Timely Implementation Of Resolution Plan Is The Underlying Objective Of The IBC: NCLAT
The National Company Law Appellate Tribunal (NCLAT) Principal Bench, New Delhi in the case of Darwin Platform Infrastructure Limited vs Union Bank of India, recently dismissed the appeal filed by Darwin Platform, upholding an order passed by the National Company Law Tribunal (NCLT), Mumbai, which had reinstated the Corporate Insolvency Resolution Process (CIRP). The case arose from...
The National Company Law Appellate Tribunal (NCLAT) Principal Bench, New Delhi in the case of Darwin Platform Infrastructure Limited vs Union Bank of India, recently dismissed the appeal filed by Darwin Platform, upholding an order passed by the National Company Law Tribunal (NCLT), Mumbai, which had reinstated the Corporate Insolvency Resolution Process (CIRP).
The case arose from the failure of the appellant to implement the resolution plan within the stipulated timeline, leading to the invocation of its Performance Bank Guarantee (PBG).
Brief Facts
Darwin Platform Infrastructure Ltd. filed an appeal challenging the previous order dated 6th September 2024 passed by the NCLT, Mumbai, rejecting its application and allowing the application filed by the Union Bank of India.
The case originates from an insolvency proceeding of Lavasa Corporation Limited, which was admitted into the Corporate Insolvency Resolution Process (CIRP) in 2018.
The appellant submitted its resolution plan in the year of 2021 and was approved by the committee of creditors with a 96.41% vote share, and the Adjudicating Authority also subsequently approved the plan through an order in the month of December 2021. The Appellant subsequently also formulated a Performance Bank Guarantee (PBG) as a part of the resolution plan requirement, and with certain addendums made by the Appellant in future, the resolution plan was finally approved in the year of 2023.
Despite the approval, the implementation of the resolution placed multiple challenges with State Bank of India (SBI) and the Union Bank of India (UBI) filing applications before the adjudicating authority for withdrawal of the approval order. The same application was rejected by the authority, but the concerns arose regarding the appellant's ability to fulfil the financial obligations under the resolution plan. The Monitoring Committee established observed that the appellant had failed to make an upfront of payment of Rs 100 crore which was due with the effective date.
On 6th April, 2024 the Joint Lenders Meeting (JLM) was held wherein it was unanimously held concluding that the appellant had failed to implement the resolution plan as per the agreed timelines. Consequently, UBI also invoked PBG for non-compliance of the resolution plan.
Consequently, the appellant filed an application challenging the invocation of the PBG and an opportunity to proceed with the resolution plan with the creditors filing an application for initiation of the CIRP. The NCLT through its order rejected the application of the Appellant and allowed the application filed by the UBI, thereby reinstating the CIRP. The appellant challenged this order before the NCLAT.
NCLAT Judgement
The National Company Law Appellate Tribunal dismissed the appeal filed by the Appellant and upheld the order of the National Company Law Tribunal, Mumbai, stating that the Appellant failed to implement the Resolution Plan and was not able to infuse the required amount of Rs 100 crore within 90 days from the effective date. The tribunal also held that the invocation of the Performance Bank Guarantee (PBG) was justified and that the invocation was based on the majority decision of the Joint Lenders Meeting (JLM).
The Tribunal also highlighted the principle of the timely implementation of the CIRP process, stating that IBC has to be completed in a timeline and the timeline of the CIRP process has to be adhered to by all, including the SRA.
The tribunal also highlighted the judgement State Bank of India & Ors.' Vs. 'Consortium of Murari Lal Jalan and Florian Fritsch & Anr passed by the Apex Court, stating that the timely implementation of the resolution plan is one of the underlying objectives of the IBC.
The court, in conclusion, dismissed the appeal due to non-compliance with the resolution plan and held that the invocation of the PBG was upheld to be legally justified. The CIRP was reinstated, allowing creditors to explore fresh resolution options.
Case: Darwin Platform Infrastructure Limited vs Union Bank of India
Tribunal: NCLAT, Delhi
Bench: Justice Ashok Bhushan Chairperson, Barun Mitra Member (Technical), Arun Baroka Member (Technical)
Date: 9th September, 2024
For Appellant: Mr. Nagesh P., Sr. Advocate and Mr. Lovkesh Sawhney, Sr. Advocate with Mr. Rohit Jain and Mr. Gaurav Jain, Advocates.
For Respondent: Mr. Krishnendu Datta, Sr. Advocate with Mr. Abhishek Swaroop, Mr. Anupm Prakash, Ms. Kirti Talreja and Ms. Alina Merin, Advocates for R-1 to 16. Mr. Vaijayant Paliwal, Ms. Kirti Gupta, Mr. Devansh Rathi, Advocates with Mr. Udayraj Patwardhan, RP for RP.
Citation: Company Appeal (AT) (Insolvency) No. 2012-2013 of 2024 & I.A. No. 7544 of 2024
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