Extension of time does not amount to modification of resolution plan, expounds NCLAT, Read Judgement

19 Apr 2024

The NCLAT, Principal Bench New Delhi opined that that the NCLT has jurisdiction to grant extension of timeline in making the payment in a Resolution Plan and the view of the NCLT that granting of extension of the timeline is modification of the terms of the Resolution Plan is not a correct view.

Further, for extension of timeline it is not necessary that CoC should express its concurrence, only then the NCLT can exercise its jurisdiction. Granting extension of time in payment as per Resolution Plan for implementation of the Resolution Plan, appropriate jurisdiction is always vested with the NCLT to pass appropriate order.

Brief Facts:

The Successful Resolution Applicant (‘SRA’) has filed present appeals to challenge orders of the NCLT vide which liquidation of corporate debtor was allowed and application of SRA seeking extension of time to make payments under approved resolution plan was dismissed.

Brief Background:

Appellant submitted a resolution plan for revival of the corporate debtor. A settlement was offered under the plan and the same was approved by the Committee of Creditors (‘CoC’) which consisted only of SBI. NCLT also approved the said resolution plan.

The settlement money was to be paid from sources of fund which included recovery money from ongoing litigations. The recoveries as expected from the litigation, could not be made and hence application was filed to seek extension of time to make payments. Meanwhile SBI filed for liquidation.

Contentions of the Appellant:

It was argued that since CoC consisted only of SBI, it should have collaborated and extended co-operation to implement the Resolution Plan.

Contentions of the Respondent:

It was urged that since payment was not made within the timeline, the Respondent was right in initiating the liquidation. Further, extension of time amounted to modification of the Resolution Plan which is outside the scope of the NCLT.

Observations of the Tribunal:

It was noted that the NCLT has ruled that it should refrain from modifying the terms of approved Resolution Plan unless the same was concurred by the CoC.

The Tribunal opined that that the NCLT has jurisdiction to grant extension of timeline in making the payment in a Resolution Plan and the view of the NCLT that granting of extension of the timeline is modification of the terms of the Resolution Plan is not a correct view.

The Bench noted that the Appellant was not just ready but had put in efforts to make the payments as proposed.

It was unequivocally held that extension of time does not amount to modification of the resolution plan.

The decision of the Tribunal:

Based on the aforementioned submissions, the Bench allowed the extension of time to Appellant and the order of the NCLT was accordingly set aside.

Case Title: Ashok Dattatray Atre & Ors. v. State Bank of India & Ors.

Case No.: Company Appeal (AT) (Insolvency) Nos. 221 and 222 of 2024

Coram: Justice Ashok Bhushan, Arun Baroka (Technical Member)

Advocates for Appellants: Advs. Mr. Pankaj Jain and Mr. Sarthak Dugar

Advocates for Respondents: Advs. Mr. Harshit Khare, Mr. Prafful Saini, Ms. Udita Singh