In the matter of State Bank of India v. Adhunik Metaliks Limited and Others, the National Company Law Tribunal ("NCLT"), Cuttack rejected the resolution plan filed by the resolution applicant on the grounds of delay and mandated the liquidation of the corporate debtor. Adhunik Metaliks Limited and its subsidiary M/s. Zion Steel Limited ("Corporate Debtor") have been requested to begin the corporate insolvency resolution process ("CIRP") by State Bank of India ("State Bank") under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("Code"). Liberty House Group ("Liberty House") submitted a resolution plan in accordance with this in order to be considered, and it was adopted by the committee of creditors ("CoC") before being accepted by the NCLT, Kolkata.
Liberty House did not carry out the resolution plan in any way. In order to effectuate the resolution plan by making an upfront payment, or else to pass an order for the corporate debtor's liquidation, the CoC filed an application with the NCLT in Kolkata. Liberty House received a notification from the NCLT in Kolkata asking them to explain why an order of liquidation should not be imposed. The National Company Law Appellate Tribunal (NCLAT), in response to an appeal, ordered Liberty House to pay upfront within 30 days. The NCLT Cuttack was operating in the meantime, and when Liberty House failed to pay, the CoC went to the NCLT, Cuttack, asking for the cancellation of the resolution plan and permission to forfeit the funds.
In the instant case titled State Bank of India v. Adhunik Metaliks Limited and Others the issue raised for clarification before the NCLT was:
Is it possible to reject the NCLT, Kolkata, resolution plan because it wasn't carried out? If so, is it possible to take into account the resolution plan given by another resolution applicant? If not, is it possible to file for liquidation against the corporate debtor?
With regard to this issue, The NCLT in Cuttack noted that failure to abide by the NCLAT's directive to make the upfront payment within 30 days constitutes a violation of the settlement plan's conditions. The NCLT, Cuttack further rejected Liberty House's arguments by holding that the resolution plan's usage of the term "upfront payment" cannot be qualified by any conditions that they later sought to apply. The NCLT, Cuttack further noted that while accepting the resolution plan, the CoC did not request any performance security from Liberty House to ensure the resolution plan's successful execution. Additionally, it was noted that Regulation 36B(4A) of the Regulations cannot be applied retroactively because it was inserted by an amendment made on April 24, 2019. Therefore, the CoC cannot refuse to pay the 50 crore INR advance payment.
The NCLT refused to accept the CoC's arguments in regards to resurrecting the CIRP and taking the second-highest bidder's resolution plan into consideration. It noted that the second-highest bidder's resolution proposal was rejected earlier because their investment in the corporate debtor was less than its liquidation value. The NCLT in Cuttack ruled that the clock cannot be turned back to day one. Additionally, if the second-highest bidder was truly interested in the corporate debtor's affairs, they still have the chance to do so by submitting an application for merger and amalgamation during liquidation in accordance with Sections 230–232 of the Companies Act, 2013, which was passed in 2013.
The NCLT categorically stated that,
“We are not inclined to interfere with the impugned order dated 4th September, 2019 whereby application under Section 7 of the Insolvency and Bankruptcy Code, 2016 filed by 'State Bank of India' against 'M/s Adhunik Steels Ltd.' the Corporate Guarantor of 'M/s Adhunik Alloys and Power Ltd.' (Principal Borrower) has been disposed of as being not maintainable, following the ratio of judgment rendered by this Appellate Tribunal in 'Vishnu Kumar Agarwal Vs. Piramal Enterprises Ltd.', Company Appeal No. 346 and 347 of 2018 disposed of on 8th January, 2019.”