NCLT passes order for liquidation of Corporate Debtor finding that the 270 days period for implementation of Resolution Plan; directs Liquidator to liquidate the Corporate Debtor as a going concern as per Regulation 32 (f) of Insolvency and Bankruptcy Board of India (Liquidation Process Regulation, 2016 since Corporate Debtor is going concern having more than 1,500 workers and employee
In the present matter, applications are filed under Section 60 (5) of Insolvency and Bankruptcy Code, 2016 by State Bank of India one of the Financial Creditor and Member of Committee of Creditors, by Resolution Professional, by Liberty House Group the successful Resolution Applicant, by workmen of Adhunik Metaliks Limited (Corporate Debtor), by MSTC one of the operational Creditor of the Corporate Debtor etc. State Bank of India/Committee of Creditors and the Resolution Professional have filed application for direction to the Liberty House Group – the successful Resolution Applicant to act as per the approved Resolution Plan. Later on, State Bank of India/Committee of Creditors filed application to cancel the Resolution Plan of Liberty House Group stating that they committed breach in implementation of Resolution Plan.
SBI avers that Liberty House Group committed a breach of the implementation of the Resolution Plan by failing to make upfront cash payment of Rs.410 Crore within 57 days of approval of the Resolution Plan. Liberty House Group contends that Committee of Creditors/Monitoring Committee did not issue in their favour offer letter of equity shares of the Corporate Debtor. Unless such offer letter is issued, it is difficult for them to invest the funds as per the Plan. NCLAT passed the order dated 15.03.2019 directing Liberty House Group to make upfront payment within 30 days. NCLT states that it cannot again go in to the question whether Liberty House Group can be allowed to not to make upfront payment because Committee of Creditor/Monitoring Committee did not give them offer letter.
NCLT observes that the Liberty House Group the Successful Resolution Applicant committed the breach of the terms of approved Resolution Plan approved by the Committee of Creditors of the Corporate Debtor and it is nothing but contravention of terms of the Resolution Plan within meaning of Section 74 (3) of Insolvency and Bankruptcy Code, 2016.
NCLT observes from the record that Liberty House Group did not make upfront cash payment within 57 days of approval of the Resolution Plan. Further, NCLT and NCLAT extended time to make upfront payment which they did not make. By filing various applications now, they raised the point that as per Resolution Plan it was for Committee of Creditors/Monitoring Committee to give them an offer letter about equity shares of the Corporate Debtor.
NCLT holds that this contention of Liberty House Group cannot be accepted mainly for two reasons –
- It has been raised at a belated stage and
- the word “up-front payment” used in the Resolution plan cannot be qualified by any condition as sought to be attached subsequently by them.
NCLT observes that there cannot not be any precondition in making up-front payment as contended by the Liberty House Group. As regards whether the amount of Rs. 50 Crore deposited by Liberty House Group can be treated as performance security under Regulation 36 B (a A) of Insolvency Resolution Regulations, 2016, NCLT states that such provision cannot be used retrospectively and if this provision is to be used against Liberty House Group by forfeiting their amount treating as performance’s security, it would be nothing but penalising them at this stage. NCLT rejects the prayer of Committee of Creditors to allow them to forfeit sum of Rs. 50 Crore deposited by Liberty House Group treating it as a performance’s Security.
NCLT observes that Successful Resolution Applicant Liberty House Group is not in position to implement the Resolution Plan and since Corporate Insolvency Resolution Process period of 270 days has already been over along back. In such a situation NCLT has no option but to pass order of liquidation of the Corporate Debtor as per Section 33 of Insolvency and Bankruptcy Code, 2016.
NCLT further observes that Committee of Creditors had an opportunity to consider the Plan submitted by IWs Maharashtra Seamless Limited at earlier point of time but their Plan was rejected by Committee of Creditors because in the Plan they had offered the investment in the Corporate Debtor below the liquidation value. And as such NCLT cannot allow the Committee of Creditors to restart the Corporate Insolvency Resolution Period afresh over and again. NCLT holds that since the Liberty House Group, the Successful Resolution Applicant failed to implement Resolution Plan as submitted by them, NCLT cancelled their Resolution Plan and proceed to pass order of liquidation of Corporate Debtor as contemplated under Section 33 of Insolvency and Bankruptcy Code, 2016.
NCLT further orders the Liquidator to liquidate the Corporate Debtor as a going concern as per Regulation 32 (f) of Insolvency and Bankruptcy Board of India (Liquidation Process Regulation, 2016). NCLT invokes provisions of Section 34(4) of Insolvency and Bankruptcy Code, 2016 and appoint Mr. Sumit Binani ex-Interim Resolution Professional as the Liquidator.