TaxTMI 
TaxTMI 
2026 (5) TMI 1240
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.... For the Respondent : Mr. PBA Srinivasan, Ms. Barnali Paul, Mr. Manish Kumar, Advocates for Respondent No. 5/Intervener. Mr. Harshit Khare, Mr. Prafful Saini, Mr. Ayuj Agrawal, Advocates for SBI. Ms. Eshna Kumar, Ms. Astha Agrawal, Advocates for R-3. Ms. Aditi Sharma, Advocate for R-4. JUDGMENT [Per: Justice Mohd. Faiz Alam Khan, Member (Judicial)] Both the aforesaid appeals have been filed against the same impugned order passed by the Ld. Adjudicating Authority and for the sake of convenience are being disposed of by passing this common judgment. 2. CA (AT) (Ins) No. 1950 of 2024 has been filed by the Resolution Applicant (RA) of the Corporate Debtor (CD) Challenging the impugned order dated 27.09.2024 passed by the National Company Law Tribunal, Ahmedabad Bench, (Adjudicating Authority) in IA No. 33 of 2024 moved in CP IB No. 561 of 2018 for the approval of the Resolution Plan whereby the Resolution Plan approved by the Committee of Creditors (CoC) has been rejected by the Ld. Adjudicating Authority and order for liquidation of the CD has been passed while CA (AT) (Ins) No. 1952 of 2024 has been preferred by the Resolution Professional of the CD (RP) challenging th....
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....ter the 9th CoC meeting was held on 22.04.2021 wherein the CoC resolved to direct the Resolution Applicants to submit their financial offers on or before 27.04.2021 and thereafter in the 10th CoC meeting held on 03.05.2021 all the three Resolution Applicants were called through online mode to ascertain whether they can increase their offers and ultimately it was resolved that the applicants will submit their revised plans. 8. It is also reflected that in the 11th CoC meeting held on 07.05.2021 after negotiations with all the three Resolution Applicants the CoC informed them to send their revised financial offers and in pursuance of this resolution, revised resolution plan was submitted by the appellant Lorenzo Vitrified Tiles Pvt. Ltd. (appellant), and Mr. Purshottam Lalji Patel. However, Vishram Akhai Patel along with six consortium members did not provide any revised Resolution Plan. 9. It is further reflected that the 12th meeting of the CoC was held on 13.07.2021 wherein the CoC required more time for negotiations and to take a decision to approve or reject the Resolution Plans submitted by the Prospective Resolution Applicants (PRA's) and as the CIRP period of 330 days s....
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.... and the first application for approval of the Resolution Plan was filed within the time limit given by the Ld. Adjudicating Authority however the said application filed by the RP remained pending before the Ld. Adjudicating Authority for about 2 years and thereafter vide order dated 08.11.2023 passed in IA No. 638 of 2021 the Resolution Plan of the Appellant was remanded back to the CoC to reconsider it in view of the Rainbow Paper Judgment passed by the Hon'ble Supreme Court and to resubmit it to the Ld. Adjudicating Authority till 30.11.2023. 15. It is further submitted that the RP has filed an affidavit on 04.09.2024, explaining therein the time consumed in refiling the application for approval of the plan and it was evident that the sole CoC i.e. SBI was served with the copy of the order of the Ld. Adjudicating Authority and it took time to review the order and the delay has been caused by them in taking a decision and thereafter the 19th CoC meeting was held on 04.12.2023 wherein the order of the Ld. Adjudicating Authority dated 08.11.2023 was considered and the SBI asked the appellant to give revised amount and resubmit the plan and the revised plan submitted by the appel....
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....2 of 2024 submits that the impugned order could not be permitted to stand as a grave jurisdictional error has been committed by the Ld. Adjudicating Authority in passing the impugned order in complete disregard to the fact that Resolution Plan was approved by 100% of the CoC and the same has been rejected solely on hyper technical ground of delayed refiling of the approval application. 20. It is further submitted that after taking requisite extensions and exclusions the resolution plan submitted by M/s Lorenzo Vitrified Tiles Pvt. Ltd. (SRA) was approved by the CoC with 100% voting share on 03.08.2021 and an application being IA No. 638 of 2021 was filed for approval of the same and the same remained pending before the Ld. Adjudicating Authority for more than 2 years and it was on 08.11.2023 the same was remanded back for reconsideration of the CoC in view of the judgment of the Hon'ble Supreme Court passed in State Tax Officer vs. Rainbow Paper Ltd. with a further direction to refile the same by 30th November, 2023. 21. It is further submitted that the Appellant RP immediately send the copy of this order to the Respondent SBI and after Diwali Holidays the 19th CoC meeting wa....
