State Bank of India & Ors. v. The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch & Anr.

State Bank of India & Ors. v. The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch & Anr.

will be forfeited if a resolution applicant fails to implement the plan. This is collected before the adjudicating authority approves the plan. Notably, the Regulations also direct forfeiture of the performance security in case the resolution applicant “contributes to the failure of implementation”, which could potentially include any attempts at withdrawal of the plan. xxx xxx xxx

172. Based on the plain terms of the statute, the adjudicating authority lacks the authority to allow the withdrawal or modification of the resolution plan by a successful resolution applicant or to give effect to any such clauses in the resolution plan. Unlike Section 18(3)(b) of the erstwhile SICA which vested the Board for Industrial and Financial Reconstruction with the power to make modifications to a draft scheme for sick industrial companies, the adjudicating authority under Section 31(2) IBC can only examine the validity of the plan on the anvil of the grounds stipulated in Section 30(2) and either approve or reject the plan. The adjudicating authority cannot compel a CoC to negotiate further with a successful resolution applicant. A rejection by the adjudicating authority is followed by a direction of mandatory liquidation under Section 33. Section 30(2) does not envisage setting aside of the resolution plan because the resolution applicant is unwilling to execute it, based on terms of its own resolution plan. xxx xxx xxx

222. If the legislature in its wisdom, were to recognise the concept of withdrawals or modifications to a resolution plan after it has been submitted to the adjudicating authority, it must specifically provide for a tether under IBC and/or the Regulations. This tether must be coupled with directions on narrowly defined grounds on which such actions are permissible and procedural directions, which may include the timelines in which they can be proposed, voting requirements and threshold for approval by the CoC (as the case may be). They must also contemplate at which stage the corporate debtor may be sent into liquidation

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by the adjudicating authority or otherwise, in the event of a failed negotiation for modification and/or withdrawal. These are matters for legislative policy.

223. In the present framework, even if an impermissible understanding of equity is imported through the route of residual powers or the terms of the resolution plan are interpreted in a manner that enables the appellants› desired course of action, it is wholly unclear on whether a withdrawal of a CoC-approved resolution plan at a later stage of the process would result in the adjudicating authority directing mandatory liquidation of the corporate debtor. Pertinently, this direction has been otherwise provided in Section 33(1)(b) IBC when an adjudicating authority rejects a resolution plan under Section 31. In this context, we hold that the existing insolvency framework in India provides no scope for effecting further modifications or withdrawals of CoC-approved resolution plans, at the behest of the successful resolution applicant, once the plan has been submitted to the adjudicating authority. A resolution applicant, after obtaining the financial information of the corporate debtor through the informational utilities and perusing the IM, is assumed to have analysed the risks in the business of the corporate debtor and submitted a considered proposal. A submitted resolution plan is binding and irrevocable as between the CoC and the successful resolution applicant in terms of the provisions of IBC and the CIRP Regulations. In the case of Kundan Care, since both, the resolution applicant and the CoC, have requested for modification of the resolution plan because of the uncertainty over the PPA, cleared by the ruling of this Court in Gujarat Urja [Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta, (2021) 7 SCC 209 : (2021) 4 SCC (Civ) 1] , a one-time relief under Article 142 of the Constitution is provided with the conditions prescribed in Section K.2.” (emphasis supplied)

116Copy pinpoint116. In light of the aforesaid, it is clear that the existing insolvency framework does not provide any scope for effecting further

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State Bank of India & Ors. v. The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch & Anr.

modifications or withdrawals of the Resolution Plan approved by the CoC, at the behest of the successful resolution applicant, once the plan has been submitted to the adjudicating authority. The submitted Resolution Plan is binding and irrevocable as between the CoC and the successful resolution applicant in terms of the provisions of the IBC, 2016 and the 2016 Regulations as well. In other words, once a CoC-approved resolution plan is submitted to the Adjudicating Authority i.e., NCLT, it immediately becomes binding on the CoC and the SRA, even if the Adjudicating Authority has not yet given its stamp of approval on the same. While deciding so, this Court re-emphasized the object under Section 31(1) of the IBC, 2016 and observed that once the Adjudicating Authority has approved the plan under Section 31(1) of the IBC, 2016, the Resolution Plan is binding on all the stakeholders including those stakeholders who are not direct participants of the CIRP. Therefore, there is absolutely no scope for modification of the terms of a Resolution Plan which has received the imprimatur of the Adjudicating Authority, be it by the Adjudicating Authority itself, the CoC or the SRA.

117Copy pinpoint117. When the aforesaid is the position of law, and the NCLT had approved the present Resolution Plan vide order dated 22.06.2021, the Resolution Plan was immune to any modification or alteration whatsoever. Therefore, the Appellants could have only proposed an offer under the Lender’s Affidavit dated 16.08.2023 which stood true to the terms of the Resolution Plan approved by the NCLT. They could not have created any deviations, alterations or modifications of the terms of the Resolution Plan. It is in this context that the submission of the SRA that, the Lender’s Affidavit required an infusion of Rs. 350 Crore in cash, while the Resolution Plan allowed for the payment of Rs. 200 Crore in cash and Rs. 150 Crore through adjustment of the PBG, must be rejected. Both the Resolution Plan and the Lender’s Affidavit dated 16.08.2023 reflected the same terms i.e., infusion “in cash” of the first tranche payment of Rs. 350 Crore. In fact, even the date within which the Lender’s Affidavit required Rs. 350 Crore to be infused in cash i.e., 31.08.2023 was in compliance with the order dated 26.05.2023 passed by the NCLAT granting the 2nd Implementation Extension. Therefore, no new terms were cast on the SRA.

118Copy pinpoint118. The fact that the Lender’s Affidavit did not impose any condition which was different from that contemplated under the Resolution

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Plan, was also understood by all the parties involved, including the SRA. This is evident from the arguments put forth by the SRA, before the NCLAT and before this Court respectively, which dealt with the issue of whether the adjustment of the PBG was possible under the terms of the Lender’s Affidavit. The following were the submissions made by the SRA in the order dated 28.08.2023 as recorded by the NCLAT: “20. Learned Sr. Counsel for the SRA has submitted that approved Resolution Plan provides adjustment of Performance Bank Guarantee towards first tranche of payment whereas Learned Counsel for the Appellants has referred to certain clauses of RFRP and also provisions of Regulation 36B (4A) to support his submission that performance bank guarantee cannot be permitted to be invoked towards payment of first tranche.” (emphasis supplied)

119Copy pinpoint119. The submissions made by the SRA as recorded in the order of this Court dated 18.01.2024 are as follows: “18. The submission which has been urged on behalf of the lenders has been opposed on behalf of the SRA by Mr. Krishnendu Datta, senior counsel, on behalf of the SRA, it has been submitted that: (i) The Resolution Plan specifically contemplates the adjustment of the PBG (originally of Rs. 47.5 crores, subsequently enhanced to Rs. 150 crores). In support of this submission, reliance has been placed on the summary of payments and security package forming a part of clause 6.4.4 of the Resolution Plan; (ii) The SRA was in the first tranche required to pay an amount of up to Rs. 185 crores against the creation of securities, namely, (i) PBG of Rs. 47.5 crores; (ii) BKC Property (if given); and (iii) Mortgage over Dubai Property No 1 valued at over Rs. 100 crores. In the last column of the table, it has been stipulated that the securities would be released, as indicated; (iii) The PBG was liable to be adjusted against the cash payment of the first tranche of Rs. 185 crores;

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State Bank of India & Ors. v. The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch & Anr.

(iv) No specific date for the release of the security in relation to the PBG has been mentioned; (v) Moreover, in respect of the second tranche comprising of Rs. 195 crores, there was no requirement to furnish any security in the form of a PBG; (vi) The securities, in other words, were of a revolving nature, but significantly on the release of the PBG against a cash payment of Rs. 185 crores, the PBG is not required to be renewed as a fresh security for the following tranches; and …” (emphasis supplied)

120Copy pinpoint120. A perusal of the abovementioned would indicate that both the parties as well as the NCLAT were ad idem on the fact that the terms imposed by the Lender’s Affidavit dated 16.08.2023 were in pursuance of and similar to the terms of the Resolution Plan. This is because, in order to take benefit of the offer made in the Lender’s Affidavit, the SRA had repeatedly asserted that the PBG should be allowed to be adjusted under the terms of the Resolution Plan and as a consequence, such an adjustment must be allowed under the Lender’s Affidavit as well. Even the NCLAT in its order dated 28.08.2023 had held that the SRA could adjust the PBG of Rs. 150 Crore to take benefit of the offer of the Lender’s Affidavit by relying on Clause 6.4.4 of the Resolution Plan which provided for the summary of payments and security package.

121Copy pinpoint121. Therefore, in our view the conditions imposed on the SRA under the Lender’s Affidavit and the Resolution Plan were one and the same, the only difference being that the Appellants had offered not to press issues relating to the compliance of the Conditions Precedent and grant of extensions/exclusions along with offering to withdraw the Company Appeal and the Appeals pending before this Court.

