Case Law Analysis

Section 31(4) IBC | One-Year Deadline for Regulatory Approvals Mandatory; Failure Triggers Liquidation : NCLAT

NCLAT upholds liquidation of a corporate debtor after the resolution applicant failed to secure RBI approvals within the one-year deadline under Section 31(4) of the Insolvency and Bankruptcy Code. The ruling reinforces strict compliance with regulatory timelines, impacting insolvency practitioners and creditors in CIRP proceedings.

Cassie News NetworkCassie News Network
Jul 7, 2026, 9:37 PM(Updated: Nov 3, 2026)
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Section 31(4) IBC | One-Year Deadline for Regulatory Approvals Mandatory; Failure Triggers Liquidation : NCLAT

The National Company Law Appellate Tribunal (NCLAT) has reaffirmed the mandatory nature of Section 31(4) of the Insolvency and Bankruptcy Code, 2016 (IBC), holding that a Successful Resolution Applicant (SRA) must obtain all regulatory approvals, including those from the Reserve Bank of India (RBI), within one year of plan approval. Failure to comply renders the resolution plan unenforceable, justifying liquidation to prevent value erosion. The judgment underscores the time-bound objectives of the IBC and the limited scope for judicial indulgence in cases of prolonged non-compliance.

Background & Facts

The Dispute

The appeal arises from the liquidation of Ushdev International Limited (Corporate Debtor), admitted into the Corporate Insolvency Resolution Process (CIRP) on 17.05.2018 under Section 7 of the IBC. Taguda Pte. Limited (Appellant), the Successful Resolution Applicant (SRA), had its revised resolution plan approved by the National Company Law Tribunal (NCLT), Mumbai, on 03.02.2022. Despite this approval, the plan remained unimplemented for over three years due to the Appellant's failure to secure RBI approvals and mobilize funds from its foreign investor, ANZA Capital Investment LLC.

Key Facts

  • CIRP Initiation: 17.05.2018 (NCLT Order)
  • Resolution Plan Approval: 03.02.2022 (NCLT Order)
  • Regulatory Approvals Required: RBI approvals for foreign investment under FEMA
  • Payment Obligation: ₹227 crores (₹225 crores to financial creditors)
  • Funds Secured by Appellant:
    • ₹18 crores (Performance Bank Guarantee and Bid Bond Guarantee)
    • ₹41 crores (Cash balances of the Corporate Debtor)
    • ₹15 crores (Deposited with the Official Liquidator)
    • ₹153 crores (Pay Orders/Demand Drafts ready for disbursal)
  • Total Funds Available: ₹227 crores (matching the resolution plan amount)

Procedural History

The timeline below captures the critical events leading to the liquidation order:

