Resolution plan enforcement: bank guarantee forfeiture, limited refund, and interim trade creditors' dues upheld in insolvency dispute.

A successful resolution applicant remained bound by the approved resolution plan and process memorandum, so the performance bank guarantee and earnest money were validly invoked on repeated non-implementation. Alleged non-disclosure of the transaction audit report and related materials did not make performance voidable, as the statutory disclosure duty covered only material information needed for formulation of the plan and the applicant had due diligence access. The blanket refund of the infused amount was not sustainable; only the balance, after payment of interim trade creditors' dues from the preserved fixed deposit, was refundable. A standalone claim for unliquidated compensation and damages was not entertained.

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Issues: (i) Whether the performance bank guarantee and earnest money could be invoked and forfeited on the successful resolution applicant's failure to implement the approved resolution plan; (ii) Whether alleged non-disclosure of the transaction audit report and allegedly incorrect financial information made the resolution plan implementation voidable; (iii) Whether the refund of the amount infused by the successful resolution applicant, including interest, was sustainable; (iv) Whether the interim trade creditors' unpaid dues incurred during the period of the former successful resolution applicant's control were payable from the fixed deposit amount; (v) Whether the CoC's claim for compensation and damages in the bank's application was maintainable.

Issue (i): Whether the performance bank guarantee and earnest money could be invoked and forfeited on the successful resolution applicant's failure to implement the approved resolution plan.

Analysis: The process memorandum expressly provided that the performance guarantee would remain alive until implementation of the successful resolution plan and could be invoked for breach of the letter of intent or resolution plan, including failure to implement the plan to the satisfaction of the CoC. It also prohibited set-off of the performance guarantee against the consideration payable under the plan. The record showed repeated defaults and non-implementation by the successful resolution applicant, and the CoC invoked the guarantee in accordance with the contractual framework.

Conclusion: The invocation and forfeiture of the performance bank guarantee and earnest money were valid and sustainable, in favour of the CoC and against the successful resolution applicant.

Issue (ii): Whether alleged non-disclosure of the transaction audit report and allegedly incorrect financial information made the resolution plan implementation voidable.

Analysis: The relevant information duty under section 29 and Regulation 36(2) covered material information necessary for formulation of the resolution plan, but did not, at the relevant time, require sharing of the transaction audit report or avoidance application materials with the resolution applicant. The applicant had access to the information memorandum and virtual data room, was expected to conduct its own due diligence, and the plan itself acknowledged the risk of inadequacy or error in the information supplied. The applicant was also aware that avoidance proceedings were contemplated, as reflected in the CoC meeting and in the plan's provision for related costs. The alleged non-disclosure did not render performance voidable.

Conclusion: The challenge based on non-disclosure failed, and the successful resolution applicant could not avoid implementation on that ground.

Issue (iii): Whether the refund of the amount infused by the successful resolution applicant, including interest, was sustainable.

Analysis: The amount sought to be refunded comprised different components, but the performance guarantee and earnest money were not part of the equity infusion and could not be treated as set-off against the equity commitment. The applicant had not completed the required equity infusion under the resolution plan, and section 42(6) of the Companies Act, 2013 did not govern the consequences of non-compliance with a resolution plan. However, the amount of Rs. 38.2 crores, with accrued interest standing at Rs. 42.99 crores in fixed deposit, remained available for appropriate adjustment after payment of legitimate dues of interim trade creditors.

Conclusion: Refund of the entire Rs. 93.82 crores was not sustainable; only the balance remaining after meeting the interim trade creditors' dues was refundable, in favour of the successful resolution applicant only to that limited extent.

Issue (iv): Whether the interim trade creditors' unpaid dues incurred during the period of the former successful resolution applicant's control were payable from the fixed deposit amount.

Analysis: The liabilities were created during the period when the corporate debtor was under the former successful resolution applicant's management. The approval order of the later resolution plan had specifically recorded the unpaid balance of about Rs. 20.9 crores and directed that the fixed deposit of Rs. 42.99 crores be retained intact and abide by further orders. The Adjudicating Authority's refusal to decide the claim on the ground that it had to be pursued in some other proceeding was incorrect, because the claim arose in the same CIRP framework and the RP had already recognised the outstanding liability.

Conclusion: The interim trade creditors were entitled to payment of their outstanding dues of Rs. 20.9 crores, with interest earned, from the fixed deposit amount, in favour of the interim trade creditors.

Issue (v): Whether the CoC's claim for compensation and damages in the bank's application was maintainable.

Analysis: The application sought compensation, interest, litigation costs, and other damages for alleged non-implementation of the plan. While the CoC could seek relief contemplated by the process documents and insolvency framework, the Adjudicating Authority could not, in this proceeding, adjudicate unliquidated compensation and damages as a general claim for damages under section 60(5)(c) of the Code. The rejection of the application was therefore upheld, though the reason assigned below was not fully accepted.

Conclusion: The CoC's claim for compensation and damages was not entertained as a standalone damages claim, and the rejection of that application was upheld.

Final Conclusion: The impugned order was modified in part. The forfeiture of the performance bank guarantee and earnest money was upheld, the interim trade creditors were granted payment from the fixed deposit, the blanket refund of the full amount to the successful resolution applicant was set aside, and the compensation claim application of the CoC was not granted.

Ratio Decidendi: A successful resolution applicant is bound by the approved resolution plan and the governing process memorandum, cannot set off or reclaim the performance guarantee as part of its plan consideration, cannot avoid implementation on the basis of alleged non-disclosure that was not statutorily required to be shared at the relevant time, and liabilities created during its control of the corporate debtor may be directed to be satisfied from funds preserved for that purpose in the CIRP.

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