NCLAT Declines To Entertain Revised Resolution Plan As CIRP Had Already Crossed 559 Days, Timely Completion Of Resolution Necessary
The National Company Law Appellate Tribunal ("NCLAT"), New Delhi Bench, comprising of Justice Rakesh Kumar Jain (Judicial Member), Mr. Kanthi Narahari (Technical Member), Dr. Alok Srivastava (Technical Member), while adjudicating an appeal in Shrinathji Trading Company v Sanwaria Consumer Ltd., has dismissed an application filed by resolution applicant seeking consideration of...
The National Company Law Appellate Tribunal ("NCLAT"), New Delhi Bench, comprising of Justice Rakesh Kumar Jain (Judicial Member), Mr. Kanthi Narahari (Technical Member), Dr. Alok Srivastava (Technical Member), while adjudicating an appeal in Shrinathji Trading Company v Sanwaria Consumer Ltd., has dismissed an application filed by resolution applicant seeking consideration of its revised resolution plan. The Bench observed that the Corporate Insolvency Resolution Process ("CIRP") period of the Corporate Debtor had already crossed 559 days as against a statutory period of 330 days and held that timely completion of resolution is necessary under IBC.
Background Facts
Corporate Insolvency Resolution Process ("CIRP") was initiated against M/s. Sanwaria Consumer Limited ("Corporate Debtor"), formerly M/s. Sanwaria Agro Oils Ltd., on 29.5.2020. Shrinathji Trading Company ("Appellant") had submitted its resolution plan for the Corporate Debtor on 22.1.2021. After multiple revisions, the Committee of Creditors ("CoC") informed the Appellant on 23.04.2021 that its resolution plan has not been approved.
Thereafter, the Appellant had moved an application before the Adjudicating Authority seeking indulgence for consideration of its revised resolution plan and the latter had permitted the Appellant to submit the latest revised plan to the Resolution Professional. The Appellant submitted revised plan on 10.09.2021 in which it had increased the financial bid and reduced the time schedule for payment. The Resolution Professional informed the Appellant that the CoC did not approve the resolution plan. The Appellant again filed an interim application before the Adjudicating Authority seeking direction to the CoC for consideration of its latest revised resolution plan dated 10.09.2021. The application was rejected by the Adjudicating Authority vide an order dated 09.12.2021, stating that the Appellant's plan was already considered by the CoC earlier, CIRP period of 330 days was over and application for liquidation was already been filed before the Adjudicating Authority.
The Appellant filed an appeal before the NCLAT, challenging the order dated 09.12.2021.
Contentions Of The Appellant
The Appellant argued that the Corporate Debtor is a going concern and liquidation should be the last resort as it would mean certain death of the corporate debtor. Therefore, the Appellant's Plan being a much improved version of the previous resolution plans, would be in the interest of the corporate debtor as well as the creditors that such a plan was considered by the CoC.
Contentions Of The Respondent
The CoC argued that sufficient opportunity and time was granted to the Appellant to submit satisfactory resolution plan and also revise it, however, the plan failed to meet the expectations of the CoC. It was submitted that CIRP of the Corporate Debtor had commenced on 29.05.2020 and by 16.09.2021 the revised resolution plans of the Appellant were rejected by the CoC. For the same reason, liquidation application was filed before the Adjudicating Authority.
It was further argued that the resolution applicant had neither shown seriousness nor modified the plan in accordance with the directions of the lender banks. The Resolution Professional submitted that the Supreme Court in Ebix Singapore Pvt. Ltd. v CoC of Educomp Solutions Ltd. & Anr., Civil Appeal No. 3324 of 2020, had held that if statutory timelines are over and no resolution could be obtained, the matter should be allowed to take due course in accordance with the provisions of IBC without unnecessary delay.
Decision Of The NCLAT
The Bench took note of the findings of Joint Lenders, which recorded that the only change in Appellant's revised plan was the amount and no changes were made in respect of source of funds, seeding of party on security, requirement of bank guarantee for confirmation of dissolution, etc. as was discussed. Despite commitment, the Appellant failed to submit desired confirmations/documents which reflected that the Appellant was not serious towards the plan. The Bench observed that due to the Appellant's failure to provide required comfort to the lender banks despite ample opportunities, the CoC was not willing to consider any further revised resolution plans, and such decision was within the ambit of commercial wisdom of the CoC.
It was further opined that Section 12 of IBC provides a period of 330 days that could be spent in obtaining prospective resolution plan. However, approximately 559 days were already spent since the initiation of CIRP till the order dated 09.12.2021; enough opportunities were accorded to prospective resolution applicant to provide resolution plan without success.
The Bench placed reliance on the Supreme Court judgment in Ebix Singapore Pvt. Ltd. v CoC of Educomp Solutions Ltd. & Anr., Civil Appeal No. 3324 of 2020, wherein timely completion of resolution process has been considered necessary without delaying the stage of liquidation, if circumstances so require. Accordingly, the Bench upheld the Adjudicating Authority's order dated 09.12.2021 and dismissed the appeal.
Case Title: Shrinathji Trading Company v Sanwaria Consumer Limited, Company Appeal (AT) (Ins.) No. 480 of 2022
Counsel For Appellant: Mr. Akshat Agrawal, Advocate.
Counsel For Respondents: Mr. Gautam Mittal & Mr. Manish Jain, for R1/RP, Mr. Prakash Shinde, Mr. Nishit Dhruva, Ms. Meghna Arvind, Ms. Aalisha Sharma & Ms. Astha Ojha, for R-2/CoC