122Copy pinpoint122. The order of this Court dated 18.01.2024 must be seen & understood in the aforesaid background. While the appeal before us had resulted from several interim orders of the NCLAT, the question before us was whether the adjustment of the PBG of Rs. 150 Crore was permissible under the Lender’s Affidavit as well as the terms of the Resolution Plan, being one and the same. We interpreted the term

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“infuse” as mentioned in the affidavit and under the Resolution Plan, and arrived at the conclusion that it demonstrably meant “payment in cash”. Therefore, the directions that were issued by this Court, especially the direction that - “the SRA shall peremptorily on or before 31 January 2024, deposit an amount of Rs. 150 crores into the designated account of SBI, failing which the consequences under the Resolution Plan shall follow”, must have been necessarily seen in the context of the Resolution Plan as well. The phrase “failing which the consequences under the Resolution Plan shall follow” was a mandatory direction that should have been taken into account by the NCLAT in its impugned order dated 12.03.2024. There was no escape for the NCLAT in this regard. There was no option which was given to the SRA to deviate from this direction which purely stemmed from the Resolution Plan. The fact that this direction was binding was clearly understood by the SRA since it attempted to file another Miscellaneous Application before this Court requesting for an extension to comply with our order dated 18.01.2024 which was dismissed as misconceived.

123Copy pinpoint123. There were two other directions which were issued by us in our order dated 18.01.2024 i.e., (ii) that the PBG of Rs. 150 Crore shall continue to remain in operation and effect pending the final disposal of the appeal before the NCLAT, and shall abide by the final outcome of the appeal and the directions that may be issued by the NCLAT; and (iii) whether or not the SRA has been compliant with all the conditions of the Resolution Plan as well as of the conditions set out in paragraph 8 of the affidavit dated 16 August 2023 shall be decided by the NCLAT in the pending appeal. These two directions must not be seen as giving any leeway to the NCLAT to act in complete ignorance or defiance of the first direction that was issued by us. Such a selective compliance with our order dated 18.01.2024 deserves to be nipped in the bud more particularly when it was mandated that our directions be considered and complied with in its entirety. Therefore, the NCLAT, while finally deciding the pending Company Appeal on merits which led to the impugned order dated 12.03.2024 has, either by design or unknowingly, ignored the directions issued by this Court vide order dated 18.01.2024 that the remaining amount of Rs. 150 Crore had to be necessarily deposited in cash only. This has resulted in a perverse decision which stands contrary to law and to the terms of the Resolution Plan itself.

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State Bank of India & Ors. v. The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch & Anr.

124Copy pinpoint124. In view of our crystal clear order dated 18.01.2024, we are of the opinion that the PBG of Rs. 150 Crore could not have been allowed to be adjusted with the first tranche payment of Rs. 350 Crore. Non-compliance of the SRA with the order of this Court has led to a dereliction of its obligations to implement the Resolution Plan.

ii. Whether the non-implementation of the Resolution Plan by the SRA necessarily leads to the consequence of liquidation as under Section 33(3) of the IBC, 2016?

125Copy pinpoint125. In the foregoing paragraphs, we have reached the conclusion that the SRA failed to implement the Resolution Plan by not infusing the first tranche payment of Rs. 350 Crore in cash, as required by Clause 6.3.1(g) and the Implementation Schedule under Clause 7.7 of the Resolution Plan. It is now to be seen if this has resulted in the contravention of other terms of the Resolution Plan as well.

a. Whether Respondent No.1/SRA had failed to implement the Resolution Plan on non-payment of the Airport Dues as per the terms of the Resolution Plan?

126Copy pinpoint126. With respect to the Airport dues, the impugned order of the NCLAT had taken into consideration Clauses 6.4.1(e), 6.4.1(h) and 6.4.1(m) respectively. Specifically dealing with Clause 6.4.1(h), it said that this provision dealt with the treatment of outstanding CIRP costs which included parking charge i.e., Airport Charges. While considering so, the following observations were made: “54. The provisions of Resolution Plan as noted above clearly indicates that CIRP costs includes Airport Charges. SRA is also entitled to use funds available with the Corporate Debtor as on effective date to meet any portion of CIRP costs. The submission of the Appellants that the entire Airport Charges have to be borne by the SRA upfront cannot be accepted nor non-payment of Airport Charges by SRA as on date makes the allotment of slot unavailable to the SRA. Allotment of slot having been achieved by the SRA as noted above, non-payment of airport charges upfront by SRA cannot be said to be a reason to not accept the fulfillment of condition of slot allotment. The payment of Airport Charges has to be made as per the Resolution Plan

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when the implementation of the plans commences as per the Resolution Plan. We thus do not find any substance in the submission of Learned Counsel for the Appellant that allotment of slot is not completed since airport charges have not been paid by the SRA.

55. With regard to submission of the Appellant that old dues of Airport Charges having not been settled, the Adjudicating Authority has rightly observed that settling old dues cannot be conceded as non-allotment of slots. We thus fully concur with the finding of the Adjudicating Authority that conditions precedent under Clause 7.6.1(c) were fulfilled.” (emphasis supplied).

127Copy pinpoint127. The case of the Appellants is that upon consideration of Clause 6.4.1(h), the NCLAT erroneously concluded that the Airport Charges would be a part of the CIRP costs. Clause 6.4.1(h) of the Resolution Plan is reproduced hereinbelow: “(h) Based on the information provided, the Resolution Applicant have assumed that the amounts standing to the credit of the bank account of the Corporate Debtor (including amounts estimated to be received subsequently) are sufficient to cover for the CIRP Costs of the Corporate Debtor (excluding parking charges, rental charges, employee dues, taxes etc). Accordingly, the Resolution Applicant has set aside a sum of Rs. 25 Crores as CIRP Costs towards payment of any such costs until the Approval Date. Any expenses incurred by the Corporate Debtor from the Approval Date until the Effective Date will be incurred out of the positive bank balance of the Corporate Debtor.” (emphasis supplied)

128Copy pinpoint128. A plain reading of Clause 6.4.1(h) reveals that the amount standing to the credit of the bank account of the Corporate Debtor would be sufficient to cover the CIRP costs of the Corporate Debtor but that this would exclude the parking charges, rental charges, employee dues, taxes etc. Therefore, the clause does not expressly exclude Airport Charges from the ambit of CIRP costs entirely but only states that

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State Bank of India & Ors. v. The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch & Anr.

the amount available in the bank account of the Corporate Debtor would be insufficient to cover the parking charges, rental charges etc which also form a part of the CIRP costs. Since such a bank balance would not cover the parking charge, rental charges, employee dues, taxes etc, the Resolution Plan had set apart a separate sum of Rs. 25 Crore for the payment of any such CIRP costs which might have accrued till the Approval Date. Further, the other expenses including parking charges, rental charges etc. which have been incurred post the Approval Date but within the Effective Date i.e., the period during which the Conditions Precedent would be fulfilled, would also be incurred out of the positive bank balance of the Corporate Debtor. This is what Clause 6.4.1(h) provides for. To hold that Clause 6.4.1(h) excludes airport dues from the scope of CIRP costs altogether would also question the placement of clauses such as Clauses 6.4.1(f) (which provides for an estimate of Rs. 240 Crore towards parking charges) under the larger umbrella of Clause 6.4.1 which deals with the “Treatment of Outstanding CIRP Costs” in totality.

129Copy pinpoint129. Therefore, what the Resolution Plan contemplates is that the Airport Charges be subsumed within the CIRP Dues and since all of the different CIRP dues cannot be satisfied through the bank balance which stands to the credit of the Corporate Debtor, a separate sum of Rs. 25 Crore was demarcated towards the remaining CIRP payments. Hence, the NCLAT was right in arriving at the conclusion that Airport Dues were indeed a part of the CIRP costs.

130Copy pinpoint130. It must further be noted that, the impugned order of the NCLAT nowhere caps the Airport Dues to a maximum of Rs. 25 Crore. Moreover, such a mention of Rs. 25 Crore is plainly absent in its observations regarding Airport Dues. All that is mentioned is that “The payment of Airport Charges has to be made as per the Resolution Plan when the implementation of the plan commences as per the Resolution Plan”. It is in this regard that Clause 6.4.1(j) provides that if the CIRP costs exceed the current estimates, then they will be paid as per “actuals” in compliance with the provisions of the IBC and as a consequence, the pay-outs towards the other creditors would be reduced proportionately to account for such additional CIRP costs. This would be subject to a minimum payment of liquidation value to the Operational Creditors and Dissenting Financial Creditors of the Corporate Debtor and subject to a maximum of Rs. 475 Crore. Therefore, the Resolution Plan, too, does not contemplate the CIRP

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costs to be strictly subject to a maximum of Rs. 25 Crore. To accept such a contention of the Appellants would be to misinterpret the observations made in the impugned order.

131Copy pinpoint131. The Appellants rely on Clause 6.3.1(d), specifically under the heading “BKC Property not part of Resolution” to assert that the Airport Dues have to be settled upfront and in full in the first 180 days from the Effective Date and that it cannot be in staggered payments spread across a period of time. However, Clause 6.3.1(d) which is titled “Proposal for Resolution of Outstanding Airport and Parking Dues (Rs. 240 Crores as of August 31, 2020” is attached with the following qualification: “The Resolution Applicant states and confirms that this “Proposal for Resolution of outstanding airport and parking dues (approx. Rs. 240 Crores as of August 31,2020)” which deals with the appropriation of the BKC Property is merely a proposal and not a condition to the implementation of this Resolution Plan and the CoC has the discretion to accept/ reject such a proposal. If the above-mentioned proposal is acceptable to the CoC, then it is acceptable to the Resolution Applicant in the manner stated hereinabove”. (emphasis supplied)

The contention of the SRA is that the aforesaid qualification applies equally to the part of Clause 6.3.1(d) under the heading “BKC Property not part of resolution” and that the entire Clause 6.3.1(d) would remain a proposal and not a binding condition on the SRA. Irrespective of a determination on the same, even as per Clause 6.4.1, the payment towards CIRP costs including Airport Charges had to be made in full, in priority, within 180 days from the Effective Date. This is evident from – (a) Clause 6.4.1(a) which states that the CIRP Costs are to be paid in priority to any other creditor of the Corporate Debtor in terms of Section 30(2)(a) of the IBC, 2016; (b) Clause 6.4.1(k) which states that the outstanding CIRP costs shall be paid by the Resolution Applicant out of the funds infused by the Resolution Applicant in the Corporate Debtor and as per the Implementation Schedule set out in Clause 7.7 below; (c) Clause 6.4.1(m) which states that the CIRP cost shall be “fully paid and discharged after the Effective Date” before payment is made to any of the creditors as per the

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State Bank of India & Ors. v. The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch & Anr.