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....CoC and therefore these remarks are required to be expunged. 27. Ld. Counsel for the Respondent No. 1 i.e. State Bank of India submits that the Ld. Adjudicating Authority vide order dated 08.11.2023 has remanded the matter back to the COC for reconsideration in the light of the judgment passed in Rainbow Paper Ltd. (supra) with a further direction that the application for approval of the revised plan shall be filed by 30.11.2023, however this fact was never communicated by the RP to the CoC and the meeting of the CoC could only be convened by the RP on 04.12.2023, after the expiry of the CIRP period and the timeline stipulated by the Ld. Adjudicating Authority. 28. It is further submitted that so much so the RP thereafter placed the resolution for original plan approval before the CoC in its 20th meeting dated 06.01.2024 and the same was approved in 21st CoC meeting held on 25.01.2024. However, for reasons best known to the RP alone, the fresh application for approval of the Resolution Plan was filed by him on 04.03.2024. 29. Ld. Counsel for the SBI has drawn the attention of this Appellate Tribunal towards many portions of the aforesaid both appeals in order to show that ....
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....A (AT) (Ins) No. 771 of 2023 was filed which is pending before this Appellate Tribunal. 34. It is also submitted that after passing of order dated 08.11.2023 the 20th CoC meeting was held on 06.01.2024 and thereafter the 21st CoC meeting was held on 25.01.2024 wherein the filing of the application and appeal by the intervener was discussed and the intervener in this meeting also dissented the agenda for revised distribution as presented before voting and the revised distribution schedule in Resolution Plan submitted by the SRA was rejected by the intervener. 35. It is also submitted that the intervener had voted upon and dissented the agenda with regard to distribution and not on the original plan as the voting was with regard to the revised distribution as per Rainbow judgment. 36. We have heard Ld. Counsel for the parties and have perused the record including written submissions filed by them. 37. It appears that Section 12 and Section 33 of the Code would be relevant for our discussion and both these Sections are reproduced as under: "Section 12: Time-limit for completion of insolvency resolution process. (1) Subject to sub-section (2), the corporat....
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.... shall-- (i) pass an order requiring the corporate debtor to be liquidated in the manner as laid down in this Chapter; (ii) issue a public announcement stating that the corporate debtor is in liquidation; and (iii) require such order to be sent to the authority with which the corporate debtor is registered. (2) Where the resolution professional, at any time during the corporate insolvency resolution process but before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of the committee of creditors [approved by not less than sixty-six per cent of the voting share] to liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1). [Explanation. -- For the purposes of this sub-section, it is hereby declared that the committee of creditors may take the decision to liquidate the corporate debtor, any time after its constitution under sub-section (1) of section 21 and before the confirmation of the resolution plan, including at any time before the preparation of the information memorandum.] (3) Where ....
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....ate Insolvency shall not be granted more than once and the second proviso attached with Section 12 also provides that the Insolvency Process shall mandatorily be completed within a period of 330 days from the Insolvency commencement date including any extension of the period of Corporate Insolvency Resolution Process granted under this Section and the time taken in legal proceedings in relation to the Resolution Process. 39. Section 33 of the Code appears in Chapter -III of the Code which provides various eventualities on the happening of which the Adjudicating Authority shall pass an order for liquidation of the CD and Sub-Section 1 (a) of this Section provides one of the eventuality as the non-completion of the Corporate Insolvency Resolution Process within the maximum period provided under Section 12 of the Code. Sub-Section 2, 3, 4, 5, 6 and 7 deals with other situations not relevant for our discussion. 40. At this juncture, it is also fruitful to have a glance on the precedents of this Appellate Tribunal as well as of the Hon'ble Supreme Court which have been relied on by the parties, to assess the manner in which the delay occurred in the Insolvency Process or the expir....
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....ial wisdom" of the CoC might no longer remain in cases where incessant extensions are granted by NCLT and NCLAT under their discretionary powers. 169. The discretion in extending the time-limits fixed under the resolution plan must be exercised in a much more circumspect manner, especially in cases such as the present, which pertains to the aviation sector, wherein timely resolution and revival of the corporate debtor is all the more crucial since the sector operates in such a way that a continuous flow of cash is required to maintain the company in a position of status quo. 42. Hon'ble Supreme Court again in Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17 held as under: "28. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/t....
