As per the case facts, a Resolution Plan approved by the NCLAT nearly five years ago has seen no significant progress. The case involves issues such as non-payment of airport ...
No Acts & Articles mentioned in this case
2024 INSC 852 REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 5023-5024 OF 2024
STATE BANK OF INDIA & ORS …APPELLANT(S)
VERSUS
THE CONSORTIUM OF MR. MURARI LAL
JALAN AND MR. FLORIAN FRITSCH & ANR …RESPONDENT(S)
WITH
CIVIL APPEAL NOS. 12220-12221 OF 2024
J U D G M E N T
Civil Appeal Nos. 5023-5024 of 2024 Page 1 of 168
J.B. PARDIWALA, J. :-
For convenience of exposition, this judgment is divided into the following parts: -
INDEX
A. FACTUAL MATRIX ................................................................................... 3
B. SUBMISSIONS ON BEHALF OF THE APPELLANTS ...................... 41
i. Issue No.1: Adjustment of PBG of Rs. 150 Crore towards the first
tranche payment............................................................................................ 43
ii. Issue No. 2: Non-payment of Airport dues ........................................... 53
iii. Issue No. 3: Non-payment of Workmen and Employees’ dues ........... 55
iv. Issue No. 4: Achievement of Effective Date .......................................... 57
v. Issue No. 5: Non-fulfilment of Conditions Precedent .......................... 59
C. SUBMISSIONS ON BEHALF OF THE RESPONDENTS ................... 63
D. ISSUES FOR DETERMINATION .......................................................... 76
E. ANALYSIS ................................................................................................. 77
i. Whether the Performance Bank Guarantee (PBG) could have been
adjusted against the first tranche payment which was to be made under
the Resolution Plan, within 180 days from the Effective Date, in
contravention of the order of this Court dated 18.01.2024, the terms of the
Resolution Plan and the provisions of law? ................................................ 85
a. Whether the Conditions Precedent were fulfilled by Respondent
No.1/SRA and the Effective Date was fixed at 20.05.2022? ................... 85
b. Whether the NCLAT could have directed the Performance Bank
Guarantee (PBG) to be adjusted against the first tranche payment which
was to be made within 180 days of the Effective Date? .......................... 93
Civil Appeal Nos. 5023-5024 of 2024 Page 2 of 168
I. The adjustment of the PBG was impermissible under the terms of
the Resolution Plan read with Regulation 36B(4A) of the 2016
Regulations. ........................................................................................ 94
II. The Lender’s Affidavit dated 16.08.2023 did not impose conditions
which were different from the terms of the Resolution Plan. .......... 106
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? ......................................................................................... 117
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? ....................................................................................................... 118
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? ....................................................................... 124
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? ................................. 131
iii. Whether the timely implementation of the Resolution Plan is also one
of the objectives of the IBC, 2016? ............................................................ 139
F. SHORTCOMINGS AND SUGGESTIONS TO THE IBC, 2016. ....... 150
G. CONCLUSION......................................................................................... 167
Civil Appeal Nos. 5023-5024 of 2024 Page 3 of 168
1. These appeals arise from the judgment and order dated 12.03.2024 passed by the
National Company Law Appellate Tribunal (hereinafter, the “NCLAT”) in
Company Appeal (AT) (INS) 129-130 of 2023 filed by the Appellant herein by
which the NCLAT dismissed the appeal and upheld the order dated 13.01.2023
passed by the National Company Law Tribunal (hereinafter, the “NCLT”). The
order of the NCLT held that Respondent No.1 had fulfilled all the Conditions
Precedent as stipulated in the Resolution Plan. The NCLAT further issued several
directions including a direction that the Performance Bank Guarantee of Rs. 150
Crore (hereinafter, the “PBG”) could be adjusted towards the first tranche
payment of Rs. 350 Crore which was to be made by Respondent No.1.
A. FACTUAL MATRIX
2. The NCLT vide its order dated 20.06.2019 in C.P. 2205 (IB)/ (MB)/ 2019
admitted the application for initiation of Corporate Insolvency Resolution
Process (hereinafter, the “CIRP”) filed by State Bank of India (hereinafter,
“SBI”) in respect of Jet Airways (India) Limited (hereinafter, the “Corporate
Debtor”) in accordance with Section 7 of the Insolvency and Bankruptcy
Code, 2016 (hereinafter, the “IBC, 2016”). The total admitted claim of the
Financial Creditors was Rs. 7800 Crore (approx.). Pursuant to the aforesaid
Order, Mr. Ashish Chhawchharia, was appointed as the Interim Resolution
Civil Appeal Nos. 5023-5024 of 2024 Page 4 of 168
Professional and was appointed as the Resolution Professional (hereinafter,
the “RP”) as well.
3. On 02.06.2020, the RP issued the 4
th
Round of the Request for Resolution Plan
(hereinafter, the “RFRP”) as approved by the Committee of Creditors
(hereinafter, “CoC”) which invited submissions of Resolution Plans for the
Corporate Debtor from potential Resolution Applicants. The relevant clauses
of the RFRP are reproduced hereinbelow:
“3.13 Performance Security
3.13.1 The Successful Resolution Applicant shall furnish or
cause to be furnished, an unconditional and irrevocable
performance bank guarantee or a demand draft, issued by
any scheduled commercial bank in India or a foreign bank
which is regulated by the central bank of a jurisdiction
outside India which is compliant with the Financial Action
Task force Standards and is a signatory to the International
Organisation of Securities Commissions Multilateral
Memorandum of Understanding, provided that it is
acceptable to the Resolution Professional (acting for the
CoC) (“PBG Bank”), of an amount of INR 150 Crores
(Indian Rupees Hundred and Fifty Crores only) or 10% of
upfront amount (payable as per the resolution plan by the
Successful Resolution Applicant), whichever is higher in
favour of “State bank of India, (that is, SBI) (in its capacity
as an agent of the CoC (and acting on behalf of the
Company), within 7 (seven) days of declaration of the
Successful Resolution Applicant, or by way of a direct
deposit by way of the real time gross settlement system into
a bank account held by the SBI Bank, the details of which
shall be shared separately with the Successful Resolution
Applicant (“Performance Security”)
Civil Appeal Nos. 5023-5024 of 2024 Page 5 of 168
3.13.2 If the Performance Security is being provided as a
performance bank guarantee, it shall be in accordance with
Format VIII-A of this RFRP (“PBG”). The PBG shall be
valid, till the later of (i) a period of 180 days from the date
of the PBG; and (ii) the date of completion of the
implementation of the Resolution Plan (as determined by the
RP and the (CoC) and shall be subject to re-issuance or
extension by the Successful Resolution Applicant as may be
required by the CoC (as assisted by the Resolution
Professional) (“PBG Validity”).
xxx xxx xxx
3.13.7 SBI, in its capacity as an agent of the CoC (and acting
on behalf of the Company), shall have the right to invoke the
Performance Security on behalf of the CoC (and upon
receiving approval from the CoC), (by issuance of a written
demand to the Bank to invoke the Performance Security, if
provided as a PBG). The Performance Security can be
invoked and appropriated at any time, upon occurrence of
any of the following conditions, without any reference to the
Resolution Applicant.
i. any of the condition under the Letter of Intent or the
Successful Resolution Plan are breached;
ii. if the Resolution Applicant fails to re-issue or extend
the Performance Security (if provided as a PBG), in
accordance with the terms of this RFRP; or
iii. failure of the Successful Resolution Applicant to
implement the Approved Resolution Plan to the
satisfaction of the CoC, and in accordance with the
terms of the Approved Resolution Plan.
3.13.8 The Performance Security shall be returned to the
Successful Resolution Applicant within a period 7 (seven)
Business Days (based on the request received from the
Successful Resolution Applicant) upon 100% (one hundred
percent) of the completion of the implementation of the
Approved Resolution Plan by the Successful Resolution
Applicant.
Civil Appeal Nos. 5023-5024 of 2024 Page 6 of 168
3.13.9 The Performance Security shall not be set-off against
or used as part of the consideration that the Successful
Resolution Applicant proposes to offer in relation to the
Company, even if expressly indicated as such by the
Successful Resolution Applicant in the Successful Resolution
Plan.”
(emphasis supplied)
4. On 21.09.2020, the Consortium of Murari Lal Jalan and Florian Fritsch
(hereinafter, the “Respondent No.1 / SRA”) submitted its Resolution Plan. It
was amended by the version dated 30.09.2020 and further supplemented and
amended by the addendum dated 02.10.2020. At the 17
th
meeting of the CoC
held on 03.10.2020, the Resolution Plan was placed before the CoC by the RP
and was voted upon by the CoC from 05.10.2020 to 17.10.2020 in accordance
with Regulation 39 of the Insolvency and Bankruptcy Board of India
(Insolvency Resolution Process for Corporate Persons) Regulations, 2016
(hereinafter, the “2016 Regulations”). The CoC, in its commercial wisdom,
approved the Resolution Plan proposed by Respondent No. 1 with a majority
of 99.22% votes. The relevant clauses of the Resolution Plan are reproduced
hereinbelow:
“2. INTRODUCTION OF THE RESOLUTION
APPLICANT
2.1.4. The resolution applicant ("Resolution Applicant") is
defined to mean a Consortium of:
Civil Appeal Nos. 5023-5024 of 2024 Page 7 of 168
a) Mr. Murari Lal Jalan who is the Lead Partner of the
Consortium;
b) Mr. Florian Fritsch is the Other Partner of the
Consortium; and
2.1.5. Mr. Murari Lal Jalan will hold shares in the Corporate
Debtor in his personal capacity.
xxx xxx xxx
6.3.1(c) Summary of Financial Proposal
THE RESOLUTION PLAN SUBMITTED BY THE
RESOLUTION APPLICANT IS UNCONDITIONAL
AND NOT SUBJECT TO SALE OF THE ASSETS OF
THE CORPORATE DEBTOR.
HEADS PACKAGE OF
~RS. 4,783
CRORES
COMPRISING
OF
• ~RS. 1,090.1
CR
COMMITTED
CASH
• ~Rs. 3,668
Crores –
estimated
value of 10%
Equity Stake in
Jet 2.0 at Year
5
• 7.5% Equity
stake in JPPL
AMOUNT
(In Rs.)
PAYMENT TERMS
Civil Appeal Nos. 5023-5024 of 2024 Page 8 of 168
for Assenting
FCs.
• Airport
Savings
• Additional
Upside on
Aircraft +
ATR + Spares
+ BKC
• ~ Rs. 25
Crores for
acquisition of
additional
50.1% stake in
JPPL from
Etihad
Within 180
days from
the
Effective
Date
After 180
from
Effective
Date
CIRP Cost CIRP COST 25 Cr 100% -
ASSENTING
FCS
• Rs. 195 Cr +
up to Rs. 185
Cr +
Guaranteed
NPV of Rs.
391 Cr (using
the discount
rate specified
in the
Evaluation
Matrix)
• Rs. 40 Cr of
Positive Cash
Balance
• 9.5% equity
in Jet 2.0 (5th
Yr Value ~Rs.
3,485 Crore)
• 7.5% equity
in JPPL
• Upside on
Aircrafts +
380 Cr 185 Cr
(Incl. 10 Cr
for
BKC)
9.5%
Equity in
Jet 2.0
7.5%
equity in
JPPL
Additional
Upside on
Aircrafts
Sales +
ATR Sales
+ Spares
Savings on
CIRP
Costs
195 Cr
in Yr. 2
Guaranteed
NPV of 391
Cr (using
the
discount
rate
specified in
the
Evaluation
Matrix) in
Yr. 3, 4, 5
Upside on
BKC
Savings on
Airport
Civil Appeal Nos. 5023-5024 of 2024 Page 9 of 168
ATR
Inventory +
Spares + BKC
Property (if
given)
• Savings on
CIRP Costs
• Savings on
airport and
parking
charges
• Savings on
Contingency
Fund
• All payments
are secured
against
tangible
security
• Dissenting
FCs will be
paid in priority
as per IBC
Positive
Cash
Balance
Workmen &
Employees
• Rs. 52 Crores
52 Cr 100% -
OCs • Rs. 15,000 to
each of the
Operational
Creditors,
irrespective of
their claim
10 Cr 100% -
OC (Dutch
Admin)
10,000 100% -
Other
Creditors
(other than
FCs and
OCs)
10,000 100% -
Civil Appeal Nos. 5023-5024 of 2024 Page 10 of 168
Shareholders
(promoters,
Etihad and
PNB)
10,000 100% -
Contingency
Fund
8 Cr
100%
Established
JPPL Offer from RA
to acquire
50.01%
shareholding in
JPPL
from Etihad.
The said sum of
Rs. 25 Crores
will be infused
by the RA in
addition to the
abovementioned
amounts.
25 Cr - 100%
TOTAL
475 Cr
+
25 Cr
*THIS IS A SUMMARY OF THE FINANCIAL
PROPOSAL. PLEASE REFER TO THE DETAILED
PROVISION UNDER THE RESPECTIVE HEAD.
xxx xxx xxx
(d) PROPOSAL FOR RESOLUTION OF
OUTSTANDING AIRPORT AND PARKING DUES (RS.
240 CRORES AS OF AUGUST 31, 2020)
[…]
BKC Property not part of resolution - If CoC decides to
retain the BKC Property as a non-core asset and not offer it
as part of this resolution process as proposed above, then the
Resolution Applicant will not pay the upfront sum of Rs. 10
Crores to the Assenting Financial Creditors as envisaged in
the above Clause for BKC Property. Further, then the
Civil Appeal Nos. 5023-5024 of 2024 Page 11 of 168
airport dues and parking charges after the ICD (approx. Rs.
240 Crores as of August 31, 2020) will be paid by the
Resolution Applicant upfront in priority over any other
payments to the creditors of the Corporate Debtor, subject
to a maximum of Rs. 475 Crores. As per the general aviation
practice in respect to parking and airport space, as and when
the Corporate Debtor will intend to use/ move the aircrafts
or use the airport space, such claimants will seek their past
dues. Therefore, their payments need to be resolved upfront
by pro rata reduction of amounts payable to other creditors,
to enable the Corporate Debtor to re-commence its
operation, which is why the Resolution Applicant has
suggested that their payments be made upfront against the
BKC Property. SUCH PAYMENTS WILL BE SETTLED
UPFRONT IN FULL IN FIRST 180 DAYS FROM THE
EFFECTIVE DATE AND WITHOUT ANY
CONDITIONS (INCLUDING NOT BEING
STAGGERED PAYMENTS SPREAD ACROSS A
PERIOD OF TIME) SO THAT FLYING CAN START
IMMEDIATELY WITHOUT ANY FUTURE DISPUTES
AND CONCERNS WITH SUCH CLAIMANTS FOR
PAST DUES. Alternatively, the Resolution Professional can
provide the Resolution Applicant with a no-dues certificate
from such contingent creditors, in which case, these
creditors will be treated in compliance with the provisions of
the IBC.
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 proposal. If the above-mentioned proposal is
acceptable to the CoC, then it is acceptable to the Resolution
Applicant in the manner stated hereinabove.
(g) Infusion of funds and timelines
Civil Appeal Nos. 5023-5024 of 2024 Page 12 of 168
Infusion
Timelines (In
Days)
Amount (In Rs.) Purpose/Utilization
As Equity As ECB
Upfront
(within 180
days)
350,00,00,000 - CIRP Cost;
Contingency Fund;
Payment to FCs,
OCs, Other
Creditors, and
other stakeholders;
working capital for
business; Misc.
Admin Expenses
181-365 days 250,00,00,000 - Working capital for
business; Portion
of funds can be
used for acquiring
Etihad's stake in
JPPL; making
payments to
creditors if RA is
inclined in
advancing any
payment timelines
Year 2 - 175, 00,00,000 Remaining
payment to FCs.;
Misc. expenses for
general corporate
and day-to-day
operations, in
compliance with
the extant ECB
Regulations.
After Year 2 - 600,00,00,000 Working capital for
business
Sub-Total 600,00,00,000 775,00,00,000
TOTAL
1,375,00,00,000
xxx xxx xxx
Civil Appeal Nos. 5023-5024 of 2024 Page 13 of 168
6.4. Treatment of Stakeholders
6.4.1. Treatment of outstanding CIRP Costs
(a) In terms of Section 30(2)(a) of the IBC, the CIRP Costs
are to be paid in priority to any other creditor of the
Corporate Debtor.
(b) As per the information disclosed by the Resolution
Professional on August 14, 2020, the CIRP Costs includes:
i. Operating and Process Costs (Rs. 27.16 Crores, as
of August 31, 2020) which includes fees, charges,
salaries of Asset Protection Team (APT) of the
Corporate Debtor and other costs incurred by the
Resolution Professional in running the operations of
the Corporate Debtor as a going concern;
ii. Interim Finance Cost (Rs. 54.4 Crores, as of August
31, 2020).
[…]
(d) The Resolution Professional has also disclosed to the
Resolution Applicant that the Corporate Debtor has a
positive bank balance of approx. Rs. 92 Crores and estimates
to collect a further sum of Rs. 40 Crores in the next 2-3
months.
[…]
(f) The Resolution Professional has estimated an approx.
sum of Rs. 240 Crores (as of August 31, 2020) towards
parking charges for aircrafts and airport space lease
charges. Such amounts are good faith estimates of the
Resolution Professional based on previous invoices as it has
not received any invoice/ demand from any of the lessors/
owners for such amounts. The Resolution Applicant shall
endeavour to negotiate the parking fee and rental fee for the
Corporate Debtor with the various airports and will
endeavour that the cost for such heads is kept to the
minimum.
[…]
Civil Appeal Nos. 5023-5024 of 2024 Page 14 of 168
(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.
(i) As stated in Clause 6.3.1(d) above, if the CoC agrees to
offer a clear and marketable title in the BKC Property (one
floor) to the Resolution Applicant, then the Resolution
Applicant shall settle the airport and parking charges
(estimated at approx. Rs. 240 Crores, as of August 31, 2020).
Savings from such charges will be distributed to the
Assenting Financial Creditors. If the airport and parking
charges over are over Rs. 245 Crores, then amounts over and
above Rs. 245 Crores will be first paid out of Rs. 25 Crores
reserved as CIRP Costs (if there are no outstanding CIRP
Costs) and then out of the positive cash flows of the
Corporate Debtor. Any amounts over and above such
amounts will be shared between the Resolution Applicant
and the Assenting Financial Creditors in equal proportion.
(j) The Resolution Applicant states that if the CIRP Cost is
less than the estimated amounts and the airport dues are less
than Rs. 245 Crores, then the differential amounts will be
paid by the Resolution Applicant to the Assenting Financial
Creditors, which amounts are over and above the amounts
reserved for them this Resolution Plan. However, if the CIRP
Cost exceeds the current estimates, then the CIRP Costs will
be paid by the Resolution Applicant as per actuals in
compliance with the provisions of the IBC and commercial
proposal for other creditors of the Corporate Debtor will be
adjusted accordingly, subject however to a maximum of Rs.
475 Crores. It is clarified that on account of such payments
from the amounts infused by the Resolution Applicant in the
Civil Appeal Nos. 5023-5024 of 2024 Page 15 of 168
Corporate Debtor, the pay-outs towards other claimants as
currently stated will be reduced proportionately to account
for such additional CIRP Costs, 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 Crores.
(k) The outstanding CIRP Costs shall be paid by the
Resolution Applicant out of funds infused by the Resolution
Applicant in the Corporate Debtor and as per the
Implementation Schedule set out in Clause 7.7 below.
[…]
(m) Priority of Payment CIRP Cost shall be fully paid and
discharged after the Effective Date before payment is made
to any of the Creditors as per the Resolution Plan. The
Resolution Applicant will be entitled and will use funds
available with the Corporate Debtor on the Effective Date
for making any portion of CIRP payments.