Resolution Plan; (d) Clause 6.4.1(n) which states that the Resolution Applicant has sufficient funds and that the CIRP costs shall be met out of funds infused by the Resolution Applicant; and (e) S.No. 16 of the Implementation Schedule under Clause 7.7 which states that the CIRP costs must be paid as per Clause 6.4.1 within Z+170 days.

132Copy pinpoint132. Therefore, the SRA not having infused the first tranche payment of Rs. 350 Crore as per Clause 6.3.1(g) and S. No. 11 of the Implementation Schedule under Clause 7.7 within a period of 180 days from the Effective Date and within the multiple extensions granted therefrom, has defaulted on its obligation towards the payment of CIRP costs (which include airport dues) under Clause 6.4.1 as well.

b. Whether Respondent No.1/SRA could be said to have failed to implement the Resolution Plan on account of the non-payment of workmen and employees’ dues as per the terms of the Resolution Plan and the order of the NCLT dated 21.10.2022 which was confirmed by the order dated 31.01.2023 of this Court?

133Copy pinpoint133. The Resolution Plan, under Clause 6.4.2 deals with the “Treatment of Employees/Workmen dues, including dues of the Authorized Representatives of Employees/Workmen”. Clause 6.4.2(a) provides for a fixed sum of Rs. 52 Crore to be paid to the workmen and employees towards settlement of all their claims. Clause 6.4.2(b) states that this payment shall be made out of the funds infused by the SRA in the Corporate Debtor, in priority to the payment to the financial creditors and as per the Implementation Schedule set out in Clause 7.7 i.e., within 175 days from the Effective Date. Clause 6.4.2(c) provides that if the Liquidation Value due to the workmen and employees is not “nil”, then the SRA would pay such a Liquidation Value. If this Liquidation Value is over and above the amount proposed to be paid under the Resolution Plan, then such additional amounts shall be first paid out of the positive bank balance of the Corporate Debtor as on the Effective Date and the remaining amounts shall be paid out of the amounts reserved for other creditors on a pro rata basis, subject to a maximum of Rs. 475 Crore.

134Copy pinpoint134. The order dated 21.10.2022 of the NCLAT dealt with the entitlements of the workmen and employees to several payments and made the following observations:

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“71. In view of the aforesaid discussion, we arrive at following conclusions: (i) The workmen and employees are entitled for payment of full amount of provident fund and gratuity till the date of commencement of the insolvency which amount is to be paid by the Successful Resolution Applicant consequent to approval of the Resolution Plan in addition to the 24 months workmen dues as the workmen is entitled to under Section 53(1)(b) of the Code. It is made clear that in addition to part amount of provident fund and gratuity as proposed in Resolution Plan to workmen, Successful Resolution Applicant is obliged to make payment of balance unpaid amount of provident fund and gratuity to workmen and employees.

72. Our answer to Question II and III is as follows: (i) The workmen and employees are entitled to receive the amount of provident fund and gratuity in full since they are not part of the liquidation estate under Section 36(4)(b)(iii). (ii) The workmen are entitled to receive their dues from the Corporate Debtor for period of 24 months as per provision of Section 53(1)(b) at least to minimum liquidation value envisaged under Section 32(2)(b) read with Section 53(1).

80. As observed above, in admitted claim of workmen provident fund, gratuity and leave encashment was included, and payment proposed in plan partly satisfy above dues also. The workmen are entitled to full payment of provident fund and gratuity, hence, the balance of above dues are to be paid by the Successful Resolution Applicant, to satisfy statutory obligations. Non-payment of full provident fund and gratuity shall lead to violation of Section 30(2)(e), hence, to save the plan the above payments have to be made.

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128. In the forgoing discussions, we have noted that the liquidation value of the workmen as has been referred to in Form-H preferred by the Resolution Professional is Rs.113

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State Bank of India & Ors. v. The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch & Anr.

crores and workmen were entitled to receive at least Rs.113 crores as per Section 30(2)(b) read with Section 53(1)(b) of the Code. Shri Krishnendu Datta, learned Counsel for Successful Resolution Applicant during his submission, submitted that Successful Resolution Applicant shall be paying an amount of Rs.113 crores to the workmen as per the Resolution Plan, since it was contemplated that, if liquidation value is more than Rs.52 crores, the liquidation value shall be payable to the workmen. To clear any doubt, we deem it fit and proper to issue direction to Successful Resolution Applicant to make payment to the workmen of Rs.113 crores as per the Resolution Plan.

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134. In result, the Appeal(s) are decided in following manner: (I) The Appeal(s) of workmen and employees being Company Appeal (AT) (Insolvency) Nos. 643 of 2021, 752 of 2021, 801 of 2021, 915 of 2021, 771 of 2022 are partly allowed with following directions: (a) Successful Resolution Applicant is directed to make payment of unpaid provident fund to the workmen till date of insolvency commencement, after deducting the amount already paid towards provident fund in the Resolution Plan to the workmen. (b) The workmen are also entitled for payment of their gratuity dues as on insolvency commencement date, after adjusting any amount towards gratuity paid under the Resolution Plan. It is made clear that entitlement of those employees and workmen, who were demerged into AGSL shall not be there, since demerger has not been treated as termination of their services. (c) The employees are also entitled for the payment of their full provident fund, unpaid up to the date of insolvency commencement date. It is made clear that full payment of provident fund would be of that unpaid part of provident

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fund, which has not been deposited by the Corporate Debtor in the EPFO. (d) Employees shall also be entitled for the gratuity, which fell due up to insolvency commencement date. (e) The rest of the prayers of the workmen and employees are denied. (f) The Chairman of the Monitoring Committee, erstwhile Resolution Professional is directed to compute the payments to be made to workmen and employees within one month from today and communicate the same to the Successful Resolution Applicant to take steps for payment.” (emphasis supplied)

135Copy pinpoint135. Thus, it was held in clear terms that the workmen and employees are entitled to full payment of Provident Fund and Gratuity. The non- payment of these amounts shall lead to a violation of Section 30(2) (e) of the IBC, 2016 which requires that the Resolution Plan must not contravene any of the provisions of the law for the time being in force. Further, it was held that the workmen and employees are entitled to a liquidation value of Rs. 113 Crore instead of Rs. 52 Crore as contemplated in the Resolution Plan. The NCLAT directed the Chairman of the Monitoring Committee (the erstwhile Resolution Professional) to compute the payments to be made to the workmen and employees within one month and to communicate the same to the SRA. The RP had arrived at a figure of Rs. 226.6 Crore which comprised of Rs. 14 Crore towards Provident Fund dues, Rs. 188.2 Crore towards Gratuity dues and Rs. 24.4 Crore towards damages for non-payment of Provident Fund.

136Copy pinpoint136. The SRA sought a clarification of the aforesaid order before the NCLAT and vide order dated 02.12.2022, it was made clear that the cost of paying the unpaid amount towards the Provident Fund and Gratuity to the workmen and employees has to be borne by the SRA. The same cannot be paid out of the amounts reserved for the other creditors of the Corporate Debtor on a pro-rata basis subject to a maximum of Rs. 475 Crore as stated in Clause 6.4.2(e) of the Resolution Plan since that was a contemplation pertaining to the liquidation value only and not for the dues relating to Provident

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Fund and Gratuity. An appeal against the order dated 21.10.2022 was dismissed by this Court vide order dated 30.01.2023. Therefore, there was no scope left for the SRA to avoid payment of the Provident Fund and Gratuity dues to the workmen and employees. Such an obligation was in addition to the payment of minimum liquidation value that the workmen/employees were entitled to under the terms of the Resolution Plan.

137Copy pinpoint137. The SRA had filed IA Nos. 3789-3790 of 2023 in the Company Appeal on 16.06.2023 praying that the Gratuity Claims be allowed to be paid in three tranches i.e., within 3, 4 and 5 years from the Closing Date. The SRA also sought leave from the NCLAT to approach the EPFO Authorities under Section 14B to seek a reduction or waiver of the damages of Rs. 24.4 crore imposed on the Corporate Debtor and to also pursue an appeal against the order of the EPFO Authorities directing the SRA to pay the damages. Subsequently, on 18.08.2023, the SRA filed two other IAs 3801-3802 of 2023 in the Company Appeal, praying that, in case the previous IA relating to the Gratuity and Provident Fund Claims is not allowed, then the Resolution Plan cannot be implemented under Section 30(2)(e) and as a consequence, the Lenders be directed to refund all amounts invested or infused into the Corporate Debtor by the SRA.

