NCLT Mumbai Rules, Adjudicating Authority Must Pass Liquidation Order U/S 33(4) Of IBC Upon Breach Of Resolution Plan By Successful Applicant
Pranav B Prem
The Mumbai Bench of the National Company Law Tribunal (NCLT), comprising Ms. Lakshmi Gurung (Judicial Member) and Mr. Hariharan Neelakanta Iyer (Technical Member), has held that when a Successful Resolution Applicant (SRA) breaches the terms of an approved resolution plan, the Adjudicating Authority is obligated to order liquidation under Section 33(4) of the Insolvency and Bankruptcy Code, 2016 (IBC). The ruling came in a liquidation application filed by Janaseva Sahakari Bank Limited, a secured creditor of Utech Engineering Works (India) Pvt. Ltd., against the said Corporate Debtor.
Background of the Case
Utech Engineering Works (India) Pvt. Ltd. was admitted into Corporate Insolvency Resolution Process (CIRP) pursuant to an application filed under Section 9 of the IBC by Premium Transmission Private Limited. A resolution plan submitted by Mr. Ravindra P. Birole, who was the Successful Resolution Applicant (SRA), was approved by the Tribunal on February 11, 2022. The plan detailed a comprehensive schedule of payments to financial creditors, operational creditors, and statutory authorities, including timelines, interest rates, and security arrangements.
Despite approval of the plan, the SRA failed to adhere to the agreed payment timelines and obligations under the plan. Janaseva Sahakari Bank Limited, the sole secured financial creditor, alleged continuous non-compliance by the SRA and sought liquidation of the Corporate Debtor under Section 33(3) of the IBC.
Arguments by the Applicant
The applicant cited multiple breaches by the SRA, including:
Failure to pay the entire CIRP cost of ₹67,04,255 by the due date of May 22, 2022.
Delay in payment of the first tranche of ₹50,00,000 due to the financial creditor by April 24, 2022, which was instead made on March 31, 2023.
Improper adjustment of CIRP costs from subsequent payments, resulting in a shortfall.
Non-payment of the second and third tranches due in April and August 2023, respectively.
Continued failure to make interest payments on the Working Capital Term Loan and Funded Interest Term Loan, along with default in payments to operational and statutory creditors.
The applicant emphasized that despite multiple reminders and opportunities to cure the default, the SRA had remained non-responsive and failed to implement the plan in good faith. The applicant also pointed out that a previous liquidation application had been withdrawn based on assurances by the SRA, which were ultimately not honored.
Defence by the SRA
The SRA admitted delays in payments but attributed the non-compliance to unforeseen challenges in reviving the Corporate Debtor’s operations, particularly given the company had been dormant since 2018. It argued that:
The business had suffered a severe loss of goodwill and operational continuity.
Regulatory licenses required for functioning in the sugar machinery sector were either expired or not renewable due to the company's CIRP status.
Despite these constraints, substantial payments had been made, including full payment of CIRP costs by January 2023 and ₹50,00,000 towards financial creditors by March 2023.
In total, ₹2.42 crores had been infused into the Corporate Debtor for various obligations.
The SRA maintained that it had not acted in bad faith and requested leniency in view of its efforts and the economic environment.
Observations of the Tribunal
After reviewing the submissions and the record, the Tribunal held that the SRA had clearly failed to implement the resolution plan in accordance with the approved terms. The Bench referred to Section 33(4) of the IBC, which mandates the Adjudicating Authority to pass a liquidation order upon determining that the resolution plan has been contravened.
The Tribunal also placed reliance on the Supreme Court's decisions in Arcelormittal India v. Satish Kumar Gupta [2018 SCCOnLine SC 1733] and the recent rulings in Kalyani Transco v. Bhushan Power and Steel Ltd [2025 SCC OnLine SC 1010] and State Bank of India v. Murari Lal Jalan [2024 SCCOnLine SC 3187], which emphasized strict compliance with resolution plans and clarified that leniency towards SRAs in breach of plans is unwarranted.
Quoting the apex court, the Tribunal noted: “Merely because the Code is silent with regard to the phase of implementation of the Resolution Plan… neither the Tribunal nor the Courts should give excessive leeway to the Successful Resolution Applicant to act in flagrant violation of the terms of the Resolution Plan or in a lackadaisical manner.” It further added that under Section 33(4), if a resolution plan is contravened, the Tribunal is duty-bound to pass a liquidation order without discretion.
Verdict
The NCLT concluded that there was a clear and continued breach of the approved resolution plan by the SRA. Accordingly, it allowed the application filed under Section 33(3) of the IBC and passed an order directing liquidation of Utech Engineering Works (India) Pvt. Ltd. The Tribunal appointed Shri Rajesh S. Shah as the Liquidator under Section 34 of the IBC and directed him to proceed with the liquidation process in accordance with the IBBI (Liquidation Process) Regulations, 2016. The order also marked the cessation of the moratorium declared under Section 14 and the commencement of a fresh moratorium under Section 33(5). Thus, the application was disposed of with a categorical declaration that failure to implement a resolution plan leaves no scope for leniency and invites mandatory liquidation under the statutory framework.
Appearance
For Applicant: Adv. Avinash R. Khanolkar a/w Adv. Surekha Yadav ,Adv. Khushbu Bhanushali
Cause Title: Janaseva Sahakari Bank Limited V. Ravindra P. Birole
Case no: I.A. No. (Liq.) 81 of 2024 In C.P. (IB) 2476/MB/2018
Coram: Lakshmi Gurung [Member (Judicial)], Hariharan Neelakanta Iyer [Member (Technical)]