(n) The Resolution Applicant has sufficient funds and do not
envisage any challenge in terms of source for making such
payments. The net worth and financial capabilities of the
Resolution Applicant are evident from its financial
statements submitted at the time of submitting its EOI.
Regarding the Source of Funds, the CIRP Costs shall be met
out of funds infused by the Resolution Applicant in the
Corporate Debtor.
xxx xxx xxx
6.4.2. Treatment of Employees/Workmen dues, including
dues of Authorized Representatives of Employees/
Workmen
(a) The Resolution Applicant proposes to pay a fixed sum of
Rs. 52 Crores to the Workmen/ Employees towards
settlement of all the claims made by the Employees and
Workmen of the Corporate Debtor, including to the
Authorized Representatives of Employees and Workmen as
Civil Appeal Nos. 5023-5024 of 2024 Page 16 of 168
set out in the List of Creditors ("Admitted Workmen and
Employees Dues").
(b) The payments towards Admitted Workmen and
Employees Dues shall be made out of funds infused by the
Resolution Applicant in the Corporate Debtor and as per the
Implementation Schedule set out in Clause 7.7 below. The
said payment is also being made in priority to the payment
to the financial creditors.
(c) In any case, if the Liquidation Value due to Operational
Creditors (Employees/ Workmen dues, including dues of the
Authorized Representatives of Employees/ Workmen) is not
"NIL", then the Resolution Applicant undertakes that the
Liquidation Value due to such Operational Creditors
(Employees/ Workmen dues including dues of Authorized
Representatives of Employees/ Workmen) shall be paid and
shall be given priority in payment over Financial Creditors
as is already reflected in the Implementation Schedule in
Clause 7.7 below. The entire payment to the Employees/
Workmen dues including dues of Authorized Representatives
of Employees/ Workmen is being made in priority within 175
(one hundred seventy five) days from the Effective Date.
[…]
(g) Other than Admitted Workmen and Employees Dues
which the Resolution Applicant proposed to pay, all other
potential obligations and workmen dues including any dues
towards Provident Fund (Contribution of Employees /
Company), Gratuity, Employees State Insurance Scheme,
Professional Tax or any other taxes in nature of employment
owed or payable to, (including any demand for any penalty,
penal interest already accrued/ accruing or in connection
with any claims) and all rights and entitlements of present or
past, direct or indirect, permanent or temporary, employees
and/or workmen of the Corporate Debtor, whether admitted
or not, due or contingent, asserted or unasserted, crystalized
or uncrystallized, known or unknown, secured or unsecured,
disputed or undisputed, present or future, whether or not set
Civil Appeal Nos. 5023-5024 of 2024 Page 17 of 168
out in the balance sheet of the Corporate Debtor or the profit
and loss account statements of the Corporate Debtor or the
List of Creditors, claim submitted or not submitted, claim
admitted or not admitted, in relation to any period prior to
the ICD will be written off in full and shall be deemed to be
permanently extinguished and waived off subject to Clause
9.9 of this Resolution Plan by virtue of the order of
Adjudicating Authority approving the Resolution Plan and
neither the Corporate Debtor nor the Resolution Applicant
shall, at no point of time be, directly or indirectly, held
responsible or liable in relation thereto.
[…]
(i)(xi) For the avoidance of doubt it is hereby clarified that
notwithstanding the acceptance or rejection of the terms of
the proposed demerger by the employees and/or workmen,
the Resolution Applicant shall ensure the payment of (i)
minimum value due and payable to such employees and
workmen (under Section 30(2) of the IBC); and (ii) the CIRP
costs admitted by the Resolution Professional, subject to a
maximum of Rs. 475 Crores.
xxx xxx xxx
6.4.4. Treatment of Financial Creditors
[…]
Summary of payments and security package
Head Amount
Payable
Security
Offered
Value
of
Security
Date of
Creation
of
Security
Date of
Release of
Security
Cash
Payment
Up to Rs.
185
Crores
PBG of Rs.
47.5 Crores
Rs.
393.5 Cr
(with
BKC)
Or
Effective
Date
PBG
adjusted
BKC
Property (if
given)
To be
released on
sale of
BKC
Civil Appeal Nos. 5023-5024 of 2024 Page 18 of 168
Mortgage
over Dubai
Property No.
1 valued at
more than Rs.
100 Crores
Rs.
147.5 Cr
(without
BKC)
Year 5 or
on
complete
payment,
whichever
is earlier
Cash
Payment
Rs. 195
Crores
BKC
Property (if
given)
Rs. 445
Cr
(with
BKC)
Or
Rs. 200
Cr
(without
BKC)
Effective
Date
To be
released on
sale of
BKC
Mortgage
over Dubai
Property No.
1 valued at
more than Rs.
100 Crores
Effective
Date
Year 5 or
on
complete
payment,
whichever
is earlier
Mortgage
over Dubai
Property No.
2 valued at
more than Rs.
100 Crores
Effective
Date
Cash
Payment
NPV of
Rs. 391
Crores
(using the
discount
rate
specified
in the
Evaluation
Matrix)
Mortgage
over Dubai
Property No.
1 valued at
more than Rs.
100 Crores
Rs. 600
Crores
Effective
Date
Year 5 or
on
complete
payment,
whichever
is earlier
Mortgage
over Dubai
Property No.
2 valued at
more than Rs.
100 Crores
Effective
Date
Mortgage
over Dubai
Property No.
3 valued at
more than Rs.
50 Crores.
Effective
Date
Civil Appeal Nos. 5023-5024 of 2024 Page 19 of 168
Floating
charge by
way of
hypothecation
on India POS
Credit Card
Receivables
of Year 3,
Year 4, Year
5 of the
Corporate
Debtor of Rs.
350 Crores or
the total
outstanding
dues of the
Assenting
FCs,
whichever is
lower.
Effective
Date
Upside
on
Aircrafts
Rs. 60
Crores +
upside as
per terms
of Series
B ZCB
Three 737s;
Five 777s &
Three A330
BV of
Rs.
1,900
Effective
Date
On sale of
relevant
aircraft(s)
as it
could be
sold in
Lots and in
phases
or on
relevant
redemption
date,
whichever
is earlier.
Upside
on ATR
Inventory
Rs. 15
Crores +
upside as
per terms
of Series
C ZCB
Entire ATR
Inventory
BV of
Rs. 134
Cr
Effective
Date
On sale of
ATR
Inventory
on
relevant
redemption
Civil Appeal Nos. 5023-5024 of 2024 Page 20 of 168
date,
whichever
is
earlier.
Upside
on
Spares
Rs. 50
Crores +
upside as
per terms
of Series
D ZCB
Aircraft
Spares
BV of
Rs. 600
Cr
Effective
Date
On sale of
Spares
on relevant
redemption
date,
whichever
is earlier.
(a) COMMITTED CASH PAYMENTS
(i) The Resolution Applicant will pay the Assenting Financial
Creditors a total sum of Rs. 185 Crores on 180th day from
the Effective Date. If the BKC Property is not provided to the
Resolution Applicant as per the proposal stated in Clause
6.3.1(d), then the Resolution Applicant will pay the Assenting
Financial Creditors, a total sum of Rs. 175
Crores on 180th day from the Effective Date. The said
amounts shall be paid on the following principal terms:
Amount Payable Up to Rs. 185 Crores/ up to Rs. 175
Crores
Payable By Jet Airways (India) Limited
Payable To Financial Creditors against
conversion of admitted claims of
equivalent amount.
Date of Payment 180th day from the Effective Date.
Security • Performance bank guarantee of
Rs. 47.5 Crores
• Mortgage over BKC Property
(if given to the RA).
Civil Appeal Nos. 5023-5024 of 2024 Page 21 of 168
• Mortgage over Dubai Property
No. 1 valued at more than Rs.
100 Crores.
Date of creation of
security
Effective Date
Date of release of
Security
• BKC Property - On sale of BKC
Property (if given to the RA) or
on the date of payment,
whichever is earlier.
• Charge over Dubai Property
No. 1 with respect to this
payment will be released on the
date of payment.
Security Related
Terms
RBI approval required for creating
charge over Dubai Property No. 1
will be applied after the CoC
approves this Resolution Plan. If
the RBI approval for creating such
charge is not received by the
Effective Date, then alternate
security will be provided in India
of equivalent value on the
Effective Date.
Event of Default Corporate Debtor’s failure to make
such committed payment
Consequences of Event
of Default
Enforcement of security for
recover the outstanding amounts.
Governing Law and
Jurisdiction
Indian Law and courts of Mumbai
will have exclusive jurisdiction.
xxx xxx xxx
6.4.12. Request for the consideration of the CoC - As
required under the RFRP, the Resolution Applicant shall
provide the performance security bank guarantee (“PBG”)
for a total sum of Rs. 150 Crores. The PBG will be provided
in two parts, with the first PBG of Rs. 47.5 Crores provided
Civil Appeal Nos. 5023-5024 of 2024 Page 22 of 168
within 7 (seven) days from the date of receipt of LOI; and
PBG for the remaining sum of Rs. 102.5 Crores provided on
the Effective Date.
7.3. Compliance with respect of Regulation 36B (4A)
The Resolution Applicant undertakes to provide the
performance security bank guarantee as per the terms of the
RFRP in favour of "State Bank of India" (in its capacity as
an agent of the CoC (and acting on behalf of the Corporate
Debtor)), within 7 (seven) days of it being declared the
"Successful Resolution Applicant", or by way of a direct
deposit by way of the real time gross settlement system into
a bank account held by the SBI Bank, as per the terms of the
RFRP.
xxx xxx xxx
7.1. Term of the Resolution Plan
7.1.2. The effectiveness and implementation of the Resolution
Plan by the Resolution Applicant shall be subject to the
approval of the NCLT. Notwithstanding anything set out in
this Resolution Plan, the implementation of this Resolution
Plan by the Resolution Applicant shall not be conditional
upon satisfaction of any conditions, other than approval of
the NCLT.
7.6. Conditions to the Implementation of the Resolution
Plan
7.6.1. Conditions Precedent - The obligation of the
Resolution Applicant to re-commence operations as an
aviation company, being the business proposed to be
acquired is subject to the fulfilment of the following
conditions after the Approval Date ("Conditions
Precedent"):
(a) Validation of AOP of the Corporate Debtor by DGCA &
MoCA - The AOP of the Corporate Debtor shall have been
Civil Appeal Nos. 5023-5024 of 2024 Page 23 of 168
validated by the DGCA, the MoCA and any other relevant
Government Authority and grant of all other mandatory
approvals to the Corporate Debtor to enable it to re-
commence flying operations (including commercial/ cargo
operations) and related on-ground services.
(b) Submission and approval of the Business Plan to DGCA &
MoCA - The Business Plan of the Resolution Applicant shall
have been submitted after the Approval Date to the DGCA
and MoCA for their review, and approval. The Resolution
Applicant agrees to modify its business plan to incorporate
all reasonable changes required by the DGCA/ MoCA,
which otherwise does not make the business unviable for the
Resolution Applicant.
(c) Slots Allotment Approval - The DGCA and MoCA shall have
approved the reinstatement of all the suspended slots
(including the bilateral rights and traffic rights) back to Jet
Airways/ Corporate Debtor. The slots (along with related
bilateral rights and traffic rights) can be allotted to the
Corporate Debtor gradually as per its Business Plan with
immediate slots allotment approval (along with related
bilateral rights and traffic rights) for sectors on which Jet
2.0 proposes to recommence operations after the Effective
Date.
(d) International Traffic Rights Clearance - The Corporate
Debtor shall have received the International Traffic Rights
Clearance in compliance with Applicable Laws.
(e) Demerger - The Scheme filed as part of this Resolution Plan
shall have been approved under Applicable Laws and the
Demerged Employees shall have demerged from the
Corporate Debtor to AGSL along with all their past dues,
liabilities and outstanding's with effect from the Approval
Date, without the requirement of any further consent or
approval of any other stakeholder of AGSL (since we
understand that AGSL currently does not have any creditor)
or any stakeholder of the Corporate Debtor (including
existing or past employee or workmen or employees' unions
of the Corporate Debtor).
7.6.2. Fulfilment of Conditions Precedent - The date of
fulfilment of all the Conditions Precedent as stated in Clause
Civil Appeal Nos. 5023-5024 of 2024 Page 24 of 168
7.6.1 above shall be the effective date for the purposes of this
Resolution Plan ("Effective Date").
7.6.4. Automatic Withdrawal - The Resolution Applicant is
confident of completing all the Conditions Precedent (as set
out in Clause 7.6.1 above) within 90 (ninety) days from the
Approval Date. In the unlikely event that all the Conditions
Precedent cannot be fulfilled within 90 (ninety) days, the
Resolution Applicant takes the responsibility of completing
the outstanding Conditions Precedent at the earliest and
seeks to extend the Conditions Precedent fulfilment period
by another term of maximum 180 (one hundred and eighty)
days. If all the Conditions Precedent are not fulfilled within
such period (i.e. 270 (two hundred and seventy) days from
the Approval Date), then this Resolution Plan shall
automatically stand withdrawn without any further acts,
deeds, or things. On such withdrawal, the members of the
Resolution Applicant in the Monitoring Committee shall
resign, and the remaining members of the Monitoring
Committee shall assume absolute control of the Corporate
Debtor.
7.7. Implementation Schedule -
7.7.1. The Resolution Applicant shall take the following steps
in the order of sequence (except otherwise mentioned in any
step for any part of the step) as an integral part of the
Resolution Plan. It is provided that the procedure, timelines
and the sequence of steps listed below are only indicative and
that they may be re-arranged/ changed as may be required
or directed based on discussions with the necessary
Governmental Authorities/ stock exchange (on account of
past non-compliances of the Corporate Debtor or otherwise)
or for the purposes of advancing any payments to the
stakeholders, and at all times in compliance with Applicable
Laws:
Step Activity Days
1. Receipt of approval from the Competition
Commission of India under the provisions of
Before
approval of
Civil Appeal Nos. 5023-5024 of 2024 Page 25 of 168
the Competition Act, 2002 read with the
provisions of the IBC.
Resolution
Plan by CoC
2. Declaration of the Successful Resolution
Applicant and Receipt of LoI from the CoC
X
3. Unconditional acceptance of the LoI X + 3
4. Issuance of Performance Security Bank
Guarantee
X + 7
5. Finalization of the members of the
Monitoring Committee
Between X
and
Approval
Date
6. Approval Date Y
7. Monitoring Committee to take control as per
Clause 7.8.2.
Y
8. Fulfilment of Conditions Precedent as per
Clause 7.6.1
After Y
9. Filings of the certified copy of the Order of
Approval
received from Adjudicating Authority
sanctioning the Resolution Plan with the
relevant Government Authorities/ Stock
Exchange/ Departments.
Y + 10
10. Effective Date Z
11. Infusion of Rs. 350 Crores in the
Corporate Debtor
Z + 150
12. Setting up the Contingency Fund Z + 170
13. Cancellation of Shares (excluding Public
Shares) as per Clause 7.4.1(c).
Z + 170
14. Reconstitution of Share Capital as per Clause
7.4.2 above.
Z + 170
15. Steps towards issuance of equity shares as
per Clause 7.4.3
above.
Z + 170
16. Payment of CIRP Costs as per Clause 6.4.1. Z + 170
17. Payment to the Operational Creditors
(Workmen and
Employees, including Authorized
Representatives of
Workmen and Employees) as per Clause
6.4.2.
Z + 175
Civil Appeal Nos. 5023-5024 of 2024 Page 26 of 168
18. Payment to all the Operational Creditor
(other than Workmen and Employees) as per
Clause 6.4.3 above.
Z + 175
19. Payment to Other Creditors and Stakeholders
as per Clause 6.4.5, Clause 6.4.6, 6.4.7, and
6.4.8
Z + 175
20. Payment to Dissenting Financing Creditors
as per Clause 6.4.4(m)(i).
Z + 176
21. 1st Tranche payment to Financial Creditors
as per Clause
6.4.4.
Z + 180
22. Monitoring Committee to be released and
Reconstituted Board of Directors to take over
the management of the Corporate Debtor.
Z + 180
23. Closing Date. Z + 180
24. Redemption of Series B, Series C; and Series
D ZCBs
Z + 365
25. Necessary statutory approvals Y + 365
(in
accordance
with Sec
31(4) of the
IBC)
26. Redemption of Series A ZCB Z + 730
27. Release of charge (if any) over assets of the
Corporate Debtor (which have not been
previously released).
Z + 730
28. Redemption of NCDs and release of any
charge (if any)
Z + 5 Years
xxx xxx xxx
9.4. Implementation - The performance guarantee provided
by the Resolution Applicant can be invoked in accordance
with the terms of the RFRP.”
5. The RP preferred an application under Section 30(6) read with Section 31 of
the IBC, 2016 before the NCLT seeking approval of the Resolution Plan
Civil Appeal Nos. 5023-5024 of 2024 Page 27 of 168
submitted by Respondent No.1 and vide order dated 22.06.2021, the NCLT
approved the Resolution Plan. In view of the uncertainty regarding the
achievement of the “Effective Date” under Clauses 7.6.2 and 7.6.4 of the
Resolution Plan, it was clarified that the same would be fixed on the 90
th
day
from the Plan Approval Order dated 22.06.2021. Respondent No.1 was also
given liberty to approach the NCLT for appropriate orders with respect to an
extension of the timeline, subject to a maximum of another 180 days, in case
they fail to fulfill all the Conditions Precedent within 90 days. The relevant
observations are reproduced hereinbelow:
“33. During the hearing, the uncertainty of the time frame
for implementation of the Resolution Plan was discussed. It
is stated by the SRA in clause no. 7.6.2 (pdf 276) of the
Resolution Plan that the effective date would mean the date
of the fulfilment of all the conditions precedent as stated in
clause 7.6.1 thereof. The SRA, at clause no. 7.6.4, has gone
on to add that the consortium would make all endeavor to
ensure all the compliances are done for the fulfillment of the
conditions precedent within a period of 90 days. In the
unlikely event that the conditions precedent are not complied
within this period, SRA would require a maximum of 180
days more to fulfil the conditions. Failing which the
Resolution Plan would stand automatically withdrawn
without any further act, deed or thing. In view of such
uncertainty in the ‘effective date’ the Bench suggested that
let the effective date be the 90th day from the Approval Date
(clause 3.1 at pdf page 201). The SRA as well as the
Applicant (RP of the Corporate Debtor) had agreed to the
suggestion. This in our opinion is not in the nature of a
substitution or addition to the decision, commercial or
otherwise, of the CoC. The suggestion is made only to give
finality and certainty to the effective date, which the SRA has
otherwise committed in the Resolution Plan to endeavor to
do. It could accordingly be ordered so. Failing which the
Civil Appeal Nos. 5023-5024 of 2024 Page 28 of 168
SRA / Corporate Debtor would be at liberty to approach this
Authority for appropriate orders with regard to extension of
the timeline, as would be deemed proper. That would help
prevent the SRA from the frustration of ‘automatic
withdrawal’ referred to in clause 7.6.4 of the Resolution
Plan.”
(emphasis supplied)
6. Since the initial period of 90 days for fulfilment of the Conditions Precedent
expired on 22.09.2021, an extension of another 90 days was granted by the
NCLT vide order dated 29.09.2021 (1
st
extension). The 1
st
extension of 90
days expired on 22.12.2021. The NCLT vide order dated 20.01.2022, again,
granted an extension of another 90 days (2
nd
extension). The 2
nd
extension of
90 days expired on 22.03.2022. The maximum extension that could have been
provided under Clause 7.6.4 of the Resolution Plan i.e., an additional 180
days, had now come to an end. However, vide order dated 11.04.2022, the
NCLT granted exclusion of a period of 65 days from 17.01.2022 to
22.03.2022, which was spent in moving the application for grant of time. This
finally extended the time for achieving the Effective Date from 22.03.2022 to
25.05.2022 (3
rd
extension).
