Liquidation of Corporate Debtor can be initiated When Successful Resolution Applicant Fails to Obtain Approvals Within One Year: NCLAT [Read Order]

A Successful Resolution Applicant (SRA), the appellant, Taguda Pte Ltd.has filed a challenge to the order dated 08.12.2023 passed by the adjudicating authority (National Company Law Tribunal ), partly allowing the filing by the State Bank of India (SBI), Respondent No. 1, praying for direction to the SRA to implement the revised resolution plan. By the impugned order, prayers made in I.A. i.e., Prayer (a) has been allowed directing the SRA (appellant) to implement the resolution plan within a period of 2 months. Aggrieved by which order, this appeal has been filed.

The corporate debtor, namely Ushdev International Limited, was admitted to the Corporate Insolvency Resolution Process (CIRP) by order dated 17.05.2018 passed by the adjudicating authority on an application filed under Section 7 by the SBI. The Adjudicating Authority approved the resolution plan on 03.02.2022, with an Implementation and Monitoring Agency (IMA) formed, including members from SBI, IDBI, the appellant, and the Resolution Professional (RP). The plan proposed ₹227 crore, with ₹225.14 crore earmarked for financial creditors.

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In March 2022 and April 2023, several IMA meetings took place. The appellant stated that it has requested for the necessary clearances from the Reserve Bank of India (RBI) and the Securities Exchange Board of India (SEBI) in April 2022. To enforce the settlement plan, SBI filed on April 28, 2023. The appellant contended that, in accordance with Clause 14 of the plan, RBI approval was a prerequisite for the plan's implementation.

Within two months, the Adjudicating Authority oversaw the plan's execution. Thereafter, there were Joint Lenders' and IMA meetings. SBI invoked the Performance Bank Guarantee (PBG) on February 9, 2024. On February 16, 2024, the appellant appealed the implementation order. The appellant and SBI were unable to agree on account-opening terms, even though the appellant offered to deposit ₹225.14 crore in an overseas SBI branch. The money was never deposited, and delays persisted while the parties communicated.

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The appellant argued that it was unable to carry out the resolution plan because the RBI had not given the required approval for several of the transactions that the plan called for. The appellant cannot be said to have failed to implement the resolution plan because the plan's closing date is only triggered upon the fulfillment of all prior conditions, which are still unmet.

It was further argued that although the appellant was prepared to park the funds under the resolution plan with the SBI branch in the United Arab Emirates, the aforementioned event was unable to take place because of a number of requirements imposed by the SBI. On 08.02.2024, the JLM invoked the performance bank guarantee and proceeded with liquidation after the respondent argued that the appellant had not carried out the resolution plan. The appellant was in charge of obtaining all regulatory approvals, including those from the RBI, in accordance with the RFRP. The appellant has failed to execute this requirement even after the proposal was approved on 03.02.2022, which was more than three years ago.

The resolution plan was authorized on 03.02.2022, according to the tribunal. In sessions of the Monitoring Committee, the appellant insisted that the delay in implementation was caused by the need for RBI approvals. But according to Section 31(4) of the IBC and Clause 3.1 of the RFRP, the resolution applicant must secure all required regulatory approvals within a year of the plan's approval.

The bench of Justice Ashok Bhushan (Judicial Member), Mr. Arun Baroka (Technical Member) and Mr. Barun Mitra (Technical Member) viewed that in order to prove their bona fides, the appellant requested that the resolution plan money be parked with SBI's Singapore or UAE branch, and the order was granted. Although the appellant promised to deposit the remaining sum, the money is still hidden, even in the United Arab Emirates.

The Tribunal concluded that the necessary permissions were not obtained in the allotted one-year period or even in the NCLT's extended timeframe, which ended on February 8, 2024. The pending liquidation application before the Adjudicating Authority must thus proceed, as there are good reasons to believe that the plan has not been carried out. The appeal was dismissed by the court.

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