EXTENSION OF CORPORATE INSOLVENCY RESOLUTION PROCESS

[Mr. M. GOVINDARAJAN]

Corporate Insolvency Resolution Process

The corporate insolvency resolution process can be initiated against a corporate debtor by a financial creditor or by an operational creditor or by the corporate applicant itself.  The Adjudicating Authority, on its satisfaction that the application filed by the applicant is complete in all aspects, shall admit the application.  The date of admission of the application is the date of commencement of corporate insolvency resolution process.

Time limit

Section 12(1) of the Insolvency and Bankruptcy Code, 2016 (‘Code’ for short) provides that the corporate insolvency resolution process shall be completed within a period of one hundred and eighty days from the date of admission of the application to initiate such process.

Extension

Section 12(2) of the Code provides that the resolution professional shall file an application to the Adjudicating Authority to extend the period of the corporate insolvency resolution process beyond 180 days, if instructed to do so by a resolution passed at a meeting of the committee of creditors by a vote of 66% of the voting shares.

Section 12(3) of the Code provides that if the Adjudicating Authority is satisfied that the subject matter of the case is such that corporate insolvency resolution process cannot be completed within 180 days, it may by order extend the duration of such process beyond one hundred and eighty days by such further period as it thinks fit, but not exceeding 90 days.    Any extension of the period of corporate insolvency resolution process under this section shall not be granted more than once.

The second proviso to section 12(3) of the Code which has been inserted vide Insolvency and Bankruptcy Code (Amendment) Act, 2019 with effect from 16.08.2019.  The second proviso provides that the corporate insolvency resolution process shall mandatorily be completed within a period of 330 days from the insolvency commencement date, including any extension of the period of corporate insolvency resolution process granted under this section and the time taken in legal proceedings in relation to such resolution process of the corporate debtor.

Impact of COVID

The COVID has an impact over the corporate insolvency resolution process.   The Supreme Court of India in suo motu Writ Petition (Civil) No(s). 3/2020 IN RE : COGNIZANCE FOR EXTENSION OF LIMITATION - 2020 (5) TMI 418 - SC ORDER’, vide order dated 23.03.2020, observed as under:-

‘This Court has taken suo motu cognizance of the situation arising out of the challenge faced by the country on account of Covid-19 Virus and resultant difficulties that may be faced by litigants across the country in filing their petitions/applications/suits/appeals/all other proceedings within the period of limitation prescribed under the general law of limitation or under Special Laws (both Central and/or State).

To obviate such difficulties and to ensure that lawyers/litigants do not have to come physically to file such proceedings in respective Courts/Tribunals across the country including this Court, it is hereby ordered that a period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or Special Laws whether condonable or not shall stand extended with effect from  15^th  March 2020 till further order/s to be passed by this Court in present proceedings.

We are exercising this power under Article 142 read with Article 141 of the Constitution of India and declare that this order is a binding order within the meaning of Article 141 on all Courts/Tribunals and authorities’.

Based on the Supreme Court judgment,  the Insolvency and Bankruptcy Board of India, inserted Regulation 40C to the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, vide notification dated 29.03.2020.  The newly inserted regulation 40C is a special provision relating to time line.  Regulation 40C provides that notwithstanding the time-lines contained in these regulations, but subject to the provisions in the Code, the period of lockdown imposed by the Central Government in the wake of COVID-19 outbreak shall not be counted for the purposes of the time-line for any activity that could not be completed due to such lockdown, in relation to a corporate insolvency resolution process.

Case laws

IN RE : PARTHIV PARIKH RP OF MV OMNI PROJECTS (INDIA) LTD. - 2020 (11) TMI 129 - NATIONAL COMPANY LAW TRIBUNAL , AHMEDABAD BENCH, the application for CIRP was admitted by the Adjudicating Authority on 29.08.2019 and further, 90 days beyond 180 days was extended on 24.02.2020. The Resolution Professional has moved this application for seeking extension of 30 days as there is high probability of approval and/or acceptance of proposed Resolution Plan and thereby, the Corporate Debtor can be saved as a going concern.  The Adjudicating Authority observed that looking to the very object of the Code, Committee of Creditors desires to get extension of 30 days as there is every likelihood that some resolution plan will be accepted and/or approved by the Committee of Creditor.  However, the Supreme Court has observed that 330 days is the outer limit within which resolution of the stressed assets of the Corporate Debtor must take place.

