Pranav B Prem

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Justice Ashok Bhushan (Judicial Member), Mr. Arun Baroka (Technical Member) and Mr. Barun Mitra (Technical Member), has held that where a successful resolution applicant fails to obtain the necessary approvals within the one-year period prescribed under Section 31(4) of the Insolvency and Bankruptcy Code, 2016 (IBC), liquidation of the corporate debtor can be ordered as a necessary consequence.

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The appeal was filed by Taguda Pte Ltd., the Successful Resolution Applicant (SRA), challenging the order dated 08.12.2023 passed by the National Company Law Tribunal (NCLT), Mumbai Bench, Court-II. The NCLT had directed the SRA to implement the revised resolution plan for Ushdev International Limited within a period not exceeding two months. The NCLAT dismissed the appeal and upheld the order.

The corporate debtor, Ushdev International Limited, was admitted into the Corporate Insolvency Resolution Process (CIRP) on 17.05.2018 based on an application under Section 7 filed by the State Bank of India (SBI). The resolution plan submitted by the appellant was approved by the Committee of Creditors (CoC) on 22.06.2021 and subsequently by the NCLT on 03.02.2022. The plan involved a total settlement amount of ₹227 crore, with ₹225.14 crore earmarked for financial creditors.

Following the approval, an Implementation and Monitoring Agency (IMA) was constituted. Several IMA meetings were held between March 2022 and April 2023. In these meetings, the appellant repeatedly stated that necessary approvals from the Reserve Bank of India (RBI) were awaited, which were essential for implementing the resolution plan. However, even after more than a year from the approval date, these approvals remained pending.

SBI filed I.A. No. 1857/2023 on 28.04.2023, seeking a direction to enforce the resolution plan. The appellant argued that RBI’s approval was a precondition under Clause 14 of the resolution plan, without which implementation could not proceed. They further submitted that despite their readiness to park ₹225.14 crore in an SBI branch in Singapore or UAE, the event could not materialize due to procedural delays and requirements communicated by SBI.

The respondents, including SBI, countered that it was solely the responsibility of the resolution applicant to secure all required regulatory approvals, as per Clause 3.1 of the Request for Resolution Plan (RFRP) and Section 31(4) of the IBC. They emphasized that despite multiple extensions and more than three years since the plan's approval, the appellant had failed to meet this obligation. SBI also pointed out that only ₹2.4 crore, out of ₹225.14 crore, required RBI approval, and the delay in the remaining payment was unjustified.

The Tribunal observed that as per the statutory framework under Section 31(4) of the IBC and Clause 3.1 of the RFRP, the successful resolution applicant was required to obtain all necessary regulatory approvals within one year from the approval date, i.e., by 03.02.2023. The delay was attributed solely to the appellant, who could not secure the RBI approvals nor deposit the amount in any of the suggested accounts.

The Tribunal noted that even the extended time granted by the NCLT in its order dated 08.12.2023 had lapsed without implementation. Despite assurances given during IMA meetings and before the NCLAT, the appellant failed to park the funds as proposed.

The NCLAT held that the appellant could not justify the delay by blaming external factors or procedural hurdles when the legal obligation to secure the necessary approvals rested entirely with the resolution applicant. The Tribunal emphasized that the appellant’s continued inability to implement the plan and fulfill statutory obligations under the IBC provided sufficient grounds to allow the liquidation process to proceed.

Also Read: NCLAT Rules, Payment Made During Pendency Of CIRP Application Cannot Be Considered For Calculating Threshold U/S 4 Of IBC

Accordingly, the NCLAT dismissed the appeal, upholding the NCLT’s direction for implementation and permitting the pending liquidation application before the Adjudicating Authority to be proceeded with. The Tribunal also requested the Adjudicating Authority to decide the liquidation application expeditiously, preferably within three months.

Appearance

For Appellant: Mr. Abhijeet Sinha, Sr. Advocate with Mr. Kumar Anurag Singh, Mr. Zain A. Khan, Mohd. Abran Khan and Mr. Vijay Kumar, Advocates.

For Respondents: Mr. Navin Pahwa Sr. Advocate with Mr. Vaijyant Paliwal and Ms. Kirti Gupta, Advocates for R 1/SBI.

Mr. Soummo Biswas, Mr. Rishabh Jaisani, Ms. Aditi Tomar and Advocates for R-2/ PNB.

Cause Title: Taguda Pte Ltd. V. State Bank of India & Anr.

Case No: Company Appeal (AT) (Insolvency) No. 351 of 2024  

Coram: Justice Ashok Bhushan [Judicial Member], Mr. Arun Baroka [Technical Member], Mr. Barun Mitra [Technical Member]

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