The Supreme Court has held that any delay in arriving at the conclusion that the company is to be liquidated is 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.
The court added that liquidation should be the last resort and that delay in arriving at this decision does not have the effect of hampering the realizations that can be made through liquidation. “This judgment serves as a clarion call for all stakeholders in the insolvency ecosystem to align their actions with the IBC’s goals, fostering ethical conduct, collaboration, and a steadfast commitment to the timely and efficient resolution of corporate distress,” said Saurav Agrawal, Advocate, Delhi High Court.
Relying on several judicial decisions, the court highlighted the importance of a speedy resolution process under the Insolvency and Bankruptcy Code, 2016 in the context of either completing the Corporate Insolvency Resolution 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.
This judgment serves as a critical precedent in insolvency jurisprudence, underscoring that incomplete adherence to resolution plans can lead to liquidation – a message to prospective resolution applicants about the high standards of compliance expected under the IBC.Sonal Alagh, Partner, Alagh & Kapoor Law Offices
The Supreme Court observed that the discretion in extending the time limits fixed under the Resolution Plan must be exercised in a much more circumspect manner. Further exercising their plenary jurisdiction under Article 142 of the Constitution, directing the corporate debtor to be taken in liquidation. “In the opinion of the Supreme Court, given that the NCLAT order was unsustainable in law, the implementation of the resolution plan had failed and there was an inordinate delay in attempting resolution, the Court had no option but to invoke its powers under Article 142, overturn the order of the NCLAT and direct the liquidation of Jet Airways,” said Vihang Virkar, Partner, DMD Advocates.
The court held that 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. “This judgment, hopefully, will set a guideline to the Adjudicating Authorities for commencing liquidation processes where the resolution plans are not viable or the resolution plans are violated,” said Shashank Agarwal, Advocate, Delhi High Court
These appeals arise from the National Company Law Appellate Tribunal in Company Appeal which dismissed the appeal and upheld the order passed by the National Company Law Tribunal.
The NCLAT further issued several directions including a direction that the Performance Bank Guarantee of ₹150 Crore could be adjusted towards the first tranche payment of ₹350 Crore which was to be made by the respondent.
The NCLT held that the respondent had fulfilled all the Conditions Precedent as stipulated in the Resolution Plan.