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....ebtor must be completed within the outer limit of 330 days from the insolvency commencement date, including extensions and the time taken in legal proceedings. However, on the facts of a given case, if it can be shown to the Adjudicating Authority and/or Appellate Tribunal under the Code that only a short period is left for completion of the insolvency resolution process beyond 330 days, and that it would be in the interest of all stakeholders that the corporate debtor be put back on its feet instead of being sent into liquidation and that the time taken in legal proceedings is largely due to factors owing to which the fault cannot be ascribed to the litigants before the Adjudicating Authority and/or Appellate Tribunal, the delay or a large part thereof being attributable to the tardy process of the Adjudicating Authority and/or the Appellate Tribunal itself, it may be open in such cases for the Adjudicating Authority and/or Appellate Tribunal to extend time beyond 330 days. Likewise, even under the newly added proviso to Section 12, if by reason of all the aforesaid factors the grace period of 90 days from the date of commencement of the Amending Act of 2019 is exceeded, there aga....
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....legislative text that underwent subsequent modifications by the legislature) to indicate the binding nature of the resolution plan and the finality of negotiations once it is approved by the CoC, does not establish the legal nature of the document, especially when it is not complemented by the text and design of IBC". 47. Hon'ble Supreme Court in Invent Assets Securitisation & Reconstruction Pvt. Ltd. v. Girnar Fibres Ltd., (2022) ibclaw.in 26 Held as under: "Time and again, it has been expressed and explained by this Court that the provisions of the Code are essentially intended to bring the corporate debtor to its feet and are not of money recovery proceedings as such. The intent of the appellant had only been to invoke the provisions of the Code so as to enforce recovery against the corporate debtor. We find no fault in the Tribunal and the Appellate Tribunal having declined the prayer of the appellant". 48. Hon'ble Supreme Court in STATE BANK OF INDIA VS. M/S MANIBHADRA POLYCOT & ORS., CIVIL APPEAL NOS. 4392-4393 of 2019 held as under: C.A. Nos. 4656-4657/2019 1. The National Company Law Appellate Tribunal in the impugned order dated 01.05.2019 ....
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....reme Court in the matter of K. Sashidhar Vs Indian Overseas Bank (2019) 12 SCC 150. 30. It is pertinent to note that the statutory construct of IBC in terms of Section 33 clearly empowers the CoC to decide to liquidate the Corporate Debtor any time before the confirmation of the resolution plan by the Adjudicating Authority". 50. This Appellate Tribunal again in JM Financial Asset Reconstruction Company Ltd vs. Venkatachalam, Resolution Professional of Raigarh Champa Rail Infrastructure Pvt. Ltd. 2025 SCC OnLine NCLAT 1052, held as under: "6. Consequent to this, an Application was submitted before the Ld. Adjudicating Authority for the purposes of approval of the Resolution Plan. The same was heard and was reserved for final orders on 10.07.2024. However, before Ld. NCLT could pass any orders on the said Application, CoC on 23.10.2024 with the majority voting share of 78.59%, resolved to undertake the challenge mechanism process, in accordance with the CIRP Regulations under I & B Code, 2016. In pursuance to this decision taken on 23.10.2024, the CoC also resolved to withdraw the Plan approval application already submitted, with liberty to file a fresh applicat....
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....f any, shall stand disposed of". 52. Coming back to the facts of this case the State Bank of India has filed an application under Section 7 of the Code for initiation of Resolution Process against the CD and vide order dated 21.01.2020 the same was accepted and Mr. Arvind Gaudana was appointed as the IRP. The public announcement was made on 31.01.2020 and claims were invited from the creditors and IRP after collating the claims constituted the CoC comprising of SBI as the sole financial creditor. 53. The first meeting of the CoC was convened on 20.02.2020 wherein the IRP was appointed as the RP. The CIRP period was to expire on 18.07.2020 and in this regard an IA No. 604 of 2020 was filed by the RP for extension/exclusion of the CIRP period and vide order dated 21.09.2020 the aforesaid IA was allowed and the period of CIRP was extended for 90 days till 15.10.2020. In the meanwhile, intervener Intec Capital Ltd. filed an IA No. 340 of 2020 before Ld. Adjudicating Authority for admission of its claim as secured financial creditor and vide order dated 11.11.2020 a direction was given by the Adjudicating Authority that the process would proceed only after disposal of the aforesai....