138Copy pinpoint138. The NCLAT in its impugned order has taken note of its own order dated 21.10.2022 but has, however, only allowed the upfront payment of the Provident Fund dues of Rs. 12 Crore to the workmen and employees along with the payments that they are entitled to under the Resolution Plan. There is no specific direction as regard the payment obligations related to Gratuity nor any decision rendered on the two aforesaid IAs filed by the SRA in the Company Appeal. The NCLAT committed a serious error in failing to consider these IAs filed by the SRA and has given the impression that the SRA is liable to pay only the Provident Fund dues upfront.

139Copy pinpoint139. According to the SRA, the dues relating to the Provident Fund would be paid upfront in compliance with Section 11 of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952. However, the Gratuity Dues could be paid in tranches since neither the order dated 21.10.2022 of the NCLAT nor the order dated 30.01.2023 of this Court had imposed any timelines for the payment of the Gratuity Dues. Furthermore, it was submitted that the provisions of

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the Payment of Gratuity Act, 1972 were not so stringent. However, such a proposal cannot be allowed especially in light of the fact that the order dated 21.10.2022 of the NCLAT is unambiguous in its declaration that both Provident Fund and Gratuity dues have to be paid by the SRA in order to save the Resolution Plan from being hit by Section 30(2)(e) of the IBC, 2016.

140Copy pinpoint140. Therefore, by not infusing the first tranche payment of Rs. 350 Crore as per the Implementation Schedule of the Resolution Plan, the SRA has breached the terms of the Resolution Plan which required a minimum liquidation value of Rs. 113 Crore to be paid towards the Workmen and Employees’ Dues as well. Moreover, both the Provident Fund and Gratuity Dues amounting to Rs. 226 Crore should also have been paid by the SRA as per the order dated 21.10.2022 of the NCLAT in fulfillment of its obligations, which it failed to do.

c. Whether there were sufficient grounds before the NCLAT to hold that Respondent No.1/SRA had contravened the terms of the approved Resolution Plan and that the Corporate Debtor must be directed to be liquidated under Section 33(3) of the IBC, 2016?

141Copy pinpoint141. The NCLAT in its impugned order held that the non-deposit of Rs. 150 Crore in cash towards the first tranche payment of Rs. 350 Crore cannot lead to the conclusion that the Resolution Plan had failed. The relevant observations are reproduced hereinbelow: “79. The submission of the Appellant that on account of non-deposit INR 150 crores as directed by the Hon’ble Supreme Court, should lead to liquidation of the Corporate Debtor, cannot be accepted. The Hon’ble Supreme Court in its judgment dated 18.01.2024 has clearly held that its order modifying the direction of the Tribunal is confined only to the permission granted to the SRA to adjust INR 150 crores PBG. Thus, modification of the order by the Hon’ble Supreme Court also has to confine to the adjustment of the PBG. It was held by the Hon’ble Supreme Court that Appellant have asked for infusion of INR 350 crores and infusion does not include adjustment of PBG. The Hon’ble Supreme Court neither considered nor expressed any opinion on the question of liquidation of the Corporate Debtor,

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nor the order dated 18.01.2024 can be read to mean that non-compliance of the direction to deposit INR 150 crores by the SRA by 31.01.2024 should lead to liquidation of the Corporate Debtor. The submission of the Appellant that non- deposit of INR 150 crores leads to failure of Resolution Plan, cannot be accepted. As observed above, consequence of non-deposit of INR 150 crores is that these Appeals have to be heard on merits and the question, which has arisen in the Appeal has to be decided regarding compliance of conditions precedent by the SRA by 20.05.2022. Further submission of the Appellant that this Tribunal may exercise jurisdiction under Section 33, sub-section (3) in directing liquidation of the Corporate Debtor due to non- compliance of deposit on INR 150 crores also cannot be accepted. For passing an order under Section 33, sub- section (3), there has to be adjudication that Resolution Plan approved by the Adjudicating Authority has been contravened by the Successful Resolution Applicant. We do not accept the submission of the Appellant that by non-deposit of INR 150 crores by 31.01.2024, the SRA has contravened the Resolution Plan and order be passed under Section 33, sub-section (3). In view of our above observations and conclusions, we answer Question Nos. v, vi, and vii in following manner:

Question No. v: Direction of Hon’ble Supreme Court permitting the Successful Resolution Applicant to infuse INR 150 crores by 31.01.2024 was in reference to offer made by Appellant in affidavit dated 16.08.2023

Question No. iv: The Successful Resolution Applicant having not been able to infuse funds by 31.01.2024 as directed by Hon’ble Supreme Court vide its judgment dated 18.01.2024, it cannot be held that Resolution Plan has failed and cannot be implemented by the SRA.

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Question No. vii: No grounds have been made out to direct the liquidation of the Corporate Debtor under Section 33, sub-section (3) in these Appeals.”

(emphasis supplied)

142Copy pinpoint142. The NCLAT declined to accept the submission of the Appellant that on account of non-deposit of Rs. 150 Crore as directed by this Court, the Corporate Debtor should be liquidated. However, this was based on the incorrect assumption that the direction of this Court to infuse to Rs. 150 Crore in cash was only confined to the terms of the Lenders Affidavit dated 16.08.2023. Previous segments of the judgment have elaborated in sufficient detail that the Lender’s Affidavit could not have provided for conditions which were incompatible with the terms of the Resolution Plan. Such an affidavit would have been in direct contravention with Section 31(1) of the IBC, 2016 which does not permit any modifications to be made in the Resolution Plan duly approved by the Adjudicating Authority. Therefore, the direction of this Court in its order dated 18.01.2024 was with respect to both the Lenders Affidavit and the underlying terms of the Resolution Plan. The same was so understood by all the parties involved.

143Copy pinpoint143. The Lender’s Affidavit in precise terms stated that “Failing to comply with the conditions mentioned in Para 8(a) to (c) above, the Corporate Debtor should be directed to go into liquidation”. It was in this context that this Court stated that, “the SRA shall peremptorily on or before 31 January 2024, deposit an amount of Rs. 150 crores into the designated account of SBI, failing which the consequences under the Resolution Plan will follow”. Therefore, it is incorrect to contend that this Court neither considered nor expressed any opinion on the question of liquidation of the Corporate Debtor. The consequence of non-implementation of the Resolution Plan by the SRA must necessarily be liquidation of the Corporate Debtor in accordance with Section 33(3) of the IBC, 2016. Section 33(3) of the IBC, 2016 reads as thus: “(3) Where the resolution plan approved by the Adjudicating Authority is contravened by the concerned corporate debtor, any person other than the corporate debtor, whose interests are prejudicially affected by such contravention,

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may make an application to the Adjudicating Authority for a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1).” (emphasis supplied)

144Copy pinpoint144. The non-deposit of Rs. 150 Crore had in fact lead to a failure of the Resolution Plan on several counts as elaborated herein. In addition to the breach of Clauses 6.3.1(g), 6.4.4 and S. No. 11 of the Implementation Schedule under Clause 7.7, the non-infusion of the first tranche payment in accordance with the terms of the Resolution Plan has also led to an infraction as regards Clause 6.4.1 on the payment of CIRP costs and Clause 6.4.2 on the payment of workmen/employees’ dues. Further, the payment of the Provident Fund and Gratuity dues of the workmen/Employees as mandated by the order dated 21.10.2022 of the NCLAT which was confirmed by this Court on 31.01.2023, has also not been made by the SRA.

145Copy pinpoint145. The SRA was given multiple extensions, post the Effective Date i.e., 20.05.2022 in order to implement the Resolution Plan and infuse the first tranche payment of Rs. 350 Crore into the Corporate Debtor. This includes the extensions granted by (a) the NCLT vide order dated 13.01.2023, by which the timeline for infusion of the first tranche payment was extended till 15.05.2023; (b) the NCLAT vide order dated 26.05.2023, where the timeline of 180 days was further extended up to 31.08.2023; (c) the NCLAT vide order dated 28.08.2023, where the timeline of 180 days was extended up to 30.09.2023; and (d) this Court vide order dated 18.01.2024, whereby the time of 180 days for infusion was extended up to 31.01.2024. However, indisputably, there has been a failure on the part of the SRA to abide by all these extended timelines as well. No further extensions or accommodations can be given to the SRA in light of the multiple opportunities already granted as aforesaid. Further, if such a request for further extension is entertained, it would only serve to bring us to the position that the parties were at when the order of this Court dated 18.01.2024 was passed.

146Copy pinpoint146. In Kridhan Infrastructure Private Limited v. Venkatesan Sankaranarayan and Others reported in (2021) 6 SCC 94 the appellant had failed to fulfil its obligations under the Resolution Plan, including that of equity infusion, despite numerous opportunities

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granted over a period of 6 months. Therefore, the CoC voted by a majority to liquidate the corporate debtor as a result of failure to implement the resolution plan. The NCLT had allowed the liquidation to proceed and the NCLAT had upheld the same. On an appeal before this Court, a statement was made by the successful resolution applicant therein that an amount of Rs. 50 Crore would be deposited on or before 10.01.2021. Bearing in mind that liquidation under the IBC is a matter of last resort, such an opportunity was granted. The time for making the said deposit was further extended until 25.02.2021. However, no payment was made. By underscoring that time is a crucial facet of the scheme under the IBC, this Court held that there was a failure on part of the resolution applicant to implement the resolution plan and it was ordered that the liquidation proceedings against the corporate debtor be revived. The relevant observations are reproduced hereinbelow: “11. The appellant has been unable to raise the funds. The fact of the matter, as it emerges from Mr Viswanathan’s submissions, is that the appellant will be unable to raise funds from the term lenders who are insisting that the status of the Company should change from a company under liquidation to an active status. The order of liquidation has not been set aside. Ultimately, what the request of the appellant reduces itself to, is that it would raise funds on a mortgage of the assets of the Company and unless the Company is brought out of liquidation, it would not be in a position to raise the funds. This is unacceptable. At this stage, the order of liquidation has only been stayed, but a final view was, thus, to be taken by this Court. Sufficient opportunities were granted to the appellant 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. Since 9-10-2020, 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 IBC [Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407, paras 12-16 : (2018) 1 SCC (Civ) 356] . To allow such proceedings to

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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 consequence envisaged under the order of this Court shall accordingly ensue in terms of the forfeiture of the amount of Rs 20 crores. As a consequence of this order, the management shall revert to the liquidator for taking steps in accordance with law. The civil appeal is accordingly dismissed.” (emphasis supplied).

