Time Is A Crucial Facet Of Scheme Under IBC; Resolution Applicant Must Be Fair In Its Dealings: Supreme Court

Time is a crucial facet of the scheme under the IBC, the Supreme Court said while dismissing the appeal filed by a Resolution applicant.

In this case, the National Company Law Tribunal [NCLT] allowed the liquidation of the Corporate Debtor to proceed. Upholding this order, the National Company Law Appellate Tribunal [ NCLAT] observed that the applicant had failed to implement the Resolution Plan for a period of over eight months.

The applicant had submitted a Resolution Plan for a company by the name of Tecpro Systems Limited which was undergoing the Corporate insolvency Resolution Process.. The Resolution Plan was approved by the Committee of Creditors on 8 March 2019 with a majority of 89.92%. The Resolution Plan was approved by the National Company Law Tribunal on 15 May 2019. The applicant accordingly deposited an amount of Rs 5 Crores in an Escrow Account of the Corporate Debtor. However, the applicant did not fulfil its further obligations, including equity infusion, under the Resolution Plan despite numerous opportunities over a period of six months. On 11 November 2019, the CoC voted, by a majority of 99.28%, for the liquidation of the Corporate Debtor as a result of the failure of the appellant to implement the Resolution Plan.

In appeal, the bench comprising Justices DY Chandrachud and MR Shah noted that sufficient opportunities were granted to the applicant earlier during the pendency of the proceedings both before the NCLT and NCLAT. The orders of the NCLT and NCLAT make it abundantly clear that despite the grant of sufficient time, the appellant has not been able to comply with the terms of the Resolution Plan, it said.

"Since 9 October 2020, despite the passage of almost five months, the appellant has not been able to deposit an amount of Rs 50 crores. Time is a crucial facet of the scheme under the IBC.. To allow such proceedings to lapse into an indefinite delay will plainly defeat the object of the statute. A good faith effort to resolve a corporate insolvency is a preferred course. However a resolution applicant must be fair in its dealings as well. The appellant has failed to abide by its obligations. In that view of the matter, we see no reason or justification to entertain the Civil Appeal any further", the bench said while dismissing the appeal.

Case: Kridhan Infrastructure Pvt Ltd. vs. Venkatesan Sankaranarayan [CA  3299 of 2020]
Coram: Justices DY Chandrachud and MR Shah
Counsel: Sr. Adv K.V. Vishwanathan, Sr. Adv Meenakshi Arora
Citation: LL 2021 SC 139

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