Delays in implementation of Resolution Plan under IBC: A growing concern

The framework of the Insolvency and Bankruptcy Code, 2016 (“IBC” / “Code”), is to keep the corporate debtor’s business afloat using the mechanism of Insolvency Resolution Process, as laid down under the Code. Liquidation is inevitable only when the conditions mentioned under Section 33 of the Code are fulfilled. If such conditions are fulfilled, liquidation of the business can be ordered by the Adjudicating Authority, that is, the National Company Law Tribunal (“NCLT” / “tribunal”).

In this article, we would like to discuss the absence of timelines when it comes to challenging the implementation of Resolution Plans approved by the tribunals.

Under the Code, among other conditions mentioned under Section 33, sub-section (3) of the said Section states that if the terms of the approved resolution plan are contravened by the corporate debtor, any person whose interests are prejudicially affected due to such contravention can apply to the Adjudicating Authority for a liquidation order. Often, the timelines for the implementation of the Resolution Plan have become a roadblock to fulfilling the objective of the Code. Since, there is no stipulated time period mentioned in the Code, there is a lack of consistency in judicial approaches surrounding delays.

The Supreme Court pronouncements dealing with matters involving delays in implementation of the resolution plans have been seemingly contradictory, which not only compromises the expectation of various stakeholders, including resolution applicants, but also threatens the credibility of IBC as a resolution mechanism. This will have a devastating effect on the IBC. Further, the Successful Resolution Applicant (“SRA”) who invested substantial amounts in equity and discharges of the debts of the corporate debtors, should further fight the liquidation proceedings.

The Supreme Court in Kridhan Infrastructure (P) Ltd. v. Venkatesan Sankaranarayan, (2021) 6 SCC 94 took an unequivocal position that a Resolution Applicant must be fair in its dealings. The Resolution Applicant in this case submitted a Resolution Plan for a company going under the Corporate Insolvency Resolution Plan (“CIRP”) which was approved by NCLT. Later, due to SRA’s failure to implement the plan, an application was filed under Section 33 of the IBC seeking the liquidation of the corporate debtor which was allowed by the NCLT. Thereafter, the SRA preferred an appeal before the National Company Law Appellate Tribunal (“NCLAT”) and was granted an opportunity to submit a timeline for implementing the plan. The NCLAT allowed the revised timeline as per the terms agreed upon by the members of the erstwhile CoC, SRA and the liquidator. However, since the appellant did not adhere to the aforesaid terms, the NCLAT upheld the liquidation order, which was then challenged before the Supreme Court.

The Supreme Court held that despite the grant of sufficient time to the SRA, it was unable to raise funds and implement the plan. The Court further held that time is the most crucial facet of the scheme under IBC and to allow such proceedings to lapse into an indefinite delay would defeat the object of the statute. Accordingly, it directed the forfeiture of INR 20 crores that was earlier deposited by the SRA as part of the implementation of the resolution plan.

In contrast, in a recent Supreme Court ruling in Kalyani Transco v. Bhushan Power & Steel Ltd., 2025 SCC OnLine SC 1010, the Court directed the return of payments made by the SRA to the financial creditors, operational creditors and towards equity contribution, within two months from the date of the judgment. The apex court, in this case, ordered the liquidation of Bhushan Power and Steel Limited (“BPSL”) after rejecting the resolution plan of JSW Steel. The judgment came over three years after JSW started the execution of its obligations under the resolution plan. The Supreme Court held that the resolution professional did not duly discharge his duties under the Code and the CoC failed to exercise the commercial wisdom while approving the Resolution Plan, which was in direct contravention of the provisions of the IBC.

In this case, the Punjab National Bank had initiated CIRP proceedings against BPSL under Section 7 of the Code and several resolution plans were submitted. JSW’s resolution plan emerged as the highest scoring bid and the CoC later approved the resolution plan. The NCLT approved the plan, subject to certain conditions. Several appeals were filed before the NCLAT against the judgment of NCLT by both JSW and operational creditors. The NCLAT upheld the approval of the resolution plan with some modifications to the earlier conditions.

JSW implemented the resolution plan in three phases between 2021 and 2022, infusing equity of INR 100 crores in BPSL in 2021, made payment of INR 19,350 crores to financial creditors of BPSL in 2021 and also made a payment of approximately INR 350 crores to operational creditors of BPSL in 2022. However, the Supreme Court invalidated the implementation citing various reasons including procedural infirmities, non-compliance with mandatory provisions of the Code, delay in filing application, and delay in implementation of the Resolution Plan.

However, the Supreme Court in the matter of Punjab National Bank v. Kalyani Transco & Ors., R.P.(C) No. 1432 - / 2025 has made a prima facie observation on July 31, 2025 that the judgement in Bhushan Power and Steel Ltd. & Ors. (Supra), requires a review as it was contrary to the law laid down in various precedents and recalled the same. It was also observed that the commercial wisdom of the CoC cannot be interfered with lightly, especially when it has been concurrently upheld both by the NCLT and the NCLAT.

The Supreme Court was of the opinion that the breaking of the timeline should not be so fatal that a successfully implemented plan is set aside and a direction is issued under Article 142 to liquidate a company which has been revived in these five (5) years. Considering all these factors, the Supreme Court has recalled its order for review.

It is imperative to note that neither the Code nor any other legislation prescribes a timeline under which the implementation of a resolution plan should be put into effect. In the BPSL judgment, the “effective date” for implementation of JSW’s resolution plan was to occur within 30 days from the date when NCLT approved the resolution plan. However, JSW significantly delayed the implementation of its resolution plan with the payments being made to the operational creditors after a period of almost 900 days. The Court further directed to reverse the payments that were made to the creditors on account of necessary enforcement of procedural and statutory discipline, observing that the Code did not contemplate conditional or deferred implementation of the plans.

The case will have a broader implication on resolution applicants as to how they approach risk assessment. There are several concerns and critical issues / challenges that this judgment has raised. The most important being the risk to investors who would be willing to participate in the resolution process. Another key consequence of this judgment is that several investors might fear that their executed resolution plans might later be invalidated on technical or other grounds, which may or may not go status quo ante.

Judicial decisions surrounding delays in the implementation of resolution plans have different approaches, which have resulted in unpredictability and operational disruption. The absence of a coherent stance undermines the fundamental object of the Code. Without a statutory mandate that would prescribe the timeline for the implementation of the resolution plan, both resolution applicants as well as creditors will be left exposed to uncertainty. While procedural compliance under the Code is essential, the remedy for procedural lapses should be made proportionate, especially when there has been substantial implementation of the plan. A rigid jurisprudence of retrospective invalidation or forfeiture on non-compliance without any legislation in place would result in disproportionate harm to the parties in both the transactions and needs to be addressed by the Hon’ble Court or legislature.

Even though the Supreme Court has recalled its order passed in Bhushan Power, unless and until there is a statutory intervention laying down the timeline for implementation of the resolution plans and a time limit to challenge the said implementations, the ambiguity continues, jeopardizing the very object of the Code.

About the authors: Dinesh Babu Eedi is a Partner and Guru Charan is an Associate at Lakshmikumaran & Sridharan attorneys.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

If you would like your Deals, Columns, Press Releases to be published on Bar & Bench, please fill in the form available here.