SCI (2025.05.02) in Kalyani Transco Vs. Bhushan Power and Steel Ltd. and Ors. [(2025) ibclaw.in 173 SC, Civil Appeal No. 1808 of 2020] concluded;
(i) The Resolution Professional had utterly failed to discharge his statutory duties contemplated under the IBC and the CIRP Regulations during the course of entire CIR proceedings of the Corporate Debtor- BPSL.
(ii) The CoC had failed to exercise its commercial wisdom while approving the Resolution Plan of the JSW, which was in absolute contravention of the mandatory provisions of IBC and CIRP Regulations. The CoC also had failed to protect the interest of the Creditors by taking contradictory stands before this Court, and accepting the payments from JSW without any demurer, and supporting JSW to implement its ill-motivated plan against the interest of the creditors.
(iii) The SRA-JSW after securing the highest score in the Evaluation matrix in the 18th meeting of CoC,submitted the revised consolidated Resolution Plan with addendum under the garb of complying with the amendments made in the CIRP Regulations, 2016, and got the same approved from the CoC. However, JSW even after the approval of its Plan by the NCLAT, willfully contravened and not complied with the terms of the said approved Resolution Plan for a period of about two years, which had frustrated the very object and purpose of the IBC, and consequently had vitiated the CIR proceedings of the Corporate Debtor-BPSL.
(iv) The Resolution Plan of JSW as approved by the CoC did not confirm the requirements referred to in subsection (2) of Section 30, the same being in flagrant violation and contravention of the expressed provisions of the IBC and the CIRP Regulations. The said Resolution Plan therefore was liable to be rejected by the NCLT under sub-section (2) of Section 31, at the very first instance.
(v) The impugned judgment passed by the NCLAT in allowing the Company Appeal of JSW and issuing the directions without any authority of law and without jurisdiction is perverse, coram non judice and liable to be set aside.
Excerpts of the Order;
Issue No.1 - Maintainability of the Appeal Persons aggrieved as contemplated in section 62 of IBC
# 10. Thus, the use of the phrase “any person aggrieved” indicates that there is no rigid locus requirement to institute an Appeal challenging the order of NCLT before the NCLAT, or an order of NCLAT before this Court. Any person who is aggrieved by the order may institute an Appeal. Once the Corporate Insolvency Resolution Process is initiated, the proceedings are no longer restricted to any individual Applicant Creditor or to the Corporate Debtor, but rather they become collective proceedings in rem, where all the creditors and the Ex-Directors would be necessary stakeholders. Therefore, the Appellants who are the operational creditors, and the erstwhile Promoters, being important stakeholders, and whose Company Appeals have been dismissed by the NCLAT vide the impugned judgment, would certainly be the persons aggrieved entitled to file Appeals before this Court under Section 62 of the IBC. Moreover, they have also raised number of questions of law in the instant appeals, which although will be considered in the later part of this judgment, nonetheless, they being the persons aggrieved, the Appeals at their instance are certainly maintainable.
Issue No.2 - Grounds of appeal under section 61(3) of IBC
# 15. In the Appeal being the Company Appeal No. 957 of 2019 filed by the JSW under Section 61 before the NCLAT, none of the grounds stated in the sub-section (3) of Section 61 were raised, as did not exist. When the Resolution Plan of JSW was approved by the Resolution Professional, it was binding to all the stakeholders including the SRA/JSW as per Section 31(1), and the respondent JSW could not have filed the Appeal before the NCLAT, when none of the grounds stated in subsection (3) existed. Interestingly, the NCLAT vide the impugned judgment dated 17.02.2020, not only entertained but also allowed the said Appeal of JSW which was not legally maintainable, modified the conditions which were not suitable to JSW, and dismissed all the other Appeals filed by the Operational Creditors, the Ex- Promoters and the State of Odisha.
Issue No.3 - Section 29A compliance by RP &RA ( Non-disclosure & suppression made by SRA about its relation with CD)
# 23. Since, the eligibility/ineligibility of the Resolution Applicant to submit the Resolution Plan goes to the root of the matter, it was incumbent on the part of the Resolution Professional to verify and certify that the contents of the mandatory affidavit, filed by the Resolution Applicant-JSW in respect of Section 29A were in order. The same having not been stated in the Application filed by the Resolution Applicant before the NCLT, it has raised serious doubt in the mind of the Court with regard to the very eligibility of the JSW to submit the Resolution Plan. Our said doubt is further fortified by the observations made and justification given by the NCLAT for the non-disclosure and suppression made in the Resolution Plan by JSW, with regard to the Joint Venture Agreement dated 05.03.2008 entered into by and between the JSW, BPSL and Jai Balaji as discussed hereinabove.
