2026 (3) TMI 1079 - AT - IBC

Creditor consent to extension permits conditional revival of resolution plan; failure to comply revives liquidation and forfeiture.

Appellants sought extension for payment of the 2nd and 3rd tranches; the financial creditor agreed in principle to extend the deadline to 30.09.2025 ... Seeking extension of time for payment of 2nd Tranche and 3rd Tranche of the Resolution Plan - implementation of resolution plan - non-restoration of electricity supply - consensual settlement with financial creditor - Whether the impugned orders refusing extension of time and directing liquidation could be set aside in view of the parties' settlement. Settlement between parties effecting judicial disposal - HELD THAT:- The Tribunal recorded that the parties reached a consensual settlement in which the sole Financial Creditor agreed in principle to grant an extension of time for payment of the balance tranches subject to stipulated terms and conditions, and the Appellants accepted those terms. On that basis the Tribunal treated the affidavit of settlement as determinative and allowed the Appeals by quashing the impugned orders, making the settlement terms part of the Tribunal's order. The Tribunal made clear that compliance with the agreed conditions is a pre condition to the continued suspension of the liquidation order and that failure to comply would revive the order of liquidation and forfeiture consequences specified in the settlement. [Paras 7, 8, 9, 10] Appeals allowed and impugned orders quashed subject to the settlement terms recorded in the affidavit; non-compliance will revive the liquidation order and forfeiture consequences. Conditional suspension of liquidation orders - HELD THAT: - The Tribunal directed that the terms offered by the Financial Creditor and accepted by the Appellants be treated as part of its order; accordingly the earlier order appointing a Liquidator is suspended so long as the Appellants strictly comply with those conditions. The Tribunal expressly provided that any breach of the agreed terms would permit revival of the liquidation proceedings and forfeiture of amounts paid as specified in the settlement. [Paras 8, 9, 10] Liquidation order stands suspended on strict compliance with the recorded settlement terms; breach will revive liquidation and trigger forfeiture as agreed. Final Conclusion: The Appeals were allowed on the basis of a binding settlement recorded on the record: the impugned orders refusing extension and ordering liquidation were quashed and the liquidation order suspended subject to the settlement terms; failure to comply with those terms will revive the liquidation order and the forfeiture consequences set out in the settlement, and all pending interlocutory applications are closed. Issues: (i) Whether the Adjudicating Authority erred in refusing extension of time for payment of the 2nd and 3rd tranches under the approved resolution plan; (ii) Whether the Adjudicating Authority erred in ordering liquidation of the corporate debtor for alleged non-compliance with the resolution plan.Issue (i): Whether extension of time for payment of the 2nd and 3rd tranches of the approved resolution plan should have been granted.Analysis: The appellate record shows that the appellants sought extension of time for payment of the 2nd and 3rd tranches and that the financial creditor subsequently filed an affidavit agreeing in principle to extend the payment deadline to 30.09.2025 subject to specified terms including payment with interest on a reducing basis, payment of CIRP/liquidation costs, and forfeiture/ revival of liquidation on breach. The parties recorded a settlement before the Tribunal and the financial creditor accepted the terms such that the creditor's commercial consent to extension formed the basis for permitting the delayed payments.Conclusion: Extension of time to make the 2nd and 3rd tranche payments is allowed subject to payment by 30.09.2025 and strict compliance with the terms recorded in the affidavit.Issue (ii): Whether the order directing liquidation of the corporate debtor for non-payment of the tranches should be sustained.Analysis: The financial creditor agreed to rescind the liquidation step conditional on the appellants complying with the settlement terms. The parties undertook that on strict compliance the earlier orders for liquidation would be quashed; conversely, breach would revive the liquidation order and result in forfeiture of amounts paid. The appellate disposal is therefore based on the recorded consensual terms and the conditional settlement entered into before the Tribunal.Conclusion: The order directing liquidation is quashed subject to the appellants' compliance with the recorded terms; failure to comply will revive the liquidation order and the forfeiture consequences specified.Final Conclusion: Both appeals are allowed and the impugned orders dated 27.03.2025 and 09.04.2025 are quashed on the terms recorded in the affidavit, thereby preserving the resolution plan implementation prospect subject to the conditions agreed by the parties.Ratio Decidendi: Where a financial creditor consents to an extension and the parties record a conditional commercial settlement, an appellate authority may quash liquidation and permit implementation of the resolution plan subject to strict compliance with the agreed terms; breach will revive liquidation and forfeiture consequences.