7. On 20.05.2022, Respondent No.1 obtained the Air Operation Certificate
(hereinafter, the “AOC”) and asserted that all the Conditions Precedent
required under Clause 7.6.1 of the Resolution Plan had been met and that the
Effective Date in accordance with Clause 7.6.2 had been achieved. As a
Civil Appeal Nos. 5023-5024 of 2024 Page 29 of 168
consequence, Respondent No.1 had 180 days from 20.05.2022 i.e., until
16.11.2022 to infuse an amount of Rs. 350 Crore in the Corporate Debtor as
per Clause 6.3.1(g) and the Implementation Schedule under Clause 7.7.1 of
the Resolution Plan.
8. The workmen and employees of the Corporate Debtor and several Operational
Creditors challenged the order of the NCLT dated 22.06.2021 by which the
Resolution Plan was approved before the NCLAT. Vide order dated
21.10.2022, the NCLAT upheld the order of the NCLT dated 22.06.2021.
However, it was observed that the workmen and employees are entitled to the
payment of their full provident fund and gratuity which was unpaid as on the
insolvency commencement date and that the balance of the above dues should
be paid by the Successful Resolution Applicant i.e., Respondent No.1, in order
to satisfy its statutory obligations. It was further stated that “Non-payment of
full PF and Gratuity shall lead to violation of Section 30(2)(e) and hence, to
save the plan, the above payments have to be made”. On 20.12.2022,
Respondent No.1 preferred Civil Appeal Nos. 465-469 of 2023 against the
aforesaid order dated 21.10.2022 passed by the NCLAT, before this Court.
9. It is the case of Respondent No.1 that between May 2022 and October 2022,
the Appellants disputed the fulfilment of the Conditions Precedent by
Respondent No.1 on one ground or another. Therefore, on 18.10.2022,
Civil Appeal Nos. 5023-5024 of 2024 Page 30 of 168
Respondent No.1 filed two Interim Applications – First, IA No. 3398 of 2022
(hereinafter, “Implementation Application”) before the NCLT seeking
necessary directions for the implementation of the Resolution Plan and a
declaration that all the Conditions Precedent have been fulfilled; Second, IA
No. 3508 of 2022 requesting that the period from 20.05.2022 till the date on
which the Implementation Application would be decided by the NCLT be
excluded for the purpose of calculating 180 days from the Effective Date, for
the purpose of making the first tranche payment of Rs. 350 Crore.
10. The NCLT allowed both the aforesaid IAs and vide its common order dated
13.01.2023 held that all the Conditions Precedent have been duly complied
with and therefore, 20.05.2022 would be the Effective Date. Further, it
excluded the period from 20.05.2022 to 16.11.2022 (180 days) from the period
of 180 days within which the first tranche payment had to be made, in the
interests of justice and to achieve the primary objective of maximization of
assets and resolution of the Corporate Debtor. As a consequence, the deadline
to meet with the first tranche payment obligation of Rs. 350 Crore was
extended till 15.05.2023 (hereinafter, “1
st
implementation extension”). The
appellants challenged this common order dated 13.01.2023 passed by the
NCLT before the NCLAT by way of Company Appeal (AT)(INS) Nos. 129-
Civil Appeal Nos. 5023-5024 of 2024 Page 31 of 168
130 of 2023 (hereinafter, “Company Appeal”) and also sought a stay on the
same.
11. On 30.01.2023, this Court dismissed Civil Appeal Nos. 465-469 of 2023 filed
by Respondent No.1 and upheld the order dated 21.10.2022 passed by the
NCLAT. In such circumstances, Respondent No.1 was obliged to pay the full
provident fund and gratuity that the workmen and employees were entitled to
within 180 days from the Effective Date.
12. The NCLAT vide its order dated 03.03.2023, declined to stay the order dated
13.01.2023 passed by the NCLT while observing that the steps regarding the
implementation of the Resolution Plan have to be taken by the SRA which
needs to be overseen by the Monitoring Committee. On 17.04.2023, the
Appellants filed Civil Appeal Nos. 3736-3737 of 2023 before this Court
against the order of the NCLAT declining the grant of stay.
13. Since 15.05.2023 was fixed as the deadline to make the first tranche payment
of Rs. 350 crore, Respondent No.1, on 11.05.2023, filed IA Nos. 2028-2029
of 2023 respectively before the NCLAT in the Company Appeal for the
purpose of seeking exclusion of the period from 16.11.2022 till the time the
Company Appeal is decided from the calculation of 180 days stipulated for
the infusion of first tranche of funds under the Resolution Plan. Immediately
Civil Appeal Nos. 5023-5024 of 2024 Page 32 of 168
thereafter, on 17.05.2023, IA Nos. 2059-2060 of 2023 in the Company Appeal
were also filed by Respondent No.1 seeking to restrain the Appellants from
encashing or appropriating the Performance Bank Guarantee and Earnest
Money deposited by Respondent No.1 in favor of the Appellants under the
Resolution Plan.
14. The NCLAT vide its common order dated 26.05.2023, stated that the period
between 16.11.2022 and 03.03.2023 (107 days) be excluded from the
calculation of 180 days for the infusion of first tranche of funds under the
Resolution Plan and also held that the Appellants could invoke the PBG only
with the leave of the NCLT. This, effectively, extended the period to infuse
Rs. 350 Crore under the first tranche till 31.08.2023 (2
nd
implementation
extension). Soon thereafter, on 13.06.2023, the Appellants filed Civil Appeal
Nos. 4131-4134 of 2023 against the common order dated 26.05.2023 passed
by the NCLAT.
15. On 16.06.2023, Respondent No. 1 filed two other IA Nos. 3789-3790 of 2023
(hereinafter, “Gratuity Application”) in the Company Appeal requesting that
they be allowed to discharge the gratuity claims of the employees and
workmen of the Corporate Debtor in three tranches and also allow them to
approach the EPFO authorities in order to reduce or waive off the claim
towards damages amounting to Rs. 24.4 Cr imposed on the Corporate Debtor
Civil Appeal Nos. 5023-5024 of 2024 Page 33 of 168
or grant permission to challenge the imposition of damages in an appeal before
the appropriate authority.
16. In the meantime, vide letter dated 27.07.2023, the Office of the Director
General of Civil Aviation, Government of India (hereinafter, “DGCA”)
extended the validity of the AOC issued to the Corporate Debtor until
03.09.2023 subject to certain conditions. The relevant extracts from the letter
are reproduced hereinbelow:
“Sir,
Reference is invited to Jet Airways Letter dated 16.05.2023
followed by email dated 12.06.2023 and discussions with Sh
Ankit Jalan, representative of Jalan-Kalrock Consortium
(SRA) on 14.07.2023 and 27.07.2023 regarding extension of
validity of AOC.
2. In view of the fact that Jet Airways is still undergoing
CIRP under IBC, 2016, NCLT and NCLAT having the
jurisdiction in respect of the insolvency of the Company have
granted extension(s)/exclusion(s) of time for implementation
of the approved Resolution Plan upto 03.09.2023, the AOC
No. 6A in respect of Jet Airways (India) Ltd. shall be
considered as valid until 03.09.2023, subject to the following
conditions:-
i. This extension shall be applicable only for the limited
purpose of completing the ongoing CIRP.
ii. Jet Airways shall be required to undergo re-
certification in accordance with the procedure
contained in CAP 3100, as applicable for issuance of
AOC and demonstrate compliance of all the
applicable regulatory requirements afresh before
commencement of flight operations.
Civil Appeal Nos. 5023-5024 of 2024 Page 34 of 168
iii. Fee as applicable for issuance of AOC, shall be
payable for such re-certification.
iv. Jet Airways shall submit a firm action plan for revival
of operations after the company is taken over by the
SRA in accordance with the NCLT approved
resolution plan.
This issues with the approval of the Director General.”.
17. While the Company Appeal was pending before the NCLAT, the Appellants
filed an Affidavit dated 16.08.2023 (hereinafter, “Lender’s Affidavit”)
before the NCLAT. The Lender’s Affidavit provided that, if Respondent No.1,
firstly, infuses Rs. 350 Crore by 31.08.2023; secondly, complies with the
payment obligations to the workmen and employees, and; thirdly,
scrupulously follows the other terms and conditions of the Resolution Plan -
the Appellants would not contest the issues relating to the grant of
exclusion/extension of time as well as the issue relating to the compliance of
all Conditions Precedent by the Respondent and would withdraw the
Company Appeal pending before the NCLAT along with the Civil Appeals
filed before this Court. The Lender’s Affidavit also provided that, upon failure
to comply with the aforesaid conditions, the Corporate Debtor should be
directed to go into liquidation. This opportunity was given to Respondent
No.1/SRA as a one-time measure. Para 8 of the Lender’s Affidavit which
stipulates these conditions is reproduced hereinbelow:
“8. In the present appeal, the lenders are agreeable that in
case;
Civil Appeal Nos. 5023-5024 of 2024 Page 35 of 168
a) SRA infuses Rs. 350 Crores by 31.08.2023, the date by which
said payment is to be made as per the Resolution Plan, read
with Order dated 26.05.2023 passed by this Hon’ble
Tribunal; and
b) SRA Undertakes to scrupulously follow the other terms and
conditions of the resolution plan and
c) SRA complies with the liabilities relating to payment to the
employees as per order of NCLAT dated 21.10.2022 which
has been upheld by the Hon’ble Supreme Court in its order
dated 30.01.2023,
the Lenders would not contest the issues relating to granting
of exclusion/extension of time (in terms of the orders dt.
13.01.2023 passed by NCLT and order dt. 26.05.2023 passed
by this Hon’ble Tribunal) as well as on the issue relating to
compliance of condition precedent by the SRA and
accordingly undertakes to withdraw the present Company
Appeal (AT) Ins 129-130 of 2023 which is pending
adjudication before this Hon'ble Tribunal along with Civil
Appeal Nos. 4131-34 of 2023 & 3736-37 of 2023 filed before
the Hon'ble Supreme Court, on the said two issues. In other
words, lenders would not contest the granting of exclusions
as well as on the issue regarding the compliance of
Conditions Precedent, in case the aforesaid steps are taken
by SRA without any further delay. Failing to comply with the
conditions mentioned in Para 8(a) to (c) above, the
Corporate Debtor should be directed to go into liquidation.”
18. In response to the aforesaid Lender’s Affidavit, Respondent No.1 on
18.08.2023 filed IA Nos. 3801 and 3802 of 2023 (hereinafter, “Adjustment
application”) in the Company Appeal seeking inter alia – First, a direction
to the Appellants to adjust the PBG of Rs. 150 Crore towards part payment of
the first tranche under the Resolution Plan; second, to allow Respondent No.1
to infuse Rs. 100 Crore as share application money on or by 31.08.2023 and;
Civil Appeal Nos. 5023-5024 of 2024 Page 36 of 168
thirdly, to allow Respondent No.1 to infuse the remaining Rs. 100 Crore as
share application money on or before 30.09.2023. Through these applications,
Respondent No.1 further urged that, in the event the Gratuity Application was
not allowed, the Resolution Plan would not be implemented and in such
eventuality, the Appellants and the Corporate Debtor may be directed to
refund all the amounts infused or deposited by Respondent No.1. including
the share application money and the PBG.
19. The NCLAT, vide its order dated 28.08.2023, partly allowed the Adjustment
Application so far as the payment of the first tranche of Rs. 350 Crore was
concerned and stated that as regards the prayer with respect to the Gratuity
Application, the submissions required further consideration. The PBG of Rs.
150 was allowed to be adjusted against the first tranche payment and the
remaining Rs. 200 Crore was allowed to be infused on or by 31.08.2023 and
30.09.2023 respectively. Therefore, the deadline to infuse the aforesaid
amount and implement the Resolution Plan was further extended to
30.09.2023 (3
rd
implementation extension). Immediately thereafter, the
Appellants filed Civil Appeal Nos. 6427-6428 of 2023 before this Court
against the aforesaid order dated 28.08.2023 passed by the NCLAT.
20. Meanwhile, on 03.09.2023, the conditional AOC issued by the DGCA came
to an end. Before the expiry of the 3
rd
implementation extension i.e.,
Civil Appeal Nos. 5023-5024 of 2024 Page 37 of 168
30.09.2023, Respondent No. 1 had deposited an amount of Rs. 200 Crore.
However, it is the case of the Appellants that the manner of infusion of the
same was in contravention of the Resolution Plan, specifically Clause 2.1.5,
since Respondent No.1 infused a portion of the funds through a third party,
thereby inducting them into the Resolution Plan as a shareholder.
21. Before this Court, the following three Interim Orders passed by the NCLAT
came to be challenged by the Appellants over a period of time:
i) Civil Appeal Nos. 3736-3737 of 2023 challenging the Interim Order
dated 03.03.2023 passed by the NCLAT by which it declined to stay
the NCLT Order dated 13.01.2023 which held that all the Conditions
Precedent had been fulfilled;
ii) Civil Appeal Nos. 4131-4134 of 2023 challenging the Interim Order
dated 26.05.2023 passed by the NCLAT through which the NCLAT
restrained the Appellants from invoking the PBG and extended the
time for infusion of first tranche payment of Rs. 350 Crore up to
31.08.2023; and
iii) Civil Appeal Nos. 6427-6428 of 2023 challenging the Interim Order
dated 28.08.2023 passed by the NCLAT allowing the PBG of Rs. 150
Crore to be adjusted against the first tranche payment and allowing
the remaining amount of Rs. 200 Crore to be infused by 30.09.2023.
Civil Appeal Nos. 5023-5024 of 2024 Page 38 of 168
22. All the aforementioned appeals were heard together and vide common
judgment and order dated 18.01.2024, this Court held that the PBG cannot be
permitted to be adjusted against the first tranche payment and therefore,
directed that the amount of Rs. 150 Crore be infused in cash on or before
31.01.2024 (4th implementation extension). In the event of failure by
Respondent No.1 to infuse the said amount within the said date, this Court
held that the consequences under the Resolution Plan would follow. It
disposed of the appeals as thus:
“25. The lenders have argued in the appeals that there has
been a failure on the part of the successful resolution
applicant to comply with the conditions precedent. If the
successful resolution applicant were to comply with the
terms as envisaged in SBI's affidavit dated August 16, 2023,
evidently issues pertaining to compliance with the conditions
precedent were not to be pressed thereafter. In order to
furnish this successful resolution applicant a final
opportunity to comply and consistent with the above
position, we issue the following directions:
(i) The successful resolution applicant shall peremptorily on
or before January 31, 2024, deposit an amount of Rs. 150
crores into the designated account of SBI, failing which the
consequences under the resolution plan shall follow;
(ii) The performance bank guarantee of Rs. 150 crores shall
continue to remain in operation and effect, pending the final
disposal of the appeal before the National Company Law
Appellate Tribunal, and shall abide by the final outcome of
the appeal and the directions that may be issued by the
National Company Law Appellate Tribunal; and
(iii) Whether or not the successful resolution applicant 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 August 16, 2023 shall be decided by the
Civil Appeal Nos. 5023-5024 of 2024 Page 39 of 168
National Company Law Appellate Tribunal in the pending
appeal.”
(emphasis supplied)
23. Respondent No.1 failed to deposit Rs. 150 Crore in cash by 31.01.2024 as
directed by this Court. Therefore, on 27.01.2024, Respondent No.1 filed Misc.
Application Nos. 216-217 of 2024 in the Civil Appeal Nos. 6427-6428 of 2023
seeking an extension of time for making the deposit of Rs. 150 Crore. The
same was dismissed by us vide order dated 02.02.2024 as being misconceived
in view of our previous order dated 18.01.2024. This order is reproduced
hereunder:
“ ORDER
1. The Miscellaneous Application is misconceived in
view of the final order passed by this Court on 18 January
2024.
2. The Miscellaneous Application is accordingly
dismissed.
3 Pending applications, if any, stand disposed of.”
24. Later, the NCLAT, vide its impugned order dated 12.03.2024, dismissed the
Company Appeal filed by the Appellants against the order of the NCLT dated
13.01.2023 while holding that Respondent No.1 had fulfilled all the
Conditions Precedent and had also complied with all the other terms of the
Resolution Plan. The following were the concluding observations in the
impugned order of the NCLAT:
Civil Appeal Nos. 5023-5024 of 2024 Page 40 of 168
“129. In view of our foregoing discussions and conclusions,
we dispose of these Appeals in the following manner:
1. The impugned order passed by the Adjudicating
Authority dated 13.01.2023 is upheld.
2. The Monitoring Committee and MC Lenders as well as
SRA are directed to take steps for creation of charge
over the Dubai Property No. 1, Dubai Property No. 2,
and Dubai Property No.3 within a period of 30 days
from today. The SRA to bear all necessary expenses for
creation of necessary charge.
3. The Performance Bank Guarantee of INR 150 Crores,
which is lying with the Monitoring Committee/MC
Lenders, shall be adjusted towards the first tranche
payment of INR 350 crores as INR 200 crores have
already been paid by the SRA. By adjustment of PBG
as per the Resolution Plan, the first tranche of payment
of INR 350 crores shall be completed.
4. Steps shall be taken for re-constitution of the shares as
per the Resolution Plan forthwith.
5. Out of the first tranche payment of INR 350 crores,
payments shall be made to the workmen and employees
and the creditors as per the Resolution Plan, including
the payment of CIRP cost as per the Resolution Plan,
which payment shall be completed within 60 days from
the date of this judgment.
6. The SRA shall submit an Application for re-issue of Air
Operation Certificate which may be obtained within 90
days from the date of this judgment.
7. The closing date shall be 90
th
day from the date of this
judgment, on which date, handing over of the
Corporate Debtor to the SRA by the Monitoring
Committee shall be completed.
8. Towards the payment of provident fund dues, as per the
order dated 21.10.2022 passed by this Tribunal in
Company Appeal (AT) (Insolvency) Nos. 643 of 2021,
SRA has undertaken to make payment of provident fund
upfront along with payment of dues of workmen and
employees as per the Resolution Plan, which payment
Civil Appeal Nos. 5023-5024 of 2024 Page 41 of 168
of INR 12 Crores as undertaken, shall be made in
addition to the payments as directed above.”
(emphasis supplied)
25. The aforesaid judgment and order of the NCLAT once again extended the time
limit for implementation of the Resolution Plan and satisfaction of the first
tranche payment obligation of Rs. 350 Crore to 11.04.2024 i.e., the date within
which the creation of charge over the various Dubai properties was to be
completed (5
th
implementation extension). The same charge has, admittedly,
not been created as on date.
26. In light of the above, the Appellants have challenged the aforesaid impugned
order of the NCLAT dated 12.03.2024 by way of the present Civil Appeals
filed under Section 62 of the IBC, 2016.
B. SUBMISSIONS ON BEHALF OF THE APPELLANTS
27. Mr. N. Venkataraman, learned ASG appearing for the Appellants broadly
classified his submissions into the following issues:
i. That the direction of the NCLAT in the impugned order dated
12.03.2024 allowing Respondent No.1 to adjust the PBG of Rs. 150
Crore towards the first tranche payment of Rs. 350 Crore, runs counter
Civil Appeal Nos. 5023-5024 of 2024 Page 42 of 168
to the judgement of this Court dated 18.01.2024. The Resolution plan
mandates a cash infusion and the question of PBG adjustment would
arise only when the three Dubai properties valued at Rs.250 crores are
mortgaged by Respondent No.1.
ii. That the NCLAT, through its impugned order dated 12.03.2024
erroneously limited the Airport Dues to Rs. 25 Crore and further
categorising it as a part of the CIRP costs especially when the
Resolution Plan obligates an upfront payment of Rs. 475 Crore towards
Airport Dues. Such an error is glaring since the Resolution Plan clearly
excludes the Airport Dues from the ambit of CIRP costs.
iii. That the NCLAT while approving the Resolution Plan vide its Order
dated 21.10.2022 increased the workmen’s dues from Rs. 52 Crore to
Rs. 289.2 Crore (which according to the appeals filed by the workmen
would be reduced to Rs. 226 Crore post the demerger of the ground
handling business). An appeal against the order stood dismissed by this
Court on 30.01.2023. Therefore, it is a matter of concern that the
impugned order of the NCLAT limited the workmen’s compensation
to a mere Rs. 12 Crore which is contrary to its earlier order dated
21.10.2022 as upheld by this Court on 30.01.2023.
