fund Based facilities

NCLAT Principal Bench dismissed appeals challenging Adjudicating Authority's order directing lenders to implement Resolution Plan by releasing Non-Fund Based facilities. Tribunal held that except one bank, no lender had issued bank guarantees or letters of credit, and company had not defaulted on any existing facilities. NCLAT emphasized that approved Resolution Plans are binding on all stakeholders and must be implemented. The court rejected arguments that extended implementation timeline made the plan unviable, noting that preventing company from obtaining necessary bank guarantees would impede normal business operations and revenue generation, ultimately affecting repayment obligations contrary to Resolution Plan objectives.

---

---

Issues Involved:

1. Implementation of the Resolution Plan and release of Non-Fund Based (NFB) facilities.
2. Jurisdiction of the Adjudicating Authority in altering commercial terms.
3. Compliance with applicable laws and regulations for issuance of NFB facilities.
4. Evaluation of the company's viability and financial condition before releasing NFB facilities.

Issue-wise Detailed Analysis:

1. Implementation of the Resolution Plan and Release of NFB Facilities:

The Appeals challenge the Adjudicating Authority's order directing lenders to release NFB limits as per the approved Resolution Plan. The Resolution Plan, approved by the Committee of Creditors (CoC) and the Adjudicating Authority, required the roll-over of bank guarantees and letters of credit to support the company's operations. The Tribunal noted that the Plan's implementation was delayed due to factors beyond the control of the Successful Resolution Applicant (SRA), and the lenders were obliged to release NFB facilities as contemplated in the Plan. The Tribunal emphasized that the lenders should monitor the company's performance and take corrective actions if necessary, but the initial release of NFB limits should not be unreasonably withheld.

2. Jurisdiction of the Adjudicating Authority in Altering Commercial Terms:

The Appellants argued that the Adjudicating Authority exceeded its jurisdiction by directing the release of NFB limits, effectively altering the commercial terms agreed upon in the Resolution Plan and NFB Agreement. The Tribunal rejected this argument, stating that the direction to release NFB limits was consistent with the Plan's terms and necessary for its implementation. The Tribunal held that the Adjudicating Authority did not renegotiate or rewrite the commercial terms but ensured compliance with the approved Resolution Plan.

3. Compliance with Applicable Laws and Regulations for Issuance of NFB Facilities:

The Appellants contended that the release of NFB facilities should comply with applicable laws and regulations, including RBI guidelines. They argued that the Adjudicating Authority's order overlooked these requirements. However, the Tribunal noted that the Resolution Plan had been approved with knowledge of existing regulations, and the lenders' obligations were subject to project appraisal rather than a re-evaluation of the borrower's viability. The Tribunal found no inconsistency between the Resolution Plan and applicable laws, asserting that the Plan's approval implied compliance with regulatory standards.

4. Evaluation of the Company's Viability and Financial Condition:

The Appellants sought to evaluate the company's viability before releasing NFB facilities, citing delays in Plan implementation and potential financial risks. The Tribunal dismissed this concern, emphasizing that the CoC had already assessed the company's feasibility and viability during the Plan's approval process. The Tribunal highlighted that the company's ability to generate revenue and fulfill its repayment obligations depended on the timely release of NFB facilities, which were integral to its operations as an EPC contractor. The Tribunal concluded that further evaluation of the company's viability was unwarranted and would hinder the Plan's implementation.

In conclusion, the Tribunal upheld the Adjudicating Authority's order, finding no merit in the Appeals. The Tribunal emphasized the importance of adhering to the approved Resolution Plan and facilitating the company's operational needs to ensure successful resolution and compliance with repayment obligations. The Appeals were dismissed, affirming the direction to release NFB limits while protecting the interests of all parties involved.

---