Issue No.4 - Powers of NCLAT to review the decision of Statutory authority under the PMLA
# 27. In this regard, it is pertinent to note that the NCLT and NCLAT are constituted under Section 408 and 410 of the Companies Act, 2013 and not under the IBC. The jurisdiction and powers of the NCLT and NCLAT are well circumscribed under Section 31 and Section 60 so far as NCLT is concerned, and under Section 61 of IBC so far as the NCLAT is concerned. Neither the NCLT nor the NCLAT is vested with the powers of judicial review over the decision taken by the Government or Statutory Authority in relation to a matter which is in the realm of Public Law. As held by a Three-judge Bench in case of Embassy Property Developments Private Limited vs. State of Karnataka & Ors. [3 (2020) 13 SCC 308] , the Section 60(5) speaks about any question of law or fact, arising out of or in relation to insolvency resolution, but a decision taken by the Government or a statutory authority in relation to a matter which is in the realm of Public Law, cannot be brought within the fold of the phrase “arising out of or in relation to the insolvency resolution” appearing in Section 60(5)(C) IBC. It has been further held therein that in the light of the statutory scheme as culled out from the various provisions of the IBC, it is clear that wherever the Corporate Debtor has to exercise a right that falls outside the purview of the IBC, especially in the realm of the public law, they cannot take a bypass and go before NCLT for the enforcement of such a right.
# 28. In view of the settled proposition of law, when the NCLT could not exercise the powers of judicial review falling outside the purview of the IBC, or falling within the purview of public law, the NCLAT also, being an Appellate Authority under Section 61 over the orders passed by the NCLT, could not exercise any power or jurisdiction beyond Section 61 of IBC.
# 29. As held by us earlier, a person aggrieved by an order of the Adjudicating Authority can refer an Appeal to the NCLAT under Section 61(1), and that an Appeal against the order approving a Resolution Plan under Section 31 could be filed only on the grounds mentioned in clauses (i) CIVIL APPEAL NO.1808 OF 2020 Page 45 of 105to (v) of sub-section (3) of Section 61. Hence, for filing an Appeal under Section 61, there has to be an order passed by the NCLT so far as sub-section (1) is concerned, and if the Appeal is filed against the order of NCLT approving the Resolution Plan under Section 31, it could be filed only onthe grounds mentioned in sub-section (3) of Section 61.
# 30. In the instant case, after the approval of Resolution Planof JSW by the NCLT on 05.09.2019, subject to the conditions mentioned therein, the PAO came to be passed by the ED on 10.10.2019 under Section 5 of the PMLA. The said PAO was challenged by SRA-JSW directly in the Company Appeal being No. 957 of 2019 filed by it before the NCLAT, and the NCLAT vide the ex parte order dated 14.10.2019 had stayed the PAO. It is pertinent to note that the said PAO dated 10.10.2019 was also the subject matter of challenge before this Court in the SLPs filed by he CoC and the same was stayed by this Court vide the Order dated 18.12.2019 in the said SLPs. Despite such position, the NCLAT while passing the impugned Judgment and Order dated 17.02.2020 recorded its findings on Section 32A of IBC to the effect that the assets of the Corporate Debtor of which JSW was a Successful Resolution Applicant, were immuned from attachment by Directorate of Enforcement. Such an Order of NCLAT is clearly in teeth of the law laid down by this Court in Embassy Property Developments (supra). The PMLA being a Public Law, the NCLAT did not have any power or jurisdiction to review the decision of the Statutory Authority under the PMLA. In our opinion, apart from the fact that the said issue was pending before this Court in respect of the same PAO dated 10.10.2019 and therefore the NCLAT should not have decided the said issue, it was beyond the jurisdiction of the NCLAT to decide the said issue in the Company Appeal filed by JSW under Section 61 of IBC.
# 31. In that view of the matter, it is held that the observations made and the findings recorded by the NCLAT in the impugned judgment with regard to the PAO dated 10.10.2019 passed by the Directorate of Enforcement under the PMLA, being without any authority of law and without jurisdiction, were coram non judice.
Issue No.5 - Declassification of subsidiaries , associates or Joint ventures in which CD have stake by NCLAT
# 17. We fail to understand as to how the directions such as declassifying the Corporate Debtor company as a promoter of any other company or entity etc., could have been given by the NCLAT in the Appeal filed by the JSW under Section 61, which was filed challenging only the conditions imposed by the NCLT while approving the Resolution plan of JSW under Section 31.
