# State Bank of India & Ors v. The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch & Anr

- **Citation:** 2024 INSC 852
- **Court:** Supreme Court of India
- **Decided:** 2024-11-07
- **Case number:** Civil Appeal Nos. 12220-12221 of 2024
- **Bench:** Dr. Dhananjaya Y. Chandrachud, J.B. Pardiwala, Manoj Misra
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-bank-of-india-ors-v-the-consortium-of-mr-murari-lal-jalan-and-mr-florian-37906
- **Pages:** 134

## Headnote

Whether the Performance Bank Guarantee (PBG) could have been
adjusted against the first tranche payment which was to be made
under the Resolution Plan, within 180 days from the Effective Date,
in contravention of the order of this Court dated 18.01.2024, the
terms of the Resolution Plan and the provisions of law; In other
words, whether the impugned order of the NCLAT allowing the
adjustment of the PBG in lieu of payment of the first tranche could
be said to be perverse; Whether the non-implementation of the
Resolution Plan by the Respondent No.1-Successful Resolution
Applicant (SRA) necessarily leads to the consequence of liquidation
as provided under Section 33(3) of the IBC, 2016; Whether the
timely implementation of the Resolution Plan is also one of the
objectives of the IBC, 2016.
Headnotes†
Insolvency and Bankruptcy Code, 2016 - Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process
for Corporate Persons) Regulations, 2016 - Constitution of
India - Article 142 - Inordinate delay in due implementation
of the Resolution Plan; several dues including the CIRP costs
of the Corporate Debtor-Jet Airways (India) Limited multiplied;
appellants incurring huge expenditure and costs every month
towards maintenance of the Corporate Debtor - Whether the
Performance Bank Guarantee (PBG) of Rs. 150 Crore could
be adjusted against the first tranche payment of Rs. 350 Crore
which was to be made under the Resolution Plan, within 180
* Author
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days from the Effective Date - NCLAT allowed the adjustment of
the PBG in lieu of payment of the first tranche - Sustainability:
Held: 1.1 NCLAT order is unsustainable in law and perverse
as it did not consider several material and relevant facts and
misread the evidence as well - The non-infusion and payment
of funds in compliance with the applicable laws and the terms
of the Resolution Plan led to a failure of the Resolution Plan.
[Paras 186, 90]
1.2 Impugned order directing the SRA to adjust the PBG of Rs.
150 Crore against the first tranche payment of Rs. 350 Crore
was in flagrant disregard of the 18th January order of this Court,
the terms of the Resolution Plan and established law - In the
peculiar and alarming circumstances and in view of the fact that
almost five years have elapsed since the Resolution Plan was
duly approved however, there being no progress, jurisdiction under
Article 142 of the Constitution is invoked and it is directed that the
Corporate Debtor be taken in liquidation - The NCLT, Mumbai
shall take appropriate steps for appointment of liquidator and all
other necessary formalities for commencement of liquidation of the
Corporate Debtor - Rs. 200 Crore already infused by the SRA,
forfeited - The Lenders/Creditors can encash the Performance Bank
Guarantee of Rs. 150 Crore furnished by the SRA - Impugned
order set aside. [Paras 90, 186, 187, 188]
2. The nature of the Conditions Precedent laid out under the
Resolution Plan were such that several of them could not be
fulfilled before the operationalization of the Corporate Debtor -
The assertion that the Effective Date would kick in only upon
fulfilment of all the Conditions Precedent and since the Appellants
had challenged the fulfilment of the Conditions Precedent, such a
date could not be said to have yet arrived not accepted - It was
repeatedly declared by different fora that the Effective Date was
frozen on 20.05.2022 and the obligation of the SRA to implement
the Resolution Plan was absolute - All steps necessary should
have been undertaken by the SRA, at least post the impugned
order of the NCLAT dated 12.03.2024 - To contend that its
hands were tied since the Conditions Precedent were still being
challenged before this Court is nothing but a reflection of the mala
fide intention on the part of the SRA to not fulfil its obligations in
accordance with the Resolution Plan under the garb of pendency
of litigation. [Paras 97, 98]
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State Bank of I

## Text

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[2024] 11 S.C.R. 2039 : 2024 INSC 852
State Bank of India & Ors.
v.
The Consortium of Mr. Murari Lal Jalan and
Mr. Florian Fritsch & Anr.
(Civil Appeal No(s). 5023-5024 of 2024)
07 November 2024
[Dr. Dhananjaya Y. Chandrachud, CJI, J.B. Pardiwala*
and Manoj Misra, JJ.]