147Copy pinpoint147. The SRA herein has failed to infuse the first tranche payment of Rs. 350 Crore as envisaged in the Resolution Plan despite the Effective Date being fixed on 20.05.2022. As a consequence, the payment of CIRP costs, workmen and employees’ dues etc. which must be made in priority over the dues of the other creditors have also not been made. More than 5 years have passed and the implementation of the Resolution Plan still seems to be a dim light at the far end of a long tunnel. Over this period of 5 years, several dues such as the Airport dues to be paid by the Corporate Debtor have increased multi-fold due to the fault of the SRA and this Court must ensure that such debts stop running at some point in time.

148Copy pinpoint148. Although one of the key objectives of the IBC, 2016 is to ensure the survival of the corporate debtor as a going concern, yet the same must not come at the cost of efficiency. In scenarios such as the present, “timely liquidation” is indeed preferred over an “endless resolution process”. Such a view will prevent the likelihood of adversely affecting the interests of all the creditors who have been suffering due to no fault of their own and also securing the maximization of value of the remaining assets.

149Copy pinpoint149. At this stage of the implementation of the Resolution Plan, it is no longer viable for the SRA to submit that the Resolution Plan shall automatically stand withdrawn according to Clause 7.6.4 of the Resolution Plan and upon, such withdrawal, the members of the SRA in the MC shall resign, the remaining members of the MC shall assume absolute

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control of the Corporate Debtor and all the amounts infused by the SRA would be refunded. This is especially so, since the Conditions Precedent were declared to be fulfilled and the Effective Date was achieved on 20.05.2022. The consequence of the failure to implement the Resolution Plan in terms of Clause 9.4 of the Resolution Plan and Clause 3.13.7(iii) of the RFRP is that the Appellants are entitled to invoke the PBG automatically without any reference to the SRA. Therefore, it is directed that the PBG may be invoked by the Appellants in accordance with the terms of the Resolution Plan.

iii. Whether the timely implementation of the Resolution Plan is also one of the objectives of the IBC, 2016?

150Copy pinpoint150. The Preamble to the Insolvency and Bankruptcy Code, 2016 reads as thus: “An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto.” (emphasis supplied)

151Copy pinpoint151. The Report of the Bankruptcy Law Reforms Committee, 2015 (hereinafter, the “2015 Report”) also serves to provide valuable insight into the several purposes for which the Code was enacted. Upon highlighting the various benefits of a consolidated insolvency regime, the Report also emphasizes on the time-bound working of the Code. The relevant observations are reproduced hereinbelow: “Speed is of essence Speed is of essence for the working of the bankruptcy code, for two reasons. First, while the “calm period” can help keep an organisation afloat, without the full clarity of ownership and control, significant decisions cannot

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be made. Without effective leadership, the firm will tend to atrophy and fail. The longer the delay, the more likely it is that liquidation will be the only answer. Second, the liquidation value tends to go down with time as many assets suffer from a high economic rate of depreciation. From the viewpoint of creditors, a good realisation can generally be obtained if the firm is sold as a going concern. Hence, when delays induce liquidation, there is value destruction. Further, even in liquidation, the realisation is lower when there are delays. Hence, delays cause value destruction. Thus, achieving a high recovery rate is primarily about identifying and combating the sources of delay.” (emphasis supplied)

The Report acknowledged that time and speed are of the essence for the working of the Code. It conceded that significant decisions cannot be made for the company without full clarity as to ownership and control. Therefore, the longer it takes for installing effective leadership, the quicker will be the rate of atrophy of the company. Over a period of time, this delay in taking control of the company will lead to liquidation being the only viable answer. In this context, if there is additional delay during the process of liquidation, the liquidation value might also reduce significantly since the company’s assets might suffer a high economic rate of depreciation.

152Copy pinpoint152. We hasten to add that any delay in arriving at the conclusion that the company is to be liquidated is also detrimental to a Company, especially when the Company has long awaited timely and positive action from the successful resolution applicant as regards the implementation of the approved resolution plan. Therefore, although liquidation should be the last resort, yet one should also ensure that further delay in arriving at this decision does not have the effect of hampering the realizations that can be made through liquidation.

153Copy pinpoint153. The decision in Innoventive Industries Limited v. ICICI Bank and Another reported in (2018) 1 SCC 407 held that the Maharashtra Relief Undertakings (Special Provisions) Act, 1959 was repugnant to the IBC, 2016 and elaborated on the scheme of the IBC, 2016 by placing reliance on the 2015 Report as aforementioned. The relevant observations are reproduced hereinbelow:

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“13. One of the important objectives of the Code is to bring the insolvency law in India under a single unified umbrella with the object of speeding up of the insolvency process. As per the data available with the World Bank in 2016, insolvency resolution in India took 4.3 years on an average, which was much higher when compared with the United Kingdom (1 year), USA (1.5 years) and South Africa (2 years). The World Bank’s Ease of Doing Business Index, 2015, ranked India as country number 135 out of 190 countries on the ease of resolving insolvency based on various indicia.

xxx xxx xxx

16. At this stage, it is important to set out the important paragraphs contained in the Report of the Bankruptcy Law Reforms Committee of November 2015, as these excerpts give us a good insight into why the Code was enacted and the purpose for which it was enacted:

xxx xxx xxx Speed is of essence Speed is of essence for the working of the bankruptcy code, for two reasons. First, while the “calm period” can help keep an organisation afloat, without the full clarity of ownership and control, significant decisions cannot be made. Without effective leadership, the firm will tend to atrophy and fail. The longer the delay, the more likely it is that liquidation will be the only answer. Second, the liquidation value tends to go down with time as many assets suffer from a high economic rate of depreciation. From the viewpoint of creditors, a good realisation can generally be obtained if the firm is sold as a going concern. Hence, when delays induce liquidation, there is value destruction. Further, even in liquidation, the realisation is lower when there are delays. Hence, delays cause value destruction. Thus, achieving a high recovery rate is primarily about identifying and combating the sources of delay.

xxx xxx xxx

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Objectives The Committee set the following as objectives desired from implementing a new Code to resolve insolvency and bankruptcy: (1) Low time to resolution. (2) Low loss in recovery. (3) Higher levels of debt financing across a wide variety of debt instruments.” (emphasis supplied)

154Copy pinpoint154. Several decisions of this Court have highlighted the importance of a speedy resolution process under the IBC, 2016 in the context of either completing the CIRP process in a time-bound manner as per Section 12 of the IBC, 2016 or ensuring that the Liquidator does not cause unnecessary delay or inefficiency in the Liquidation process. A primary and predominant consideration behind minimizing delay is to ensure that the assets of the Corporate Debtor do not get frittered away or depreciated due to the time lag caused either during the CIRP or during the liquidation process overseen by the Liquidator. Such a time bound action is also equally important and imperative while the Resolution Plan is being implemented by the successful resolution applicant. Unnecessary delay caused in implementation of the Resolution Plan would also lead to similar consequences of the assets of the corporate debtor diminishing in value. Therefore, there is no doubt that the timely implementation of the Resolution Plan is also one of the underlying objectives of the IBC, 2016.

155Copy pinpoint155. It is in the above context that the Rules regarding the power of the NCLT and NCLAT to extend time, have to be discussed. Rule 15 of the NCLT Rules, 2016 reads as thus: “15. Power to extend time.- The Tribunal may extend the time appointed by these rules or fixed by any order, for doing any act or taking any proceeding, upon such terms, if any, as the justice of the case may require, and any enlargement may be ordered, although the application therefore is not made until after the expiration of the time appointed or allowed.”

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156Copy pinpoint156. Rule 15 of the NCLAT Rules, 2016 reads as thus: “15. Power to extend time.- The Appellate Tribunal may extend the time appointed by these rules or fixed by any order, for doing any act or taking any proceeding, upon such terms, if any, as the justice of the case may require, and any enlargement may be ordered, although the application therefore is not made until after the expiration of the time appointed or allowed.

157Copy pinpoint157. Rule 15 of the NCLT and NCLAT Rules, 2016 grants power to the NCLT and NCLAT respectively, to extend the time limits for doing any act which have been fixed, either by the rules or by an order, as the justice of the case may require. However, such power must not be exercised mechanically without any application of mind. An extension on the strict timelines fixed under the resolution plan must be done by adequately weighing the period of extension sought with the consequences of such extension on the continued implementation of the Resolution Plan. After all, such a discretion cannot be exercised to the detriment of the resolution plan and its implementation itself. While one of the reasons supporting the grant of extension would be to ensure the successful revival of the corporate debtor, multiple extensions may seriously hamper the economic feasibility of the Resolution Plan and also lead to an increase in the debts of the corporate debtor. Not to mention, during the extended period, there are several costs incurred towards maintaining the corporate debtor as well. The feasibility and practicability of the resolution plan adjudged by the “commercial wisdom” of the CoC might no longer remain in cases where incessant extensions are granted by the NCLT and NCLAT under their discretionary powers.