# 18. We are also stunned by the observations made and findings recorded by the NCLAT in the paragraphs 51 to 57 of the impugned judgment, whereby the NCLAT has virtually justified the non-disclosure and suppression of the material fact in the Resolution Plan made by the JSW, with regard to the Joint Venture agreement dated 05.03.2008. The said Joint Venture Agreement was entered into by the JSW, BPSL and Jai Balaji on 05.03.2008 pursuant to an order of Government of India, in the matter of joint allocation of Rohne Coking Coal block. These facts suppressed by JSW in its Resolution Plan, had surfaced during the course of the investigation in the PMLA proceedings initiated against the Corporate Debtor and others. Based on the said material, an issue was raised before the NCLAT whether JSW was a ‘related party’ to BPSL, and therefore, ineligible under Section 29A. However, the NCLAT in its impugned judgment had sought to justify the suppression of facts made by JSW. Since, the issue of ‘Related Party’ was not pressed into service by the learned advocates appearing for the Appellants, during the course of hearing of these Appeals, we are not stretching the issue of “related party” any further.
Issue No.6 - Equity contribution CommitmentsRs 8550 Crores by SRA -JSW
# 39. We are quite conscious to the submissions made by the Learned Advocates appearing for the Respondents JSW, CoC and for the Resolution Professional that Resolution Plan in question has been implemented in part by making payments to the Financial Creditors in March, 2021 and in full by making payments to the Operational Creditors in March, 2022. According to them, though JSW initially infused only Rs.100 Crores as share capital towards Equity contribution commitments, subsequently pending the present Appeals, the reconstituted Board in its meeting held on 26.03.2021 has approved the issuance of Compulsory Convertible Debentures to Piombino Steel Limited (group entity of SRA-JSW which was to be merged into BPSL) having value of Rs.8,450 Crores, and thus requirement of infusion of Rs.8,550 Crores was complied with. We are not impressed with the said submissions.
Issue No.7 - Extension of Effective Date of Resolution plan
# 41. Except bare submissions made by the learned advocates during the course of hearing, there is no material or affidavit placed on record by the Respondent JSW to show that the Equity Commitment as contemplated in the aforestated clauses, which was condition precedent, was fulfilled by it. There is also no material placed on record by it to show that the Effective date as contemplated in its Resolution Plan was extended after the order of NCLT or NCLAT as per Clause 3.1 of the Resolution Plan. There is nothing on record to show as to how, when and by whom the Effective date as contemplated in the Resolution Plan was extended. If the Effective date was surreptitiously extended by some lenders, claiming to be part of CoC which had become functus officio and which had no authority to do so, any payment made or Equity infused by JSW under the garb of such decision, cannot be vindicated by the Court. When the SRA-JSW, CoC and Resolution Professional are being represented by very eminent Advocates, non-production of such relevant material with regard to infusion of Equity and extension of Effective date, to substantiate their submissions, cannot be without any purpose. It therefore raises serious doubts about the legality of such actions and genuineness of the so-called compliance of Resolution Plan, pending these Appeals.
Issue No.8 - Non compliance of Mandatory Provisions and Hon’ble SC in fact found it to be violative of the provisions of the code
# 42. Even it is assumed for the sake of arguments that pending the present Appeals, the terms of the Resolution Plan have been complied with, it may be noted that no party can be permitted to deliberately create a situation where the proceedings in the Court would be frustrated or the Court’s decision would become irrelevant or ineffective. A situation of fait accompli cannot be permitted to be created in the Court to frustrate the proceedings, more particularly when the CIR proceedings had ex facie stood vitiated on account of non-compliance of the mandatory provisions of law and on account of the misuse of the process of law by the parties. Any action taken or any deal/any settlement entered into by and between the parties in respect of the subject matter of the proceedings, have to pass the test of judicial scrutiny and would always be subject to the final outcome and adjudication of the proceedings.
Issue No.9 - IBC – Entire proceedings to complete in time bound manner
# 46. In view of the above, it is explicitly made clear that the provision contained in Section 12(1) is mandatory in nature as the expression “shall be completed” is used. Sub-section (3) further makes it clear that the duration of 180 days may be extended further “but not exceeding 90 days”, meaning thereby a maximum of 270 days’ time limit is statutorily laid down. The proviso to Section 12 also further clarifies that the extension of period of CIRP under the said Section shall not be granted more than once. Therefore, there remains no shadow of doubt that prior to insertion of two provisos by way of amendment in Section 12 which came into force w.e.f 16.08.2018, the entire CIRP proceedings had to be completed within maximum period of 270 days from the date of admission of the Application to initiate such process.
