Exclusion of Interim Restraint Period from Resolution Plan Timeline Justified Due to Hindrance in Fund Generation by the Successful Resolution Applicant
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NCLAT held that the exclusion of the interim restraint period from the Resolution Plan implementation timeline was justified, as the restriction on transfer of units hindered the Successful Resolution Applicant’s ability to generate funds critical for execution of the Plan.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench comprising Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Barun Mitra and Mr. Arun Baroka, reviewed two appeals along with connected IAs and held that the period during which an interim order restraining the transfer of units was in effect could justifiably be excluded from the timeline for implementation of the Resolution Plan under the IBC, as the restraint materially hindered the Successful Resolution Applicant’s ability to generate funds through unit sales—a key component of the Plan’s financial structure.
The National Company Law Appellate Tribunal (NCLAT) addressed two Appeals against an order dated 28.08.2024 passed by the National Company Law Tribunal (NCLT), Principal Bench, New Delhi. The impugned order had allowed an application by the Successful Resolution Applicant (SRA), Crown Abacus IT Park Association, for exclusion of the period from 12.04.2023 to 01.07.2024 from the timeline for implementation of the approved Resolution Plan of M/s Crown Realtech Pvt. Ltd., a real estate company. This exclusion was sought on the basis of an interim restraint imposed by the NCLAT during the pendency of earlier Appeals challenging the Plan. The present Appeals—one by eight allottees and the other by the Suspended Director—were heard together and were entertained upon sufficient cause being shown for condonation of delay.
The Corporate Insolvency Resolution Process (CIRP) had commenced on 06.12.2019, and the Resolution Plan—approved by 96.38% of the Committee of Creditors—was sanctioned by the NCLT on 21.02.2023. The Plan envisaged completion of the construction within 12 months, extendable by 6 months. However, on 12.04.2023, the NCLAT passed an interim order restraining the SRA from transferring any unit, which continued until the dismissal of the Appeals on 01.07.2024. The SRA, thereafter, sought exclusion of this 446-day period, contending that the inability to sell units during this time critically impacted the financial implementation of the Plan, especially the anticipated inflow of ₹50 crores from unit sales.
The Appellants contended that the interim order only restrained the transfer of units and did not obstruct construction. They also questioned the authority of the affidavit filed by the SRA due to the appointment of an Administrator in the Association by the Registrar of Societies. Allegations were raised regarding inadequate construction progress and non-fulfilment of funding commitments, with only ₹7 crores infused instead of the committed ₹10 crores. In response, the SRA asserted that the Registrar’s order had been stayed by the Punjab and Haryana High Court on 25.10.2024, thereby upholding the status quo and validating the affidavit. The SRA demonstrated various initiatives undertaken, such as renewal of licenses valid till 19.03.2026, application for environmental clearance, and incurring over ₹15.46 crores on CIRP costs, statutory dues, and operational creditors, as well as awarding work orders worth over ₹18.23 crores.
The NCLAT found no merit in the contention that the restraint order did not impact the implementation of the Plan. It held that the restriction on the transfer of units directly affected the SRA’s ability to raise funds through the sale of inventory, which was a central component of the Plan’s funding strategy. The Tribunal also dismissed the Appellants’ indirect challenge to the eligibility of the SRA, terming it irrelevant, especially in light of the dismissal of four earlier Appeals challenging the Resolution Plan on 01.07.2024. Taking into account the substantial efforts made by the SRA—an association of nearly 250 allottees—and the documented financial and operational progress, the Tribunal upheld the NCLT’s order allowing exclusion of the 446-day period. Accordingly, both Appeals were dismissed without any order as to costs.
Mr. Gaurav Mitra, Mr. Prafful Saini and Ms. Aishwarya Modi, Advocates, represented the Appellants.
Mr. A. Mishra and Mr. Sahil, Advocates, appeared for the Successful Resolution Applicant.
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