Issue for Consideration
Whether the Performance Bank Guarantee (PBG) could have been
adjusted against the first tranche payment which was to be made
under the Resolution Plan, within 180 days from the Effective Date,
in contravention of the order of this Court dated 18.01.2024, the
terms of the Resolution Plan and the provisions of law; In other
words, whether the impugned order of the NCLAT allowing the
adjustment of the PBG in lieu of payment of the first tranche could
be said to be perverse; Whether the non-implementation of the
Resolution Plan by the Respondent No.1-Successful Resolution
Applicant (SRA) necessarily leads to the consequence of liquidation
as provided under Section 33(3) of the IBC, 2016; Whether the
timely implementation of the Resolution Plan is also one of the
objectives of the IBC, 2016.
Headnotes†
Insolvency and Bankruptcy Code, 2016 - Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process
for Corporate Persons) Regulations, 2016 - Constitution of
India - Article 142 - Inordinate delay in due implementation
of the Resolution Plan; several dues including the CIRP costs
of the Corporate Debtor-Jet Airways (India) Limited multiplied;
appellants incurring huge expenditure and costs every month
towards maintenance of the Corporate Debtor - Whether the
Performance Bank Guarantee (PBG) of Rs. 150 Crore could
be adjusted against the first tranche payment of Rs. 350 Crore
which was to be made under the Resolution Plan, within 180
* Author
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days from the Effective Date - NCLAT allowed the adjustment of
the PBG in lieu of payment of the first tranche - Sustainability:
Held: 1.1 NCLAT order is unsustainable in law and perverse
as it did not consider several material and relevant facts and
misread the evidence as well - The non-infusion and payment
of funds in compliance with the applicable laws and the terms
of the Resolution Plan led to a failure of the Resolution Plan.
[Paras 186, 90]
1.2 Impugned order directing the SRA to adjust the PBG of Rs.
150 Crore against the first tranche payment of Rs. 350 Crore
was in flagrant disregard of the 18th January order of this Court,
the terms of the Resolution Plan and established law - In the
peculiar and alarming circumstances and in view of the fact that
almost five years have elapsed since the Resolution Plan was
duly approved however, there being no progress, jurisdiction under
Article 142 of the Constitution is invoked and it is directed that the
Corporate Debtor be taken in liquidation - The NCLT, Mumbai
shall take appropriate steps for appointment of liquidator and all
other necessary formalities for commencement of liquidation of the
Corporate Debtor - Rs. 200 Crore already infused by the SRA,
forfeited - The Lenders/Creditors can encash the Performance Bank
Guarantee of Rs. 150 Crore furnished by the SRA - Impugned
order set aside. [Paras 90, 186, 187, 188]
2. The nature of the Conditions Precedent laid out under the
Resolution Plan were such that several of them could not be
fulfilled before the operationalization of the Corporate Debtor -
The assertion that the Effective Date would kick in only upon
fulfilment of all the Conditions Precedent and since the Appellants
had challenged the fulfilment of the Conditions Precedent, such a
date could not be said to have yet arrived not accepted - It was
repeatedly declared by different fora that the Effective Date was
frozen on 20.05.2022 and the obligation of the SRA to implement
the Resolution Plan was absolute - All steps necessary should
have been undertaken by the SRA, at least post the impugned
order of the NCLAT dated 12.03.2024 - To contend that its
hands were tied since the Conditions Precedent were still being
challenged before this Court is nothing but a reflection of the mala
fide intention on the part of the SRA to not fulfil its obligations in
accordance with the Resolution Plan under the garb of pendency
of litigation. [Paras 97, 98]
[2024] 11 S.C.R.
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State Bank of India & Ors. v. The Consortium of Mr. Murari Lal Jalan
and Mr. Florian Fritsch & Anr.