# 53. It appears that though the e-voting process was conducted on 15.10.2018-16.10.2018, the so-called approved Plan was placed before the NCLT for its approval under Section 31 only on 14.02.2019. There is no justification whatsoever submitted by the Resolution Professional as to why the said Application for approval of the Plan was filed after almost four months. Such an Application filed by the Resolution Professional being ex-facie in contravention of Section 12 read with Regulation 39(4) of the Regulations 2016, should not even have been entertained by the NCLT.
# 57. In that view of the matter, we have no hesitation in holding that the Application submitted by the Resolution Professional seeking approval of the Resolution Plan of JSW under Section 31 being hit by Section 12 of IBC, the NCLT had committed grave error of law in approving the said plan vide its order dated 05.09.2019.
# 67. As transpiring from the minutes of 18th and 19th Meetings held on 14.08.2024 and 10.10.2024 respectively, a very strange procedure was followed by the CoC. As recorded in the Minutes of 18th Meeting of CoC held on 14.08.2018, Resolution Applicant JSW had acquired highest score amongst the three Prospective Resolution Applicants, but there was no declaration made as to H1 and H2. It further appears from the Minutes of 19th Meeting that thereafter the negotiations had taken place between the Core Committee comprising of Small Group of Lenders and the Resolution Applicant JSW only, pursuant to which the Consolidated Resolution Plan was submitted by JSW on 03.10.2018. The said Consolidated Resolution Plan of JSW was circulated to the members of CoC on 05.10.2018. The said Consolidated Resolution Plan of JSW along with its Letter dated 10.10.2018 (Addendum Letter) was considered by the CoC at its 19th Meeting held on 10.10.2018. As transpiring from the Minutes of 19th Meeting, number of objections were raised by the representatives of the Financial Creditors and of the Operational Creditors as regards the manner in which the proceedings were being conducted, permitting JSW only to submit and amend the plan submitted earlier; as regards non-compliance of amended Regulation 38 for making payment of amount due to the Operational Creditors in priority over the payment to the Financial Creditors; as regards the Resolution Professional having not checked the compliances of the revised Resolution Plan of JSW, though the CoC had pointed out that the plan of JSW reviewed by the Resolution Professional earlier was different from the Resolution Plan of JSW put forth subsequently for voting; as regards the consideration of the revised plan of JSW without the compliance certificate from the Resolution Professional; as regards the implication and legal obligations of the avoidance transactions and fraudulent trading by the Corporate Debtor etc.
# 72. Having adumbrated the entire facts and circumstances, we find much substance in the submissions of the learned Senior Advocate Mr. Dhruv Mehta for the Ex-Promoters that apart from the fact that there was gross noncompliance of the mandatory provisions of the IBC and the Regulations, there was a dishonest and fraudulent attempt made by JSW, misusing the process of the Court by not making the upfront payments as committed by it for about two and a half years and thereby enriching itself unjustly, and thereafter considering the rising prices of steel in the market, JSW sought to comply with the terms of Resolution Plan at a very belated stage, in collusion with the CoC and the Resolution Professional. The changing stance of CoC in the present proceedings also smacks of its bona fides and raises serious doubts about the exercise of its so called commercial wisdom.
# 75. Though the commercial wisdom of the CoC should have been given the primacy in any adjudicatory proceedings, the changing stance of CoC from time to time during the course of proceedings right from the holding of meetings for approving the Resolution Plan of JSW till the final hearing of the present Appeals, has led this Court to believe that the CoC also has played a very dubious role in the entire CIRP. It was stated by the CoC on affidavit before this Court that because of the delaying tactics adopted by JSW and deferring the implementation of the Resolution Plan, the CoC was entitled to the compensation and interest on the said amount of Rs.19,350 Crores for causing loss of crores of rupees per day. Though the CoC had written number of letters raising grievances with regard to non-payment of upfront amount of Rs.19,350 Crores to the Financial Creditors within 30 days of the approval of the plan, the CoC had changed its stance all of a sudden accepting the payment of Rs. 19350 crores without any demurer, and though the Effective date for implementation of the plan had already expired. As stated earlier, there is no material placed on record as to how, when and by whom the Effective date as stated in the Resolution Plan was extended. During the course of arguments also Dr. Abhishek Manu Singhvi appearing for the CoC supported the submissions made by the learned Senior Counsel Mr. Neeraj Kishan Kaul for JSW to the effect that the Resolution Plan was implemented in part in March 2021 by making payment of Rs.19,350 Crores to Financial Creditors and making payment to the Operational Creditors in March 2022, and therefore the Appeals of the Appellants were required to be dismissed. Such a contradictory stands taken by the CoC at various stages of proceedings clearly proves that CoC had played foul and had not exercised its commercial wisdom in the interest of the Creditors.