Civil Appeal Nos. 5023-5024 of 2024 Page 43 of 168
iv. Clause 7.6.1 of the Resolution Plan deals with the five Conditions
Precedent and imposes an obligation on the SRA to fulfil the same in
order to recommence the operations of the Corporate Debtor as an
aviation company. The SRA could be said to have breached three of
these conditions i.e. Condition (a) on obtaining the AOC; Condition (c)
on obtaining the Slots Allotment Approval, and; Condition (d) on
obtaining the International Traffic Rights Clearance. The NCLT, vide
its order dated 13.01.2023 had held that the Conditions (a) and (c) stood
fulfilled and amended Condition (d) which effectively transformed it
from a condition precedent to a condition subsequent. Such erroneous
findings came to be wrongly affirmed by the NCLAT through its
impugned order dated 12.03.2024.
i. Issue No.1: Adjustment of PBG of Rs. 150 Crore towards the first
tranche payment
28. As far as the first tranche payment of Rs. 350 Crore is concerned, it was
submitted that a payment of only Rs. 200 Crore in cash has been made and the
SRA has failed to infuse the remaining Rs. 150 Crore in cash.
Civil Appeal Nos. 5023-5024 of 2024 Page 44 of 168
29. The learned ASG submitted that Clause 6.3.1(g) relating to the “Infusion of
Funds and Timelines” provides that the timeline for the infusion of the upfront
first tranche payment of Rs. 350 Crore was within 180 days from the Effective
Date. The clause also indicates the manner in which the first tranche would
be utilized and obligates a distribution pattern towards the CIRP costs,
contingent fund, payments to FCs, OCs, other creditors and other
stakeholders, working capital for business and miscellaneous administrative
expenses.
30. The learned ASG then elaborated on the scope of Clause 7.7 of the Resolution
Plan which provides the “Implementation Schedule” and requires that the
Resolution Plan be completed within 5 years from the Effective Date.
According to this clause, the performance of different obligations was to be
completed within the said corresponding timelines. S.No. 11 under this table
specifically requires the infusion of Rs.350 Crore in the Corporate Debtor by
the SRA within “Z+150 days” where “Z” represents the Effective Date. The
expression “infusion” has been interpreted by this Court vide its judgement
dated 18.01.2024 to mean “payment in cash”.
31. Reference was made by the learned ASG to the RFRP, more particularly to
Clauses 3.13.1, 3.13.2, 3.13.7(iii) and 3.13.9 which mandate the execution of
a PBG for an amount of Rs. 150 Crore and also provide that the PBG cannot
Civil Appeal Nos. 5023-5024 of 2024 Page 45 of 168
be set-off against or used as a part of the consideration which the SRA
proposes to offer in relation to the company even if expressly indicated as such
in the successful Resolution Plan. It also provides for an automatic right to
invoke the PBG without any reference to the SRA, should the SRA fail to
implement the approved Resolution Plan in accordance with the terms of the
Resolution Plan and to the satisfaction of the CoC. It was also submitted that
vide Clauses 7.3 and 9.4 of the Resolution Plan respectively the spirit and
intention of the RFRP stood translated into the Resolution Plan. Under Clause
7.3 of the Resolution Plan, the SRA undertook to provide the PBG as per the
RFRP and in compliance with Regulation 36B(4A) of the 2016 Regulations.
Clause 9.4 of the Resolution Plan authorizes the invocation of the PBG in
terms of the RFRP.
32. The learned ASG submitted that Clause 6.4.4 of the Resolution Plan on
“Treatment of Financial Creditors - Summary of payments and Security
package” under its tabular column evidently conveys the mandate that the
SRA is under an obligation to execute a mortgage over the three Dubai
properties i.e., Property No. 1 valued at Rs. 100 Crore, Property No.2 valued
at Rs. 100 Crore and Property No.3 valued at Rs. 50 Crore. The table provides
that the date of creation of such security would be the Effective Date. This
security had to be created at the cost of the SRA. Therefore, the SRA was
obliged to not only infuse an amount of Rs. 350 Crore within 180 days of the
Civil Appeal Nos. 5023-5024 of 2024 Page 46 of 168
Effective Date, but also execute the mortgage of the three Dubai properties on
the Effective Date. In other words, the Resolution Plan obligated the SRA to
satisfy the following twin conditions for the PBG to be discharged – (a)
infusing Rs. 350 Crore as the first tranche payment and (b) executing a
mortgage on the three Dubai properties worth Rs. 250 Crore on the Effective
Date. The learned ASG submitted that, it is not in dispute that the NCLT vide
its order dated 11.04.2022 extended the time for achieving the Effective Date
to 25.05.2022 and Respondent No.1 claimed to have achieved the same on
20.05.2022. Consequently, all the three Dubai properties ought to have been
mortgaged on or before 20.05.2022.
33. It was submitted that the Respondent SRA failed to make the first tranche
payment of Rs. 350 Crore despite the fact that it ought to have been infused
within 6 months from 20.05.2022. Instead, the Respondent SRA continuously
contended that the order of the NCLT dated 13.01.2023 (holding that the
Conditions Precedent have been fulfilled) was challenged by the Appellants
before the NCLAT and that they could not therefore bring in Rs. 350 Crore
since the Effective Date had not yet materialized.
34. It was submitted that the Appellants filed the Lender’s Affidavit dated
16.08.2023 before the NCLAT and vide Para 8 of the Lender’s Affidavit, the
Appellants agreed not to contest the issues relating to the grant of exclusion
of time (granted by the Order of the NCLT dated 13.01.2023 and the NCLAT
Civil Appeal Nos. 5023-5024 of 2024 Page 47 of 168
dated 26.05.2023) and the issue relating to the compliance with the Conditions
Precedent. In the said affidavit, the Appellants also agreed to withdraw the
Company Appeal pending before the NCLAT along with the Civil Appeal
Nos. 4131-4134 of 2023 and Civil Appeal Nos. 3736-3737/2023 filed before
this Court. However, this would be subject to the fulfilment of the three
conditions imposed vide Para 8 by the SRA. The conditions were that – firstly,
the SRA infuses an amount of Rs. 350 Crore by 31.08.2023 i.e., the date by
which the said payment is to be made as per the Resolution Plan read with
order dated 26.05.2023 passed by the NCLAT; secondly, the SRA undertakes
to scrupulously follow the other terms and conditions of the Resolution Plan
and; thirdly, the SRA complies with the liabilities in relation to the payment
to be made to the employees as per the order of NCLAT dated 21.10.2022,
which has been upheld by this Court vide order dated 30.01.2023
35. It was submitted that in terms of Serial No. 11 under Clause 7.7.1 read with
Clause 6.1.3(g), the SRA had to infuse cash amounting to Rs 350 Crore and it
was for this reason alone that Para 8(a) of the Lender’s Affidavit refers
specifically to the infusion of Rs. 350 crore in cash by 31.08.2023. It was
reiterated that the first tranche payment had to necessarily be made in cash
since such a requirement flows from the Resolution Plan. It was not open to
the SRA to contend that the Resolution Plan had a different mode of payment
namely, the payment of Rs. 200 Crore in cash and Rs. 150 Crore by way of
Civil Appeal Nos. 5023-5024 of 2024 Page 48 of 168
adjusting the PBG. The learned ASG contended that none of the clauses in the
Resolution Plan stipulates such condition. To the contrary, under Clause 6.4.4,
the PBG could be released or adjusted only upon the satisfaction of the twin
requirements abovementioned. Therefore, the assumption by the Respondent
that the infusion of Rs. 350 Crore emanates only out of the Lender’s Affidavit
dated 16.08.2023, is totally incorrect. The Lender’s Affidavit has not and
cannot impose any condition over and above those which are provided under
the Resolution Plan. The Lender’s Affidavit was filed to only set out a
deadline for infusing Rs. 350 Crore by 31.08.2023, which was subsequently
extended by the order dated 28.08.2023 of the NCLAT to 30.09.2023. The
Lender’s Affidavit only insisted on compliance with payment obligations
within specified timelines and neither did it alter the Resolution Plan nor lay
out new conditions.
36. The NCLAT in its order dated 28.08.2023 fell in error in allowing the
adjustment of PBG of Rs. 150 Crore as a part of the first tranche payment.
This is evident from the order of this Court dated 18.01.2024, specifically
under Para 21, wherein it was held that an infusion of Rs. 350 Crore would
only mean an infusion by cash and the same could not be substituted for the
adjustment of PBG. This Court, further, under Para 25 directed that a failure
to make this payment on or before 31.01.2024 would necessitate the
consequences under the Resolution Plan to follow. This Court further issued
Civil Appeal Nos. 5023-5024 of 2024 Page 49 of 168
a direction that the NCLAT shall decide whether the SRA had been compliant
with all the conditions contained in the Resolution Plan as well as the
conditions in Clause 8 of the Affidavit dated 16.08.2023. This Court made it
clear that the non-infusion of Rs. 150 Crore in cash would lead to
consequences both in terms of the Affidavit and also the Resolution Plan since
the condition insofar as infusion was concerned, remained the same both in
the Affidavit and in the Resolution Plan. Therefore, the observation of the
NCLAT in the impugned order holding that the consequences of non-deposit
of Rs. 350 Crore was that “the SRA was not entitled to take any benefit of the
offer” is contrary to the Resolution Plan and the order of this Court dated
18.01.2024.
37. This Court had directed a cash payment of Rs. 150 Crore on or before
31.01.2024 and the SRA had admittedly failed to remit the same. Realizing
that this would lead to the initiation of the consequences under the Resolution
Plan, Respondent No.1 had applied for an extension before this Court which
was declined outright as being misconceived vide order dated 02.02.2024.
Therefore, the SRA having failed to make the payment and having breached
this Court’s order dated 18.01.2024, the NCLAT ought to have concluded that
the Resolution Plan had failed.
38. In the alternative, the ASG argued that, assuming without admitting that the
non-compliance of this Court’s Judgement dated 18.01.2024 would only have
Civil Appeal Nos. 5023-5024 of 2024 Page 50 of 168
the consequence of bringing a closure to the offer made in the Lender’s
Affidavit dated 16.08.2023 and not have any effect on the Appeal that was
pending before the NCLAT, the NCLAT while passing it’s final order dated
12.03.2024 ought to have insisted on the payment of Rs. 150 Crore in cash.
That would have been in tune with the specific direction that was issued by
this Court & the intent with which the direction was issued, and the SRA
having not paid the same, had committed a breach of the Resolution Plan. The
NCLAT went to the extent of swapping the conditions laid out in the
Resolution Plan by directing the adjustment of the PBG first and the execution
of the mortgage on the three Dubai properties later i.e., within 30 days from
its order dated 12.03.2024. It was submitted that even the extension that was
allowed for the execution of mortgage expired on 11.04.2024 and the SRA
continues to be a defaulter in this regard as well.
39. The ASG vehemently contended that, there has been a triple breach on the part
of SRA – Firstly, breach of the Resolution Plan; secondly, violation of the
directions issued by this Court dated 18.01.2024 and; thirdly, the failure to
execute the mortgage of the three Dubai properties before 11.04.2024.
40. The ASG submitted that the impugned order of the NCLAT dated 12.03.2024
at Para 129, granted 30 days’ time to the SRA for the creation of charge over
the Dubai properties and directed the SRA to bear all the necessary expenses.
Civil Appeal Nos. 5023-5024 of 2024 Page 51 of 168
It was submitted that there was complete inaction on the part of the SRA for
29 days from the date of the impugned order and on 10.04.2024 at 16:38 hours,
the SRA sent an email stating that they are willing to proceed with the security
creation of the Dubai properties and also informed that since its value had
reduced by Rs. 14 Crore, they would bridge the gap with an additional
property or a cash security. On the same date, another email was sent by the
SRA at 17:18 hours stating that an account balance of Rs. 76.07 Lakh is
available with the Appellants and the same may be used to execute the
mortgage. The ASG submitted that the Appellants replied to the said
communication on the same day at 19:18 hours stating that:
(a) The assenting financial creditors on 13.10.2023 have appointed Mashreq
Bank to act as the agent for creation of the mortgage in terms of the
prevailing law in Dubai and the necessary amount required to be paid to
them had not yet been received.
(b) After the impugned order of the NCLAT came to be passed on 12.03.2024,
the Appellants sent an email on 22.03.2024 regarding the cost for the
creation of a mortgage over the properties located in Dubai, which had not
been paid till date.
(c) That, instead of remitting the amount for creation of security as already
advised, the SRA was sending an email that it had “no objection with the
Civil Appeal Nos. 5023-5024 of 2024 Page 52 of 168
MC lenders immediately proceeding with the security creation of the
Dubai properties”.
(d) It was also brought to the notice of the SRA that 11.04.2024 would be the
last date for complying with the impugned order of the NCLAT and that
the SRA was well aware of the fact that the cost of creation of securities is
Rs. 2,36,00,767 and not Rs. 76.07 lakh. This shows the SRA’s clear
disinclination to execute the mortgage. It was further brought to the SRA’s
notice that they had failed to comply with the Resolution Plan and the
impugned order of the NCLAT dated 12.03.2024.
Further, on the same day, at 21:05 hours, the SRA sent an email referring to
12 acres of contiguous land situated in Aligarh, Uttar Pradesh which had been
valued in excess of Rs. 250 Crore, owned by a reputed individual entrepreneur
resident in India and that the SRA was ready to offer this property as an
alternative security in India. The Appellants replied to the said email on
16.04.2024 and stated that the period of 30 days had already expired on
11.04.2024, the expenses for creation of charge had not been paid and that
accepting the property in India which belongs to a third party would
tantamount to modification of the Resolution Plan.
41. The ASG therefore submitted that the above exchanges patently bring out the
SRA’s non-cooperation, defiance to judicial orders and desperate attempts to
Civil Appeal Nos. 5023-5024 of 2024 Page 53 of 168
suggest the creation of security of unknown third-party properties, all of which
were done after the expiry of the time period of 30 days provided by the
NCLAT for compliance with their order dated 12.03.2024. Consequently,
even in terms of the impugned Order of the NCLAT, there has been a total
breach on the part of the SRA which only indicates that they have no
inclination worth the name to implement the Resolution Plan. Consequently,
in terms of Clause 9.4 of the Resolution Plan and Clause 3.13.7(iii) of the
RFRP respectively, the Appellants are entitled to invoke the PBG
automatically without any reference to the SRA.
ii. Issue No. 2: Non-payment of Airport dues
42. It was submitted that in terms of Clause 6.3.1(d), the airport dues and parking
charges are to be paid by the SRA upfront in priority over any other payment
to the creditors of the Corporate Debtor. Clause 6.4.1(f) provides that on
31.08.2020, an approximate figure of Rs 240 Crore towards parking charges
for aircrafts and airport space lease charges was arrived at through the estimate
given by the RP and this was subject to a maximum of Rs. 475 Crore. Specific
attention was drawn to the expression in Clause 6.3.1(d) which states that
“such payments will be settled upfront in full in first 180 days from the
effective date and without any conditions (including not being staggered
Civil Appeal Nos. 5023-5024 of 2024 Page 54 of 168
payments spread across a period of time) so that flying can start immediately
without any future disputes and concerns with such claimants for past dues”.
The respondents, however, have not remitted any amount towards the airport
dues nor have they allowed the Resolution Plan to be implemented. As a result
of the several extensions/exclusions given by the NCLT and NCLAT to the
SRA, the airport dues as on date stand at a staggering figure of Rs. 1100 Crore
approx., which amount, again, is to be paid by the respondents alone.
43. The ASG submitted that, when the aforesaid is the position in the Resolution
Plan, the NCLAT in its impugned order dated 12.03.2024 vide Paras 53-55
respectively has chosen to restrict the Airport dues to a mere Rs. 25 Crore and
has erroneously construed it to be a part of the CIRP cost. The counsel drew
specific attention to Para 53 of the impugned order wherein the NCLAT had
referred to Clause 6.4.1(h) and stated that “…CIRP cost of the Corporate
Debtor (excluding parking charges, rental charges, employees dues, taxes
etc.) Accordingly, the Resolution Applicant has set aside a sum of Rs 25 crores
as CIRP cost towards payment of any such cost until the approval date…”.
Thus, despite the fact that Clause 6.4.1(h) on treatment of Outstanding CIRP
Costs excludes the parking charges, rental charges, employees’ dues, taxes
etc., the NCLAT has surprisingly read the same to mean as “inclusive
of/included in” the CIRP costs while directing the payment of a mere Rs. 25
Civil Appeal Nos. 5023-5024 of 2024 Page 55 of 168
Crore. Therefore, this is an error apparent on the face of it which requires
interference by this Court.
44. It was submitted that, in case the argument of the SRA that a maximum of
only Rs. 475 Crore is to be paid by the SRA under the Resolution Plan, is
accepted, then the entire amount of Rs. 475 Crore shall go towards the airport
dues and as a consequence, nothing would become payable to the financial
creditors, operational creditors, workmen etc. The amount of Rs. 240 Crore
was a mere estimate of the dues payable in the year 2020. Due to non-payment
and non-commencement of flying operations, the same amount in the year
2024 has increased multi-fold. To contend that such an increased amount does
not fall under the Resolution Plan and therefore, is not payable, will cast a
further burden on the CoC of the Corporate Debtor. Further, it would be unfair
to accept that, for the reason of the Respondent’s default in payment, the CoC
would have to bear the Airport dues of Rs. 1100 Crore and none of the
creditors or workmen would get anything out of this plan. This misconceived
contention which intentionally makes the plan unworkable needs to be
outrightly rejected.
iii. Issue No. 3: Non-payment of Workmen and Employees’ dues
Civil Appeal Nos. 5023-5024 of 2024 Page 56 of 168
45. The ASG submitted that the Resolution Plan originally provides for a sum of
Rs. 52 Crore towards the payment of workmen’s and employees’ dues.
However, the NCLAT vide its order dated 21.10.2022, in Para 78, had
increased the same to Rs. 289.2 Crore which now stands modified to about
Rs. 226 Crore. The NCLAT in the order dated 21.10.2022 under Para 80 had
observed in unambiguous terms that “the workmen are entitled to full payment
of provident fund and gratuity, hence the balance of above dues ought to be
paid by the SRA to satisfy statutory obligations. Non-payment of full provident
fund and gratuity shall lead to violation of Section 30(2)(e) and hence, to save
the Plan the above payments have to be made”. This view of the NCLAT had
also been upheld by this Court vide its order dated 30.01.2023. The Resolution
Plan under Clause 6.3.1(c) obligates the payment of such dues within 180 days
from the Effective Date.
46. It was submitted that, the NCLAT, vide Paras 111-114 had erroneously
directed the payment of an amount of Rs. 12 Crore towards the Provident
Fund and has completely ignored the payment of dues pertaining to gratuity
of the workmen and employees. The Appellants contend that this finding is
not only an error apparent but completely inconsistent with the NCLAT’s
own earlier order dated 21.10.2022, which stood upheld by this Court on
31.01.2023.