3. The Effective Date was frozen on 20.05.2022 - As per Clause
6.3.1(g) on the "Infusion of Funds and Timelines", and Serial No.11
under Clause 7.7, the first tranche payment of Rs. 350 Crore had
to be made by the SRA, upfront, within a period of 180 days from
the Effective Date - As per the Resolution Plan, this 180-day
timeline otherwise would have expired on 16.11.2022 - Several
extensions were granted to the SRA to infuse this amount, at
different stages of this litigation, by the NCLT, the NCLAT and this
Court (vide order dtd.18.01.2024, 180 days time for infusion was
extended up to 31.01.2024) as well. [Para 98]
4. Further, an adjustment of the PBG against the first tranche
payment was also in violation of Regulation 36B(4A) of the 2016
Regulations - The PBG had to be kept alive until the complete
implementation of the Resolution Plan as per Regulation 36B(4A) -
This was also provided under Clauses 3.13.2 and 3.13.8 of the
RFRP (Request for Resolution Plan) respectively wherein the PBG
was required to be kept alive and was to be returned to the SRA
only upon 100% completion of the implementation of the Resolution
Plan - This binding nature of the RFRP was transferred onto the
Resolution Plan through Clauses 7.3 and 9.4 respectively of the
Resolution Plan - Even in light of the NCLAT's own order dated
26.05.2023, it does not follow that the PBG could have been
adjusted by the SRA, mid-implementation, against its payment
obligation. [Paras 104, 105, 107]
5.1 Once the Adjudicating Authority has approved the plan
u/s.31(1) of the IBC, 2016, the Resolution Plan is binding on
all the stakeholders including those stakeholders who are not
direct participants of the CIRP - Therefore, there is absolutely no
scope for modification of the terms of a Resolution Plan which
has received the imprimatur of the Adjudicating Authority, be it by
the Adjudicating Authority itself, the CoC or the SRA. [Para 116]
5.2 The NCLT had approved the present Resolution Plan vide
order dated 22.06.2021, the Resolution Plan was immune to any
modification or alteration whatsoever - The submission of the
SRA that the Lender's Affidavit required an infusion of Rs. 350
Crore in cash, while the Resolution Plan allowed for the payment
of Rs. 200 Crore in cash and Rs.150 Crore through adjustment of
the PBG, rejected - The conditions imposed on the SRA under
the Lender's Affidavit and the Resolution Plan were one and the
same, the only difference being that the Appellants had offered
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not to press issues relating to the compliance of the Conditions
Precedent and grant of extensions/exclusions along with offering
to withdraw the Company Appeal and the Appeals pending before
this Court - In view of clear order dated 18.01.2024, the PBG of
Rs.150 Crore could not have been allowed to be adjusted with
the first tranche payment of Rs. 350 Crore - Non-compliance of
the SRA with the order of this Court has led to a dereliction of
its obligations to implement the Resolution Plan - SRA failed to
implement the Resolution Plan by not infusing the first tranche
payment of Rs. 350 Crore in cash, as required by Clause 6.3.1(g)
and the Implementation Schedule under Clause 7.7 of the
Resolution Plan. [Paras 117, 121 124, 125]
Insolvency and Bankruptcy Code, 2016 - ss.33(3), 31(1) -
Whether there were sufficient grounds before the NCLAT to
hold that Respondent No.1-SRA had contravened the terms of
the approved Resolution Plan and that the Corporate Debtor
must be directed to be liquidated u/s.33(3) - Whether SRA
failed to implement the Resolution Plan on non-payment of
the Airport Dues as per the terms of the Resolution Plan -
Whether SRA could be said to have failed to implement the
Resolution Plan on account of the non-payment of workmen
and employees' dues as per the terms of the Resolution
Plan and the order of the NCLT dated 21.10.2022 which was
confirmed by the order dated 31.01.2023 of this Court - Need
for "timely liquidation" over "endless resolution process"
emphasised:
Held: 1.1 The Resolution Plan contemplated that the Airport
Charges be subsumed within the CIRP Dues and since all of the
different CIRP dues cannot be satisfied through the bank balance
which stands to the credit of the Corporate Debtor, a separate
sum of Rs. 25 Crore was demarcated towards the remaining CIRP
payments - Hence, NCLAT was right in arriving at the conclusion
that Airport Dues were indeed a part of the CIRP costs. [Para 129]
1.2 The impugned order of the NCLAT nowhere caps the Airport
Dues to a maximum of Rs. 25 Crore - Moreover, such a mention
of Rs. 25 Crore is plainly absent in its observations regarding
Airport Dues - The Resolution Plan, too, does not contemplate
the CIRP costs to be strictly subject to a maximum of Rs. 25
Crore - To accept such a contention of the Appellants would be
[2024] 11 S.C.R.
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and Mr. Florian Fritsch & Anr.
to misinterpret the observations made in the impugned order.
[Paras 129, 130]
1.3 The SRA not having infused the first tranche payment of Rs. 350
Crore as per Clause 6.3.1(g) and S. No. 11 of the Implementation
Schedule under Clause 7.7 within a period of 180 days from the
Effective Date and within the multiple extensions granted therefrom,
defaulted on its obligation towards the payment of CIRP costs
(which include airport dues) under Clause 6.4.1 as well. [Para 132]
2. By not infusing the first tranche payment of Rs. 350 Crore
as per the Implementation Schedule of the Resolution Plan, the
SRA breached the terms of the Resolution Plan which required
a minimum liquidation value of Rs.113 Crore to be paid towards
the Workmen and Employees' Dues as well - Moreover, both the
Provident Fund and Gratuity Dues amounting to Rs. 226 Crore
should also have been paid by the SRA as per the order dated
21.10.2022 of the NCLAT in fulfillment of its obligations, which it
failed to do. [Para 140]
3.1 The NCLAT declined to accept the submission of the Appellant
that on account of non-deposit of Rs.150 Crore as directed by
this Court, the Corporate Debtor should be liquidated - This was
based on the incorrect assumption that the direction of this Court
to infuse to Rs.150 Crore in cash was only confined to the terms
of the Lenders Affidavit dated 16.08.2023 - The Lender's Affidavit
could not have provided for conditions incompatible with the terms
of the Resolution Plan - Such an affidavit would have been in
direct contravention with s.31(1) of the IBC, 2016 - Therefore, the
direction of this Court in its order dated 18.01.2024 was w.r.t both
the Lenders Affidavit and the underlying terms of the Resolution
Plan - The same was so understood by all the parties involved.