Issue No.10 - Role of Resolution Professional
# 59. It cannot be gainsaid that as per the scheme of the Act, the role of the Resolution Professional while conducting the entire CIRP, is not only of an Administrator or Facilitator, but is also of an Invigilator, to ensure that the CIR proceedings are completed in a time bound manner, for maximisation of value of assets in order to balance the interest of the stakeholders and that there is compliance of all the mandatory provisions of the Code during the course of entire proceedings. As per Section 17, from the date of appointment of Interim Resolution Professional, the Management of the affairs of the Corporate Debtor vests in the Interim Resolution Professional, and he is responsible for complying with all the requirements under any law for the time being in force on behalf of the Corporate Debtor. As per Section 20, the Interim Resolution Professional is required to make every endeavour to protect and preserve the value of the property of the Corporate Debtor and manage the operations of the Corporate Debtor as a going concern. The duties of Interim Resolution Professional are enumerated in Section 18, and the duties of Resolution Professional are enumerated in Section 25. A very significant duty which is cast upon the Resolution Professional under Section 30(2) after the receipt of the Resolution Plans from the Prospective Resolution Applicants, is to examine each of such Resolution Plans and confirm that each Resolution Plan provided for the payment of Insolvency Resolution Process costs in the manner specified by the Board in priority to the payment of other debts of the Corporate Debtor; and provided for the payment of debts of Operational Creditors in such manner as may be specified by the Board. The Resolution Professional is required to confirm that each Resolution Plan provides for the matters stated in Section 30(2), and also specifically confirm that the Resolution Plan does not contravene any of the provisions of the law for the time being in force, and conforms to such other requirements as may be specified by the Board. Sub-section (3) of Section 30 states that the Resolution Professional shall present to the Committee of Creditors for its approval such Resolution Plans which confirm the conditions referred to in subsection (2). It is therefore, incumbent on the part of Resolution Professional to examine each Resolution Plan received by him and to confirm that each plan provided for the matters stated in sub-section (2) of Section 30. He has to present to the CoC for its approval, only such Resolution Plans which confirm the conditions referred to in subsection (2).
# 66. Despite such gross non-compliances of the mandatory provisions of IBC and the CIRP Regulations 2016, the Resolution Professional placed the Resolution Plan of JSW before the CoC. The CoC also without verifying the mandatory requirements of Regulation 38 particularly with regard to the feasibility and viability of the plan, effective implementation of the plan and the capability of Resolution Applicant to implement the plan, permitted the Resolution Applicant to submit the Consolidated Resolution Plan with Addendum Letter, which otherwise had many loose ends. Just as the Resolution Professional had failed to examine and confirm the compliance of mandatory provisions of the Code, to secure the interests of all the stakeholders involved in the process, the CoC also did not discharge its duty to carefully examine the feasibility and viability of the plan, and the capacity and resources of the Resolution Applicant-JSW for the implementation of the plan proposed by it.
Issue No.11 - Applications for avoidance of Transactions in accordance with Chapter III of IBC
# 64. As set out earlier, the Resolution Professional had utterly failed in discharging his duties under the Code, by not making Application for extension of time under Section 12 and by not certifying as to whether the Resolution Applicant-JSW was an “eligible” person under Section 29A to submit the plan. He also had failed to make any Applications for avoidance of transactions in accordance with Chapter-III of the Code. When the RBI had issued directions to the Indian Banks to mandatorily initiate CIRP against infamously known as “dirty dozen” companies, and when BPSL was one of them, it was obligatory on the part of the Resolution Professional to discharge his statutory duty cast upon him to file Applications for avoidance of transactions in accordance with Chapter-III of IBC.
Issue No.12 - Payment of Dues of Operational creditors
# 65. The Resolution Professional had also failed to confirm that the Resolution Plan of JSW met with the requirements under Section 30(2) more particularly with regard to non contravention of any provision of law and with regard to the payment of debts to the Operational Creditors in priority. As per Sub-regulation (1) of Regulation 38 as it stood prior to its amendment in November, 2019, the amount due to the Operational Creditors under a Resolution Plan had to be given priority in payment over the Financial Creditors. However, in the Resolution Plan, the said mandatory requirement was not complied with and the dues of Financial Creditors were given priority over the dues of the Operational Creditors.
Issue No.13 - Role of COC
# 66. Despite such gross non-compliances of the mandatory provisions of IBC and the CIRP Regulations 2016, the Resolution Professional placed the Resolution Plan of JSW before the CoC. The CoC also without verifying the mandatory requirements of Regulation 38 particularly with regard to the feasibility and viability of the plan, effective implementation of the plan and the capability of Resolution Applicant to implement the plan, permitted the Resolution Applicant to submit the Consolidated Resolution Plan with Addendum Letter, which otherwise had many loose ends. Just as the Resolution Professional had failed to examine and confirm the compliance of mandatory provisions of the Code, to secure the interests of all the stakeholders involved in the process, the CoC also did not discharge its duty to carefully examine the feasibility and viability of the plan, and the capacity and resources of the Resolution Applicant-JSW for the implementation of the plan proposed by it.
