Resolution Plan Not Implemented: Forfeited Amounts Are Not CIRP Costs – NCLT Mumbai

State Bank of India Vs JET Airways India Limited (NCLT Mumbai)

The National Company Law Tribunal, Mumbai Bench considered an application filed by the consortium of the Successful Resolution Applicant (SRA) under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, seeking to treat amounts aggregating ₹350 crore as Corporate Insolvency Resolution Process (CIRP) costs in the liquidation of the corporate debtor. The SRA claimed that it had infused a total of ₹370.76 crore during the CIRP, comprising ₹150 crore as a performance bank guarantee, ₹200 crore as share capital money forming part of the first tranche payment, and ₹20.76 crore to keep the corporate debtor as a going concern.

The background to the dispute lay in the failure to implement the approved resolution plan. The resolution plan had been approved earlier, but the SRA failed to infuse the first tranche payment of ₹350 crore within the stipulated timeline. In its judgment dated 07.11.2024, the Supreme Court of India recorded that despite the effective date being fixed, the SRA had not complied with its payment obligations, resulting in non-payment of CIRP costs, workmen’s and employees’ dues. Considering that nearly five years had elapsed without meaningful progress, the Supreme Court ordered liquidation of the corporate debtor, directed forfeiture of ₹200 crore already infused by the SRA, and permitted lenders to encash the performance bank guarantee of ₹150 crore.

Before the NCLT, the SRA argued that the forfeited amounts should nevertheless be treated as CIRP costs and that the forfeiture and encashment were illegal. It was contended that the performance bank guarantee could only be forfeited by the resolution professional and not by lenders, and that the ₹200 crore infused as share application money ought to be refundable in terms of company law. The SRA also sought recognition as a stakeholder in the liquidation proceedings.

The Tribunal rejected these contentions. It held that the Supreme Court had unequivocally found that the SRA failed to implement the resolution plan and had issued specific directions for forfeiture of ₹200 crore and encashment of the ₹150 crore performance bank guarantee. The encashment had taken place pursuant to those directions, and merely because the guarantee was encashed by lenders rather than the resolution professional did not alter its legal character. In view of Article 141 of the Constitution, the law declared by the Supreme Court was binding, and any interpretation that sought to negate or dilute the effect of that judgment was impermissible. The Tribunal therefore held that the forfeited ₹350 crore could not be treated as CIRP costs.

The Tribunal also considered the SRA’s claim regarding ₹20.76 crore allegedly infused to keep the corporate debtor as a going concern. It noted that the resolution plan had been approved on 22.06.2021 and that, thereafter, the SRA was contractually obliged to fund the sustenance and operational requirements of the corporate debtor in terms of the approved plan. The amounts in question were incurred after approval of the resolution plan and were meant to meet operational expenses and conditions precedent under the plan. The Tribunal held that expenses incurred after approval of the resolution plan fall outside the scope of CIRP costs as defined under Section 5(13) of the Code, since the CIRP comes to an end upon approval of the plan. Consequently, reimbursement of this amount as CIRP cost was also denied.

In light of these findings, the Tribunal concluded that none of the amounts claimed by the SRA qualified as CIRP costs. The application seeking declaration of ₹350 crore as CIRP cost, recognition of the SRA as a stakeholder in liquidation, and other consequential reliefs was dismissed in its entirety.

FULL TEXT OF THE NCLT JUDGMENT/ORDER

Adv. Abhishek Adke a/w Adv. Malhar for the Petitioner in IA 1878/2020 present. Adv. P. Bathey for the Respondent No. 8 in IA 1878/2020 present. Senior Adv. Chetan Kapadia a/w Adv. Rohan Agarwal, Adv. Anush Mathkar, Adv. Ananya Bajpai for the Respondent Nos. 1, 2 and 3 in IA 5371/2025 are present. Adv. Malhar Zatakia a/w Adv. Vasudha Jain for the Liquidator in IA 5371/2025 present. Adv. Rohit Gupta a/w Adv. Himanshu Sachdeva and Adv. Mahima Rathore for the Applicant present. Adv. Rahul Dev a/w Adv. Ranjit Shetty Adv. Tejas Gokhale and Adv. Avina Karnad for Respondent Nos. 4 and 6 are present.

IA 1878/2020

1. Ld. Counsel for the Liquidator seeks time to place on record a certified copy of the Application stating that the original documents are missing as the lawyer handling the matter has passed away. Certified copy of the application as well pleadings, if any, be placed on record.