  • 17.05.2018: NCLT initiates CIRP; Subodh Kumar Agarwal appointed as Interim Resolution Professional (IRP).
  • 06.02.2019: Committee of Creditors (CoC) rejects Taguda’s initial resolution plan (77.61% votes) and authorizes RP to file for liquidation.
  • 07.02.2019: RP files liquidation application (I.A. No. 626/2019); Taguda files I.A. No. 762/2019 for approval of its rejected plan.
  • 07.11.2019: NCLT dismisses liquidation application and approves Taguda’s resolution plan.
  • 29.11.2019: NCLAT stays NCLT order in Company Appeal No. 1377/2019 filed by State Bank of India (SBI).
  • 08.04.2021: NCLAT grants 6 weeks to CoC to consider Taguda’s revised resolution plan.
  • 22.06.2021: CoC approves revised resolution plan with 91.06% votes.
  • 03.02.2022: NCLT approves Taguda’s revised resolution plan (Plan Approval Order).
  • 08.09.2022: Interim Monitoring Agency (IMA) notes delay in RBI approvals despite Appellant’s efforts.
  • 14.10.2022: Taguda files I.A. Nos. 887/2022 and 1606/2022 seeking modification of Plan Approval Order; NCLT grants 6-month extension.
  • 01.03.2023: SBI urges expedited implementation, citing Section 31(4) IBC and Clause 3.1 of the Request for Resolution Plan (RFRP).
  • 28.04.2023: SBI files I.A. No. 1857/2023 seeking:
    • Immediate implementation of the resolution plan
    • 10% p.a. interest on the resolution amount
    • Fresh CIRP initiation in case of non-compliance
    • Interim deposit of resolution amount in escrow
  • 08.12.2023: NCLT directs SRA to implement the plan within 2 months (by 08.02.2024).
  • 08.02.2024: Deadline expires; lenders invoke BBG (₹5 crores) and PBG (₹11.50 crores) and authorize liquidation.
  • 05.07.2024: NCLAT directs SRA to deposit ₹225.14 crores in SBI’s Singapore/UAE branch within one week.
  • 16.07.2024: SRA proposes a letter of comfort instead of deposit, citing account-opening delays.
  • 25.09.2024: SBI DIFC informs SRA that DFSA regulations prohibit accepting UAE-sourced funds.
  • 30.05.2025: NCLAT dismisses SRA’s appeal (Company Appeal (AT) (Ins.) No. 351 of 2024) and directs NCLT to decide the liquidation application within 3 months.
  • 23.07.2025: Supreme Court dismisses Taguda’s challenge to the NCLAT order.
  • 16.10.2025: NCLT passes the Impugned Order, allowing liquidation and dismissing Taguda’s I.A. No. 4253/2025 (one-time payment proposal).
  • 07.04.2026: SRA submits fresh offer to SCC, which rejects it with 81.778% majority.
  • 20.05.2026: ₹41.05 crores disbursed to secured financial creditors from Corporate Debtor’s cash balances.

The Parties' Positions

For the Appellant (Taguda Pte. Limited)

  1. Non-Compliance Due to Regulatory Hurdles: The Appellant contended that the delay in implementing the resolution plan was attributable to pending RBI approvals, which were beyond its control. It argued that it had taken all possible steps, including filing a writ petition before the Bombay High Court (Writ Petition (L) No. 34990 of 2025), to secure these approvals.

  2. Readiness to Pay: The Appellant emphasized its readiness to disburse the entire resolution amount of ₹227 crores immediately, backed by:

    • ₹18 crores (forfeited BBG and PBG)
    • ₹41 crores (Corporate Debtor’s cash balances)
    • ₹15 crores (deposited with the Official Liquidator)
    • ₹153 crores (Pay Orders/Demand Drafts) It offered to deposit the funds either in SBI’s account or the Official Liquidator’s account for distribution.

  3. Value Maximization: The Appellant argued that the resolution plan offered more than double the liquidation value (₹227 crores vs. ₹71.28 crores), making liquidation commercially irrational. It highlighted the inflated liquidation valuation, including unrealizable investments in Uttam Galva Ferrous Ltd. (₹75.78 crores), and the risk of asset degradation in liquidation.

  4. Judicial Precedents: The Appellant distinguished the case from State Bank of India v. Consortium of Murari Lal Jalan & Anr. (2024 SCC Online SC 3945), arguing that unlike Jet Airways, it was not seeking modifications to the plan but was ready to implement it in full. It also cited Asha Chopra & Ors. v. M/s. Hind Motors India Limited (29.08.2024) to argue that CIRP withdrawal is permissible even after liquidation commencement.

  5. Natural Justice: The Appellant claimed that the NCLT passed the liquidation order without hearing I.A. No. 4253/2025, which proposed a one-time payment, violating principles of natural justice.

For the Respondents (SBI and Liquidator)

  1. Finality and Res Judicata: SBI argued that the Appellant’s pleas - regarding RBI approvals, fund readiness, and further indulgence - had been squarely rejected by NCLAT (Company Appeal (AT) (Ins.) No. 351 of 2024) and the Supreme Court (Civil Appeal No. 7648 of 2025). The present appeal was an impermissible collateral attack on final orders.

