TaxTMI 
TaxTMI 
2026 (9) TMI 828
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....piaar Cements Ltd, the Corporate Debtor (CD). 2. The background to this appeal is provided as below: a) On 27.06.2013, M/s. Jeppiaar Power Corporation Ltd. availed a term loan of Rs. 92.50 crores from M/s Indian Bank, the 3rd Respondent herein, for which the corporate debtor stood as a corporate guarantor. On 05.08.2016, the principal borrower availed another loan of Rs. 48.50 crores from Indian Bank, and the corporate debtor (CD) offered a corporate guarantee for this loan as well. b) As the principal borrower defaulted on the loan repayment, Indian Bank filed application under Sec. 7 of IBC against the corporate guarantor, the corporate debtor in this case, and this petition came to be allowed and the corporate guarantor was drawn into CIRP vide the Order of the Adjudicating Authority, dated 10.10.2019. An Interim Resolution Professional (IRP) was appointed, who constituted the Committee of Creditors (CoC) comprising of two financial creditors, M/s. Indian Bank as the major financial creditor with 96.65 % voting share and M/s. HDFC Bank with remaining 3.35% voting share. On constitution of the CoC, it resolved to retain the IRP to act as the Resolution Profes....
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....mail, the resolution professional referred to the filing of the application under Sec. 60(5), and informed the financial creditors that the "Registrar office has raised objection on the said application and asked me to file the application under proper section which is 33(1) in this case". On the same day, Indian Bank, the majority voting shareholder in the CoC responded with its e-mail which reads: "Please proceed in accordance with the provisions of the IBC". But two weeks later, on 28.07.2022, the same Indian Bank chose to extend the deadline to the personal guarantors for complying with the OTS till 30.09.2022. But by then, the resolution professional had filed I.A.800 of 2022 under Sec. 33(1) of the Code for initiating liquidation proceedings. In his application, the resolution professional had fairly disclosed the OTS offered to the personal guarantors as well as the part payment of the amounts required to be paid in terms thereof. On 26.08.2026, the Adjudicating Authority allowed this application and ordered liquidation. The order directing liquidation of the corporate debtor is now under challenge by the suspended directors of the corporate debtor, the appellants herein. ....
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....known whether they had been settled. So far as dismissal of application under Section 12A is concerned, it is in order since it cannot be maintained once the Adjudicating Authority has decided to order liquidation of the CD. c) Turning to Indian Bank, the respondent no. 3, it supported the appellant but it must be taken note of, that it is its vacillation in taking a position in the 11th meeting of the CoC that has brought about the situation. 5. In response, the learned counsel for the appellant would submit that, the timeline prescribed is only directory and not mandatory, and had the factum of OTS been brought to the notice of the Adjudicating Authority, it might have weighed its decision after factoring in the OTS. Discussion & Decision 6. If the facts are sequentialized chronologically, they strongly suggest that here has arisen a situation which neither side welcomes now, except perhaps the liquidator, but he is not a stakeholder but a mere statutory facilitator, who is, and who can be, concerned only with the legality of the issue involved. The action starts from 30.03.2022 and ends on 15.09.2022. Between these dates, Indian Bank had offered OTS, even as th....
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....legitimately be made. However, a solitary move by the resolution professional in filing an application under Sec. 33(1), which according to him was insisted by the Registry of the tribunal, has led to a situation which pose challenges on the reversibility of the order of liquidation for accommodating an application under Sec. 12A, but who is to be blamed for it? a) Is it the Indian Bank? Its approach was unclear and it was most evidently caught in a plane of uncertainty. Or, is it plainly clueless without a strategy? It did not vote on liquidation, extended time for OTS compliance, and in the same breath advised the resolution professional to act by the Code, when it knows, or ought to know that the only option available was to apply for liquidation. b) Was the Registry of the tribunal to be blamed? According to the resolution professional it was, otherwise, how to appreciate his e-mails dated 12.07.2022 and 14.07.2022? If this allegation is true, then it is very unfortunate that the Registries of judicial fora should display a tendency to behave as a super court to insist upon the litigants the nature of relief that they should seek. Any advocate with some degree....
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....astructure P Ltd vs Venkatesan Sankaranarayan and another [ Civil Appeal NO.3299 of 2020], Dinesh Gupta Vs. Vikram Bajaj [Civil Appeal No. 2471 of 2021], Vallal RCK Vs. Siva Industries and Holdings Ltd & Others [ 2022 (9) SCC 803], V.S Varun Vs. South Indian Bank [2022 SCC Online NCLT 218]) to sustain their rival contentions, yet we are required to travel alone. Placing reliance on the ratio in Asha Chopra and others Vs M/s Hind Motors India limited [CA(AT) Ins.no.1425- 1428 of 2024] the learned counsel for the liquidator contended that the Code bars a reversal from liquidation to CIRP. If this proposition were to be accepted as a universal truth, then we will have a corporate debtor in this case with no financial debt to be discharged through the order of liquidation yet its suspended board faces an imminent possibility of losing an opportunity to run the corporate debtor that they had promoted as a going concern thorough Sec. 12A (For a similar view see paragraph 10(b) of the judgement in Achal Kumar Jindal Vs Sanjay Kumar Bhuwalka [C.A.(AT) (Ins)2341 of 2024, dated 30.06.2026). It is indisputable that the Income tax Department has its claim which is in the nature of an operation....