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....ity and in this regard an CA (AT) (Ins) No. 771 of 2023 was filed before this Appellate Tribunal which according to the intervener is still pending. 59. The record further shows that on approval of resolution plan by the CoC on 03.08.2021, in its 13th meeting, the RP filed IA No. 638 of 2021 for approval of the plan, however vide order dated 08.11.2023 Ld. Adjudicating Authority remanded the plan back to CoC for its reconsideration in the light of the judgment passed by the Hon'ble Supreme Court in Rainbow Paper Ltd. The order dated 08.11.2023 passed in IA No. 638 of 2021 is reproduced as under: IA/638(AHM) 2021 This application is remanded back to the RP and dismissed with the liberty to re-file the same again in view of the position of the claims and the distribution amount is crystallized by the Successful Resolution Applicant in the next CoC meeting taking into consideration Rainbow Paper judgment of the Hon'ble Supreme Court. Application for approval, if any, to be filed not later than 30.11.2023. Accordingly, IA/638(AHM) 2021 is dismissed. 60. Perusal of this order would reveal that Ld. Adjudicating Authority has categorically directed the CoC....
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....rit of the IBC. Such behavior is not only subject to criticism but may also attract penal consequences under the law, as it has significantly hindered the timely and efficient resolution of the corporate debtor's insolvency. XI. This Tribunal is fully conscious of the need to keep judicial intervention or innovation from NCLT at its bare minimum and should not disturb the foundational principles of the IBC, as the law laid down in catena of rulings of Hon'ble Supreme Court of India, however at the same time we cannot overlook or brush aside this glaring breach of compliance of a statutory mandatory provision by the parties when noticed". 62. Thus, the Ld. Adjudicating Authority observed that the RP convened various meetings of the CoC without prior authorisation and outside the mandate of the IBC and also that the RP as well as the CoC has shown gross negligent conduct and approach and thereafter censured their conduct. 63. According to the Ld. Adjudicating Authority the CoC/RP failed to comply the timeline given in order dated 08.11.2023 and the Resolution plan instead of placing before Ld. Adjudicating Authority on 30.11.2023, as directed vide order dated 0....
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....er. Thus, having regard to the first date on which this application was presented before the Ld. Adjudicating Authority, the delay of about 8 months had occurred since 30.11.2023. In the background of the aforesaid factual matrix we do not find any illegality in the observation of the Ld. Adjudicating Authority that the application for approval of Resolution Plan was moved after 8 months' delay. 66. The RP in his additional affidavit dated 08.08.2024 filed before Ld. Adjudicating Authority has also admitted to have convened the first meeting of the CoC after passing of the order dated 08.11.2023, on 04.12.2023, while the last date given in the order dated 08.11.2023 for resubmission of revised plan was 30.11.2023 and by that time this date had already expired and no further extension was sought by the RP by moving any application before Ld. Adjudicating Authority. 67. It is also evident that the next meetings of the CoC were held on 06.01.2024 and 25.01.2024 and it was in the 21st CoC meeting held on 25.01.2024 the resolution plan was approved but, even after approval of the plan by the CoC on 25.01.2024 the application of approval of the plan was moved with in ordinate and u....
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.... the stakeholders the timely liquidation should be preferred over an endless resolution process and in this way the interest of the creditors would also be secured who may be suffering because of no fault of theirs and in this way maximising of the value of the assets may also be achieved. 70. The timely action and the speed by which the resolution process of the CD must travel has been enshrined in various provisions of the Code and Regulations made thereunder as well as in catena of judgments passed by the Hon'ble Supreme Court and this Appellate Tribunal. The report of the Bankruptcy Law Reforms Committee, 2015 also highlights and emphasises the timely working of the Code and has observed that speed of the Resolution is of the essence for the correct working of the bankruptcy code, as the calm period can help to keep an organization afloat without the full clarity of ownership and control, as significant decisions cannot be made and the longer the delay, the more likely it is that liquidation will be the only answer. This report also highlights that the liquidation value tends to go down with time as many assets suffer from a high economic rate of depreciation. 71. It may ....
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.... being that 330 days is the outer limit within which resolution of the stressed assets of the CD must take place beyond which the CD is to be driven into liquidation. 75. In State Bank of India vs. M/s Manibhadra Polycot and Ors. (supra) this Appellate Tribunal has set aside the judgment of the Adjudicating Authority whereby the application filed by the Resolution Professional for initiation of the liquidation of the CD was allowed. On an appeal filed before the Hon'ble Supreme Court in State Bank of India vs. M/s Manibhadra Polycot and Ors. Civil Appeal Nos. 4392-4393 of 2019, vide order dated 09.08.2019, Apex Court set aside the order of this Appellate Tribunal and refused to exclude 21 days from being counted as part of 270 days' period on the ground that first two sets of days namely 7 days and 11 days cannot be excluded for the reason that they are not incurred in any litigation process and also noticed that the resolution plan in question is submitted beyond time stipulated. 76. At the cost of repetition, we highlight that the Ld. Adjudicating Authority has remanded the resolution plan for reconsideration of the CoC in the background of the law laid down by the Hon'ble ....