  2. Mandatory Nature of Section 31(4) IBC: SBI emphasized that Section 31(4) IBC and Clause 3.1 of the RFRP mandated the SRA to obtain all approvals within one year of plan approval. Mere pendency of an RBI application did not constitute compliance. The Appellant’s failure to secure approvals for over three years demonstrated a lack of bona fide intent.

  3. Dilatory Tactics: SBI highlighted the Appellant’s history of non-compliance:

    • NCLAT Order (05.07.2024): Directed deposit of ₹225.14 crores in SBI’s Singapore/UAE branch. The Appellant instead proposed a letter of comfort from its UAE financier.
    • DFSA Regulations: SBI DIFC informed the Appellant that UAE-sourced funds were prohibited, yet the Appellant failed to comply.
    • SCC Rejection: The Stakeholders Consultation Committee (SCC) rejected the Appellant’s fresh offer (07.04.2026) with 81.778% majority

Case Details

Taguda Pte. Limited v. State Bank of India & Anr.

Judgment
Court
National Company Law Appellate Tribunal, Principal Bench, New Delhi
Date
06 July 2026
Case Number
Company Appeal (AT) (Insolvency) No. 1710 of 2025
Bench
Justice N. Seshasayee (Member Judicial), Arun Baroka (Member Technical)
Counsel
Pet: Mr. T. Gowthaman, Sr. Advocate, Mr. Vivek Jain, Mr. Sadiq Noor, Mr. Angad Pathak, Mr. Mehul Khare, Mr. Padmesh Mishra, Ms. Ginni Med, Advocates
Res: Mr. Krishnendu Data, Sr. Advocate with Mr. Yugal Jain, Mr. Vaijyant Paliwal, Ms. Charu Bansal, Mr. S. Biswas, Ms. Kirti Gupta, Advocates for R-1/SBI, Mr. Kumar Shubham and Mr. Arpan Behl, Advocates for R-2, Mr. Eshaan S. Advocate for CD

Frequently Asked Questions

Section 31(4) IBC mandates that the Successful Resolution Applicant (SRA) must obtain all regulatory approvals required for implementing the resolution plan within one year of the plan’s approval by the NCLT. This timeline is mandatory, and failure to comply renders the plan unenforceable, justifying liquidation under Section 33 IBC.
No. The NCLAT held that mere pendency of an application (e.g., RBI approval) does not constitute compliance with Section 31(4) IBC. The SRA must take all necessary and legally permissible steps to secure approvals within the prescribed period. Passive reliance on regulatory bodies is insufficient.
If the SRA fails to implement the resolution plan within the one-year timeline (or extended period, if any), the Adjudicating Authority (NCLT) is justified in initiating liquidation proceedings under Section 33 IBC. This is to prevent value erosion and ensure time-bound resolution as envisaged by the Code.
Yes. The commercial wisdom of the CoC/SCC holds primacy under the IBC. Courts will not interfere with their decision unless it is arbitrary, mala fide, or violates statutory provisions. In this case, the SCC rejected the Appellant’s proposal due to lack of credibility, consistent delays, and failure to deposit actual funds, despite the plan offering higher value.
Filing an interlocutory application after arguments are concluded and orders reserved does not entitle the applicant to a re-hearing. The NCLAT held that such applications are misconceived and may be dismissed as dilatory tactics. SRAs must act proactively to avoid such scenarios.
#NCLAT judgment#Section 31(4) IBC#Liquidation Proceedings#Commercial Wisdom of Creditors#Regulatory Approvals in CIRP#Resolution Plan Implementation#[Banking & Finance Law]#Corporate Insolvency Resolution Process#Insolvency and Bankruptcy Code 2016
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Disclaimer

This article is for informational purposes only and does not constitute legal advice. The views expressed are based on the judgment analysis and should not be taken as professional counsel. Please consult with a qualified attorney for advice specific to your situation.

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