[Para 142]
3.2 The Lender's Affidavit in precise terms stated that "Failing to
comply with the conditions mentioned in Para 8(a) to (c) above,
the Corporate Debtor should be directed to go into liquidation" -
It was in this context that this Court stated that, "the SRA shall
peremptorily on or before 31 January 2024, deposit an amount of
Rs. 150 crores into the designated account of SBI, failing which the
consequences under the Resolution Plan will follow" - Therefore,
it is incorrect to contend that this Court neither considered nor
expressed any opinion on the question of liquidation of the Corporate
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Debtor - The consequence of non-implementation of the Resolution
Plan by the SRA must necessarily be liquidation of the Corporate
Debtor in accordance with s.33(3) of the IBC, 2016. [Para 143]
3.3 The SRA failed to infuse the first tranche payment of Rs. 350
Crore as envisaged in the Resolution Plan despite the Effective
Date being fixed on 20.05.2022 - Consequently, the payment of
CIRP costs, workmen and employees' dues etc. which must be
made in priority over the dues of the other creditors were also not
made - More than 5 years have passed and the implementation of
the Resolution Plan still seems to be a dim light at the far end of
a long tunnel - Over this period of 5 years, several dues such as
the Airport dues to be paid by the Corporate Debtor have increased
multi-fold due to the fault of the SRA and this Court must ensure
that such debts stop running at some point in time. [Para 147]
3.4 Although one of the key objectives of the IBC, 2016 is to ensure
the survival of the corporate debtor as a going concern, yet the
same must not come at the cost of efficiency - In scenarios such
as the present, "timely liquidation" is indeed preferred over an
"endless resolution process" - Such a view will prevent the likelihood
of adversely affecting the interests of all the creditors who have
been suffering due to no fault of their own and also securing the
maximization of value of the remaining assets. [Para 148]
3.5 The consequence of the failure to implement the Resolution
Plan in terms of Clause 9.4 of the Resolution Plan and Clause
3.13.7(iii) of the RFRP is that the Appellants are entitled to invoke
the PBG automatically without any reference to the SRA - The
PBG may be invoked by the Appellants in accordance with the
terms of the Resolution Plan. [Para 149]
Insolvency and Bankruptcy Code, 2016 - Preamble - Timely
implementation of the Resolution Plan is also one of the
objectives of the IBC, 2016 - Report of the Bankruptcy Law
Reforms Committee, 2015, time-bound working of the Code
emphasised; time and speed are of the essence under the
Code - NCLT Rules, 2016 - NCLAT Rules, 2016 - r.15 - Power
of NCLT and NCLAT to extend the time limits not be exercised
mechanically without any application of mind. [Paras 150, 151,
152, 154, 157, 158]
Constitution of India - Article 142 - Insolvency and Bankruptcy
Code, 2016 - Plenary powers u/Article 142 - When to be
[2024] 11 S.C.R.
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State Bank of India & Ors. v. The Consortium of Mr. Murari Lal Jalan
and Mr. Florian Fritsch & Anr.
exercised, discussed - Inordinate delay in due implementation
of the Resolution Plan, several dues including the CIRP costs
of the Corporate Debtor multiplied; appellants have to incur
huge expenditure and costs every month towards maintenance
of the Corporate Debtor - Corporate Debtor, if to be directed
to be taken in liquidation exercising power u/Article 142:
Held: Yes - The fundamental concern of this Court must not only
be of doing substantial and complete justice but also to ensure
expeditious resolution of the issues in the interests of the underlying
objective of the IBC, 2016 and all the stakeholders involved - The
terms of the Resolution Plan have been contravened and that there
has been a failure to implement on part of the SRA - Resolution
Plan is no longer capable of being implemented - In exercise of
plenary powers u/Article 142, the Corporate Debtor is directed to
be taken in liquidation - NCLT Rules, 2016 - r.11. [Paras 163-165]
Insolvency and Bankruptcy Code, 2016 - Deficiencies/
Shortcomings - Suggestions - Functioning of the NCLTs and
NCLAT - The Guidelines for Committee of Creditors (CoC)
issued by the IBBI on 06.08.2024, enumerated - Suggestions
made to CoC - Role, duty and responsibility of Successful
Resolution Applicant; lenders and also that of creditors:
Held: 1. The Guidelines for Committee of Creditors issued by
the IBBI may go a long way in streamlining the functions of the
CoC - Adding to the aforesaid guidelines, it is suggested that
the CoC exercise their commercial wisdom and approve/reject
the Resolution Plans placed before them exhibiting fairness and
with good reasons - Such a reasoned decision making on their
part will only serve to further enable the other key players like the
Adjudicating Authorities to understand the rationale behind their
decision and to uphold the correctness of the same - Furthermore,
it is also suggested that the Central Government or the IBBI explore
the possibilities of better enforcement of the standards and practices
enumerated in the guidelines through an independent mechanism
under the auspices of an oversight committee instead of making
them self-regulatory. [Para 172]
2.1 Once a resolution plan is approved under the IBC, 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
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restore the corporate debtor to viability and ensure a meaningful
