Holding

The Supreme Court held that the liquidation order remains in force, the appellant failed to fulfil its obligations, and the forfeiture of Rs 20 crore is warranted.

Summary

Kridhan Infrastructure Pvt Ltd (now Krish Steel) submitted a resolution plan for Tecpro Systems Ltd, which was approved by the Committee of Creditors and the NCLT. The appellant deposited Rs 5 crore in escrow but failed to meet further obligations, leading the CoC to vote for liquidation, which was approved by the NCLT and upheld by the NCLAT. The Supreme Court stayed the liquidation order and directed the appellant to deposit Rs 15 crore immediately and Rs 50 crore by 10 January 2021 (later extended to 25 February 2021), with a warning that the previously deposited Rs 20 crore would be forfeited on default. The appellant could not raise the required funds and sought to have the company's status changed from liquidation to active. The Court held that the liquidation order could not be set aside, the appellant had failed to comply with its obligations, and therefore the forfeiture of Rs 20 crore was justified. The appeal was dismissed and the matter was referred back to the liquidator.

Issues considered

The liquidation order under the IBC can be set aside or stayed pending further compliance by the resolution applicant.
Whether the appellant's failure to deposit the stipulated Rs 50 crore justifies forfeiture of the Rs 20 crore already deposited.
Whether the court can direct a change in the status of the corporate debtor from "under liquidation" to "active" to enable the appellant to raise funds.
The effect of repeated extensions of time on the appellant's entitlement to relief under the IBC.

Legislation cited

Insolvency and Bankruptcy Code, 2016s. 33
NCLAT Rules, 2016s. Rule 11

Subjects

InsolvencyCorporate Insolvency Resolution ProcessLiquidationResolution PlanForfeitureEscrow AccountIBCCommittee of CreditorsNCLTNCLATSupreme CourtTerm lendersStatus of corporate debtor

Judgment

520 [2021]REPORTS
SUPREME COURT 2 S.C.R. 520 [2021] 2 S.C.R.

A KRIDHAN INFRASTRUCTURE PVT. LTD.
(NOW KNOWN AS KRISH STEEL AND TRADING PVT LTD)
v.
VENKATESAN SANKARANARAYAN & ORS.
(Civil Appeal No. 3299 of 2020)
B
MARCH 01, 2021
[DR. DHANANJAYA Y CHANDRACHUD AND
M.R. SHAH, JJ.]
Insolvency and Bankruptcy Code, 2016 – The appellant
C submitted a resolution plan for a company which was undergoing
the Corporate Insolvency Resolution Process (CIRP) under the 2016
Code – The Resolution Plan was approved by the Committee of
Creditors (CoC) and National Company Law Tribunal (NCLT) –
Accordingly, the appellant deposited an amount of Rs.5 crores in
D an escrow account of the corporate debtor – However, further
obligations were not fulfilled by the appellant under the Resolution
Plan despite numerous opportunities – As a result on 11.11.2019,
the CoC voted for the liquidation of the corporate debtor – The
same was allowed by the NCLT – In appeal, the NCLAT permitted
appellant to deposit Rs.15 crores in the escrow account and
E appellant agreed to the stipulation that the amount of Rs.15 crores
would be forfeited if it failed to deposit the payment of Rs. 50 crores
– On 08.09.2020, the appeal was dismissed and NCLAT upheld the
order of liquidation – Before the Supreme Court on 09.10.2020,
the appellant stated that an amount of Rs.50 crores would be
F deposited on or before 10.01.2021 – The appellant was specifically
informed that if it failed to do so in whole or in part, the entire
amount of Rs.20 crores deposited earlier would be forfeited –
Thereafter, the time for making the deposit was extended until
25.02.2021 – However, several months elapsed after extension of
time and no payments were made – Appellant submitted that it has
G moved to term lenders for finance – However, before finance can
be made available to the appellant, the term lenders insisted that
the status of the company must be altered from that of a company
under liquidation, to an active company – Held : The appellant was
unable to raise the funds – The fact of the matter emerges that the
H
520
KRIDHAN INFRASTRUCTURE PVT. LTD. v. VENKATESAN 521
SANKARANARAYAN