Civil Appeal Nos. 5023-5024 of 2024 Page 57 of 168
iv. Issue No. 4: Achievement of Effective Date
47. It was submitted that Clause 7.6.2 of the Resolution Plan provided that the
date of fulfilment of all the Conditions Precedent as stated in Clause 7.6.1,
shall be the Effective Date for the purposes of the Resolution Plan. A failure
to fulfill the Conditions Precedent within 270 days of the Approval Date
would lead to an automatic withdrawal of the Resolution Plan as per Clause
7.6.4. However, the NCLT, vide its order dated 22.06.2021, expressed its
opinion that there was uncertainty with respect to the achievement of the
Effective Date under the Resolution Plan and therefore, modified Clause 7.6.4.
As a consequence, it fixed the Effective Date to be the 90
th
day from the
Approval Date of 22.06.2021 and stated that this could be extended for a
maximum period of another 180 days. The Effective Date, therefore, became
22.09.2021 i.e., 90 days from 22.06.2021. Subsequently, three extensions
were given to the SRA with respect to the achievement of the Effective Date
– First, vide order dated 29.09.2021, the NCLT extended it to 22.12.2021;
Secondly, vide order dated 20.01.2022, the NCLT extended to 22.03.2022
through which the maximum extension of 270 days that could be provided
under the Resolution Plan had been reached and; Thirdly, vide order dated
11.04.2022, the NCLT further extended it to 25.05.2022 by excluding a period
Civil Appeal Nos. 5023-5024 of 2024 Page 58 of 168
of 65 days spent in moving the application for grant of time. Therefore, the
Effective Date was finally frozen on 25.05.2022.
48. The learned ASG submitted that the SRA, however, contended that the
Effective Date had been achieved on 20.05.2022 and the same was accepted
by the NCLT in its order dated 13.01.2023. Therefore, the calculation of 180
days for the infusion of the First Tranche Payment begins from 20.05.2022.
The initial 180 days had expired on 16.11.2022. However, several extensions
were given to the SRA for infusion of the first tranche payment – Firstly, vide
order dated 13.01.2023, the NCLT extended the timeline for infusion of First
Tranche Payment till 15.05.2023; Secondly, vide order dated 26.05.2023, the
NCLAT further extended the timeline of 180 days till 31.08.2023; Thirdly,
vide order dated 28.08.2023, the NCLAT extended the timeline of 180 days
till 30.09.2023 and; Fourthly, vide Order dated 18.01.2024, this Court
extended the time of 180 days for infusion till 31.01.2024.
49. The learned ASG highlighted that Respondent No.1 had failed to make the
first tranche payment of Rs. 350 Crore, airport dues of Rs. 475 Crore and the
workmen’s and employees’ dues of Rs. 226 Crore within the initial 180 days
from the Effective Date as well as within the multiple extensions granted by
the NCLT, NCLAT and this Court. The ASG submitted that multiple
extensions and accommodations have already been granted to the SRA for
Civil Appeal Nos. 5023-5024 of 2024 Page 59 of 168
implementation of the Resolution Plan. Therefore, it is too late in the day to
claim that the non-infusion of Rs. 150 Crore to complete the first tranche
payment of Rs. 350 Crore is only a breach of the Lender’s Affidavit dated
16.08.2023 and not the Resolution Plan. The same needs to be rejected
outrightly.
v. Issue No. 5: Non-fulfilment of Conditions Precedent
50. The ASG submitted that the respondents have failed to comply with 3
Conditions Precedent, specifically under Clauses 7.6.1(a), (c) and (d) of the
Resolution Plan respectively.
51. It was submitted that Clause 7.6.1 (a) requires the SRA to obtain an AOC
which has to be validated by the DGCA and the Ministry of Civil Aviation
(hereinafter, “MoCA”). The Respondent possessed an AOC on 20.05.2022
i.e., the Effective Date as contended by the SRA. The validity of the AOC was
further extended by the DGCA on 27.07.2023 up to 03.09.2023 subject to
certain conditions. It was clearly stated that the extension is only for the
limited purpose of completing the ongoing CIRP process and the Corporate
Debtor would be required to undergo fresh re-certification in accordance with
the prescribed procedure for issuance of an AOC and also submit a firm action
Civil Appeal Nos. 5023-5024 of 2024 Page 60 of 168
plan for the revival of its operations. The AOC expired on 03.09.2023 and the
same was never extended by the SRA.
52. It was submitted that the NCLT in its order dated 13.01.2023 had recorded a
finding that the Condition Precedent with respect to the AOC was fulfilled but
it must be noted that this was an observation made during a time when the
SRA had a valid subsisting AOC, which subsequently expired.
53. It was further submitted that vide letter dated 26.12.2023, the Director General
of Civil Aviation confirmed that no further extension of the AOC was granted
to the Corporate Debtor beyond 03.09.2023. The NCLAT in its impugned
order dated 12.03.2024 required the SRA to submit an application for re-
issuance of the AOC within 90 days from the date of its order and the deadline
for the same had expired on 12.06.2024. It was submitted that, even today,
the Respondents do not have a valid AOC and the fact that the Respondents
are contending that they had not renewed the AOC solely because of the matter
being under litigation, only exposes their disinterest and disinclination in
taking their obligations forward.
54. It was then submitted that Clause 7.6.1(c) requires the SRA to obtain Slot
Allotment Approval. The NCLT in its order dated 13.01.2023 vide para 124
had clearly rendered a finding that “there is no dispute that slots for which
Civil Appeal Nos. 5023-5024 of 2024 Page 61 of 168
SRA applied were granted to them by the concerned competent authority
including the slots in Delhi and Mumbai on settling the old dues and as such,
it cannot be considered as non-allotment of slots, as SRA has received the
slots it requested for in compliance with the plan approval order.” The ASG
also referred to the email dated 27.06.2022 issued by MAIL and the same
reads as under: “We are happy to consider your request for slots on parking
bay during the ongoing summer schedule. The same is subject to the closure
of ongoing discussions pertaining to settlement of outstanding dues of jet
airways towards MAIL.”
55. While the NCLT had correctly recorded a finding that the slot allotment is
subject to the payment of airport dues (which the Respondents had not paid
even today), the NCLAT vide para 50 and Para 55 erroneously concluded that
“the adjudicating authority has rightly observed that settling of old dues
cannot be considered as non-allotment of slots” and therefore condition
7.6.1(c) stands fulfilled. This finding is contrary to the finding recorded by
NCLT and the Resolution Plan and as a consequence, the Respondents could
be said to have breached this condition precedent as well.
56. The ASG submitted that Clause 7.6.1(d) requires the SRA to obtain the
International Traffic Rights Clearance. The NCLT, vide Para 125, had righty
held that “the international traffic rights clearance is required to be obtained
Civil Appeal Nos. 5023-5024 of 2024 Page 62 of 168
in compliance with the applicable laws which stipulates that minimum 20
aircrafts are required to be deployed before applying for such clearance”.
However, after holding so, the NCLT proceeded to conclude that this
condition cannot be satisfied upfront and can be fulfilled only when the
operations have recommenced successfully and that, therefore, this condition
precedent stood fulfilled. In simple terms, the NCLT could be said to have
modified a condition precedent to a condition subsequent and this view of the
NCLT has been upheld by the NCLAT in Paras 56 to 58. These findings are
in clear contradiction to the express stipulation in the Resolution Plan and
therefore, this condition too stands breached by the respondents.
57. One more aspect that the learned ASG highlighted through his submissions
was that, the Circular F.No.AV.14027/17/2018-AT-1 issued by the Office of
Director General of Civil Aviation provides certain requirements for
undertaking aerial work. Para 6 of the said Circular deals with Security
Clearance and the same requires the Applicant or Company and its Board of
Directors to obtain Security Clearance from the Ministry of Home Affairs
(MHA) if they are foreign nationals. It was submitted that according to the
communications dated 09.07.2024 issued by the Ministry of Civil Aviation, it
had been confirmed that Security Clearance had not been conveyed in respect
of Mr. Florian Fritsch. Hence, the threshold requirement of security clearance
Civil Appeal Nos. 5023-5024 of 2024 Page 63 of 168
has not yet been obtained by one of the Resolution Applicants, who according
to Clause 2.1.4 of the Resolution Plan, is the other partner to the Consortium
along with Mr. Murari Lal Jalan. The ASG also placed reliance on news items
which suggested that Mr. Florian Fritsch is facing money laundering
proceedings in three different jurisdictions. The same had been dealt with by
the NCLAT summarily in its impugned order in Para 125. However, it was
wrongly concluded that this was yet another attempt by the Appellants to
create roadblocks in the process of implementation of the Resolution Plan.
58. The counsel finally submitted that, since the Airport Dues and the CIRP costs
have substantially increased solely on account of the delay, the Court should
invoke its powers under Article 142 of the Constitution of India and direct that
the Corporate Debtor be sent to liquidation.
C. SUBMISSIONS ON BEHALF OF THE RESPONDENTS
59. On the other hand, Mr. Mukul Rohatgi, learned senior counsel appearing on
behalf of Respondent No.1 submitted that Section 62 of the IBC, 2016 requires
an appeal to the Supreme Court from an order of the NCLAT to be on a
“question of law”. He submitted that the present appeal only seeks to
challenge the concurrent findings of fact recorded by the NCLT and the
Civil Appeal Nos. 5023-5024 of 2024 Page 64 of 168
NCLAT, with regard to compliance of the Conditions Precedent by the SRA
and does not bring out any question of law. To fortify this submission, the
counsel placed reliance on the decision of this Court in IFCI Ltd. v. Sutanu
Sinha and Others reported in 2023 SCC OnLine SC 1529.
60. The counsel submitted that the directions issued by this Court vide order dated
18.01.2024 were interim and not final. The appeals which were decided by
this Court arose out of an interlocutory application which was filed by the
SRA seeking directions from the NCLAT on the mode of satisfying the
conditions in the Lender’s Affidavit dated 16.08.2023. It was submitted that
the same is evident from a reading of Para 19 which reads that “.. Observations
in the present judgment are confined to the arrangement which must operate
during the pendency of the appeal without the court expressing a final view
on merits of the appeal, which will fall for consideration before the NCLAT”.
Further, Para 21 of the same order stated that, “…The impugned order of the
NCLAT, on the other hand, allowed the plea of the SRA for adjustment and
consequential release of the PBG at the interlocutory stage. This prima facie
would not be in accordance with the tenor of paragraph 8 of the affidavit…”.
Therefore, it was submitted that the directions issued by this Court only related
to a scenario were the SRA sought benefit of the offer made in the Lender’s
Affidavit.
Civil Appeal Nos. 5023-5024 of 2024 Page 65 of 168
61. The counsel submitted that the NCLAT in its impugned order dealt with this
Court’s order dated 18.01.2024 at length and concluded that the direction
issued by this Court to deposit the amount of Rs. 150 Crore peremptorily on
or before 31.01.2024 was in reference to the Lender’s Affidavit dated
16.08.2023. Meaning thereby, the order of the NCLAT dated 28.08.2023 to
adjust the PBG of Rs. 150 Crore was substituted by the direction of the
Supreme Court. Therefore, the SRA would render itself disentitled to take
benefit of the offer of the Appellant that they would withdraw the Company
Appeal and the appeals before the Supreme Court. As such, the pending
Company Appeal was to be heard on merits and decided in accordance with
law by the NCLAT. In short, the entire issue before this Court was confined
to an interpretation as to how the condition of Rs. 150 Crore in the affidavit
was to be interpreted and if the condition was complied with, the Appeals
would stand withdrawn, if not, they would be decided on their own merits.
62. It was further submitted that the NCLAT rightly observed that, the submission
of the Appellant that the Corporate Debtor should be directed to be liquidated
on account of non-deposit of Rs. 150 Crore, cannot be accepted since the
Supreme Court neither considered nor expressed any opinion on the question
of liquidation. Liquidation was never recorded as a consequence and this is
evident from liquidation not being mentioned in; (a) the arguments of the
Civil Appeal Nos. 5023-5024 of 2024 Page 66 of 168
Appellants recorded by the NCLAT in its order dated 28.08.2023, (b) the
judgment of the NCLAT dated 28.08.2023, (c) the arguments of the
Appellants recorded by this Court in its order dated 18.01.2024 and, the
findings or the directions of this Court in its order dated 18.01.2024.
63. The counsel also submitted that the adjustment of the PBG against the first
tranche payment was possible under the Resolution Plan, specifically under
Clause 6.4.4 which sets out the “Summary of payments and security package”.
It is evident through Clause 6.4.4 that a revolving package was agreed against
each tranche of the payment under the Resolution Plan. For the first tranche
of payment, the security package comprises of the PBG and one of the Dubai
Properties and it is stated that the PBG will be adjusted against the first tranche
payment. For subsequent tranches of payment, the security package does not
include the PBG and instead includes other types of security. It was submitted
that the Lenders are relying on the RFRP to claim that no adjustment of the
PBG was possible. However, the RFRP is only a wish list of the CoC which
was informed to the applicants at the time of inviting plans. Therefore, it
cannot override a negotiated and approved provision of the Resolution Plan.
This is precisely why the approved Resolution Plans often deviate from the
RFRP.
Civil Appeal Nos. 5023-5024 of 2024 Page 67 of 168
64. The counsel submitted that according to Clause 6.4.4 of the Resolution Plan,
the Balance Security is in the form of immovable properties located in Dubai
and since they are located outside India, the approval of the RBI was necessary
for the creation of security. The security on the Dubai properties of the SRA
was to be created on the Effective Date, i.e., 20.05.2022. On 21.05.2022, a day
after the Effective Date, the SBI had applied for the approval and the same
was received on 22.07.2022.
65. It was submitted that, on 03.02.2023 the SRA had shared drafts of the
transaction documents required for the creation of security. However, no
comments were received from the Appellants. It is the case of the SRA that
the Appellants did not reply to the reminder emails sent between the months
of May and October 2023 and this issue was also discussed during the 37
th
MC Meeting dated 09.10.2023. However, after more than a year of sharing
the transaction documents, the Appellants sent their comments on the same on
08.04.2024 i.e., three days before the expiry of the 30-day timeline given
under the impugned order of the NCLAT.
66. It was further submitted that, only in the 42nd MC Meeting that took place on
02.04.2024 the SRA was informed for the first time that, as per the recent
valuation, the valuation of the Balance Security worked out at Rs. 236 Crore
and that there was a shortfall of Rs. 14 Crores. In the same meeting, the SRA
Civil Appeal Nos. 5023-5024 of 2024 Page 68 of 168
suggested that a property in India valued at Rs. 250 Crore could be provided
as an alternate security. Vide email dated 10.04.2024, the SRA provided
details of the alternate security equivalent to Rs. 250 Crore in India. However,
the Appellants responded to the above vide their email dated 16.04.2024
stating that providing an alternate security would tantamount to modification
of the Resolution Plan.
67. The counsel submitted that the SRA, vide email dated 16.04.2024 conveyed
that they had not received any invoice from Mashreq Bank towards payment
of their costs for acting as an agent for security creation and that the payment
of security related costs to the extent of Rs. 76 Lakh could be done from the
existing deposit with the Appellants. For the balance amounts, they requested
that the invoices be shared with the SRA and that the same would be processed
immediately. On 20.04.2024 and 01.05.2024 respectively, the SRA reminded
the Appellants to share the invoices for the purpose of security creation.
68. On the issue of security creation, the counsel summed up submitting that the
SRA had done everything within its control to enable the Appellants to create
security including agreeing to bear all costs and expenses for creation and
preservation of security, providing contracts for such security creation, and
providing title documents of all the immovable properties to the Appellants.
Civil Appeal Nos. 5023-5024 of 2024 Page 69 of 168
Therefore, the contention that the SRA failed to create Balance Security is
factually incorrect.
69. With respect to the payment of the Airport Dues, it was submitted that, the
Resolution Plan provides for the adjustment of CIRP dues from the positive
cash balance of the Corporate Debtor and then from the share of the Lenders.
The Appellants’ own case is that the Airport Dues amount to Rs. 1000 Crore
approximately. Therefore, as per the Resolution Plan, Rs. 400 Crore approx.
is payable towards the airport dues, first, from the positive cash balance of the
Corporate Debtor and if that is insufficient, then from the Lenders’ share being
CIRP Dues. Finally, the remaining Rs. 600 Crore would be borne by the SRA
70. As regards the payment of Provident Fund and Gratuity to the workmen and
employees, it was submitted that the NCLAT did not waive off the liability of
the SRA towards the payment of PF and Gratuity. On the contrary, for the
implementation of the same, the NCLAT had provided timelines for making
such payments in compliance with the applicable laws. It was further
submitted that in the 42
nd
MC meeting held on 02.04.2024, the SRA undertook
to make the payment towards the dues of PF and gratuity and the Appellants
are aware of the same.
Civil Appeal Nos. 5023-5024 of 2024 Page 70 of 168
71. The counsel submitted that there are concurrent findings on the fulfillment of
Conditions Precedent vide the order of the NCLT dated 13.01.2023 and the
impugned order of the NCLAT dated 12.03.2024. Clause 7.6.1 of the
Resolution Plan sets out five Conditions Precedent. It was submitted that two
of the five Conditions Precedent were “admittedly complied” with. On the
remaining three, both the Tribunals have rendered concurrent findings, which
ought not to be interfered with in an appeal under Section 62 of the IBC, 2016,
which is effectively a Second Appeal.
72. The counsel submitted that the SRA cannot suo moto infuse funds into the
Corporate Debtor since such infusion necessarily requires steps/actions to be
taken by the Appellants and the Corporate Debtor acting through the MC.
These steps include the appointment of directors on the board of the Corporate
Debtor and seeking in-principal approval from the relevant stock exchanges
under the SEBI LODR Regulations by the Corporate Debtor. However,
despite constantly following up with the Appellants, the same has not been
received yet and therefore, they have not allowed the SRA to undertake such
a funding.
73. The Counsel submitted that the first Condition Precedent is the Validation of
AOC by DGCA and MoCA as provided under Clause 7.6.1(a). The SRA had
a valid AOC until 03.09.2023 and the lapse of the AOC during the pendency
Civil Appeal Nos. 5023-5024 of 2024 Page 71 of 168
of the appeals cannot mean that the Condition Precedent was not met. It was
submitted that the condition was met on the date of the implementation
application being filed before the NCLT and that the AOC has not been
renewed only due to the fault of the Appellants.
74. It was submitted that the third Condition Precedent was the requirement of
Slot Allotment Approval as provided under Clause 7.6.1(c). The counsel
rejected the contention of the Appellants that the slots were not provided
because the airport charges were not paid and stated that the airport charges
are a part of the CIRP costs which could be met as and when the Resolution
Plan was operationalized. It was further submitted that the SRA had obtained
48 slots on the Effective Date when it was supposed to secure only 46 slots.
The NCLT in its order dated 21.06.2022 had also held that it was not possible
for the SRA to obtain the slots that were historically available to the Corporate
Debtor. Therefore, this Condition Precedent has also been met.
75. The counsel submitted that the fourth Condition Precedent related to obtaining
the International Traffic Right Clearance as stated under Clause 7.6.1(d) of
the Resolution Plan. This Condition Precedent had to be satisfied in
accordance with the “applicable laws”. Upon applying for the Clearance, the
MoCA had informed the SRA that, Clause 8(b) of the National Civil Aviation
Policy, 2016 requires a minimum of 20 aircrafts to be deployed for domestic
Civil Appeal Nos. 5023-5024 of 2024 Page 72 of 168
operations before applying for international clearance and that therefore, the
same can be granted when 20 aircrafts of the Corporate Debtor are in
operation. The Business Plan only envisages 6 aircrafts and the SRA can
operationalize 20 aircrafts once the operations of the Corporate Debtor begin.
This is evident from Clause 8.2.6(f) that states that the restart of international
operations can be envisaged only after the completion of 12 months of
operating the airline. Since this condition requires operations to re-commence
before it can be satisfied, this Condition Precedent has also been complied
with.