turnaround - The role of a Successful Resolution Applicant is 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 IBC 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
recognize that rescuing a distressed company is a responsibility
of significant social and economic value, demanding a holistic and
responsible strategy. [Para 173]
2.2 In this collaborative effort, the duty to implement the plan does
not fall on the Successful Resolution Applicant alone; lenders
and creditors are equally obligated to support the process by
offering constructive and continuous cooperation - They must
not impede the implementation process through unnecessary
demands beyond the pale of the resolution plan or with delays
in implementation plan but rather should facilitate the Successful
Resolution Applicant's efforts to revive the corporate debtor -
Given their vested interest in the corporate debtor's successful
revival, lenders have a fundamental duty to act in good faith and
with transparency, recognizing that their cooperative stance is
essential for overcoming the inevitable challenges of the resolution
process - The lender's role is not merely passive; it requires active
support that aligns with the ultimate goal of the IBC, 2016- to
provide a fair and equitable resolution that maximizes asset value
while enabling the debtor's recovery - Therefore, the lenders
must balance their financial interests with the broader objective
of rehabilitation - They should not take an obstructive approach
or seek to leverage the resolution process solely for individual
benefit, as such actions would risk destabilizing the corporate
debtor's recovery trajectory - Instead, they must be prepared to
collaborate fully, sharing the responsibility to make the resolution
process work in practice. [Paras 174, 175]
[2024] 11 S.C.R.
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State Bank of India & Ors. v. The Consortium of Mr. Murari Lal Jalan
and Mr. Florian Fritsch & Anr.
2.3 The IBC, 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 SRAs repeatedly
approach the Adjudicating Authority or the NCLAT 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
NCLT and NCLAT 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 NCLT and NCLAT Rules, 2016
respectively - The NCLT and NCLAT must not entertain such
repeated attempts at violating the integrity of a CoC 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
NCLTs/NCLATs need to be sensitised of not exercising their judicial
discretion in extending the timelines fixed under IBC, 2016 or the
Resolution Plan, in such a way that it may make the Code lose its
effectiveness thereby rendering it obsolete. [Para 176]
2.4 Section 30(2)(d) of the IBC, 2016 states that the resolution
professional shall mandatorily examine each resolution plan that
is received to confirm that it provides for the implementation and
supervision of the resolution plan - Regulation 38 of the 2016
Regulations provides for the mandatory contents of a Resolution
Plan - Regulation 38(2) specifically states that the Resolution Plan
shall provide for the term of the plan and its implementation schedule,
along with adequate means for supervising its implementation -
Further, under Regulation 38(3), a resolution plan must demonstrate
that it addresses the cause of default, is feasible and viable, has
provisions for its effective implementation, has provisions for
approvals required and the timelines for the same and, that the
resolution applicant has the capability to implement the resolution
plan - Therefore, in light of these provisions of the IBC, 2016 and
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the 2016 Regulations, it can be seen that the resolution plan must
be impermeable to any shortcuts that prevent its implementation,
including timely implementation, by the successful resolution
applicant - A consideration of these provisions reinforces the idea
that timely implementation and strict adherence to the terms of
the resolution plan is crucial. [Para 177]
2.5 Section 74(3) of the IBC, 2016 provides for the punishment
for contravention of the resolution plan - The Code comes down
heavily on any knowing and willful contravention of the terms
of the Resolution Plan, committed by any person, on whom the
approved Resolution Plan has been made binding under Section
31 of the IBC, 2016 - A punishment of minimum one year which
may extend up to five years or minimum fine of one Lakh which
may be up to one Crore rupees, or both, has been prescribed
for such a contravention - In light of such strict consequence
provided for the contravention of the resolution plan envisaged
under the scheme of the Code itself, there is good reason for us
to ensure that the successful resolution applicants abide by their
commitments made under the Resolution Plan - Therefore, it is
suggested that 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. [Paras 178, 179]
2.6 One another suggestion that may aid in a coordinated and
non-adversarial implementation of the Resolution Plan by all the
stakeholders is that the 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 - This will ensure that the parties are ad idem about the
next round of their obligations that each of them is required to
discharge under the approved Resolution Plan and that they do
not delay the implementation by initiating any further litigation on
this aspect. [Para 180]
2.7 As regards the implementation of the approved Resolution
Plan, it is suggested that the IBC, 2016 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
[2024] 11 S.C.R.