appellant will be unable to raise funds from the term lenders, who A
were insisting on changing the status of company from under
liquidation to an active status – The order of liquidation was not set
aside – What the request of the appellant reduces itself to, is that it
would raise funds on a mortgage of assets of the company and
unless the company is bought out of liquidation, it would not be in
B
a position to raise the funds – This cannot be accepted – The order
of liquidation was stayed and a final view is yet to be taken –
Sufficient opportunities were granted to the appellant and it was
not able to deposit Rs.50 crores – The appellant has failed to abide
by its obligations – The consequence envisaged under the order of
the Supreme Court accordingly ensue the forfeiture of the amount C
of Rs.20 crores – As a consequence, the management directed to
revert to the liquidator for taking steps in accordance with law.
Dismissing the Civil Appeal, the Court
HELD: 1. The appellant has been unable to raise the funds.
The fact of the matter, as it emerges from appellant’s submission, D
is that the appellant will be unable to raise funds from the Term
Lenders who are insisting that the status of the Company should
change from a company under liquidation to an active status. The
order of liquidation has not been set aside. Ultimately, what the
request of the appellant reduces itself to, is that it would raise E
funds on a mortgage of the assets of the Company and unless the
Company is brought out of liquidation, it would not be in a position
to raise the funds. This is unacceptable. At this stage, the order
of liquidation has only been stayed, but a final view was, thus, to
be taken by this Court. Sufficient opportunities were granted to
the appellant earlier during the pendency of the proceedings both F
before the NCLT and NCLAT. The orders of the NCLT and
NCLAT make it abundantly clear that despite the grant of
sufficient time, the appellant has not been able to comply with
the terms of the Resolution Plan. Since 9 October 2020, despite
the passage of almost five months, the appellant has not been G
able to deposit an amount of Rs 50 crores. Time is a crucial facet
of the scheme under the IBC. To allow such proceedings to lapse
into an indefinite delay will plainly defeat the object of the statute.
A good faith effort to resolve a corporate insolvency is a preferred

H
522 SUPREME COURT REPORTS [2021] 2 S.C.R.

A course. However, a resolution applicant must be fair in its dealings
as well. The appellant has failed to abide by its obligations. In
that view of the matter, we see no reason or justification to
entertain the Civil Appeal any further. The consequence envisaged
under the order of this Court shall accordingly ensue in terms of
the forfeiture of the amount of Rs 20 crores. As a consequence of
B
this order, the management shall revert to the liquidator for taking
steps in accordance with law. [Para 11][528-A-F]
Innoventive Industries Ltd. v ICICI Bank (2018) 1 SCC
407:[2017] 8 SCR 33 – referred to.
C Case Law Reference
[2017] 8 SCR 33 referred to para 11
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3299
of 2020

D From the Judgment and Order dated 08.09.2020 of the National
Company Law Appellate Tribunal at New Delhi in Company Appeal
(AT) (Insolvency) No. 202 of 2020.
K.V. Vishwanathan, Sr. Adv., Gaurav Varma, Adv. for the
Appellant.
E Ms. Meenakshi Arora, Sr. Adv., Ms. Misha, Ms. Charu Bansal,
Ms. Prabh Simran Kaur, S. S. Shroff, Ashish Makhija, Ms. Shagun Matta,
Abhijit Sengupta, Dibyadyuti Banerjee, Srideep Chatterjee, Anand Dey,
Ms. Sumedha Banerjee, Advs. for the Respondents.
DR. DHANANJAYA Y CHANDRACHUD, J.
F 1 This appeal arises from an order of the National Company Law
Appellate Tribunal1 dated 8 September 2020.
2 The appellant submitted a Resolution Plan for a company by the
name of Tecpro Systems Limited2 which was undergoing the Corporate
insolvency Resolution Process under the Insolvency and Bankruptcy
G Code 20163. The Resolution Plan was approved by the Committee of

1
“NCLAT”
2
“Corporate Debtor”
H 3
“IBC”
KRIDHAN INFRASTRUCTURE PVT. LTD. v. VENKATESAN 523
SANKARANARAYAN [DR. DHANANJAYA Y CHANDRACHUD, J.]