2. List this matter on 01.2026.

IA (I.B.C)/5371(MB)2025

1. This Application has been filed by the consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 r/w with Rule 11 of the NCLT Rules, 2016 seeking following reliefs: –

a. Declare the amount of Rs. 150,00,00,000/- (Rupees One Hundred and Fifty Crore) infused by Applicant/SRA in form of Bank Guarantee, as CIRP Cost;

b. Declare the amount of Rs. 200,00,00,000/- (Rupees Two Hundred Crore) infused by Applicant/SRA in form Share Capital Money, as CIRP Cost;

c. Declare the amount of Rs.20, 76,32,031/- (Rupees Twenty Crore Seventy-Six Lakhs Thirty-Two Thousand and Thirty-One) infused by Applicant/SRA to keep the Corporate Debtor as going concern, as CIRP Cost;

d. Declare the Applicant/SRA, who has infused Rs. 370, 76,32,031/-(Rupees Three Hundred Fifty Crore Only), into the Corporate Debtor, as stakeholder in the on-going liquidation;

e. Declare the forfeiture and adjustment of Rs. 350,00,00,000/-(Rupees Three Hundred Fifty Crores Only) by the CoC as illegal and against the Order dated 07.11.2025 passed by the Hon’ble Supreme Court in Company Appeal (AT)(INS) Nos. 129-130 of2023;

f. Clarify the legal status of the Applicant as the SRA in the ongoing
liquidation proceedings of the Corporate Debtor;

g. Grant any other reliefs as this Hon’ble Tribunal may deem fit and proper in the facts and circumstances of the case to safeguard the rights and interests of the Applicant.

2. The Applicant is constrained to file the present Application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, on behalf of the Consortium of Mr. Murari Lal Jalan & Mr. Florian Fritsch (“Applicant” or “SRA”), which was the Successful Resolution Applicant of the for-Jet Airways (India) Ltd. (Jet Airways” or “Corporate Debtor”), inter alia seeking appropriate directions to declare the amount infused by SRA subsequent to initiation of CIRP of Corporate Debtor, as CIRP cost.

3. At the outset, it is imperative to state that during the CIRP of Corporate Debtor, the Applicant, being the SRA, has infused an aggregate sum of Rs. 370,76,32,031/- (Rupees Three Hundred Seventy Crores Seventy-Six Lakhs Thirty-Two Thousand Thirty-One Only) in order to keep the Corporate Debtor as going concern. The break-up of the said amount is as follows: –

4. However, vide judgment dated 07.11.2024 passed by the Hon’ble Supreme Court of India in Civil Appeal Nos. 5023-5024 of 2024, the Hon’ble Court directed to forfeit Rs. 200 Crores infused by the SRA towards the first tranche and further permitted the lenders/creditors to encash the Performance Bank Guarantee (“PBG”) of Rs. 150 Crores furnished by the SRA.

5. Accordingly, the Applicant is approaching this Tribunal under Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 for adjudication of the present dispute, including determination of questions regarding the legal status of the Applicant/SRA post initiation of liquidation proceedings against the Corporate Debtor, when the Applicant/SRA has infused sum of Rs. 370,76,32,031/- (Rupees Three Hundred Seventy Crores Seventy-Six Lakhs Thirty-Two Thousand Thirty-one Only) in order to keep the Corporate Debtor as going concern.

6. Heard the Ld. Counsel for the Applicant, Liquidator and some of the lenders.

7. The Hon’ble Supreme Court in Civil Appeal Nos. 5023-5024 of 2024 vide judgment dated 07.11.2024, at para 147 observed that “The SRA herein has 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. As a consequence, the payment of CIRP costs, workmen and employees’ dues etc. which must be made in priority over the dues of the other creditors have also not been 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, and consequently at para 187 held that “In the peculiar and alarming circumstances as discussed in this judgment and also keeping in mind the fact that almost five years have elapsed since the Resolution Plan was duly approved by the NCLA T and there being no progress worth the name, we are left with no other option but to invoke our jurisdiction under Article 142 of the Constitution and direct that the Corporate Debtor be taken in liquidation.” After holding so, the Hon’ble Supreme Court further held at Para 188 that “The amount of Rs 200 Crore already infused by the SRA stands forfeited. The Lenders/ Creditors are further permitted to encash the Performance Bank Guarantee of Rs. 150 Crore furnished by the SRA.” There is a clear direction of the Hon’ble Supreme Court in relation to forfeiture of Rs. 200 Crore already infused by the Applicant and further direction to the lenders to encash the Performance Bank Guarantee of Rs. 150 Crore furnished by the Applicant. Further, it is pertinent to note that the performance bank guarantee is sought from the Resolution Applicant so as to bind the Resolution Applicant for performing under the approved Resolution Plan. Regulation 36(4A) of CIRP Regulations providing that “The request for resolution plans shall require the resolution applicant in case its resolution plan is approved under sub­section (4) of section 30, to provide a performance security within the time specified therein and such performance security shall stand forfeited if the resolution applicant of such plan, after its approval by the Adjudicating Authority, fails to implement or contributes to the failure of implementation of that plan in accordance with the terms of the plan and its implementation schedule”. by the lenders.