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State Bank of India & Ors. v. The Consortium of Mr. Murari Lal Jalan
and Mr. Florian Fritsch & Anr.
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 till the expiry of the
term of the Resolution Plan - The Committee shall also be required
to ensure all statutory compliances during the implementation of
the plan along with updating the Adjudicating Authorities, Financial
and other Creditors about the status of implementation of the
Resolution Plan, on a quarterly basis. [Para 181]
3.1 As regards certain efficiency issues within the NCLTs and
NCLAT, it has been noticed over a period of time that there is a
serious lack of timely admission and disposal of the applications
filed as regards the initiation of CIRP, approval of the resolution
plan and liquidation - This only adds to the uncertainty of the
process and prolongs the dispute thereby jeopardizing the interest
of all the stakeholders involved - Adjudication in a time-bound
manner would help prevent any further deterioration of the value
of the corporate entity - The integrity of the original timelines laid
down by the Code and the Resolution Plan must not be allowed
to be violated since it would dilute the objective of the Code in
its entirety, erode investor confidence and hinder all corporate
restructuring efforts. [Para 182]
3.2 The Members often lack the domain knowledge required
to appreciate the nuanced complexities involved in high-stake
insolvency matters in order to properly adjudicate such matters -
One of the salutary objects of the Code, 2016 is to protect the
assets of the corporate entity in a timely manner and take prompt
decisions, however, it has become a practice of the NCLT(s) and
NCLAT to ignore the urgent mentionings and listings of time-sensitive
matters and show no deference to long-pending matters resulting in
value erosion of the assets of the Corporate Debtor and rendering
their insolvency resolution process a foregone conclusion - Over a
period of time, this Court has noticed the growing tendency amongst
Members of the NCLT(s) and NCLAT to ignore the orders of this
Court or act in its defiance - Any act of contravention of this Court's
order and the larger rubric of judicial propriety will not be tolerated -
2050
[2024] 11 S.C.R.
Supreme Court Reports
The NCLT(s) and the NCLAT must seriously rethink their approach
towards admission and disposal of insolvency matters, they 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 matters of public importance, and the NCLT(s)
and NCLAT(s) must earnestly work towards ensuring that the IBC,
2016 achieves its avowed object. [Para 183]
3.3 One another serious issue pertaining to the functioning of the
NCLTs and NCLAT is that there is often a shortage of members
in the Tribunals and inadequate infrastructure to support their
functioning - These vacancies heavily impact the insolvency
reform initiative undertaken by the government since they lead
to operational inefficiencies - Consequently, the strict timelines
provided in Section 12 of the IBC, 2016 are not complied
with - Filling such vacancies with experts having adequate
domain knowledge in the field must be prioritized along with
addressing the infrastructure needs of the Tribunals to prevent
any adverse effect on the resolution process - There must be
strict mandates regarding the functioning of the Tribunals within
its normal working hours - The appointment of new members
must be done in a manner such that it coincides with the date
of retirement of the sitting members in a seamless manner
to avoid such operational inefficiencies - Persons with high
ideals & impeccable integrity should be appointed as Members
in the NCLT as well as NCLAT - There should be no political
appointment. [Para 184]
Insolvency and Bankruptcy Code, 2016 - s.62 - Exercise
of the jurisdiction under - Code of Civil Procedure, 1908 -
s.100 - "substantial question of law", when arises - Discussed.
[Paras 87-90]
Case Law Cited
IFCI Ltd. v. Sutanu Sinha and Others [2023] 15 SCR 280 : 2023
SCC OnLine SC 1529; Chandrabhan (Deceased) Through Lrs.
And Others v. Saraswati and Others [2022] 7 SCR 295 : 2022
SCC OnLine SC 1273; Maria Colaco and Another v. Alba Flora
Herminda D'souza and Others (2008) 5 SCC 268; Abdul Raheem v.
[2024] 11 S.C.R.
2051
State Bank of India & Ors. v. The Consortium of Mr. Murari Lal Jalan
and Mr. Florian Fritsch & Anr.
Karnataka Electricity Board and Others [2007] 12 SCR 389 :
(2007) 14 SCC 138; Ebix Singapore Private Limited v. Committee
of Creditors of Educomp Solutions Limited and Another [2021]
14 SCR 321 : (2022) 2 SCC 401; Kridhan Infrastructure Private
Limited v. Venkatesan Sankaranarayan and Others [2021] 2 SCR
520 : (2021) 6 SCC 94; Innoventive Industries Limited v. ICICI
Bank and Another [2017] 8 SCR 33 : (2018) 1 SCC 407; Glas
Trust Company LLC v. Byju Raveendran and Others, 2024 SCC
OnLine SC 3032; K Shashidhar v. Indian Overseas Bank and Ors.