158Copy pinpoint158. The discretion in extending the time limits fixed under the Resolution Plan must be exercised in a much more circumspect manner, especially in cases such as the present, which pertains to the aviation sector, wherein timely resolution and revival of the Corporate Debtor is all the more crucial since the sector operates in such a way that a continuous flow of cash is required to maintain the company in a position of status quo.

159Copy pinpoint159. We are now left to finally consider whether in view of the gross facts on record, we should, in exercise of our plenary jurisdiction under Article 142 of the Constitution, direct that the Corporate Debtor be taken in liquidation.

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160Copy pinpoint160. This Court in Ebix (supra) had opined that the exercise of powers, even under Article 142, must be broadly compliant with the insolvency framework and its underlying objective. It was highlighted therein that the Court must remain cautious in granting reliefs that may run counter to the timeliness and predictability that is central to the IBC,

2016. The relevant observations made are reproduced hereinbelow: “101. Any claim seeking an exercise of the adjudicating authority’s residuary powers under Section 60(5)(c) IBC, NCLT’s inherent powers under Rule 11 of the NCLT Rules, 2016 or even the powers of this Court under Article 142 of the Constitution must be closely scrutinised for broader compliance with the insolvency framework and its underlying objective. The adjudicating mechanisms which have been specifically created by the statute, have a narrowly defined role in the process and must be circumspect in granting reliefs that may run counter to the timeliness and predictability that is central to IBC. Any judicial creation of a procedural or substantive remedy that is not envisaged by the statute would not only violate the principle of separation of powers, but also run the risk of altering the delicate coordination that is designed by IBC framework and have grave implications on the outcome of the CIRP, the economy of the country and the lives of the workers and other allied parties who are statutorily bound by the impact of a resolution or liquidation of a corporate debtor.” (emphasis supplied)

161Copy pinpoint161. We are conscious of our recent decision Glas Trust Company LLC v. Byju Raveendran and Others reported in 2024 SCC OnLine SC 3032, taking the view that the Court must be circumspect in deviating from the prescribed procedure, especially in the context of the IBC, 2016. However, if such a deviation is made, then the Court must justify as to why the deviation was necessary to prevent the abuse of the process of the Court. The relevant observations are reproduced hereinbelow: “70. When a procedure has been prescribed for a particular purpose exhaustively, no power shall be

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exercised otherwise than in the manner prescribed by the said provisions. In such cases, the court must be circumspect in invoking its ‘inherent powers’ to deviate from the prescribed procedure. If such deviation is made, the court must justify why this was necessary to “prevent the abuse of the process of the Court”.

71. The need to be circumspect while invoking “inherent powers”, when there is an exhaustive legal framework is amplified in the context of a legislation like the IBC. In Ebix Singapore (P) Ltd. v. Educomp Solutions Ltd. (CoC), a two-judge bench of this Court, speaking through one of us (DY Chandrachud, J), affirmed this position and observed as follows: “Any claim seeking an exercise of the adjudicating authority’s residuary powers under Section 60(5)(c) IBC, NCLT’s inherent powers under Rule 11 of the NCLT Rules or even the powers of this Court under Article 142 of the Constitution must be closely scrutinized for broader compliance with the insolvency framework and its underlying objective. The adjudicating mechanisms which have been specifically created by the statute, have a narrowly defined role in the process and must be circumspect in granting reliefs that may run counter to the timeliness and predictability that is central to the IBC. Any judicial creation of a procedural or substantive remedy that is not envisaged by the statute would not only violate the principle of separation of powers, but also run the risk of altering the delicate coordination that is designed by the IBC framework and have grave implications on the outcome of the CIRP, the economy of the country and the lives of the workers and other allied parties who are statutorily bound by the impact of a resolution or liquidation of a Corporate Debtor.” (emphasis supplied)

162Copy pinpoint162. However, the aforementioned decision should in no manner be read so as to restrict the exercise of plenary powers under Article 142 of the Constitution even while in deviating from the statutory procedure and

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framework of the IBC, 2016 or the rules and regulations thereunder, if such deviation is very much necessary. This Court in Glas Trust (supra) only went so far as to say that, where there is a prescribed procedure in place for a particular purpose, then that particular thing must be done only in the manner prescribed. It no way lays a dictum that even where cogent reasons exist warranting such deviation, the court would be powerless to exercise such inherent powers. In other words, Glas Trust (supra) only went to the extent of saying that in the absence of any exceptional circumstances or extraordinary reasons necessitating a deviation from the procedure laid down, the court should refrain from invoking its inherent jurisdiction to do something which otherwise could have been validly done in accordance with the procedure.

163Copy pinpoint163. We are of the considered view that where there exists extraordinary circumstances warranting the exercise of such powers in order to ensure that the very salutary purpose of the Code, 2016 is not frustrated, then the Court would be well-within its prerogative to exercise them to secure the object of the IBC, 2016. If the proposition that there ought to be no exercise of the inherent powers where a procedure is laid down were to be blanketly accepted then it may have a very chilling effect whereby the very purpose of vesting this Court with inherent powers under Article 142 and Tribunals with Rule 11 of the NCLT Rules would be rendered otiose and meaningless.

164Copy pinpoint164. On account of the inordinate delay in due implementation of the Resolution Plan, several dues including the CIRP costs of the Corporate Debtor have continuously multiplied. The Appellants are incurring huge expenditure and costs each month towards maintenance of the Corporate Debtor. The fundamental concern of this Court must not only be of doing substantial and complete justice but also to ensure expeditious resolution of the issues in the interests of the underlying objective of the IBC, 2016 and all the stakeholders involved. We must obviate the possibility of the Corporate Debtor being stuck, embroiled and its resolution being further delayed, especially in light of the delay that has already ensued.

165Copy pinpoint165. Having due regard to the materials on record, a determination that the terms of the Resolution Plan have been contravened and that there has been a failure to implement on part of the SRA, has already been made on a consideration of the issues before us. As such, since the

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Resolution Plan is no longer capable of being implemented, we must ensure that at least liquidation remains as a “viable” last resort for the Corporate Debtor and its creditors. Being mindful of the underlying objective that “Time and Speed are of the essence under the Code” and to prevent the frustration of this objective, we have thought fit and necessary to exercise our plenary powers under Article 142 and direct the Corporate Debtor into liquidation in the manner as laid down in the IBC, 2016. Granting this relief to the Appellants would not run counter to the timelines and predictability that is central to IBC. On the contrary, it would be in furtherance of it. Ensuring that liquidation commences as soon as possible would also be in the best interests of the Corporate Debtor and the creditors including the workmen/employees who are yet to receive their rightful dues. To be precise, it would not be necessary for the parties to again approach the Adjudicating Authority for a determination under Section 33(3) of the IBC, 2016 on the ground that the provisions of the approved Resolution Plan have been contravened.

F. SHORTCOMINGS AND SUGGESTIONS TO THE IBC, 2016.

166Copy pinpoint166. This litigation is an eye opener for one and all and therefore, before we close this matter, we deem it absolutely necessary to bring to light certain deficiencies in the IBC, 2016 which require immediate attention. We would also like to definitely say something as regards the functioning of the NCLTs and NCLAT.

167Copy pinpoint167. Given the importance of the IBC, 2016 for the betterment of the economy at large, it is imperative that the insolvency ecosystem be continuously strengthened through a regular identification of its shortcomings and a quick redressal of its practical deficiencies. This would significantly improve its implementation and yield better results for all the stakeholders involved. While the receptiveness of the regime to the incorporation of novel and relevant recommendations is important, it is paramount that there also be strict adherence to the existing provisions of the Code, both in letter and spirit.

168Copy pinpoint168. Scrupulous following of the provisions of the Code along with behavioural and ethical discipline is especially required from the key participants of the IBC who are central to its design i.e., the Adjudicating Authorities, Corporate Debtor, Resolution Professionals, Committee of Creditors, potential and Successful Resolution Applicants, Approved Valuers and Liquidators.

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169Copy pinpoint169. A Resolution Plan evolves through these players referred to above. However, it is the “commercial wisdom of the CoC” that assumes a position of superiority and becomes binding on all the stakeholders. The NCLT, which is the adjudicating authority and who has to approve the Resolution Plan under Section 31 of the IBC, 2016 also cannot trespass into the commercial wisdom exercised by the CoC. This decision to restrict the scope of interference on the commercial wisdom of the CoC was conscious and possibly taken bearing in mind the time delays that may arise out of a subsequent adjudication of the resolution plans approved by the CoC. Therefore, the commercial wisdom of the CoC has achieved paramount status, immune from any judicial intervention, to ensure the completion of the respective processes under the IBC, 2016 within the timelines prescribed therein.