Issue No.14 - Conduct of COC , Credentials of SRA , what constitutes commercial wisdom
# 72. Having adumbrated the entire facts and circumstances, we find much substance in the submissions of the learned Senior Advocate Mr. Dhruv Mehta for the Ex-Promoters that apart from the fact that there was gross noncompliance of the mandatory provisions of the IBC and the Regulations, there was a dishonest and fraudulent attempt CIVIL APPEAL NO.1808 OF 2020 Page 90 of 105 made by JSW, misusing the process of the Court by not making the upfront payments as committed by it for about two and a half years and thereby enriching itself unjustly, and thereafter considering the rising prices of steel in the market, JSW sought to comply with the terms of Resolution Plan at a very belated stage, in collusion with the CoC and the Resolution Professional. The changing stance of CoC in the present proceedings also smacks of its bona fides and raises serious doubts about the exercise of its socalled commercial wisdom.
73. The position of law, propounded by this Court is that commercial wisdom of CoC means a considered decision taken by the CoC with reference to the commercial interest, the interest of revival of Corporate Debtor and maximization of value of its assets. This wisdom is not a matter of rhetoric but is denoting a well-considered decision by the CoC as the protagonist of CIRP. The CoC therefore has to take into consideration the mandatory requirements of the Code as well as the Regulations framed by the Board, and to see that the Insolvency Resolution of the Corporate Debtor is completed in a time bound manner and for maximization of value of assets of the Corporate Debtor. The mandatory requirements under the Code are, the compliance of the time limit specified in Section 12, the compliance of Section 29A to see whether the Resolution Applicant is an eligible applicant to submit the plan, the compliance of sub-section (2) of Section 30 of IBC etc. The mandatory requirements stated in Regulation 38 of the Regulations, 2016 are that the Resolution Plan must demonstrate that it addresses the cause of default, that it is feasible and viable, it has the provisions for its effective implementation and the Resolution Applicant has the capability to implement the Resolution Plan in a time bound manner. If the Resolution Plan does not comply with such mandatory requirements and such plan is approved by the CoC, it could not be said that the CoC had exercised its commercial wisdom while approving such Resolution Plan.
75. Though the commercial wisdom of the CoC should have been given the primacy in any adjudicatory proceedings, the changing stance of CoC from time to time during the course of proceedings right from the holding of meetings for approving the Resolution Plan of JSW till the final hearing of the present Appeals, has led this Court to believe that the CoC also has played a very dubious role in the entire CIRP. It was stated by the CoC on affidavit before this Court that because of the delaying tactics adopted by JSW and deferring the implementation of the Resolution Plan, the CoC was entitled to the compensation and interest on the said amount of Rs.19,350 Crores for causing loss of crores of rupees per day. Though the CoC had written number of letters raising grievances with regard to non-payment of upfront amount of Rs.19,350 Crores to the Financial Creditors within 30 days of the approval of the plan, the CoC had changed its stance all of a sudden accepting the payment of Rs. 19350 crores without any demurer, and though the Effective date for implementation of the plan had already expired. As stated earlier, there is no material placed on record as to how, when and by whom the Effective date as stated in the Resolution Plan was extended. During the course of arguments also Dr. Abhishek Manu Singhvi appearing for the CoC supported the submissions made by the learned Senior Counsel Mr. Neeraj Kishan Kaul for JSW to the effect that the Resolution Plan was implemented in part in March 2021 by making payment of Rs.19,350 Crores to Financial Creditors and making payment to the Operational Creditors in March 2022, and therefore the Appeals of the Appellants were required to be dismissed. Such a contradictory stands taken by the CoC at various stages of proceedings clearly proves that CoC had played foul and had not exercised its commercial wisdom in the interest of the Creditors.
Issue No.15 - Timeline of IBC - Supreme Court
(Has the COC’s counsel by giving an undertaking to return the funds, in case the appeal succeeds, not given a pass to SC in terms of the time in which the matter can be decided) ?