[2019] 3 SCR 845 : (2019) 12 SCC 150 - referred to.
Books and Periodicals Cited
Report of the Bankruptcy Law Reforms Committee, 2015.
List of Acts
Insolvency and Bankruptcy Code, 2016; Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process for
Corporate Persons) Regulations, 2016; Constitution of India; NCLT
Rules, 2016; NCLAT Rules, 2016; Code of Civil Procedure, 1908;
Employees' Provident Fund and Miscellaneous Provisions Act,
1952; Payment of Gratuity Act, 1972.
List of Keywords
Jet Airways liquidation; Aviation sector; Adjustment of Performance
Bank Guarantee (PBG); In lieu of payment of the First tranche
payment; Within 180 days from the Effective Date; Successful
Resolution Applicant (SRA); Non-implementation of the Resolution
Plan by SRA; Inordinate delay in due implementation of the
Resolution Plan; CIRP costs; Non-infusion and payment of
funds; Failure of the Resolution Plan; Failure to implement the
Resolution Plan; Jurisdiction under Article 142 of the Constitution
of India; Plenary powers under Article 142 of the Constitution of
India; Inherent powers; Corporate Debtor to be liquidated; Nonfulfilment of Conditions Precedent; Encash the Performance
Bank Guarantee; Extension of the timeline; Multiple extensions
granted; Maximum extension; Implementation extension; Lender's
Affidavit; Request for Resolution Plan (RFRP); Binding nature of the
RFRP; Air Operation Certificate (AOC); Slots Allotment Approval;
Dereliction of obligations to implement the Resolution Plan; Non-
2052
[2024] 11 S.C.R.
Supreme Court Reports
payment of the Airport Dues/Charges; Non-payment of workmen
and employees' dues; "timely liquidation"; "endless resolution
process"; CIRP dues; Implementation Schedule; Survival of the
corporate debtor as a going concern; Timely implementation of
the Resolution Plan; Objectives of the IBC; Time-bound working
of the Insolvency and Bankruptcy Code, 2016; Time and speed
essence under the Insolvency and Bankruptcy Code, 2016;
"substantial question of law"; Shortcomings in Insolvency and
Bankruptcy Code, 2016; Suggestions made to Committee of
Creditors (CoC); "commercial wisdom" of the CoC; Role, duty
and responsibility of Successful Resolution Applicant; Lenders
and creditors; Functioning of the NCLTs and NCLAT.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No(s). 5023-5024
of 2024
From the Judgment and Order dated 12.03.2024 of the National
Company Law Apellate Tribunal in Company Appeal (AT)
(Insolvency) Nos. 129 and 130 of 2023
With
Civil Appeal Nos. 12220-12221 of 2024
Appearances for Parties
N. Venkataraman, A.S.G., Mukul Rohatgi, Gopal Sankaranarayanan,
S. Niranjan Reddy, Amar Dave, Sr. Advs., Vikas Mehta, Mayan
Prasad, Ms. Anshula Vijay Kumar Grover, Lenpithang Sithlou,
Ms. Nitika Grover, Nishant Anshul, Sanjay Kapur, Devesh
Dubey, Ms. Divya Singh Pundir, Arjun Bhatia, Pawanshree
Agrawal, Debmalya Banerjee, Pooja Mahajan, Kartik Bhatnagar,
Rohan Sharma, Ashish Vats, Ms. Apurva, Agastya Shelat, Ms.
Arveena Sharma, Ms. Shruti Pandey, Ms. Trisha Chandran, Ms.
Tanya Srivastava, Tushar Srivastava, Ms. Aastha Prasad, M/S.
Karanjawala & Co., Surya Prakash, Ms. Mahima Kapur, Ms.
Isha Virmani, Mrs. Shubhra Kapur, Dhirajkumar Totala, Nishant
Upadhyay, Navneet R., Ankit Pal, Ajay Raj, Ms. Vasudha Jain,
Ms. Palak Arora, Ms. Alankrita Sinha, Ms. Petrushka Dasgupta,
Mridul Yadav, Raghav Bhatia, Ms. Pallavi Pratap, Pawanshree
Agrawal, Advs. for appearing parties.
[2024] 11 S.C.R.
2053
State Bank of India & Ors. v. The Consortium of Mr. Murari Lal Jalan
and Mr. Florian Fritsch & Anr.
Judgment / Order of the Supreme Court
Judgment
J.B. Pardiwala, J.
For convenience of exposition, this judgment is divided into the
following parts: -
INDEX*
A.
FACTUAL MATRIX .........................................................
3
B.
SUBMISSIONS ON BEHALF OF THE APPELLANTS.....
41
i.
Issue No.1: Adjustment of PBG of Rs. 150 Crore
towards the first tranche payment .......................
43
ii.
Issue No. 2: Non-payment of Airport dues ...........
53
iii.
