Resolution Plan Implementation: Can an SRA Be Penalised for Awaiting the Outcome of Appeals?
The approval of a resolution plan under the Insolvency and Bankruptcy Code, 2016 (IBC) marks a critical milestone in the corporate insolvency resolution process. However, disputes may arise when implementation is deferred pending appeals against the approved plan. The key question raised before NCLAT Principal Bench in Consortium of Admas Industries Pvt Ltd, Subh Ashish Exim Pvt Ltd and Amit Jain, Hardcastle Restaurants Pvt Ltd. (Successful Resolution Applicants of Sristi Hospitality Pvt Ltd.) vs. Rajan Deshraj Agarwal and Anr. (Comp. App. (AT) (INS) No. 1959 of 2026) is whether a Successful Resolution Applicant (SRA) can be held liable for such delay when the plan itself expressly conditions implementation on the outcome of pending proceedings.
The Dispute
In the matter concerning Sristi Hospitality Pvt. Ltd., the resolution plan was approved in July 2024 with 100% voting share of the Committee of Creditors (CoC). Although implementation was expected in August 2024, the SRA deferred implementation pending favourable orders from the National Company Law Appellate Tribunal (NCLAT).
The National Company Law Tribunal (NCLT), Mumbai, while considering the Third Status Report filed by the Resolution Professional on implementation of the plan, criticised the SRA’s conduct and passed an adverse order, notwithstanding that the SRA was not a party to the proceedings concerning the report. The NCLAT, however, allowed the appeal and observed that the plan’s stipulation making implementation subject to pending appeals before the NCLAT or Supreme Court, or any stay granted, had neither been waived nor modified by NCLT. Consequently, the SRA was not obliged to implement the plan during the subsistence of that contractual condition, and neither the SRA nor the Resolution Professional (RP) could be held liable for the delay.
Legal Findings and their Practical Significance
The decision underscores the importance of examining the precise terms of an approved resolution plan before attributing responsibility for delayed implementation. Approval of a plan does not, by itself, extinguish an express condition governing when implementation must commence. Where the plan makes implementation conditional upon the outcome of pending proceedings, the condition must be interpreted and applied in accordance with its actual wording.
Further, adverse findings against a person without appropriately involving that person in the relevant proceedings raise concerns of procedural fairness. Accountability must be founded on the applicable obligations, established facts and a fair opportunity to respond.
Practical Takeaways for RPs and SRAs
- For SRAs: Examine implementation conditions carefully. If implementation is expressly linked to the outcome of pending appeals, document the relevant proceedings and the contractual basis for deferring performance.
- For RPs: Monitor implementation milestones, maintain accurate status reports and distinguish contractual impediments from wilful non-compliance by the SRA.
Conclusion: The Key Learning
An approved resolution plan must be implemented according to its binding terms. An SRA cannot automatically be penalised for delay where implementation is expressly conditional upon the outcome of pending appeals and that condition remains operative. Equally, the mere filing of an appeal does not invariably justify postponement. The practical lesson is simple: read the plan, identify the trigger for implementation, and establish responsibility for delay before imposing consequences.