76. Mr. Gopal Sankaranarayanan, learned senior counsel also appearing for the
Respondents, concurred with all the aforesaid submissions made on behalf of
the SRA. In addition to bringing our attention to Clause 6.4.4 on the issue of
adjustment of the PBG, he also referred to Clause 6.4.12 of the Resolution
Plan which stated that the PBG will bring financial flexibility for the SRA and
help the SRA to advance the committed payments and achieve its goal of re-
commencing the operations of the Corporate Debtor at the earliest.
77. It was submitted that the NCLAT order dated 28.08.2023 rightly recognized
that Regulation 36B(4A) of the 2016 Regulations only provides for the PBG
requirement for the purposes of the RFRP and the same has been complied
with by the SRA. Further, the counsel pointed out that Clause 6.4.4 (a)(i)
Civil Appeal Nos. 5023-5024 of 2024 Page 73 of 168
elaborates on the “Committed Cash Payments” to be made to the Financial
Creditors. In the table, under the heading “Date of release of Security”, the
PBG of Rs. 150 Crore was not mentioned while the other two forms of security
find a mention. Thus, the intention was that, the PBG be adjusted in making
the first tranche payment.
78. The counsel further submitted that there is no specific consequence provided
under the Resolution Plan for a default in the creation of security. It was
reiterated that the SRA had undertaken all possible steps to further the
execution of the mortgage of the Dubai properties as per the Resolution Plan
and it is the Appellants who have not cooperated in this regard.
79. The counsel submitted that the Appellants have taken contradictory stances at
different stages of the dispute before different forums. Before the NCLAT in
its pending Company Appeal, it was contended by the Appellants that the
NCLT had erroneously allowed the Resolution Plan to be implemented
without the complete compliance of the Conditions Precedent by the SRA.
However, before this Court, they have argued that the SRA has claimed that
the Conditions Precedent were fulfilled on 20.05.2022 and has asserted that it
would be the Effective Date. As a consequence, the SRA should have met with
their first tranche payment obligations within 180 days from the Effective
Date.
Civil Appeal Nos. 5023-5024 of 2024 Page 74 of 168
80. The counsel submitted that the consequences of non-compliance with the
Conditions Precedent were that the SRA would not be able to re-commence
operations as an aviation company as stated in Clause 7.6.1 of the Resolution
Plan. He also submitted that the Effective Date for the purposes of the
Resolution Plan would only kick in upon the fulfillment of all the Conditions
Precedents. The consequence of non-compliance with the Conditions
Precedent would be that the Resolution Plan shall automatically stand
withdrawn and upon, such withdrawal, the members of the SRA in the MC
shall resign and the remaining members of the MC shall assume absolute
control of the Corporate Debtor.
81. Adding to the submissions as regards the Airport Dues, it was submitted that
as per the estimates made by the RP, the airport dues i.e., the parking charges
and airport space lease charges were Rs. 240 Crore and this was reflected in
Clause 6.4.1(f) of the Resolution Plan. It was submitted that the dues accrued
during the period of CIRP i.e., till the date of approval of the Resolution Plan,
is a part of the CIRP costs and such payments have to be made within 170
days from the Effective Date as per Clause 6.4.1 of the Resolution Plan. As
per Clause 6.4.1(h), a sum of Rs. 25 Crore was set aside for CIRP costs.
However, it must be noted that Clause 6.4.1(m) allows the SRA to utilize the
funds available with the Corporate Debtor for making payments of any portion
Civil Appeal Nos. 5023-5024 of 2024 Page 75 of 168
of the CIRP costs. It was submitted that the Lenders rely on Clause 6.3.1(d)
to state that the airport dues have to be settled upfront and not in staggered
payments. However, Clause 6.3.1(d) is just a proposal and not a condition of
the Resolution Plan.
82. On workmen and employees’ dues, it was submitted that, as per Clause 6.4.2
on the “Summary of Financial Proposal” the amount demarcated for all the
claims related to employees or workmen was Rs. 52 Crore and as per the
Implementation Schedule, these claims were to be paid within 175 days from
the Effective Date. However, the NCLAT vide its order dated 21.10.2022
increased it to Rs. 113 Crore since it was the minimum liquidation value that
they were entitled to as per the estimates of the RP. The final directions issued
by the NCLAT in the aforesaid order conveyed that the workmen and
employees are entitled to the payment of unpaid PF and gratuity till the
Insolvency Commencement Date and the RP was directed to compute such
payment within 30 days. The RP had calculated such amounts to be Rs. 14
Crore towards PF and Rs. 188.7 Crore towards gratuity. It was submitted that
neither the NCLAT order dated 21.10.2022 nor the order of this Court dated
30.01.2023 had provided any specific timelines for fulfillment of these
additional liabilities which were cast upon the SRA. This is precisely why the
SRA proposed to pay Rs. 14 Crore towards PF upfront in compliance with
Civil Appeal Nos. 5023-5024 of 2024 Page 76 of 168
Section 11 of the PF Act and pay the Gratuity dues of Rs. 188.2 Crore in a
staggered manner.
83. The counsel finally referred to the letter dated 16.08.2024 sent by MoCA
which provided Security Clearance in respect of a proposed Director of the
Corporate Debtor, Mr. Swapnil Jain. The validity period of this Security
Clearance was stated to be co-terminus with the validity period of the AOC
which was issued by the DGCA.
D. ISSUES FOR DETERMINATION
84. Having heard the learned counsel appearing for the parties and having gone
through the materials on record, the following questions of law fall for our
consideration: -
i. Whether the Performance Bank Guarantee (PBG) could have been
adjusted against the first tranche payment which was to be made under
the Resolution Plan, within 180 days from the Effective Date, in
contravention of the order of this Court dated 18.01.2024, the terms of
the Resolution Plan and the provisions of law? To put it in other words,
whether the impugned order of the NCLAT allowing the adjustment of
the Performance Bank Guarantee (PBG) in lieu of payment of the first
tranche could be said to be perverse?
Civil Appeal Nos. 5023-5024 of 2024 Page 77 of 168
ii. Whether the non-implementation of the Resolution Plan by the SRA
necessarily leads to the consequence of liquidation as provided under
Section 33(3) of the IBC, 2016?
iii. Whether the timely implementation of the Resolution Plan is also one
of the objectives of the IBC, 2016?
E. ANALYSIS
85. Before we proceed to advert to the rival submissions canvassed on either side
and the issues outlined above, we must look into the preliminary objection
raised on behalf of the SRA i.e., that the scope of an appeal under Section 62
of the IBC must be restricted to a “question of law”. In this regard, reliance
was placed on the decision of this Court in IFCI Ltd. v. Sutanu Sinha and
Others reported in 2023 SCC OnLine SC 1529 which dealt with the issue as
to whether compulsorily convertible debentures could be treated as a “debt”
instead of an equity instrument, to submit that the jurisdiction under Section
62 is restricted to a question of law akin to a second appeal. The relevant
observations are reproduced hereinbelow:
“29. Last but not the least, we must also note that our
jurisdiction comes from section 62 of the Code. The said
section reads as under:
“62. (1) Any person aggrieved by an order of the
National Company Law Appellate Tribunal may file an
appeal to the Supreme Court on a question of law
Civil Appeal Nos. 5023-5024 of 2024 Page 78 of 168
arising out of such order under this Code within forty-
five days from the date of receipt of such order”.
30. The jurisdiction is restricted to a question of law akin to
a second appeal. The law does not envisage unlimited tiers
of scrutiny and every tier of scrutiny has its own parameters.
Thus, the lis inter se the parties has to be analysed within the
four corners of the ambit of the statutory jurisdiction
conferred on this court.
31. We are thus of the view that the appeal does not raise any
such question of law and that the findings of the courts below
are in accordance with settled principles.”
(emphasis supplied)
86. Section 100 of the Code of Civil Procedure, 1908 is the provision related to a
second appeal and it reads as thus:
“100. Second appeal – (1) Save as otherwise expressly
provided in the body of this Code or by any other law for the
time being in force, an appeal shall lie to the High Court
from every decree passed in appeal by any Court
subordinate to the High Court, if the High Court is satisfied
that the case involves a substantial question of law.
(2) An appeal may lie under this section from an appellate
decree passed ex parte. (3) In an appeal under this section,
the memorandum of appeal shall precisely state the
substantial question of law involved in the appeal.
(4)Where the High Court is satisfied that a substantial
question of law is involved in any case, it shall formulate that
question.
(5)The appeal shall be heard on the question so formulated
and the respondent shall, at the hearing of the appeal, be
allowed to argue that the case does not involve such
question:
Provided that nothing in this sub-section shall be deemed to
take away or abridge the power of the Court to hear, for
reasons to be recorded, the appeal on any other substantial
Civil Appeal Nos. 5023-5024 of 2024 Page 79 of 168
question of law, not formulated by it, if it is satisfied that the
case involves such question.”
(emphasis supplied)
87. This Court in Chandrabhan (Deceased) Through Lrs. And Others v.
Saraswati and Others reported in 2022 SCC OnLine SC 1273 explained as
to what constitutes a “substantial question of law” under Section 100 of the
Code of Civil Procedure, 1908. The relevant observations made are
reproduced hereinbelow:
“33. The principles relating to Section 100 of the CPC
relevant for this case may be summarised thus:
(i) An inference of fact from the recitals or contents of a
document is a question of fact. But the legal effect of the
terms of a document is a question of law. Construction of a
document involving the application of any principle of law,
is also a question of law. Therefore, when there is
misconstruction of a document or wrong application of a
principle of law in construing a document, it gives rise to a
question of law.
(ii) The High Court should be satisfied that the case involves
a substantial question of law, and not a mere question of law.
A question of law having a material bearing on the decision
of the case (that is, a question, answer to which affects the
rights of parties to the suit) will be a substantial question of
law, if it is not covered by any specific provisions of law or
settled legal principle emerging from binding precedents and
involves a debatable legal issue. A substantial question of
law will also arise in a contrary situation, where the legal
position is clear, either on account of express provisions of
law or binding precedents, but the court below has decided
the matter, either ignoring or acting contrary to such legal
principle. In the second type of cases, the substantial
question of law arises not because the law is still debatable,
Civil Appeal Nos. 5023-5024 of 2024 Page 80 of 168
but because the decision rendered on a material question,
violates the settled position of law.
(iii) The general rule is that the High Court will not interfere
with findings of facts arrived at by the courts below. But it is
not an absolute rule. Some of the well-recognised exceptions
are where (i) the courts below have ignored material
evidence or acted on no evidence; (ii) the courts have drawn
wrong inferences from proved facts by applying the law
erroneously; or (iii) the courts have wrongly cast the burden
of proof. When we refer to “decision based on no evidence”,
it not only refers to cases where there is a total dearth of
evidence, but also refers to any case, where the evidence,
taken as a whole, is not reasonably capable of supporting the
finding.”
(emphasis supplied)
This Court recapitulated that a substantial question of law would also arise in
a situation where the legal position is clear, either on account of express
provisions of law or binding precedents, but the Court below has ignored or
acted contrary to such legal principles while deciding the matter. In such
circumstance, the decision rendered by the Court below would violate a settled
position of law and therefore, constitute a substantial question law.
Furthermore, it was observed therein that it is not an absolute rule that the
Court in a second appeal will not interfere with findings of fact. One of the
well-recognized exceptions is where the Courts below have drawn wrong
inferences from proved facts, by applying the law erroneously.
88. In Maria Colaco and Another v. Alba Flora Herminda D’souza and Others
reported in (2008) 5 SCC 268, it was held that in the second appeal under
Civil Appeal Nos. 5023-5024 of 2024 Page 81 of 168
Section 100 CPC, the High Court should not interfere on the questions of fact.
However, if on a scrutiny of the evidence, it is found that the finding recorded
by the first appellate court is totally perverse then an interference is certainly
possible in the matter as it constitutes a question of law. The relevant
observations are reproduced hereinbelow:
“7. The learned Single Judge after considering the matter
found that these averments did not constitute the basis on the
part of the plaintiff that he was not in possession of the suit
property. On the contrary, the learned Single Judge found in
reply to Para 13 of the plaint that the defendants in their
written statement admitted that the work was stopped by
Defendant 1 for some time but they restarted the work again.
This, according to the learned Single Judge was a proof of
the fact that Defendants 1 and 2 and Defendant 3 were not
sure about the possession and right of Defendants 1 and 2
over the property. In fact, what transpires from all these facts
is that the trial court reached the same conclusion as the
learned Single Judge in second appeal in the High Court. It
is true normally that in the second appeal the High Court
should not interfere on the questions of fact. But if on the
scrutiny of the evidence it is found that the finding recorded
by the first appellate court is totally perverse then certainly
the High Court can interfere in the matter as it constitutes
the question of law.”
(emphasis supplied)
89. In Abdul Raheem v. Karnataka Electricity Board and Others reported in
(2007) 14 SCC 138, the Court acknowledged that the High Court’s
jurisdiction in terms of Section 100 is limited. Having said so, it was also
Civil Appeal Nos. 5023-5024 of 2024 Page 82 of 168
observed that a consideration of irrelevant facts, non-consideration of relevant
facts and a finding of fact arrived at by overlooking vital documents would
also give rise to a substantial question of law. The relevant observations are
reproduced hereinbelow:
“10. A substantial question of law ordinarily would not arise
from the finding of facts arrived at by the trial court and the
first appellate court. The High Court's jurisdiction in terms
of Section 100 of the Code is undoubtedly limited.
11. The question as to whether the plaintiff was ready and
willing to perform its part of contract by itself may not give
rise to a substantial question of law. Substantial question of
law should admittedly be formulated relying on or on the
basis of findings of fact arrived at by the trial court and the
first appellate court.
12. However, there cannot be any doubt whatsoever that
consideration of irrelevant fact and non-consideration of
relevant fact would give rise to a substantial question of law.
Reversal of a finding of fact arrived at by the first appellate
court ignoring vital documents may also lead to a substantial
question of law. In Vidhyadhar v. Manikrao [(1999) 3 SCC
573] this Court held : (SCC p. 586, para 23)
“23. The findings of fact concurrently recorded by the
trial court as also by the lower appellate court could not
have been legally upset by the High Court in a second
appeal under Section 100 CPC unless it was shown that
the findings were perverse, being based on no evidence or
that on the evidence on record, no reasonable person
could have come to that conclusion.”
(See also Iswar Bhai C. Patel v. Harihar Behera [(1999) 3
SCC 457] .)
14. We may, however, notice a few decisions in regard to the
jurisdiction of the High Court under Section 100 of the Code.
In Commr. of Customs (Preventive) v. Vijay Dasharath
Civil Appeal Nos. 5023-5024 of 2024 Page 83 of 168
Patel [(2007) 4 SCC 118] this Court held : (SCC p. 128,
paras 22-26)
“22. We are not oblivious of the fact that the High Court's
jurisdiction in this behalf is limited. What would be
substantial question of law, however, would vary from
case to case.
23. Moreover, although, a finding of fact can be interfered
with when it is perverse, but, it is also trite that where the
courts below have ignored the weight of preponderating
circumstances and allowed the judgment to be influenced
by inconsequential matters, the High Court would be
justified in considering the matter and in coming to its
own independent conclusion. (See Madan
Lal v. Gopi [(1980) 4 SCC 255] .)
24. The High Court shall also be entitled to opine that a
substantial question of law arises for its consideration
when material and relevant facts have been ignored and
legal principles have not been applied in appreciating the
evidence. Arriving at a decision, upon taking into
consideration irrelevant factors, would also give rise to a
substantial question of law. It may, however, be different
that only on the same set of facts the higher court takes a
different view. (See Collector of Customs v. Swastic
Woollens (P) Ltd. [1988 Supp SCC 796 : 1989 SCC (Tax)
67] and Metroark Ltd. v. CCE [(2004) 12 SCC 505] .)
25. Even in a case where evidence is misread, the High
Court would have power to interfere. (See W.B.
Electricity Regulatory Commission v. CESC Ltd. [(2002)
8 SCC 715] and also Commr. of Customs v. Bureau
Veritas [(2005) 3 SCC 265] .)
26. In Dutta Cycle Stores v. Gita Devi Sultania [(1990) 1
SCC 586] this Court held : (SCC p. 587, para 4)
‘4. Whether or not rent for the two months in question
had been duly paid by the defendants is a question of
fact, and with a finding of such fact, this Court does not
ordinarily interfere in proceedings under Article 136 of
the Constitution, particularly when all the courts below
reached the same conclusion. But where the finding of
fact is based on no evidence or opposed to the totality
Civil Appeal Nos. 5023-5024 of 2024 Page 84 of 168
of evidence and contrary to the rational conclusion to
which the state of evidence must reasonably lead, then
this Court will in the exercise of its discretion intervene
to prevent miscarriage of justice.’
(See also P. Chandrasekharan v. S. Kanakarajan [(2007)
5 SCC 669] .)”.
(emphasis supplied)
Therefore, what would constitute a substantial question of law would differ
in each case. When material and relevant facts have been ignored and legal
principles have not been applied while appreciating the evidence, a substantial
question of law can be said to have arisen. Additionally, even in a case where
evidence is misread, the power to interfere under Section 100 would exist.
90. In our considered view the impugned order of the NCLAT directing the SRA
to adjust the PBG of Rs. 150 Crore against the first tranche payment of Rs.
350 Crore was in flagrant disregard of the order of this Court dated
18.01.2023, the terms of the Resolution Plan and established law. Such an
order was perverse for having not properly considered several material and
relevant facts and misreading evidence as well. Furthermore, the non-infusion
and payment of funds in compliance with the applicable laws and the terms of
the Resolution Plan had led to circumstances causing a failure of the
Resolution Plan. We have no doubt in our mind that the NCLAT acted
contrary to the settled legal principles and went to the extent of drawing wrong
Civil Appeal Nos. 5023-5024 of 2024 Page 85 of 168
inferences from proved facts while deciding the matter. This itself justifies the
examination of various issues in exercise of the jurisdiction afforded to us
under Section 62 of the IBC, 2016.
i. Whether the Performance Bank Guarantee (PBG) could have been
adjusted against the first tranche payment which was to be made
under the Resolution Plan, within 180 days from the Effective Date, in
contravention of the order of this Court dated 18.01.2024, the terms of
the Resolution Plan and the provisions of law?
a. Whether the Conditions Precedent were fulfilled by Respondent
No.1/SRA and the Effective Date was fixed at 20.05.2022?
91. Clause 7.6.1 of the Resolution Plan details five Conditions Precedent that have
to be fulfilled by the SRA. They are: - (a) Validation of AOC, (b) Approval of
Business Plan, (c) Slot Allotment Approval, (d) International Traffic Rights
Clearance, and (e) Demerger of AGSL. Of the five Conditions Precedent that
find mention under Clause 7.6.1 of the Resolution Plan, the Appellants have
only disputed the fulfilment of three Conditions Precedent i.e., Validation of
AOC, Slots Allotment Approval and International Traffic Rights Clearance.
According to Clause 7.6.2 of the Resolution Plan, the date of fulfillment of all
the Conditions Precedent as stated in Clause 7.6.1 would be the Effective Date
Civil Appeal Nos. 5023-5024 of 2024 Page 86 of 168
for the purposes of the Resolution Plan. A failure to fulfil the Conditions
Precedent within a maximum of 270 days from the date of approval of the
Resolution Plan would lead to an automatic withdrawal of the Resolution Plan
as per Clause 7.6.4.
92. On 22.06.2021, the NCLT had given its imprimatur to the Resolution Plan that
was submitted by the SRA and this was the Approval Date i.e., “Y” as per the
Implementation Schedule set out under Clause 7.7 of the Resolution Plan. The
SRA had to fulfil the five Conditions Precedent within a period of 90 days,
that was extendable to an additional 180 days i.e., 270 days in total. This
period expired on 22.03.2022. However, the same was extended vide order
dated 11.04.2022 by the NCLT until 25.05.2022, by allowing an exclusion of
65 days.