Issue No. 3: Non-payment of Workmen and
Employees' dues ..................................................
55
iv.
Issue No. 4: Achievement of Effective Date .......
57
v.
Issue No. 5: Non-fulfilment of Conditions
Precedent ...............................................................
59
C.
SUBMISSIONS ON BEHALF OF THE RESPONDENTS ...
63
D.
ISSUES FOR DETERMINATION ...................................
76
E.
ANALYSIS .......................................................................
77
i.
Whether the Performance Bank Guarantee
(PBG) could have been adjusted against the first
tranche payment which was to be made under
the Resolution Plan, within 180 days from the
Effective Date, in contravention of the order of
this Court dated 18.01.2024, the terms of the
Resolution Plan and the provisions of law? .....
85
* Ed. Note: Pagination as per the original Judgment.
2054
[2024] 11 S.C.R.
Supreme Court Reports
a.
Whether the Conditions Precedent were fulfilled
by Respondent No.1/SRA and the Effective Date
was fixed at 20.05.2022? .................................
85
b.
Whether the NCLAT could have directed the
Performance Bank Guarantee (PBG) to be
adjusted against the first tranche payment which
was to be made within 180 days of the Effective
Date? ...............................................................
93
I.
The adjustment of the PBG was
impermissible under the terms of the
Resolution Plan read with Regulation
36B(4A) of the 2016 Regulations. ...........
94
II.
The Lender's Affidavit dated 16.08.2023
did not impose conditions which were
different from the terms of the Resolution
Plan. .......................................................... 106
ii.
Whether the non-implementation of the
Resolution Plan by the SRA necessarily leads to
the consequence of liquidation as under Section
33(3) of the IBC, 2016? ..........................................
117
a.
Whether Respondent No.1/SRA had failed to
implement the Resolution Plan on non-payment
of the Airport Dues as per the terms of the
Resolution Plan? ................................................
118
b.
Whether Respondent No.1/SRA could be said
to have failed to implement the Resolution
Plan on account of the non-payment of
workmen and employees' dues as per the
terms of the Resolution Plan and the order
of the NCLT dated 21.10.2022 which was
confirmed by the order dated 31.01.2023 of
this Court? ..................................................... 124
[2024] 11 S.C.R.
2055
State Bank of India & Ors. v. The Consortium of Mr. Murari Lal Jalan
and Mr. Florian Fritsch & Anr.
c.
Whether there were sufficient grounds before
the NCLAT to hold that Respondent No.1/SRA
had contravened the terms of the approved
Resolution Plan and that the Corporate Debtor
must be directed to be liquidated under Section
33(3) of the IBC, 2016? .................................... 131
iii.
Whether the timely implementation of the
Resolution Plan is also one of the objectives of
the IBC, 2016? ........................................................ 139
F.
SHORTCOMINGS AND SUGGESTIONS TO THE IBC,
2016. ................................................................................ 150
G.
CONCLUSION ................................................................. 167
1.
These appeals arise from the judgment and order dated 12.03.2024
passed by the National Company Law Appellate Tribunal (hereinafter,
the "NCLAT") in Company Appeal (AT) (INS) 129-130 of 2023 filed
by the Appellant herein by which the NCLAT dismissed the appeal
and upheld the order dated 13.01.2023 passed by the National
Company Law Tribunal (hereinafter, the "NCLT"). The order of the
NCLT held that Respondent No.1 had fulfilled all the Conditions
Precedent as stipulated in the Resolution Plan. The NCLAT further
issued several directions including a direction that the Performance
Bank Guarantee of Rs. 150 Crore (hereinafter, the "PBG") could be
adjusted towards the first tranche payment of Rs. 350 Crore which
was to be made by Respondent No.1.
A.
FACTUAL MATRIX
2.
The NCLT vide its order dated 20.06.2019 in C.P. 2205 (IB)/ (MB)/
2019 admitted the application for initiation of Corporate Insolvency
Resolution Process (hereinafter, the "CIRP") filed by State Bank of
India (hereinafter, "SBI") in respect of Jet Airways (India) Limited
(hereinafter, the "Corporate Debtor") in accordance with Section 7
of the Insolvency and Bankruptcy Code, 2016 (hereinafter, the "IBC,
2056
[2024] 11 S.C.R.
Supreme Court Reports
2016"). The total admitted claim of the Financial Creditors was Rs.
7800 Crore (approx.). Pursuant to the aforesaid Order, Mr. Ashish
Chhawchharia, was appointed as the Interim Resolution Professional
and was appointed as the Resolution Professional (hereinafter, the
"RP") as well.
3.
On 02.06.2020, the RP issued the 4th Round of the Request for
Resolution Plan (hereinafter, the "RFRP") as approved by the
Committee of Creditors (hereinafter, "CoC") which invited submissions
of Resolution Plans for the Corporate Debtor from potential Resolution
Applicants.