Majestic Auto Limited vs Sharan Hospitality Private Limited (Monitoring Agent) & Anr.

Per: Prabhat Kumar, Member (Technical)

The IA 266/2023 is filed by M/s Majestic Auto Limited (“Successful Resolution Applicant” or “SRA”) for exclusion of a period from 13.12.2021 till date from the time period of 18 months provided in the Resolution Plan, in view of the Stay granted by the Hon’ble Supreme Court vide order dated 13.12.2021; and for extension of period of implementation of Resolution Plan, till 30 days from the final disposal of the matter pending before Hon’ble Supreme Court; and to restrain the Respondent No. 1 (“Monitoring Committee for implementation of Approved Resolution Plan”) and Respondent No. 2 (“Axis Bank Limited”, the financial creditor and sole member of Committee of Creditor) from invoking the Performance Bank Guarantee of the SRA.

M/s Sharan Hospitality Private Limited (“Corporate Debtor”) was admitted into Corporate Insolvency Resolution Process (“CIRP”) on 8.5.2019, and a Resolution Plan submitted by SRA was approved by this Tribunal on 15.4.2021, pursuant to which the Approved implementation of Resolution Plan was to commence anytime within 18 months from the approval of said Resolution Plan. The Approved Resolution Plan contemplated that –

SRA has pleaded that the matter is presently sub-judice in appeal before the Hon’ble Supreme Court, and in that proceedings, the Hon’ble Supreme Court has stayed the Order of Hon’ble Delhi High Court, which had lifted the restraint on implementation of the Plan. However, since the restrain still continue pursuant to Hon’ble Supreme Court, there is no failure in implementation of the Resolution Plan and the SRA ought to be protected in terms of express stipulation in the plan dealing with such scenario.

Axis Bank Limited, the Sole Member of Committee of Creditors has filed an IA 1290/2023 seeking liquidation of the Corporate Debtor on account of non-implementation of the Resolution due to ongoing litigation by third party, presently pending before Hon’ble Supreme Court in SLP 20028/2021, stating the terms of the resolution plan under ‘Clauuse 5’ of ‘the Basic Assumption while submitting the Resolution Plan’ is conditional in nature and the same is contingent upon the happening of any event i.e. vacation of the restraint/stay order of the Hon’ble High Court of Delhi.

It has further been stated in the said Application that the approved resolution plan, which is contingent in nature, provides the due charted course, in the event, the vacation of the restraint/stay Order of the Hon’ble High Court of Delhi was disallowed. The clause 6 of Basic Assumptions reads as follows –

Axis Bank Limited has also submitted that there has been a lapse of over 21 months since the approval of the resolution plan by this Tribunal, and even after several applications filed for early hearing before the Hon’ble Supreme Court, no fruitful outcomes have accrued from such applications. Accordingly, Axis Bank Limited has fairly contended that it is willing to return the Performance Bank Guarantee issued by the SRA and further states that, it would not hold it responsible for non-implementation of the approved Resolution Plan. Finally, it has been prayed that in view of the provisions of the Resolution Plan, i.e. Clause 4,5,6,7 and 8 as prescribed under “Basic Assumptions while submitting the Resolution Plan”, r/w Section 33(3) and 33(1)(b) of the Code, the applicant in the capacity of a secured financial creditor of the Corporate Debtor seeks direction from this Tribunal to initiate liquidation process against the corporate debtor, and it shall cause no prejudice to SRA, however, Axis Bank would continue to incur tremendous losses due to further delay in implementation of the approved plan.

We have heard the Counsel and perused the material available on record.

Since the issue involved in both the applications is inter-related, we consider it appropriate to dispose of both applications by this common order. The Monitoring Committee for implementation of Resolution Plan (“Monitoring Committee”)

We find that The Resolution Plan also contains provisions where the implementation of the said plan is not started within 18 months from the approval of the said plan :

We find that both these applications are in pursuance to above stipulation in the approved Resolution Plan. We find that the proceedings initiated by Daiichi Sankyo Co. Ltd. are still pending before the Hon’ble Supreme Court, and more than 21 months have passed since the Order of vacation granted by Hon’ble Delhi High Court was taken in appeal before the Hon’ble Supreme Court by Daiichi Sankyo Co. Ltd. We are in agreement with Axis Bank Limited that the implementation of the plan is contingent upon the outcome of these proceedings or vacation of stay order, and this has caused stalemate in the whole Resolution process, which is jeopardising the interest of the Financial Creditor. Accordingly, we are of considered view that a Liquidation Order can be passed in the present matter in terms of Section 33(1)(a) / 33(3) of the Code, as the Corporate Debtor can be sold as going concern in that process also. It will not serve the purpose to wait endlessly.

Accordingly, we order that the Corporate Debtor be liquidated; the Performance Bank Guarantee furnished by SRA be returned; and it be declared that the implementation of the Resolution Plan has failed on account of contingency in its implementation conditions.

In view of aforesaid, we pass following order:

a. Mr. Amit Chandrasekhar Poddar, having Registration No. IBBI/IPA-001/IP-P00449/2017-18/10792, is hereby appointed as the Liquidator as provided under Section 34(1) of the Code.

b. That the Liquidator for conduct of the liquidation proceedings would be entitled to the fees as provided in Regulation 4(2)(b) of the IBBI (Liquidation Process Regulations), 2016.

c. The Liquidator appointed in this case to initiate liquidation process as envisaged under Chapter-III of the Code by following the liquidation process given in the Insolvency & Bankruptcy Board of India (Liquidation Process) Regulations, 2016.

d. The Liquidator appointed under section 34(1) of the Code. All powers of the board of directors, key managerial personnel and the partners of the Corporate Debtor, as the case may be, shall cease to have effect and shall be vested with the liquidator.

e. That the Corporate Debtor to be liquidated in the manner as laid down in the Chapter by issuing Public Notice stating that the Corporate Debtor is in liquidation with a direction to the Liquidator to send this order to the ROC under which this Company has been registered.

f. That the personnel of the Corporate Debtor are directed to extend all co-operation to the Liquidator as required by him in managing the liquidation process of the Corporate Debtor.

g. That on having liquidation process initiated, subject to Section 52 of the Code, no suit or other legal proceeding shall be instituted by or against the Corporate Debtor save and except the liberty to the liquidator to institute suit or other legal proceeding on behalf of the Corporate Debtor with prior approval of this Adjudicating Authority.

h. This liquidation order u/s 33(7) shall be deemed to be a notice of discharge to the officers, employees and workmen of the Corporate Debtor except to the extent of the business of the Corporate Debtor continued during the liquidation process by the Liquidator.

In view of foregoing, IA 266/2023 is dismissed and IA 1290/2023 is allowed.