170Copy pinpoint170. The position that the “commercial wisdom” of the CoC is non- justiciable and only a limited judicial review is available in this regard is well-settled through several decisions of this Court. This Court in the case of K Shashidhar v. Indian Overseas Bank and Ors. reported in (2019) 12 SCC 150, held that: “52. As aforesaid, upon receipt of a “rejected” resolution plan the adjudicating authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under Section 33(1) of the I&B Code. The legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of CoC much less to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors. From the legislative history and the background in which the I&B Code has been enacted, it is noticed that a completely new approach has been adopted for speeding up the recovery of the debt due from the defaulting companies. In the new approach, there is a calm period followed by a swift resolution process to be completed within 270 days (outer limit) failing which, initiation of liquidation process has been made inevitable and mandatory. In the earlier regime, the corporate debtor could indefinitely continue to enjoy the protection given under Section 22 of the Sick Industrial Companies Act, 1985 or under other such enactments which has now been forsaken. Besides, the commercial wisdom

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of CoC has been given paramount status without any judicial intervention, for ensuring completion of the stated processes within the timelines prescribed by the I&B Code. There is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. The opinion on the subject-matter expressed by them after due deliberations in CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the “commercial wisdom” of the individual financial creditors or their collective decision before the adjudicating authority. That is made non-justiciable.” (emphasis supplied)

171Copy pinpoint171. Thus, there is no doubt that the commercial wisdom of the CoC cannot be subjected to judicial review. However, in order to foster a much more effective and time-bound decision making by the members of the CoC, in the interests of maximization of value of the assets of the Corporate Debtor, certain self-regulating guidelines were issued by the IBBI on 06.08.2024 with immediate effect. The Guidelines for Committee of Creditors are reproduced hereinbelow: “6. Guidelines A member of the CoC shall: -

Objectivity and Integrity (a) follow relevant provisions of the Code and regulations, in letter and spirit, while performing their roles and functions. (b) maintain integrity in discharging their roles and functions as envisioned under the Code. (c) maintain objectivity during the decision-making process. (d) foster informed decision making and share with the CoC/ Insolvency Professional any relevant information

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relating to transactions, guarantees, recoveries, claims, etc. relating to the corporate debtor

Independence and Impartiality (e) disclose to the CoC/ Insolvency Professional the details of any existing or potential conflict of interest arising due to pecuniary, personal or professional relationship with any stakeholder, immediately on becoming aware of it.

Professional Competence and Participation (f) keep themselves updated with the provisions of the Code, rules and regulations and the role and responsibilities assigned thereunder. (g) nominate representative with proper authorisation and sufficient mandate to effectively participate in meetings. The nominated representative may endeavour to obtain approval of the competent authority, if required, at the earliest. (h) participate actively, constructively and effectively in deliberations and decision making of the CoC.

Co-operation, supervision and timeliness (i) supervise and facilitate the Insolvency Professional in discharging his duties under the Code. (j) facilitate expeditious appointment of various professionals within the timelines prescribed under the Code and regulations. (k) endeavour to resolve any inter-se disputes between the members, particularly in relation to claims, preferably, through dialogue, or other non-adversarial means, with a view to avoid litigation to the extent possible.

Confidentiality (l) ensure at all times complete adherence to the undertaking regarding confidentiality of information.

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Costs (m) take necessary measures to ensure that the insolvency resolution process cost is reasonable. (n) expeditiously decide on all the expenses to be incurred by the Insolvency Professional including the going concern expenses of the corporate debtor and his fee. (o) prudently fix the fee payable to the liquidator while deciding to liquidate the corporate debtor.

Meeting of the CoC (p) regularly monitor the activities of the Insolvency Professional and seek rationale of decisions/actions taken by him. (q) diligently recommend for the inclusion or otherwise of the belated claims collated by the Insolvency Professional and categorised as acceptable, in the list of creditors and its treatment in the resolution plan, if any. (r) actively participate in the presentation of valuation methodologies made by the Registered Valuers. (s) ensure the conduct of the meeting at regular intervals as specified in the regulations.

Sharing of information (t) proactively share the latest financial statements, relevant extract from the audits of the corporate debtor, conducted by the creditors such as stock audit, transaction audit, forensic audit, etc. and other relevant information available, with the Insolvency Professional to enable efficient conduct of the process. (u) seek details of all litigation filed against or by the corporate debtor from Insolvency Professional and recommend necessary actions to Insolvency Professional to safeguard the interest of the corporate debtor.

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Feasibility and viability of corporate debtor (v) carefully review and assess the information memorandum prepared by Insolvency Professional and offer additional insights. (w) duly contribute to the preparation of the marketing strategy by the Insolvency Professional and may also take measures for marketing of the assets of the corporate debtor, if necessary. (x) ensure that all resolution plans as received by Insolvency Professional are placed before CoC. (y) suitably consider the requirement of a monitoring committee for the implementation of the resolution plan.”

172Copy pinpoint172. The aforesaid guidelines may go a long way in streamlining the functions of the CoC. Adding to the aforesaid guidelines, we suggest that the CoC exercise their commercial wisdom and approve/reject the Resolution Plans placed before them exhibiting fairness and with good reasons. Such a reasoned decision making on their part will only serve to further enable the other key players like the Adjudicating Authorities to understand the rationale behind their decision and to uphold the correctness of the same. Furthermore, it is also suggested that the Central Government or the IBBI explore the possibilities of better enforcement of the standards and practices enumerated in the guidelines through an independent mechanism under the auspices of an oversight committee instead of making them self-regulatory. This will enable the guidelines to achieve some level of practical and operational relevance and also prevent any significant lapse in decision making on the part of the CoC.

173Copy pinpoint173. This litigation is an eye-opener also as regards the manner in which the implementation of plans are handled by the Successful Resolution Applicant and the Lenders involved in the process. Once a resolution plan is approved under the IBC, 2016 the Successful Resolution Applicant undertakes a profound responsibility to implement the plan in both letter and spirit. This obligation is not merely an empty formality but an enduring commitment to restore the corporate debtor to viability and ensure a meaningful turnaround. The role of a Successful Resolution Applicant is thus far more than a transactional

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duty towards the creditors or stakeholders; it embodies a pivotal responsibility to the distressed entity itself, which must be approached with utmost dedication and an earnest sense of duty. Regardless of the challenges that may arise, the Successful Resolution Applicant cannot treat its obligations as optional or conditional, nor can it abdicate its responsibility in the face of unforeseen obstacles. Its efforts must reflect a determination to implement the plan fully and to rejuvenate the debtor company, as this is integral to the success of the IBC framework and the spirit of economic revival it seeks to foster. The approach, therefore, must not be frugal or narrowly profit-driven, limited to viewing the transaction through a purely commercial lens. Instead, it must recognize that rescuing a distressed company is a responsibility of significant social and economic value, demanding a holistic and responsible strategy. This involves a dedication to long- term outcomes, where the Successful Resolution Applicant adopts measures that genuinely support the debtor’s rehabilitation, rather than making minimal or half-hearted attempts at implementation. Courts and tribunals have consistently underscored that the Successful Resolution Applicant’s role transcends commercial interest and embodies a commitment to the larger purpose of corporate revival. Consequently, it must make thoughtful and sustained efforts, demonstrating adaptability and resilience even when faced with obstacles or operational impediments. Simply put, the Successful Resolution Applicant cannot step back or dismiss its obligations by attributing delays or setbacks to the conduct of other stakeholders, as this would undermine the very purpose of insolvency resolution.

174Copy pinpoint174. In this collaborative effort, the duty to implement the plan does not fall on the Successful Resolution Applicant alone; lenders and creditors are equally obligated to support the process by offering constructive and continuous cooperation. They must not impede the implementation process through unnecessary demands beyond the pale of the resolution plan or with delays in implementation plan but rather should facilitate the Successful Resolution Applicant’s efforts to revive the corporate debtor. Given their vested interest in the corporate debtor’s successful revival, lenders have a fundamental duty to act in good faith and with transparency, recognizing that their cooperative stance is essential for overcoming the inevitable challenges of the resolution process. The lender’s role is not merely passive; it requires active support that aligns with the ultimate goal

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of the IBC, 2016 — to provide a fair and equitable resolution that maximizes asset value while enabling the debtor’s recovery.

175Copy pinpoint175. Therefore, the lenders must balance their financial interests with the broader objective of rehabilitation. They should not take an obstructive approach or seek to leverage the resolution process solely for individual benefit, as such actions would risk destabilizing the corporate debtor’s recovery trajectory. Instead, they must be prepared to collaborate fully, sharing the responsibility to make the resolution process work in practice. Through a spirit of cooperation and shared purpose, the Successful Resolution Applicant and lenders together can ensure that the corporate debtor is given the best chance for revival and sustained growth, reflecting the Code’s intent to rescue viable companies and protect broader economic interests.

176Copy pinpoint176. The IBC, 2016 is silent as regards the phase of implementation of the Resolution Plan by the Successful Resolution Applicant. This is mostly due to the fact that each Resolution Plan might be unique and customized to the specific needs of the Corporate Debtor and an excessive amount of statutory control over the implementation of the Plan may prove to be counterproductive to the cause of the Corporate Debtor. However, this has unfortunately led to the consequence of giving excessive leeway to the Successful Resolution Applicants to act in flagrant violation of the terms of the Resolution Plan in a lackadaisical manner. The SRAs repeatedly approach the Adjudicating Authority or the NCLAT for the grant of reliefs in relation to relaxation of the strict compliance to the terms of the Plan, including the timelines imposed therein. The NCLT and NCLAT more often than not, accede to such requests in exercise of their inherent powers under Rule 11 or their power to extend time under Rule 15 of the NCLT and NCLAT Rules, 2016 respectively. It is reiterated that the NCLT and NCLAT must not entertain such repeated attempts at violating the integrity of a CoC approved Resolution Plan by accommodating the incessant requests of the Successful Resolution Applicants. The exercise of discretion as regards altering the binding terms of the Resolution Plan, including the timelines imposed, must be kept at a minimum, at best. The NCLTs/ NCLATs need to be sensitised of not exercising their judicial discretion in extending the timelines fixed under IBC, 2016 or the Resolution Plan, in such a way that it may make the Code lose its effectiveness thereby rendering it obsolete.