8. The Applicant has contended that PBG can only be forfeited by the Corporate Debtor, in case SRA fails to implement the resolution plan or contributes to failure to implement such Resolution Plan. The said security deposit, in any event, cannot be encashed by the creditors/lenders. Accordingly, the said PBG should have been forfeited by the Resolution Professional, as per Regulation 36B (4A) of Insolvency Regulations, 2016, after passing of judgment dated 07.11.2024 by Hon’ble Supreme Court.

9. However, in view of this specific observation of Hon’ble Supreme Court that The SRA herein has 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, it cannot be said that the Applicant has not failed to implement the Resolution Plan. Further, it is pertinence to note that the said encashment by the lender had taken place pursuant to specific direction of Hon’ble Supreme Court to the lenders after reaching to a conclusion that the Applicant herein has failed to implement the plan, and was encashed by the person authorized to do so. Merely because, the said bank guarantee was encashed by the lenders and not by the Resolution Professional cannot lend credence to the contention of Applicant to consider it as a CIRP costs.

10. Further, Article 141 of the Constitution of India provides that “The law declared by the Supreme Court shall be binding on all courts within the territory of India”, to ensure consistency and uniformity in the interpretation and application of laws across the nation. Though, Parliament, as the supreme legislative authority, may override a judicial precedent by enacting new legislation, however this can be done explicitly or implicitly, effectively altering or nullifying the legal impact of a Supreme Court decision. The Applicant has placed reliance on Section 42 of the Companies Act, 2013 to canvass that the amount of Rs. 200 crores was infused as share application money, accordingly, the Corporate Debtor is obligated to return the monies received, in case of failure to allot the shares for which it received the money. However, in view of declaration by Hon’ble Supreme Court in the facts of the case that the said amount shall stand forfeited, such interpretation as canvassed by the Applicant shall result into nullifying the decision of Hon’ble Supreme Court, which takes color of law in terms of Article 141, and same had not been overruled or modified by enacting a new legislation. Further, the provision of Section 42 cannot override the affect of order passed by the Hon’ble Supreme Court.

11. Accordingly, we do not find any merit in the Applicant contentions that these amounts of Rs. 350 Crores be considered as CIRP costs.

12. The Applicant has also contended that it had further infused a sum of Rs. 20.76 Crore solely for the purpose of keeping the Corporate Debtor as a going concern. This infusion was made with the approval of both the CoC and the Resolution Professional and is conspicuously not covered by the Hon’ble Supreme Court’s judgment. It is further contended that the infusion of Rs. 20.76 Crore during the CIRP, being directly attributable to the sustenance of the Corporate Debtor’s operations, squarely qualifies as CIRP costs and is required to be reimbursed to the Applicant. It is submitted that, as undertook in the approved resolution plan, over period of one year i.e. from January 2022 till December 2022, it had deposited a total sum of Rs. 20,76,32,031/- (Rupees Twenty Crores Seventy-Six Lakh Thirty-Two Thousand and Thirty-One only) into bank account of Corporate Debtor, which was utilized by the Corporate Debtor inter alia towards operationalization of air operator certificate, payment of rent, airport charges, government dues, among other charges/expenses of the Corporate Debtor.

13. It is noted that the Resolution Plan submitted by the Applicant was approved by this Tribunal on 22.06.2021, accordingly, the Applicant herein was under obligation to fund the sustenance of the Corporate Debtor’s operations after approval of the Plan. It is evident from the submissions of the Applicant in letter dated 21.07.2025 from the Applicant to the Liquidator that these amounts were deposited in the account of the Corporate Debtor for meeting the operational as well as fulfilling the conditions precedent, which the Applicant herein was obligated to do in terms of the approved Resolution Plan. In view of these facts, the Applicant herein cannot seek reimbursement of amounts incurred during the moratorium period for sustenance of the Corporate Debtor’s operations after approval of the Plan. It is also pertinent to note that these expenses were incurred after approval of the Plan, whereby, the Insolvency Resolution Process comes to an end, and the expenses incurred after the expiry of Insolvency Resolution Process does not fall within the scope of Insolvency Resolution Process costs under Section 5(13) of the Code. Accordingly, we do not find any merit in the prayer for the reimbursement of this sum as well.

14. In terms of above, the IA (I.B.C)/5371(MB)2025 is dismissed and disposed of.