State Bank Of India vs Consortium of Murari Lal Jalan and Florian Fritsch 2024 INSC 852 - IBC - NCLT & NCLAT

Insolvency and Bankruptcy Code 2016 (IBC)- Existing insolvency framework does not provide any scope for effecting further modifications or withdrawals of the Resolution Plan approved by the CoC, at the behest of the successful resolution applicant, once the plan has been submitted to the adjudicating authority. The submitted Resolution Plan is binding and irrevocable as between the CoC and the successful resolution applicant in terms of the provisions of the IBC, 2016 and the 2016 Regulations as well. In other words, once a CoC-approved resolution plan is submitted to the Adjudicating Authority i.e., NCLT, it immediately becomes binding on the CoC and the SRA, even if the Adjudicating Authority has not yet given its stamp of approval on the same. (Para 116)

IBC- NCLT and NCLAT Rules 2016- Rule 15 - The timely implementation of the Resolution Plan is also one of the underlying objectives of the IBC, 2016. (Para 154) Rule 15 grants power to the NCLT and NCLAT respectively, to extend the time limits for doing any act which have been fixed, either by the rules or by an order, as the justice of the case may require. However, such power must not be exercised mechanically without any application of mind-The discretion in extending the time limits fixed under the Resolution Plan must be exercised in a much more circumspect manner, especially in cases such as the present, which pertains to the aviation sector, wherein timely resolution and revival of the Corporate Debtor is all the more crucial since the sector operates in such a way that a continuous flow of cash is required to maintain the company in a position of status quo. (Para 154-158)

NCLT and NCLAT - Functioning criticized- Serious lack of timely admission and disposal of the applications filed as regards the initiation of CIRP-Members often lack the domain knowledge required to appreciate the nuanced complexities involved in high-stake insolvency matters-They don’t have the practice of sitting for the full working-lacking in the capacity to manage the growing number of cases and giving undivided attention required in such matters.-No effective system in place before the NCLTs for urgent listings. The staff of the Registry is given wide power to list or not to list a particular matter-Growing tendency amongst Members of the NCLT(s) and NCLAT to ignore the orders of this Court or act in its defiance-Should not act as a mere rubberstamping authority and must take their roles seriously in ensuring time-bound hearings and resolutions. Proper and effective hearings both virtually and in-court must be given to insolvency.-Persons with high ideals & impeccable integrity should be appointed as Members in the NCLT as well as NCLAT. There should not be any political appointment. (Para 182-185)

IBC - Shortcomings and suggestions - The authorities including the NCLT and NCLAT must not aid the successful resolution applicants in circumventing the strict mandates of the law by acceding to their requests to relax the terms of the plan itself - Adjudicating Authority while approving a Resolution Plan under Section 31 of the IBC, 2016, should record the next steps which are to be taken by the respective parties for commencement of implementation of the approved Resolution Plan- IBC, 2016 to statutorily provide for the constitution of a Monitoring Committee once the plan has been approved for a smooth handover of the Corporate Debtor to the successful resolution applicant. Presently, such a provision is absent in the Code and it is the Adjudicating Authority that orders for the constitution of a Monitoring Committee to ensure smooth implementation of the Plan. The CoC must be empowered to constitute the Monitoring Committee which may, by default, include the Resolution Professional and also include other nominees from the CoC and the resolution applicant respectively. Such a Monitoring Committee would be entrusted with the powers of monitoring and supervising the resolution plan. (Para 161-181)