93. Upon receiving the AOC from the relevant authorities on 20.05.2022 i.e.,
within the extended time period as allowed by the NCLT, the SRA asserted
that the Effective Date had been achieved. The SRA had approached the
NCLT seeking a declaration from the Tribunal that all the Conditions
Precedent have been met and that the SRA be allowed to begin the
implementation of the Resolution Plan. Vide order dated 13.01.2023, the
NCLT held that all the Conditions Precedent had indeed been met and that
20.05.2022 would be considered as the Effective Date for the purposes of
Civil Appeal Nos. 5023-5024 of 2024 Page 87 of 168
implementation of the Resolution Plan. The findings of the NCLT in the
aforesaid order are reproduced hereinbelow:
“Findings:
122. […] However, having considered the rival submissions
and on perusal of record with regards to satisfactory
compliance of conditions precedent (CPs) it is noted that
there is no dispute so far as satisfactory compliance of CPs
at serial no. (i) and (v) as per approved plan i.e.:- (i)
Validation of Air Operator Certificate by Directorate
General of Civil Aviation (DGCA) and Ministry of Civil
Aviation (MoCA) and (v) Approval of demerger of ground
handling business into all capital AGSL.
In this background we have thus considered if the remaining
three CPs are duly complied with by the applicant or
otherwise.
123. As regards to CP No. 2 i.e. Submission and approval of
business plan to DGCA and MoCA: The business plan was
submitted to above Authorities to fulfil compliance of
DGCA’s Show Cause Notice (SCN) to CD of April 2019.
SCN states that Air Operator Certificate will be issued after
MoCA approves the business plan. Thus, with issuance of Air
Operator Certificate, it is implied that the business plan has
been approved. Even otherwise, guidelines for issuance of
Air Operator Certificate being CAP 3100 clearly states that
the DGCA will review the detailed business plan of the
Applicant before issuance of Air Operator Certificate and
with issuance of Air Operator Certificate there is implied
approval of MoCA. In the background of above we find that
this CP is satisfactorily complied with the issuance of AOC.
124. As regards to CP No. 3 i.e. Slots Allotment Approval: It
is noted that plan approval order of this Tribunal dated 22
nd
June, 2021 stipulates that no historic slots will be granted to
Corporate Debtor or SRA. Admittedly, there is no challenge
to this order thereby accepting the fact that old slot cannot
be reinstated. Accordingly, this CP needs to be read with
plan approval order, where Corporate Debtor shall be
provided with such slots for which it applies. There is no
Civil Appeal Nos. 5023-5024 of 2024 Page 88 of 168
dispute that slots for which SRA applied were granted to
them by the concerned Competent Authority including the
slots in Delhi and Mumbai, on settling the old dues and as
such it cannot be considered as non-allotment of slots, as
SRA has received the slots it requested for in compliance
with plan approval order. The SRA cannot get all previous
slots as this condition needs to be read with plan approval
order of this Tribunal. In that view of the matter, above CPs
is also found to be Satisfactorily complied with.
125. As regards to CP no. 4: International Traffic Right
Clearance: On perusal of the plan approval order dated
22nd June, 2021, it is found that no blanket approval can be
granted upfront to the SRA as it has to approach the
concerned authorities for grant of such approval as per
applicable laws. As already stated above, the plan approval
order has reached its finality, thus, accepting the fact that all
the approval issued upfront cannot be reinstated.
Accordingly, this condition precedent needs to be read with
plan approval order. Even otherwise there is no dispute that
under the approved plan, SRA has to re-commence with
operation of six aircrafts. The International Traffic Rights
clearance is required to be obtained in compliance with the
applicable laws which stipulates that minimum twenty
aircrafts are required to be deployed before applying for
such clearance. In view of this, we find that this condition
cannot be satisfied upfront and needs to be satisfied in
compliance with applicable laws i.e., after the SRA has
twenty aircrafts in operation which can only be achieved
once the operation is re-commenced successfully.
Accordingly, this condition can only be fulfilled after the
SRA/Applicants re-commences its business and not prior to
its commencement.
It goes without saying that plan approved by this Tribunal
has to be implemented without any modification much less
than on satisfaction of any other undertaking and thus, the
effective date and completion date of condition precedent
under the plan shall have to be read as 20th May, 2022.
126. In the background of above facts and for the reasons
stated above we hold that in addition to CPs (I) & (V) which
Civil Appeal Nos. 5023-5024 of 2024 Page 89 of 168
are admittedly complied, remaining CPs (II), (III), (IV) are
also duly complied.”
94. During the period when the aforesaid order of the NCLT was passed, the SRA
possessed a valid AOC and therefore, there was no dispute pertaining to this
Condition Precedent. With respect to the Slot Allotment Approval, the NCLT
observed that although the historic slots which were available to the Corporate
Debtor could not be obtained by the SRA, yet the slots for which the SRA had
applied were granted to it by the concerned authorities upon settling the old
dues and as such, this could not be considered as non-allotment of slots.
Therefore, this Condition Precedent was found to be satisfactorily complied
with. As regards the Condition Precedent on obtaining International Traffic
Rights Clearance, the applicable law required a minimum of 20 aircrafts to be
deployed before applying for such a clearance. However, under the approved
Plan, the SRA had to re-commence with the operations with only six aircrafts.
It was, therefore, held that this Condition Precedent could not have been
satisfied upfront and could only be satisfied once the operations of the
Corporate Debtor had commenced successfully. With such observation, this
Condition Precedent was also found to be duly complied with. The NCLT
noted that the plan which was approved vide the Plan approval order dated
22.06.2021 had to be implemented without any modification and thus the
Civil Appeal Nos. 5023-5024 of 2024 Page 90 of 168
Effective Date i.e., the date of completion of the Conditions Precedent under
the Resolution Plan should be read as 20.05.2022.
95. The Appellants filed a statutory appeal against the order of the NCLT dated
13.01.2023 before the NCLAT and also sought a stay on the same. However,
the grant of stay was declined by the NCLAT on 03.03.2023. This should have
closed the debate on the understanding between the parties that the Effective
Date was set in stone.
96. The NCLAT also vide its impugned order held that the SRA had fulfilled all
the required Conditions Precedent. On Slot Allotment Approval, it was held
that 48 slots have been obtained by the SRA for the recommencement of
operations. The contention of the Appellants that airport charges are required
to be paid upfront for obtaining such slots was rejected since the NCLAT was
of the opinion that the payment towards airport charges, which are a part of
CIRP costs, must be made as per the terms of the Resolution Plan when its
implementation had begun. Therefore, it was declared that the Condition
Precedent on Slot Allotment Approval was fulfilled despite the non-payment
of Airport Dues by the SRA. On International Traffic Rights Clearance, the
NCLAT echoed the opinion of the NCLT that it could not have obtained this
clearance without commencing and amplifying the operations of the
Corporate Debtor. It was observed that this Condition Precedent should not
Civil Appeal Nos. 5023-5024 of 2024 Page 91 of 168
come in the way of the implementation of the Resolution Plan. As regards the
AOC, it was contended by the Appellants that the same had lapsed after
03.09.2023 and no extension was granted by the DGCA thereafter. However,
the NCLAT was of the view that the AOC was valid on the date when the
SRA had approached the NCLT for a declaration that the Conditions
Precedent were fulfilled and also when the order dated 13.01.2023 of the
NCLT was passed. The expiry of the validity period of the AOC during the
pendency of the Company Appeal was not considered sufficient grounds to
hold that the Condition Precedent was not fulfilled. The NCLAT while
reaffirming that all the Conditions Precedent were satisfactorily fulfilled
observed that there was no infirmity in the order of the NCLT dated
13.01.2023. The NCLAT further directed the SRA to make an application for
the re-issuance of the AOC within 90 days from the date of its order i.e., by
12.06.2024.
97. The nature of the Conditions Precedent laid out under the Resolution Plan
were such that several of them could not be fulfilled before the
operationalization of the Corporate Debtor. The assertion that the Effective
Date would kick in only upon fulfilment of all the Conditions Precedent and
since the Appellants had challenged the fulfilment of the Conditions
Precedent, such a date could not be said to have yet arrived, cannot be
accepted. The order of the NCLT dated 22.06.2021 approving the Resolution
Civil Appeal Nos. 5023-5024 of 2024 Page 92 of 168
Plan had fixed the Effective Date as the 90
th
day from the Approval date,
which was subject to a maximum extension of another 180 days. It
consciously removed the ambiguity that plagued Clauses 7.6.2 and 7.6.4
respectively for the precise reason & with the idea that the Effective Date
should not be endlessly postponed. Agreeing to such an erroneous proposition
would mean that the Effective Date would never be achieved as long as the
parties are litigating before the Courts and the SRA would be absolved of
taking the implementation under the Resolution Plan further. The NCLAT
had declined to stay the order of the NCLT dated 13.01.2023 which held that
all the Conditions Precedent were fulfilled. Further, on a perusal of the
impugned order, it is evident that the NCLT and NCLAT rendered concurrent
findings of fact that the SRA had fulfilled all the Conditions Precedent. In
other words, it was repeatedly declared by different fora that the Effective
Date was frozen on 20.05.2022 and the obligation of the SRA to implement
the Resolution Plan was absolute. All steps necessary should have been
undertaken by the SRA, at least post the impugned order of the NCLAT dated
12.03.2024. To contend that its hands were tied since the Conditions Precedent
were still being challenged before this Court is nothing but a reflection of the
mala fide intention on the part of the SRA to not fulfil its obligations in
accordance with the Resolution Plan under the garb of pendency of litigation.
Such an undue delay cannot be permitted, especially in light of the intention
Civil Appeal Nos. 5023-5024 of 2024 Page 93 of 168
of the IBC, 2016 to ensure a successful and time-bound revival of the
Corporate Debtor. This places a higher obligation on the SRA to act in an
expeditious manner.
b. Whether the NCLAT could have directed the Performance Bank
Guarantee (PBG) to be adjusted against the first tranche payment
which was to be made within 180 days of the Effective Date?
98. There is no dispute to the fact that the Effective Date was frozen on
20.05.2022. Therefore, as per Clause 6.3.1(g) on the “Infusion of Funds and
Timelines”, and Serial No.11 under Clause 7.7, the first tranche payment of
Rs. 350 Crore had to be made by the SRA, upfront, within a period of 180
days from the Effective Date i.e., 20.05.2022. As per the Resolution Plan, this
180-day timeline otherwise would have expired on 16.11.2022. Several
extensions were granted to the SRA to infuse this amount, at different stages
of this litigation, by the NCLT, the NCLAT and this Court as well - First, by
the NCLT vide order dated 13.01.2023, by which the timeline for infusion of
first tranche payment was extended till 15.05.2023; Secondly, by the NCLAT
vide order dated 26.05.2023, where the timeline of 180 days was further
extended up to 31.08.2023; Thirdly, again by the NCLAT vide order dated
28.08.2023, where the timeline of 180 days was extended up to 30.09.2023;
Civil Appeal Nos. 5023-5024 of 2024 Page 94 of 168
and Fourthly, by this Court vide order dated 18.01.2024, whereby the time of
180 days for infusion was extended up to 31.01.2024.
I. The adjustment of the PBG was impermissible under the terms of the
Resolution Plan read with Regulation 36B(4A) of the 2016
Regulations.
99. It is the case of the SRA that as per Clause 6.4.4 on the “Treatment of
Financial Creditors” and the table adduced under the heading “Summary of
payment and security package”, the PBG of Rs. 150 Crore could have been
adjusted against the payment of the first tranche. It was submitted that in the
last column of the table, the “Date of Release of Security” is provided. In the
very first head in the column on date of release of security, the expression
“PBG adjusted” has been mentioned against the first tranche of cash payment
to be made to the Financial Creditors. Further, in the explanation given to the
said table under Clause 6.4.4(a)(i), against the heading “Date of Release of
Security”, there is no mention of the PBG while the other two types of security
find a mention. It was submitted that the only good reason for this exclusion
was the understanding that the PBG was adjustable against the obligation of
the SRA towards payment of the first tranche. Further, it is the case of the
SRA that since a revolving security package was agreed to under Clause 6.4.4,
other types of security were envisioned for the subsequent tranches of
Civil Appeal Nos. 5023-5024 of 2024 Page 95 of 168
payment and therefore, no issue could have been raised in adjusting the PBG
towards the first tranche. However, we find it extremely difficult to agree with
the stance of the SRA for multiple reasons which are detailed below.
100. The RFRP under Clause 3.13 deals with the Performance Security to be
given by the SRA. Clause 3.13.1 provides that the SRA shall furnish or cause
to be furnished, an unconditional and irrevocable PBG, of an amount of Rs.
150 Crore in favor of the SBI within 7 days of being declared as the SRA.
Clause 3.13.2 provides that the PBG shall be valid, till the later of (a) a period
of 180 days from the date of the PBG; and (b) the date of completion of the
implementation of the Resolution Plan, as determined by the RP and the CoC.
Clause 3.13.7 provides that the PBG can be invoked or appropriated at any
time by the SBI, without any reference to the SRA, upon the occurrence of
any of the following conditions;
i. If any of the conditions under the Letter of Intent or the Resolution Plan
are breached;
ii. If the SRA fails to re-issue or extend the PBG in accordance with the terms
of the RFRP; or
iii. Failure of the SRA to implement the Resolution Plan to the satisfaction of
the CoC, and in accordance with the terms of the Resolution Plan.
Civil Appeal Nos. 5023-5024 of 2024 Page 96 of 168
Clause 3.13.8 provides that the PBG shall be returned to the SRA within a
period of 7 days, upon 100% completion of the implementation of the
Resolution Plan by the SRA. Finally, Clause 3.13.9 states in categorical terms
that, the PBG shall not be set-off against or used as part of the consideration
that the SRA proposes to offer in relation to the Corporate Debtor, even if
expressly indicated as such by the SRA in the Resolution Plan.
101. It is of vital importance that the aforementioned clauses of the RFRP are
read conjointly with Clauses 7.3 and 9.4 of the Resolution Plan. Clause 7.3 of
the Resolution Plan deals with the “Compliance with respect to Regulation
36B(4A)” and states that the SRA undertakes to provide the PBG as per the
terms of the RFRP in favor of the SBI within 7 days of it being declared as the
SRA. Clause 9.4 of the Resolution Plan is titled “Implementation” and states
that “the performance guarantee provided by the Resolution Applicant can be
invoked in accordance with the terms of the RFRP”. Therefore, it is as clear
as a noonday that the terms of the RFRP, particularly in relation to the
performance security i.e., PBG, stood incorporated in the Resolution Plan by
way of Clauses 7.3 and 9.4 respectively of the Resolution Plan.
102. Furthermore, in the Covering Letter adduced with the Resolution Plan, the
SRA stated as thus:
Civil Appeal Nos. 5023-5024 of 2024 Page 97 of 168
“4. We hereby undertake that we, and our Representatives,
shall at all times, be in compliance with the provisions of the
RFRP, the Non-Disclosure Agreement, the IB Code and the
CIRP Regulations.
xxx xxx xxx
c. Acceptance
We hereby unconditionally and irrevocably agree and accept
the terms of the RFRP and that the decision made by the
Resolution Professional, CoC and/or the Adjudicating
Authority in respect of any matter with respect to, or arising
out of, the RFRP and the Resolution Plan Submission
Process shall be binding on us…
xxx xxx xxx
10. We confirm that we have not taken any deviations so as
to be deemed non-responsive with respect to the provisions
of the RFRP, the IB Code and the CIRP Regulations.”
(emphasis supplied)
A bare reading of the above also strengthens the conclusion that the SRA has
to remain compliant with the terms of the RFRP, at all times, in addition to
being obedient to the terms of the Resolution Plan. Therefore, to say that the
RFRP was merely a wish list of the CoC which was informed to the applicants
at the time of inviting plans is incorrect, to say the least. The provisions of the
RFRP, especially those provisions related to the Performance Security or
PBG, were binding on the SRA.
103. The learned counsel for the SRA tried to place reliance on one another
Clause of the Resolution Plan i.e., Clause 6.4.12 which stated that the PBG
Civil Appeal Nos. 5023-5024 of 2024 Page 98 of 168
would bring financial flexibility and help the SRA to advance certain committed
payments. This according to the SRA is an affirmation of the fact that the PBG
could have been adjusted against the first tranche payment. However, it must be
pointed out that Clause 6.4.12 was amended vide an Addendum to the
Resolution Plan dated 02.10.2020. The erstwhile Clause 6.4.12 of the
Resolution Plan reads thus:
“6.4.12. Request for the consideration of the CoC - The
Resolution Applicant shall provide a performance security
bank guarantee for a total sum of Rs. 47.5 Crores, which will
bring financial flexibility for the Resolution Applicant and
help the Resolution Applicant advance the committed
payments and achieve its goal of re-commencing the
operations of Jet Airways at the earliest.”
However, the aforesaid Clause 6.4.12 of the Resolution Plan was deleted in its
entirety and replaced with the following:
“6.4.12. Request for the consideration of the CoC - As
required under the RFRP, the Resolution Applicant shall
provide the performance security bank guarantee (“PBG”)
for a total sum of Rs. 150 Crores. The PBG will be provided
in two parts, with the first PBG of Rs. 47.5 Crores provided
within 7 (seven) days from the date of receipt of LOI; and
PBG for the remaining sum of Rs. 102.5 Crores provided on
the Effective Date.”
A reading of the amended Clause 6.4.12 of the Resolution Plan indicates that
the parties had mutually agreed to do away with the phrase “which will bring
financial flexibility for the Resolution Applicant and help the Resolution
Civil Appeal Nos. 5023-5024 of 2024 Page 99 of 168
Applicant advance the committed payments and achieve its goal of re-
commencing the operations of Jet Airways at the earliest”. What can be
plainly deduced from such a deletion is that the PBG cannot be used by the
SRA to advance any payments that are required to be paid under the scheme
of the Resolution Plan. This, additionally, cements the idea that the PBG could
not be adjusted towards any consideration or payment which had to be made
by the SRA. Such an amendment in Clause 6.4.12 only brought the Resolution
Plan further in line with the terms of the RFRP.
104. An adjustment of the PBG against the first tranche payment would also be
in violation of Regulation 36B(4A) of the 2016 Regulations which was
inserted by Notification No. IBBI/2019-20/GN/REG040 dated 24.01.2019.
The same is reproduced hereinbelow:
“(4A) The request for resolution plans shall require the
resolution applicant, in case its resolution plan is approved
under sub-section (4) of section 30, to provide a performance
security within the time specified therein and such
performance security shall stand forfeited if the resolution
applicant of such plan, after its approval by the Adjudicating
Authority, fails to implement or contributes to the failure of
implementation of that plan in accordance with the terms of
the plan and its implementation schedule.
Explanation I. – For the purposes of this sub-regulation,
“performance security” shall mean security of such nature,
value, duration and source, as may be specified in the
request for resolution plans with the approval of the
committee, having regard to the nature of resolution plan
and business of the corporate debtor.
Civil Appeal Nos. 5023-5024 of 2024 Page 100 of 168
Explanation II. – A performance security may be specified in
absolute terms such as guarantee from a bank for Rs. X for
Y years or in relation to one or more variables such as the
term of the resolution plan, amount payable to creditors
under the resolution plan, etc.”
(emphasis supplied)
105. Regulation 36B(4A) states that the performance security shall stand
forfeited if the resolution applicant fails to implement or contributes to the
failure of implementation of the plan, in accordance with the terms of the
Resolution Plan and its implementation Schedule. Therefore, the PBG had to
be kept alive until the complete implementation of the Resolution Plan as per
Regulation 36B(4A) as well. This is also what is provided under Clauses
3.13.2 and 3.13.8 of the RFRP respectively wherein the PBG was required to
be kept alive and was to be returned to the SRA only upon 100% completion
of the implementation of the Resolution Plan. This binding nature of the RFRP
was transferred onto the Resolution Plan through Clauses 7.3 and 9.4
respectively of the Resolution Plan.