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....legal sustainability of the impugned order. A resolution professional is central to the resolution process, but suddenly he appeared to have reacted in panic when he should have asserted his role and persisted with his move to approach the Adjudicating Authority for a general direction that he initially proposed to obtain. A good start ended abruptly inappropriately. 11. Now to the second aspect - what could have been done, but omitted to be done: Given the fact that the appellant had been settling the dues to the banks behind and beyond the activities under the Code, does it not make it more probable that the CIRP might have ended under Sec. 12A without any need for the resolution professional to move for liquidation under Sec. 33(1)? This may appear sensible, but still it could be possible only if the CIRP period was extended beyond 180 days (for which the resolution professional himself had taken out I.A.321 of 2020). However, at the first instance it could be extended only by 90 days, and this period could stretch the CIRP period only up to 13.07.2022. And, it is an admitted fact that even by this date the OTS terms were still not fully complied with. But there exists anothe....
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.... only directory and not mandatory. c) there are only three known modes for resolving an insolvency resolution process (Arun Kumar Jagatramika Vs Jindal Steel and Power Ltd., & another [(2021)7 SCC 474]. Now in the 2026 amendment), (i) through the plan route under Sec. 31; (ii) through the scheme route under Regulation 2B of the IBBI (Liquidation Process) Regulation (which is part of liquidation) and (iii) actual liquidation through the sale of the assets of the corporate debtor. 13. Contextually, how to position Sec. 12A, a provision that is grouped alongside Sec. 31 in Chapter II of the Code? Will it be legislatively incompatible to read Sec. 12A conjointly and purposively with Sec. 31 and Sec. 33? In other words, does Sec. 12A provides another option for insolvency resolution? Here we also sense that our consideration of these aspects necessarily opens up a need for an adjunct examination of the role of the resolution professional who is at the triggering end of the decision towards liquidation, especially when he is faced with more options to choose from. The issues are layered, and it requires an understanding of the object of the Code and its scheme beyond wh....
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....se insolvency resolution process, a concept not within the conceptualisation of the Code, but has been observed, engineered and fashioned by the creative judicial mind in Flat Buyers Association Winter Hills Vs Umang Realtech Pvt., Ltd. (2020 SCC Online NCLAT 1199 and it was approved by the Supreme Court in Narendra Singh Vs. M/S Umang Realtech Pvt. Ltd [Civil Appeal No.2942 of 2020] and was subsequently recognised in Anand Murti Vs Soni Infratech Pvt. Ltd., [(2023)3 SCC 743], Indiabulls Asset Reconstruction Comany Ltd., Vs Ram Kishore Arora [2023 SCC OnLine SC 612] Mansi brar Fernandes Vs Shubha Sharma [2025 SCC OnLine SC 1972]), before it was partly incorporated in the Code in the 2026 amendment. 15. The votaries of strict adherence to rules may have to be informed that there exists a difference between reading the rules and handling the rule-book, and judiciary has rarely hesitated to go beyond the text of the rule if its application goes tangential to the object required to be achieved through the rule book and tend to lose pragmatism in exchange for absurdity. The Code is not designed in the mould of pure sciences that its working should match scientific precision. It shoul....
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....nt of the resolution process, in terms of the statutory structure is achievable either through a successful approval of a resolution plan under Sec. 31 or through liquidation. A resolution in that sense is finding a way out of an insolvency-condition. In a classical resolution process the object of a resolution process is to realise the maximum value for the asset of the corporate debtor either through the resolution-plan option under Sec. 31 or the liquidation option under Sec. 33, for payment to the creditors. 17. Moving further on the fundamental understanding, a default in paying the debt need not necessarily lead to an insolvency situation unless it is coupled with a trust deficit of a single creditor on the ability of the debtor to repay its debt, or where the debtor is not confident of repaying its debts with the assets it has. Now, turning to Sec. 12A, it is a provision which enables withdrawal of a resolution process on settlement, where the suspended board or the promotors of the corporate debtor can require the creditors to withdraw the CIRP either through actual repayment of debts to the satisfaction of the creditors, or through the suspended board of the debtor re-b....
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....lity of Sec. 12A as a tool of insolvency resolution. When the exit route through Sec12A has the efficacy to conclude an insolvency condition, it will be uncharitable to underestimate this non-violent provision as a legislative charity when it ought to be respected as a statutory opportunity to resolve an insolvency-condition. It should not be forgotten that, besides the promotors of the corporate debtor, the operational creditors will have greater value for their debt under the withdrawal through settlement mechanism as envisaged in Sec. 12A (not to be confused with the processual mechanism therefor) than they would have under Sec. 31. Is not then Sec. 12A fairer than Sec. 31? In Arun Kumar Jagatramika case, the Hon'ble Supreme Court, however, did not have an occasion to consider this angle. 20. In the present case, the resolution professional appeared to have either given prominence to the rule, or perhaps had even messed up with his understanding of the rule and his own role, but the rule book carries a greater message: a successful insolvency resolution process, which to repeat for an emphasis, includes not only an approval of the Adjudicating Authority to a resolution plan b....