# 77. Even after the impugned judgment was passed by the NCLAT, allowing the said untenable Appeal of JSW and dismissing the other Appeals of the Operational Creditors and the Ex-Promoters, the Resolution Plan was not implemented by JSW under the guise of pendency of the present Appeals, though there was no stay granted by this Court against the implementation of the Resolution Plan. On the contrary a statement was made by Dr. Singhvi appearing for the CoC, as recorded in the order dated 06.03.2020, to the effect that “in case he receives money he will return the said amount within two months, if the appeal succeeds.” Again, pending these Appeals, with a view to delay the implementation of the Resolution Plan, JSW filed an IA being No. 47947/2020 in SLP(C) No. 29327-29328/2019 (Civil Appeal Nos.14503-14504 of 2004), which were tagged along with the present Appeals, attempting to seek a stay on the implementation of plan under the garb of seeking clarification of the court’s order dated 06.03.2020, stating inter alia that JSW was not obligated to implement the Resolution Plan during the pendency of the Appeals filed by the Appellants herein. Thus, all throughout the proceedings, the plan was not implemented by JSW without any cogent reason or justification for about two and a half years after the approval granted by the NCLT and for about two years after the impugned order was passed by the NCLAT, leaving the creditors in lurch and leaving them high and dry.
Issue No.16 - Conduct of SRA-JSW (Resolution applicant)
# 78. Now, a situation of fait accompli is sought to be presented before this Court by the learned Senior Advocate Mr. Neeraj Kishan Kaul appearing for JSW by submitting that pending the present Appeals, the Resolution Plan has been fully implemented. In our opinion, nobody should be permitted to misuse the Process of law nor should be permitted to take undue advantage of the pendency of any proceedings in any Court or Tribunal. Instituting vexatious and frivolous litigations in the NCLT or NCLAT and delaying the implementation of Resolution Plan under the garb of pendency of proceedings, has clearly proved the mala fide and dishonest intention on the part of JSW, in firstly securing highest score making misrepresentation before CoC and then not implementing the same under the garb of pendency of proceedings, though the Resolution Plan was supposed to be an unconditional one. Such acts of misuse and abuse of process of law cannot be vindicated by this Court, which otherwise would tantamount to ratifying and pardoning the illegal acts committed by JSW and thereby giving them a clean chit.
# 79. An illegality of any nature cannot be permitted to be perpetuated, and a plea of fait accompli cannot be permitted to be raised by any party to cover up their illegal acts, after achieving the ill motivated intentions circumventing the law. As demonstrated earlier, there was an entire spectrum of lacunas and flaws in the Resolution Plan of JSW with regard to non-compliance of the mandatory requirements under the IBC. The Resolution Plan as approved by the CoC was an unconditional plan, and JSW was supposed to implement the same regardless of any unprecedented challenges or circumstances. JSW cannot treat the plan as conditional or optional, nor can it abdicate its responsibilities on the ground of unforeseen obstacles. It is pertinent to note that though all throughout from the date of order passed by the NCLT till March, 2021, the stand of the JSW evidenced through an affidavit was that it was not obliged to implement the plan because of the pendency of these Appeals, however JSW played smart by making part payment to the Financial Creditors in March, 2021, realizing the beneficial market trend of the Steel. It also surreptitiously got the Effective date extended to 31.03.2021 from the so-called core group of CoC, which had already become functus officio and which had no authority to extend the said Effective date. The net result is that the upfront payments as agreed to be made in the Resolution Plan within thirty days of the approval of the plan by NCLT was delayed by 540 days in respect of payment to the Financial Creditors and by 900 days in respect of payment to the Operational Creditors. The Equity commitment as per clause 2.3 of the Resolution Plan with regard to the infusion of Equity into the Company for an amount aggregating INR 8,550 crores, to be infused upfront on the Effective date, was also not complied with by JSW.
Issue No.17 - Role of Resolution Applicant & Findings against conduct of Resolution Professional
# 21. Thus, as evinced from the record, there was neither a certificate given nor any statement made by the Resolution Professional in the said Application, to the effect that the contents of the Affidavit filed by the Resolution Applicant with regard to its eligibility to file the Resolution Plan, were in order. In the afore-stated Table, against the column of requirement that “the disqualification under Section 29A of the Code should not apply,” the Resolution Professional has merely referred to Annexure 12 of the Approved Resolution Plan of JSW. As elicited, the said Annexure 12 of the Approved Resolution Plan which allegedly pertained to the mandatory disclosures, only disclosed the identity of the Resolution Applicant and the connected persons. The said Annexure 12 nowhere had stated about the eligibility/ineligibility of the Resolution applicant as required under Section 29A.