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177Copy pinpoint177. Section 30(2)(d) of the IBC, 2016 states that the resolution professional shall mandatorily examine each resolution plan that is received to confirm that it provides for the implementation and supervision of the resolution plan. Regulation 38 of the 2016 Regulations provides for the mandatory contents of a Resolution Plan. Regulation 38(2) specifically states that the Resolution Plan shall provide for the term of the plan and its implementation schedule, along with adequate means for supervising its implementation. Further, under Regulation 38(3), a resolution plan must demonstrate that it addresses the cause of default, is feasible and viable, has provisions for its effective implementation, has provisions for approvals required and the timelines for the same and, that the resolution applicant has the capability to implement the resolution plan. Therefore, in light of these provisions of the IBC, 2016 and the 2016 Regulations, it can be seen that the resolution plan must be impermeable to any shortcuts that prevent its implementation, including timely implementation, by the successful resolution applicant. A consideration of these provisions reinforces the idea that timely implementation and strict adherence to the terms of the resolution plan is crucial.

178Copy pinpoint178. Furthermore, Section 74(3) of the IBC, 2016 provides for the punishment for contravention of the resolution plan and reads as follows: “(3) Where the corporate debtor, any of its officers or creditors or any person on whom the approved resolution plan is binding under section 31, knowingly and wilfully contravenes any of the terms of such resolution plan or abets such contravention, such corporate debtor, officer, creditor or person shall be punishable with imprisonment of not less than one year, but may extend to five years, or with fine which shall not be less than one lakh rupees, but may extend to one crore rupees, or with both.” (emphasis supplied)

179Copy pinpoint179. The Code comes down heavily on any knowing and willful contravention of the terms of the Resolution Plan, committed by any person, on whom the approved Resolution Plan has been made binding under Section 31 of the IBC, 2016. A punishment of minimum one year which may extend up to five years or minimum

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fine of one Lakh which may be up to one Crore rupees, or both, has been prescribed for such a contravention. In light of such strict consequence provided for the contravention of the resolution plan envisaged under the scheme of the Code itself, there is good reason for us to ensure that the successful resolution applicants abide by their commitments made under the Resolution Plan. Therefore, it is suggested that the authorities including the NCLT and NCLAT must not aid the Successful Resolution Applicants in circumventing the strict mandates of the law by acceding to their requests to relax the terms of the plan itself.

180Copy pinpoint180. One another suggestion at our end that may aid in a coordinated and non-adversarial implementation of the Resolution Plan by all the stakeholders is that the Adjudicating Authority while approving a Resolution Plan under Section 31 of the IBC, 2016, should record the next steps which are to be taken by the respective parties for commencement of implementation of the approved Resolution Plan. This will ensure that the parties are ad idem about the next round of their obligations that each of them is required to discharge under the approved Resolution Plan and that they do not delay the implementation by initiating any further litigation on this aspect. If such an approach is adopted, the parties would be able to put forth any difficulty that they might face in performing those next steps before the NCLT itself and seek necessary relief in that regard. Recording the next steps that are to be undertaken in the order of the Adjudicating Authority, will keep the parties more vigilant since a non-performance of the obligation may lead to a violation of the terms of the approved Resolution Plan and also violation of the order approving the Resolution Plan as well.

181Copy pinpoint181. As regards the implementation of the approved Resolution Plan, it is suggested that the IBC, 2016 statutorily provide for the constitution of a Monitoring Committee, once the plan has been approved, for a smooth handover of the Corporate Debtor to the Successful Resolution Applicant. Presently, such a provision is absent in the Code and it is the Adjudicating Authority that orders for the constitution of a Monitoring Committee to ensure smooth implementation of the Plan. The CoC must be empowered to constitute the Monitoring Committee which may, by default, include the Resolution Professional and also include other nominees from the CoC and the Resolution Applicant

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respectively. Such a Monitoring Committee would be entrusted with the powers of monitoring and supervising the resolution plan till the expiry of the term of the Resolution Plan. The Committee shall also be required to ensure all statutory compliances during the implementation of the plan along with updating the Adjudicating Authorities, Financial and other Creditors about the status of implementation of the Resolution Plan, on a quarterly basis.

182Copy pinpoint182. Moving on to certain efficiency issues within the NCLTs and NCLAT, it has been noticed over a period of time that there is a serious lack of timely admission and disposal of the applications filed as regards the initiation of CIRP, approval of the resolution plan and liquidation. This only adds to the uncertainty of the process and prolongs the dispute thereby jeopardizing the interest of all the stakeholders involved. Adjudication in a time-bound manner would help prevent any further deterioration of the value of the corporate entity. The integrity of the original timelines laid down by the Code and the Resolution Plan must not be allowed to be violated since it would dilute the objective of the Code in its entirety, erode investor confidence and hinder all corporate restructuring efforts.

183Copy pinpoint183. The Members often lack the domain knowledge required to appreciate the nuanced complexities involved in high-stake insolvency matters in order to properly adjudicate such matters. It has been noticed that the benches of NCLT(s) and NCLAT don’t have the practice of sitting for the full working hours. They are particularly lacking in the capacity to manage the growing number of cases and giving undivided attention required in such matters. There are serious issues in the manner in which the insolvency matters are listed. There is no effective system in place before the NCLTs for urgent listings. The staff of the Registry is given wide power to list or not to list a particular matter. One of the salutary objects of the Code, 2016 is to protect the assets of the corporate entity in a timely manner and take prompt decisions, however, it has become a practice of the NCLT(s) and NCLAT to ignore the urgent mentionings and listings of time-sensitive matters and show no deference to long-pending matters resulting in value erosion of the assets of the Corporate Debtor and rendering their insolvency resolution process a foregone conclusion. Over a period of time, this Court has noticed the growing

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tendency amongst Members of the NCLT(s) and NCLAT to ignore the orders of this Court or act in its defiance. We put the NCLT(s) and the NCLAT to notice, that any act of contravention of this Court’s order and the larger rubric of judicial propriety will not be tolerated. The NCLT(s) and the NCLAT must seriously rethink their approach towards admission and disposal of insolvency matters, they should not act as a mere rubberstamping authority and must take their roles seriously in ensuring time-bound hearings and resolutions. Proper and effective hearings, both virtually and in-court, must be given to insolvency matters of public importance, and the NCLT(s) and NCLAT(s) must earnestly work towards ensuring that the IBC, 2016 achieves its avowed object.

184Copy pinpoint184. One another serious issue pertaining to the functioning of the NCLTs and NCLAT is that there is often a shortage of members in the Tribunals and inadequate infrastructure to support their functioning. These vacancies heavily impact the insolvency reform initiative undertaken by the government since they lead to operational inefficiencies. A shortfall of members and the lack of requisite strength has led to Tribunals only sitting for a few days of the week or a few hours in a day. Even in Tribunals where there is no vacancy, the absence of requisite infrastructure has forced the benches to share courtrooms or halls on a rotation basis. As a consequence, the strict timelines provided in Section 12 of the IBC, 2016 are not complied with. Filling such vacancies with experts having adequate domain knowledge in the field must be prioritized along with addressing the infrastructure needs of the Tribunals to prevent any adverse effect on the resolution process. There must be strict mandates regarding the functioning of the Tribunals within its normal working hours. The appointment of new members must be done in a manner such that it coincides with the date of retirement of the sitting members in a seamless manner to avoid such operational inefficiencies. Persons with high ideals & impeccable integrity should be appointed as Members in the NCLT as well as NCLAT. There should not be any political appointment.

185Copy pinpoint185. It is now for the Parliament to look into our suggestions in consultation with the Insolvency Bankruptcy Board of India and the Ministry of Finance.

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G. CONCLUSION

186Copy pinpoint186. For all the foregoing reasons, we have reached the conclusion that the impugned order passed by the NCLAT is perverse and unsustainable in law. It has led to further complications. As a result, the appeals succeed and are allowed. The impugned order passed by the NCLAT is set aside.

187Copy pinpoint187. In the peculiar and alarming circumstances as discussed in this judgment and also keeping in mind the fact that almost five years have elapsed since the Resolution Plan was duly approved by the NCLAT and there being no progress worth the name, we are left with no other option but to invoke our jurisdiction under Article 142 of the Constitution and direct that the Corporate Debtor be taken in liquidation. The NCLT, Mumbai shall now take appropriate steps for appointment of liquidator and all other necessary formalities for commencement of liquidation of the Corporate Debtor.

188Copy pinpoint188. The amount of Rs 200 Crore already infused by the SRA stands forfeited. The Lenders/ Creditors are further permitted to encash the Performance Bank Guarantee of Rs. 150 Crore furnished by the SRA. We accordingly order so.

189Copy pinpoint189. These appeals are disposed of in the aforesaid terms.

190Copy pinpoint190. The Registry shall forward one copy each of this judgment to the Principal Secretary, Ministry of Finance, Government of India and the Chairperson, Insolvency Bankruptcy Board of India with a request to look into this judgment more particularly the suggestions made by this Court.

Result of the case: Appeals allowed.

† Headnotes prepared by: Divya Pandey