Creditors4 on 8 March 2019 with a majority of 89.92%. The Resolution A
Plan was approved by the National Company Law Tribunal5 on 15 May
2019. The appellant accordingly deposited an amount of Rs 5 Crores in
an Escrow Account of the Corporate Debtor. However, the appellant
did not fulfil its further obligations, including equity infusion, under the
Resolution Plan despite numerous opportunities over a period of six
B
months. On 11 November 2019, the CoC voted, by a majority of 99.28%,
for the liquidation of the Corporate Debtor as a result of the failure of
the appellant to implement the Resolution Plan. On 16 January 2020, the
NCLT allowed the liquidation of the Corporate Debtor to proceed. The
order of the NCLT was upheld by the NCLAT. Among other things, the
NCLAT noted that the appellant had failed to implement the Resolution C
Plan for a period of over eight months and, hence, declined to exercise
its jurisdiction pursuant to its inherent power under Rule 11 of the NCLAT
Rules, 2016.
3 When the appeal came before this Court on 9 October 2020, a
statement was made on behalf of the appellant that an amount of Rs 50 D
crores would be deposited on or before 10 January 2021. Liquidation
under the IBC is a matter of last resort. Bearing this in mind, and in view
of the solemn statement made by Senior Counsel for the appellant, an
opportunity was granted to the appellant. Accordingly, the following order
was passed:
“1 Admit. E

2 We have heard Dr Abhishek Manu Singhvi, Senior counsel
in support of the appeal. Ms Meenakshi Arora, Senior counsel
appears on behalf of Edelweiss Asset Reconstruction
Company Limited (EARC), a financial creditor, who had
appeared before the National Company Law Appellant F
Tribunal. EARC has supported the appellant. Mr Ashish
Makhija, learned counsel appears on behalf of the liquidator
to oppose the appeal and support the order of the National
Company Law Appellate Tribunal.
3 The corporate insolvency resolution process (CIR process) G
was initiated against the Corporate Debtor on 7 August 2017.
The Resolution Plan submitted by the appellant was approved
on 30 April 2018 by the Committee of Creditors (CoC). The
4
“CoC”
5
“NCLT” H
524 SUPREME COURT REPORTS [2021] 2 S.C.R.

A Resolution Plan was approved by the NCLT on 15 May 2019.
The NCLT was thereafter moved on the ground that the
Resolution Plan had not been implemented by the appellant.
Hence an application was filed under Section 33 of the
Insolvency and Bankruptcy Code 2016 seeking liquidation
of the Corporate Debtor. This was allowed by the NCLT by
B
its order dated 16 January 2020.
4 After the appellant filed an appeal before the NCLAT on 3
February 2020, an opportunity was granted to them to file an
affidavit indicating the time frame for compliance of the
Resolution Plan. On 25 February 2020, a meeting took place
C between the member of the erstwhile CoC, the appellant
and the liquidator. A revised time line was agreed upon, under
which the appellant was to make a payment upfront of Rs
15 crores within seven days of the order of the NCLAT,
which was liable to be forfeited if the appellant failed to
D make the balance upfront payment of Rs 50 crores within
three months thereafter.
5 The appellant filed an affidavit before the NCLAT on 2 March
2020 apprising it of the understanding which had been arrived
at on the above terms. On 29 July 2020, the NCLAT permitted
E the appellant to deposit Rs 15 crores in an escrow account
to be specified by the lenders of the erstwhile CoC, within
ten days. It is not in dispute that the appellant has in
compliance with the order of the NCLAT, deposited Rs 15
crores. The appellant filed an undertaking on affidavit on 18
August 2020, accepting its obligation to make an upfront
F payment of Rs 50 crores within three months from the date
of the reversal of the liquidation order. The appellant agreed
to the stipulation that the amount of Rs 15 crores deposited
by it in escrow would stand forfeited if it failed to deposit the
payment of Rs 50 crores. NCLAT by its order dated 8
G September 2020, dismissed the appeal and upheld the order
of liquidation.
6 Dr Abhishek Manu Singhvi, Senior counsel appearing on
behalf of the appellant submits that liquidation of the
undertaking should be a matter of last resort and, consistent
H
KRIDHAN INFRASTRUCTURE PVT. LTD. v. VENKATESAN 525
SANKARANARAYAN [DR. DHANANJAYA Y CHANDRACHUD, J.]

