'Endless Indulgence' Under Guise Of Resolution Defeats IBC's Purpose: NCLAT

The National Company Law Appellate Tribunal (NCLAT) at Delhi has observed that the Insolvency and Bankruptcy Code (IBC) is intended to maximise value through a time-bound resolution process and cannot permit indefinite delays in implementing an approved resolution plan.

Applying that principle, it upheld the liquidation of Ushdev International Limited after its approved resolution plan remained unimplemented for more than three years.

A bench of Judicial Member Justice N. Seshasayee and Technical Member Arun Baroka observed:

"The overarching aim of the Code is value maximization through a time-bound process, and not the perpetuation of an unworkable or illusory resolution at the cost of continuous value erosion. Endless indulgence under the guise of resolution, where implementation remains uncertain and repeatedly deferred, defeats the very purpose of the Code."

The appeal arose from an order of the Mumbai bench of the National Company Law Tribunal (NCLT) directing the liquidation of Ushdev International Limited. It was filed by Taguda Pte. Limited is the successful resolution applicant.

Ushdev International entered the corporate insolvency resolution process in May 2018. The NCLT had initially approved Taguda's revised resolution plan in February 2022

The plan remained unimplemented for more than three years despite repeated extensions. In December 2023, the NCLT directed SRA to implement it within two months, but the deadline passed without compliance. The NCLT later ordered the liquidation leading to this present proceeding.

Before the appellate tribunal, Taguda argued that it was now ready to implement the resolution plan and that doing so would deliver greater value to stakeholders than liquidation.

State Bank of India and the liquidator opposed the appeal. They argued that Taguda had repeatedly failed to meet the timelines and secure the required approvals despite several opportunities. They also contended that the issues had already been decided by the NCLAT and the Supreme Court.

Agreeing with them, the tribunal held that the appeal sought to reopen issues that had already attained finality and was therefore barred by the principles of finality and res judicata.

The tribunal further observed that the requirement to obtain regulatory approvals formed part of Taguda's own resolution plan. Having incorporated those conditions, it could not rely on pending approvals to indefinitely delay implementation.

"The Appellant was required to take all necessary and legally permissible steps to ensure that the requisite approval was actually obtained within the prescribed period. Mere pendency of an application cannot be used as a shield to indefinitely postpone implementation of the Resolution Plan.", the tribunal observed.

Dismissing the appeal, the NCLAT upheld the liquidation order and imposed costs of ₹5 lakh on Taguda for misuse of the judicial process.