106. The NCLAT in one of its orders i.e., the order dated 26.05.2023, had
restrained the Appellants from invoking the PBG without the leave of the
NCLT. While saying so, the following observations were made;
“19. When the Resolution Plan of the Corporate Debtor has
received approval up to Hon’ble Supreme Court and the
Monitoring Committee is constituted under the Plan to
oversee implementation, the Monitoring Committee has to
Civil Appeal Nos. 5023-5024 of 2024 Page 101 of 168
act as a facilitator for implementation of the Resolution Plan
instead of finding fault and taking steps, which does not
facilitate the implementation, rather delay the
implementation. There is no doubt that Performance Bank
Guarantee can be invoked by the MC Lenders, but the said
invocation can only take place when SRA has failed to
implement the Plan. Present is a case where directions have
been issued to both MC Lenders and SRA to implement the
Plan and the event of failure of the Plan has not yet arrived.
When the Adjudicating Authority has directed on 13.01.2023
to take steps towards the implementation of the Plan and
which order was not been stayed by this Tribunal on
03.03.2023, the steps ought to have been taken by the MC
Lenders in furtherance of the implementation. The time has
not arrived for invoking the Performance Bank Guarantee.
When the SRA is ready to undertake to perform its
obligations under the Plan, we are of the view that
Performance Bank Guarantee given by the SRA cannot be
permitted to the invoked by the MC Lenders. MC Lenders
instead of threatening to invoke Performance Bank
Guarantee, should take steps, which may help
implementation of the Plan and to achieve the objective of
Resolution Plan. The Resolution Plan has been approved
with the intent and purpose to revive the Corporate Debtor,
which revival is in accordance with objective and purpose of
the IBC. We again reiterate that efforts by MC Lenders and
SRA should be coordinated for revival of the Corporate
Debtor, so as to start its operations at an early date, which
is in the interest of all stake holders as well as in the interest
of Corporate Debtor.
20. In view of the aforesaid, we direct that MC Lenders shall
not invoke the Performance Bank Guarantee in the facts of
the present case as on date, and for invocation, if any, MC
Lenders may take leave of the Adjudicating Authority. The
IA Nos.2159-2160 is disposed of accordingly.”
(emphasis supplied)
107. A careful reading of the aforesaid order of the NCLAT reflects that the
NCLAT had itself conceded to the position that the Appellants have a right to
Civil Appeal Nos. 5023-5024 of 2024 Page 102 of 168
invoke the PBG in a situation where the SRA had failed to implement the
Resolution Plan. This is again in line with the intention under Regulation
36B(4A). Therefore, even in light of the NCLAT’s own order dated
26.05.2023, it does not follow that the PBG could have been adjusted by the
SRA, mid-implementation, against its payment obligation.
108. The NCLAT in its order dated 28.08.2023 dealt with the issue of
adjustment of PBG against the first tranche payment in light of the offer made
in the Lender’s Affidavit dated 16.08.2023 and made certain observations
regarding Regulation 36B(4A) of the 2016 Regulations. The same are as
follows:
“26. When we look to the Regulation 36B (4A) it is clear that
the provision provides that RFRP shall require Resolution
Applicant to provide Performance Bank Guarantee within
the time specified. Sub-Section 4A provides that if Resolution
Applicant after approval fails to implement Performance
Security it shall stand forfeited. Present is a case, where
Performance Security has already been provided in
compliance of sub- Regulation 4A and present is not a case
that any power to forfeit the Performance Bank Guarantee
to be exercised under sub-Regulation (4A). On Explanation
I, attention of the Court was drawn by Learned Counsel for
SRA, which indicates that the performance security which is
contemplated, can be of such nature, value, duration and
source as may be specified. Thus, Performance Security can
be of a particular duration and when the Resolution Plan
provides release of security at the time of first tranche of
payment of Rs. 350 Crores, no exception can be taken to
adjustment of the Performance Bank Guarantee. The request
of SRA to adjust Performance Bank Guarantee of Rs. 150
Civil Appeal Nos. 5023-5024 of 2024 Page 103 of 168
Crores is thus according to Clause 6.4.4 of the Resolution
Plan on which no exception can be taken.
27. Submission was made by Learned Sr. Counsel for the
Appellant that performance Bank Guarantee has to be
maintained till the completion of the plan. The summary of
payment and security package as contained in the table
indicate that there are large numbers of other securities
which are to be continued. The securities in the last column
which are mortgaged over three Dubai Properties are to be
released on year 5 or on complete payment whichever is
earlier. The plan thus provides for adequate securities to
ensure the payment hence the adjustment of Performance
Bank Guarantee in the first tranche of payment cannot be
said to be against the Resolution Plan. We thus are of the
view that prayer made by the Applicant in the Application in
Prayer (a) is to be allowed.”
(emphasis supplied)
109. A bare perusal of the above observations would indicate that the NCLAT
proceeded on an incorrect understanding of Regulation 36B(4A) and its First
Explanation. Regulation 36B(4A) does not state that if the Resolution
Applicant, after approval, fails to implement the PBG, then it shall stand
forfeited. Instead, what the Regulation actually states is that the performance
security shall stand forfeited, if the resolution applicant of such a plan, after
its approval by the Adjudicating Authority, “fails to implement or contributes
to the failure of implementation of that plan in accordance with the terms of
the plan and its implementation schedule”. It is not the failure to implement
the performance security i.e., the PBG, that is dealt with in this Regulation but
the consequence of the failure to implement “the Plan” by the SRA.
Civil Appeal Nos. 5023-5024 of 2024 Page 104 of 168
110. Further the order dated 28.08.2023 proceeds to interpret Explanation I to
Regulation 36B(4A) and states that since according to Explanation I, the
performance security can be of a particular duration, the Resolution Plan can
provide for the release of security at the time of the first tranche payment of
Rs. 350 Crore and no exception can be taken to the adjustment of the PBG.
However, what the NCLAT failed to take notice of is that under Explanation
I to Regulation 36B(4A), the performance security shall mean security of such
nature, value, duration and source, as may be specified “in the request for
resolution plans”. The duration of the performance security that has been
specified in the RFRP is given under Clauses 3.13.2 and 3.13.8 of the RFRP
which categorically states that the PBG shall be kept alive until the Resolution
Plan has been completely implemented. This is the duration which is referred
to in Explanation I to Regulation 36B(4A).
111. Now, if the intention under the RFRP, the Resolution Plan (under Clauses
7.3 and 9.4) and Regulation 36B(4A) was that the PBG had to be kept alive
till the completion of implementation of the Resolution Plan by the SRA and
that it cannot be set-off against any payment obligation, then how do we
reconcile such an intention with the expression “PBG adjusted” mentioned
under Clause 6.4.4 of the Resolution Plan? As mentioned above, Clauses 7.3
and 9.4 respectively of the Resolution Plan incorporated the terms of the
Civil Appeal Nos. 5023-5024 of 2024 Page 105 of 168
RFRP into the Resolution Plan. Clause 3.13.9 of the RFRP states that the PBG
shall not be set off against any payment or consideration which is to be made
by the SRA, even if expressly provided so under the Resolution Plan. Clause
6.4.4 is quite ambiguous in its construction regarding the question whether the
PBG can be specifically adjusted against the first tranche payment. Although
in the Summary of Payments and Security Package, under the column titled
“Date of release of security”, the expression “PBG adjusted” exists, yet Clause
6.4.4(a)(i) which furnishes some additional clarity on the Summary of
Payments and Security Package provides no mention of the PBG under the
heading “Date of release of Security”, while the other two forms of security
i.e., the BKC property and Dubai property No.1 are mentioned. The argument
of the counsel for the Respondent is that this omission indicates that the PBG
would be adjusted under the first tranche payment. However, in our
considered opinion irrespective of whether Clause 6.4.4 expressly or
impliedly provided for the PBG to be adjusted, such a provision would create
a dissonance with Clause 3.13.9 of the RFRP which has also been made
binding on the SRA through Clauses 7.3 and 9.4 respectively of the Resolution
Plan. Therefore, such an adjustment should not be allowed in the facts of the
present case.
Civil Appeal Nos. 5023-5024 of 2024 Page 106 of 168
II. The Lender’s Affidavit dated 16.08.2023 did not impose conditions
which were different from the terms of the Resolution Plan.
112. It is the case of the Appellants that Serial No.11 under Clause 7.7.1 read
with Clause 6.1.3(g) evidences that the SRA had to infuse Rs. 350 Crore “in
cash” and it was for this reason alone that Para 8(a) of the Lender’s Affidavit
required the infusion of Rs. 350 Crore to be done in cash by 31.08.2023. It
was submitted that such a requirement for cash payment flowed directly from
the Resolution Plan under which an adjustment of the PBG was impermissible
and not just out of the Lender’s Affidavit dated 16.08.2023. This is because
the Lender’s Affidavit has not and cannot impose any condition over and
above the one laid under the Resolution Plan.
113. On the other hand, the Respondents vehemently submitted that it was only
the Lender’s Affidavit dated 16.08.2023 which stipulated the condition that
Rs. 350 Crore had to be infused in cash by 31.08.2023, while the Resolution
Plan, under Clause 6.4.4 allowed for the payment of Rs. 200 Crore in cash and
Rs. 150 Crore through adjusting the PBG. In other words, they argued that the
conditions envisaged in the Lender’s Affidavit were different from those
stipulated in the Resolution Plan.
Civil Appeal Nos. 5023-5024 of 2024 Page 107 of 168
114. However, the intent of the legislature is very clear on the aspect that once
a Resolution Plan is approved by the Adjudicating Authority i.e., the NCLT,
it becomes binding on all the stakeholders involved in the Resolution Plan.
Section 31(1) of the IBC, 2016 reads as thus:
“31. (1) If the Adjudicating Authority is satisfied that the
resolution plan as approved by the committee of creditors
under sub-section (4) of section 30 meets the requirements
as referred to in sub-section (2) of section 30, it shall by
order approve the resolution plan which shall be binding on
the corporate debtor and its employees, members,
creditors,[including the Central Government, any State
Government or any local authority to whom a debt in respect
of the payment of dues arising under any law for the time
being in force, such as authorities to whom statutory dues
are owed,] guarantors and other stakeholders involved in
the resolution plan.”
(emphasis supplied)
115. This Court in Ebix Singapore Private Limited v. Committee Of Creditors
of Educomp Solutions Limited and Another reported in (2022) 2 SCC 401
was faced with the issue whether withdrawals or modifications by successful
resolution applicants were permissible under the IBC, 2016 i.e., whether a
resolution applicant is entitled to withdraw or modify its Resolution Plan, once
it has been submitted by the Resolution Professional to the Adjudicating
Authority and before it is approved by such authority under Section 31(1) of
the IBC, 2016. It was unequivocally held that, based on the plain terms of the
IBC, 2016, the Adjudicating Authority lacks the power to allow the
Civil Appeal Nos. 5023-5024 of 2024 Page 108 of 168
withdrawal or modification of the Resolution Plan by a successful resolution
applicant or to give effect to any such clauses in the Resolution Plan. The
relevant observations made are reproduced hereinbelow:
“164. The approval of the adjudicating authority under
Section 31(1) IBC has the effect of making the resolution
plan binding on all stakeholders. These stakeholders include
the employees of the corporate debtor whose terms of
employment would be governed by the resolution plan, the
Central and State Governments who would receive their tax
dues on the basis of the terms of the resolution plan and local
authorities to whom dues are owed. These stakeholders are
not direct participants in the CIRP but are bound by its
consequence by virtue of the approval of the resolution plan,
under Section 31(1) IBC. Section 31(1) ensures that the
resolution plan becomes binding on all stakeholders after it
is approved by the adjudicating authority. The language of
Section 31(1) cannot be construed to mean that a resolution
plan is indeterminate or open to withdrawal or modification
until it is approved by the adjudicating authority or that it is
not binding between the CoC and the successful resolution
applicant. Regulation 39(4) of the CIRP Regulations
mandates that the RP should endeavor to submit the plan at
least fifteen days before the statutory period of the CIRP
under Section 12 is due to expire along with a receipt of a
PBG and a compliance certificate as Form H. It is pertinent
to note that sub-section (3) to Section 12 mandates that the
CIRP process, including legal proceedings, must be
concluded within 330 days. This three-hundred-and-thirty-
day period can be extended only in exceptional
circumstances, if the process is at near conclusion and serves
the object of IBC, as held by a three-Judge Bench of this
Court in Essar Steel [Essar Steel (India) Ltd. (CoC) v. Satish
Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ) 443].
Therefore, after accounting for all statutorily envisaged
delays which the RP has to explain in its Form H and
otherwise through Regulation 40-B, the procedure envisages
a fifteen-day window between submission of resolution plan
and its approval or rejection by the adjudicating authority.
Civil Appeal Nos. 5023-5024 of 2024 Page 109 of 168
This clearly indicates that the statute envisages a certain
level of finality before the resolution plan is submitted for
approval to the adjudicating authority. Even the CoC is not
permitted to approve multiple resolution plans or solicit EoIs
after submission of a resolution plan to the adjudicating
authority, which would possibly be in contemplation if the
resolution applicant was permitted to withdraw from, or
modify, the plan after acceptance by the CoC. Regulation 36-
B(4-A) requires the furnishing of a performance security
which 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
Civil Appeal Nos. 5023-5024 of 2024 Page 110 of 168
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 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
Civil Appeal Nos. 5023-5024 of 2024 Page 111 of 168
(Civ) 1] , a one-time relief under Article 142 of the
Constitution is provided with the conditions prescribed in
Section K.2.”
(emphasis supplied)
116. In light of the aforesaid, it is clear that the existing insolvency framework
does not provide any scope for effecting further 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.
Civil Appeal Nos. 5023-5024 of 2024 Page 112 of 168
117. 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 2
nd
Implementation Extension. Therefore, no new terms
were cast on the SRA.
118. The fact that the Lender’s Affidavit did not impose any condition which
was different from that contemplated under the Resolution Plan, was also
understood by all the parties involved, including the SRA. This is evident from
Civil Appeal Nos. 5023-5024 of 2024 Page 113 of 168
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)
119. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 114 of 168
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;
(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)
120. 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.
Civil Appeal Nos. 5023-5024 of 2024 Page 115 of 168
121. 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.
122. 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 “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
Civil Appeal Nos. 5023-5024 of 2024 Page 116 of 168
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.
123. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 117 of 168
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.
124. 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?
125. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 118 of 168
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?
126. 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 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
Civil Appeal Nos. 5023-5024 of 2024 Page 119 of 168
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).
127. 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)
128. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 120 of 168
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 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.
129. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 121 of 168
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.
130. 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 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.
Civil Appeal Nos. 5023-5024 of 2024 Page 122 of 168
131. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 123 of 168
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 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.
132. 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.
Civil Appeal Nos. 5023-5024 of 2024 Page 124 of 168
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?
133. 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.
Civil Appeal Nos. 5023-5024 of 2024 Page 125 of 168
134. 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:
“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).
xxx xxx xxx
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
Civil Appeal Nos. 5023-5024 of 2024 Page 126 of 168
shall lead to violation of Section 30(2)(e), hence, to save the
plan the above payments have to be made.
xxx xxx xxx
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
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.
xxx xxx xxx
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,
Civil Appeal Nos. 5023-5024 of 2024 Page 127 of 168
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
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)
135. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 128 of 168
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.
136. 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 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.
137. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 129 of 168
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.
138. 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.
139. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 130 of 168
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 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.
140. 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.
Civil Appeal Nos. 5023-5024 of 2024 Page 131 of 168
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?
141. 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, 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
Civil Appeal Nos. 5023-5024 of 2024 Page 132 of 168
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.
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)
Civil Appeal Nos. 5023-5024 of 2024 Page 133 of 168
142. 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.
143. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 134 of 168
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, 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)
144. 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.
Civil Appeal Nos. 5023-5024 of 2024 Page 135 of 168
145. 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.
146. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 136 of 168
equity infusion, despite numerous opportunities 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
Civil Appeal Nos. 5023-5024 of 2024 Page 137 of 168
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 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).
147. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 138 of 168
to the fault of the SRA and this Court must ensure that such debts stop running
at some point in time.
148. 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.
149. 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 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
Civil Appeal Nos. 5023-5024 of 2024 Page 139 of 168
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?
150. 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)
151. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 140 of 168
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.”
(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.
Civil Appeal Nos. 5023-5024 of 2024 Page 141 of 168
152. 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.
153. 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:
“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
Civil Appeal Nos. 5023-5024 of 2024 Page 142 of 168
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
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)
Civil Appeal Nos. 5023-5024 of 2024 Page 143 of 168
154. 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.
155. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 144 of 168
be ordered, although the application therefore is not made
until after the expiration of the time appointed or allowed.”
156. 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.
157. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 145 of 168
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.
158. 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.
159. 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.
160. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 146 of 168
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)
161. 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:
Civil Appeal Nos. 5023-5024 of 2024 Page 147 of 168
“70. When a procedure has been prescribed for a particular
purpose exhaustively, no power shall be 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)
162. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 148 of 168
even while in deviating from the statutory procedure and 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.
163. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 149 of 168
this Court with inherent powers under Article 142 and Tribunals with Rule 11
of the NCLT Rules would be rendered otiose and meaningless.
164. 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.
165. 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 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
Civil Appeal Nos. 5023-5024 of 2024 Page 150 of 168
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.
166. 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.
Civil Appeal Nos. 5023-5024 of 2024 Page 151 of 168
167. 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.
168. 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.
169. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 152 of 168
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.
170. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 153 of 168
which has now been forsaken. Besides, the commercial
wisdom 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)
171. 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.
Civil Appeal Nos. 5023-5024 of 2024 Page 154 of 168
(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 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.
Civil Appeal Nos. 5023-5024 of 2024 Page 155 of 168
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.
Feasibility and viability of corporate debtor
(v) carefully review and assess the information memorandum
prepared by Insolvency Professional and offer additional
insights.
Civil Appeal Nos. 5023-5024 of 2024 Page 156 of 168
(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.”
172. 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.
173. This litigation is an eye-opener also as regards the manner in which the
implementation of plans are handled by the Successful Resolution Applicant
Civil Appeal Nos. 5023-5024 of 2024 Page 157 of 168
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 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
Civil Appeal Nos. 5023-5024 of 2024 Page 158 of 168
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.
174. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 159 of 168
aligns with the ultimate goal of the IBC, 2016 — to provide a fair and
equitable resolution that maximizes asset value while enabling the debtor’s
recovery.
175. 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.
176. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 160 of 168
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.
177. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 161 of 168
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.
178. 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.”
Civil Appeal Nos. 5023-5024 of 2024 Page 162 of 168
(emphasis supplied)
179. 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 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.
180. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 163 of 168
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.
181. 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 respectively. Such a Monitoring Committee would
be entrusted with the powers of monitoring and supervising the resolution plan
Civil Appeal Nos. 5023-5024 of 2024 Page 164 of 168
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.
182. 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.
183. 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
Civil Appeal Nos. 5023-5024 of 2024 Page 165 of 168
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
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
Civil Appeal Nos. 5023-5024 of 2024 Page 166 of 168
matters of public importance, and the NCLT(s) and NCLAT(s) must earnestly
work towards ensuring that the IBC, 2016 achieves its avowed object.
184. 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.
Civil Appeal Nos. 5023-5024 of 2024 Page 167 of 168
185. 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.
G. CONCLUSION
186. 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.
187. 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.
188. 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.
Civil Appeal Nos. 5023-5024 of 2024 Page 168 of 168
189. These appeals are disposed of in the aforesaid terms.
190. 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.
...................................................... CJI.
(Dr. Dhananjaya Y. Chandrachud)
.......................................................... J.
(J.B. Pardiwala)
.......................................................... J.
(Manoj Misra)
New Delhi;
November 7, 2024
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