with the understanding which was arrived at on 25 February A
2020, the appellant is willing to abide by the terms as agreed.
He has submitted that within a period of three months, the
appellant would bring in the upfront payment of Rs 50 crores,
failing which the amount of Rs 15 crores which has already
been deposited in escrow would stand forfeited together with
B
the amount of Rs 5 crores that was deposited following the
approval of the Resolution Plan.
7 Ms Meenakshi Arora, Senior counsel appearing on behalf of
EARC supports the proposal which has been submitted by
the appellant on the ground that the erstwhile members of
the CoC have in their commercial decision found it in their C
best interest to allow the Resolution Plan to be implemented.
8 Mr Ashish Makhija, learned counsel appearing on behalf of
the liquidator has while opposing the appeal submitted that
while the liquidator does not in principle oppose the request,
as an officer of the Court, he would wish to apprise the Court D
of the fact that the appellant did not take steps following the
approval of the Resolution Plan in May 2019 for complying
with its obligations.
9 Liquidation of the Corporate Debtor should be a matter
of last resort. The IBC recognizes a wider public E
interest in resolving corporate insolvencies and its
object is not the mere recovery of monies due and
outstanding. The appellant has indicated its bona fides,
at least prima facie at the present stage, by
unconditionally agreeing to subject itself to the F
forfeiture of an amount of Rs 20 crores, which has been
deposited by it, in the event that it fails to comply with
the requirement of depositing an additional amount of
Rs 50 crores within a period of three months in terms
of the understanding that was arrived at on 25 February
2020. In order to enable the appellant to have one final G
opportunity to do so, we direct that the appellant shall,
in order to demonstrate its bona fides deposit an
amount of Rs 50 crores upfront in terms of the
understanding which was arrived at on 25 February
2020. The appellant is specifically placed on notice of H
526 SUPREME COURT REPORTS [2021] 2 S.C.R.

A the fact that should it fail to do so in whole or in part,
the entire amount of Rs 20 crores which has been
deposited thus far, shall stand forfeited without any
further recourse to the appellant. Accordingly, the
following interim directions are issued:
B (i) The operation of the impugned order of the NCLAT
dated 8 September 2020, is stayed;
(ii) The appellant shall, in order to demonstrate its ability
to implement the Resolution Plan and in compliance
with the understanding arrived at on 25 February 2020
C deposit an amount of Rs 50 crores, on or before 10
January 2021; and
(iii) The auction of the properties of the Corporate Debtor
shall remain stayed in the meantime.
10 The appeal shall be listed on 12 January 2021.”
D
(emphasis supplied)
4. Subsequently, on 25 November 2020, the above order was
clarified by this Court and time for making the deposit was extended
until 25 February 2021.
E 5. Though nearly five months have elapsed since the first order,
no payment has been made. Even after second order granting the
extension of time, three months have elapsed. The appellant took over
the Corporate Debtor after the order of stay. Though given charge, the
appellant has not fulfilled its reciprocal obligations. IA 22633 of 2021 has
been filed in the Civil Appeal, seeking a direction to the Ministry of
F Corporate Affairs, the Registrar of Companies and the Insolvency and
Bankruptcy Board of India6 to take on record the newly appointed directors
and signatories of the Corporate Debtor; to accept the Corporate Debtor
as an active company and change its status from “under liquidation” to
“active” and generally to take all actions in compliance of the previous
G orders of this Court.
6. Mr K V Vishwanathan, learned Senior Counsel appearing on
behalf of the appellant, submits that pursuant to the earlier orders dated
9 October 2020 and 25 November 2020, the appellant had moved the
Term Lenders for finance. However, the appellant submits that before
6
H “IBBI”
KRIDHAN INFRASTRUCTURE PVT. LTD. v. VENKATESAN 527
SANKARANARAYAN [DR. DHANANJAYA Y CHANDRACHUD, J.]