# 81. Recently, this Court in State Bank of India and Others Vs. Consortium of Murari Lal Jalan and Florian Fritsch and Another [2024) SCC OnLine 3187], has made very apt observations, with regard to the delaying tactics adopted by the Successful Resolution Applicant in implementing the Plan, and the NCLT and NCLAT adopting casual approach in exercising discretion in granting extension of the timelines fixed under the Code. The Court while directing the Corporate Debtor to be taken into liquidation, observed thus: -
“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 and the lenders involved in the process. Once a resolution plan is approved under the Insolvency and Bankruptcy Code, 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 the 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 Insolvency and Bankruptcy Code, 2016 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 recognise 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 implementation. The 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.
174-175………………………
176. The Insolvency and Bankruptcy Code, 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 successful resolution applicants to act in flagrant violation of the terms of the resolution plan in a lackadaisical manner. The successful resolution applicants repeatedly approach the Adjudicating Authority or the National Company Law Appellate Tribunal 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 National Company Law Tribunal and National Company Law Appellate Tribunal 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 National Company Law Tribunal and National Company Law Appellate Tribunal Rules, 2016 respectively. It is reiterated that the National Company Law Tribunal and National Company Law Appellate Tribunal must not entertain such repeated attempts at violating the integrity of a committee of creditors 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 National Company Law Tribunals/National Company Law Appellate Tribunals need to be sensitized of not exercising their judicial discretion in extending the timelines fixed under the Insolvency and Bankruptcy Code, 2016 or the resolution plan, in such a way that it may make the Code lose its effectiveness thereby rendering it obsolete.”
# 83. Having thoroughly examined the entire matter factually and legally, we arrive at the following irresistible conclusions: -
(i) The Resolution Professional had utterly failed to discharge his statutory duties contemplated under the IBC and the CIRP Regulations during the course of entire CIR proceedings of the Corporate Debtor- BPSL.
(ii) The CoC had failed to exercise its commercial wisdom while approving the Resolution Plan of the JSW, which was in absolute contravention of the mandatory provisions of IBC and CIRP Regulations. The CoC also had failed to protect the interest of the Creditors by taking contradictory stands before this Court, and accepting the payments from JSW without any demurer, and supporting JSW to implement its ill-motivated plan against the interest of the creditors.
(iii) The SRA-JSW after securing the highest score in the Evaluation matrix in the 18th meeting of CoC,submitted the revised consolidated Resolution Plan with addendum under the garb of complying with the amendments made in the CIRP Regulations, 2016, and got the same approved from the CoC. However, JSW even after the approval of its Plan by the NCLAT, willfully contravened and not complied with the terms of the said approved Resolution Plan for a period of about two years, which had frustrated the very object and purpose of the IBC, and consequently had vitiated the CIR proceedings of the Corporate Debtor-BPSL.
(iv) The Resolution Plan of JSW as approved by the CoC did not confirm the requirements referred to in subsection (2) of Section 30, the same being in flagrant violation and contravention of the expressed provisions of the IBC and the CIRP Regulations. The said Resolution Plan therefore was liable to be rejected by the NCLT under sub-section (2) of Section 31, at the very first instance.
(v) The impugned judgment passed by the NCLAT in allowing the Company Appeal of JSW and issuing the directions without any authority of law and without jurisdiction is perverse, coram non judice and liable to be set aside.
Issue No.18 - Consequences of contravention of resolution plan by any person on whom such plan is binding u/s 31
# 82. Thus, it is quite clear that merely because the Code is silent with regard to the phase of implementation of the Resolution Plan by the Successful Resolution Applicant, neither the Tribunal nor the Courts should give excessive leeway to the Successful Resolution Applicant to act in flagrant violation of the terms of the Resolution Plan or in a lackadaisical manner. In the instant case, SRA/JSW did not implement the Resolution Plan for about two years since its approval by the NCLAT, though there was no legal impediment in implementing the same. Such flagrant violation of the terms of the Resolution Plan, has frustrated the very object and purpose of the Code. It is needless to say that the Resolution Plan, after its approval by the Adjudicating Authority i.e. NCLT under Section 31, is binding not only to the Corporate Debtor, its employees, members, creditors and the Government authorities but also to all the stakeholders including the successful Resolution Applicant itself. It may be noted that any contravention of the terms of the approved Resolution Plan, by any person on whom such plan is binding under Section 31, is liable to be prosecuted and punished under sub-section (3) of Section 74 of the IBC. It is also further required to be noted that in view of Section 33, where the Adjudicating Authority, before the expiry of the insolvency resolution process period or the maximum period permitted for completion of corporate insolvency resolution process under Section 12, does not receive a Resolution Plan under Sub-section (6) of Section 30; or rejects the Resolution Plan under Section 31 for the non-compliance of the requirements specified therein, it has to pass an order requiring the Corporate Debtor to be liquidated in the manner as laid down in Chapter III of the IBC.
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