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Kridhan Infrastructure Pvt. Ltd. v. Venkatesan Sankaranarayan

Civil Appeal · 2021 INSC 127Decided 1 Mar 2021
Civil Appeal No. 3299 of 2020
Dr. Justice D.Y. Chandrachud · Justice M.R. Shah

Background

The appellant's Resolution Plan for Tecpro Systems Ltd. (the corporate debtor under insolvency resolution) was approved by the Committee of Creditors and the NCLT in 2019, after which the appellant deposited Rs. 5 crore but failed to fulfil its remaining obligations (including equity infusion) for over six months, leading creditors to vote for liquidation. Both the NCLT and NCLAT upheld liquidation. On appeal, the Supreme Court in October 2020 gave the appellant one final chance, staying liquidation on condition it deposit Rs. 50 crore by a set deadline (later extended to 25 February 2021), on pain of forfeiting the Rs. 20 crore already deposited.

Decision Breakdown

Despite the extended deadline, the appellant failed to deposit the Rs. 50 crore, instead arguing that lenders would not finance it unless the company's status was first changed from "under liquidation" to "active": a change that could only follow the very payment it had failed to make. The Court held this circular argument unacceptable, noting that sufficient opportunities had already been given over several months and that the IBC's time-bound scheme would be defeated by indefinite delay. It dismissed the appeal, directed forfeiture of the Rs. 20 crore already deposited, and ordered that management of the company revert to the liquidator for liquidation to proceed.

Lesson Learnt

While liquidation under the insolvency law is meant to be a last resort, a resolution applicant who is repeatedly given extra time and still fails to honour its financial commitments cannot keep the process open indefinitely: courts will enforce the deposit deadlines and forfeiture conditions they impose, rather than let a failed resolution linger.

Official source (sci.gov.in)View Judgment (PDF)

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