finance can be made available to the appellant, the Term Lenders have A
insisted that the status of the Company must be altered from that of a
company under liquidation, to an active company. A copy of the email
addressed by the Insolvency and Bankruptcy Board of India on 15
January 2021 has been annexed to the aforesaid IA. Mr Vishwanathan
submits that the previous orders of this Court recognize that the appellant
B
was required to deposit an amount of Rs 50 crores in terms of the
understanding which was arrived at with the CoC on 25 February 2020.
It has been submitted that the appellant would hence raise the funds
after securing a mortgage on the assets of the Corporate Debtor.
However, the Term Lenders are not ready and willing to make funds
available unless the status of the Company is altered. C
7. Ms Meenakshi Arora, learned Senior Counsel appearing on
behalf of Edelweiss Asset Reconstruction Company Limited7, submits
that EARC has the largest stake in respect of the Corporate Debtor. Ms
Arora has submitted that EARC, as recorded in the earlier orders,
supported the appellant in its efforts to comply with the Resolution Plan D
and, accordingly, suitable orders may be passed by this Court so as to
facilitate the appellant in raising the necessary funds.
8. On the other hand, Mr Ashish Makhija, learned counsel, who
had appeared on behalf of the Liquidator, submits that though the
management was handed over to the appellant, the appellant has
E
proceeded to take action towards settling various disputes, including
arbitration matters and despite various opportunities having been granted
to it, the appellant has been unable to raise funds, as stated before this
Court. Hence, Mr Makhija submits that an appropriate view may be
taken by this Court on the default by the appellant.
9. The above submission of Mr Makhija has been controverted F
by Mr Vishwanathan who denies that arbitration claims have been settled.
10. By the order of the court dated 9 October 2020, which was
passed on the statement which was made by Senior Counsel, an amount
of Rs 50 crores was required to be deposited before 10 January 2021.
On 25 November 2020, while clarifying the earlier order by which the G
order of NCLAT was stayed, time for the deposit of Rs 50 crores was
extended until 25 February 2021. The appellant was clearly put on notice
that the amount of Rs. 20 crores already deposited would stand forfeited
in the event the appellant fails to comply with the terms of the order.
7
“EARC” H
528 SUPREME COURT REPORTS [2021] 2 S.C.R.

A 11. The appellant has been unable to raise the funds. The fact of
the matter, as it emerges from Mr Vishwanathan’s submissions, is that
the appellant will be unable to raise funds from the Term Lenders who
are insisting that the status of the Company should change from a company
under liquidation to an active status. The order of liquidation has not
been set aside. Ultimately, what the request of the appellant reduces
B
itself to, is that it would raise funds on a mortgage of the assets of the
Company and unless the Company is brought out of liquidation, it would
not be in a position to raise the funds. This is unacceptable. At this stage,
the order of liquidation has only been stayed, but a final view was, thus,
to be taken by this Court. Sufficient opportunities were granted to the
C appellant earlier during the pendency of the proceedings both before the
NCLT and NCLAT. The orders of the NCLT and NCLAT make it
abundantly clear that despite the grant of sufficient time, the appellant
has not been able to comply with the terms of the Resolution Plan. Since
9 October 2020, despite the passage of almost five months, the appellant
has not been able to deposit an amount of Rs 50 crores. Time is a crucial
D
facet of the scheme under the IBC.8 To allow such proceedings to lapse
into an indefinite delay will plainly defeat the object of the statute. A
good faith effort to resolve a corporate insolvency is a preferred course.
However a resolution applicant must be fair in its dealings as well. The
appellant has failed to abide by its obligations. In that view of the matter,
E we see no reason or justification to entertain the Civil Appeal any further.
The consequence envisaged under the order of this Court shall accordingly
ensue in terms of the forfeiture of the amount of Rs 20 crores. As a
consequence of this order, the management shall revert to the liquidator
for taking steps in accordance with law. The Civil Appeal is accordingly
dismissed.
F
12. Pending applications, including the application for impleadment,
stand disposed of.

Ankit Gyan Appeal dismissed.
G

8
H Innoventive Industries Ltd. v ICICI Bank, (2018) 1 SCC 407, paras 12-16