The Adjudicating Authority under the given facts and circumstances, felt  that if the time is extended within the outer limit of 330 days, there is every likelihood that some resolution applicant may succeed for its acceptance and approval.  The Adjudicating Authority allowed the application filed by the Resolution Professional by extending 30 days from 13.08.2020.

In ‘ IN RE : BIJOY PRABHAKARAN PULIPRA RESOLUTION PROFESSIONAL PVS MEMORIAL HOSPITALS PRIVATE LIMITED - 2020 (11) TMI 123 - NATIONAL COMPANY LAW TRIBUNAL , KOCHI BENCH, the Adjudicating Authority admitted the application for CIRP on 16.10.2019.  The original due date for completion of the corporate insolvency resolution process was 13^th  April 2020. The Adjudicating Authority excluded 32 days from the Corporate Insolvency Resolution Process, which was lost due to the order passed by National Company Law Appellate Tribunal  in Appeal No.1130 of 2019 and Appeal No.1131 of 2019 P.V. NIDHISH VERSUS OCS GROUP INDIA PVT. LTD. AND ANOTHER - 2019 (12) TMI 1534 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI,  and directed the Resolution Professional to complete the corporate insolvency resolution process on or before 15.5.2020.  However, on 24^th March 2020, complete lock down throughout the country was ordered by the Government of India. The lockdown was extended till 30^th June, 2020.

The Resolution Professional accordingly had filed MA/72/KOB/2020 with regard to the applicability of Regulation 40C of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 seeking reinstatement of the corporate insolvency resolution process pursuant to the ‘Unlock 2’ declared by Government of India. This Tribunal vide order dated 27.8.2020 allowed the said MA, which ultimately extended the corporate insolvency resolution process period from 15.05.2020 to 18.10.2020.

Considering the constraint of time to conduct the due diligence of the prospective Resolution Applicant based on the material available on record to examine and satisfy their eligibility to submit the resolution plan under the Code and verification of the contents of the resolution plan submitted by the prospective Resolution Applicant, the Committee of Creditors, vide its meeting held on 15^th  October 2020, had unanimously passed a resolution to extend the time period for the completion of the corporate insolvency resolution process by a period of ninety days, subject to the approval of the Adjudicating Authority.

The Adjudicating Authority held that  in view of the fact that there is only one prospective Resolution Applicant before the Committee of Creditors as on date and the time to examine the resolution plan under the Code and verification of the contents of the resolution plan is limited, and also the intention of the Committee of Creditors to invite fresh Expression of Interest to enable more bonafide resolution applicants to bid for the revival of the Corporate Debtor seems to be reasonable, the request of Resolution Professional to extend the corporate insolvency resolution process period for a further period of 90 days is justifiable.

In PUNJAB NATIONAL BANK VERSUS KUDOS CHEMIE LTD. AND ORS. - 2021 (1) TMI 713 - NATIONAL COMPANY LAW TRIBUNAL , CHANDIGARH BENCH, the corporate insolvency resolution proceedings were commenced against the corporate debtor Kudos Chemie Limited on 05.07.2019. The 180 days' period was completed on 01.01.2020. Thereafter, the  Adjudicating Authority extended the period of corporate insolvency resolution process  by 90 days beyond 180 days vide order dated 08.01.2020 and the said extended period of 90 days was expired on 31.03.2020.   On 30.03.2020, three resolution plans were received but could not be processed due to the imposition of the Lockdown with effect from 25.03.2020.    In view of receipt of the resolution plans, the Committee of Creditors in its 11^th meeting held on 30.03.2020 with 88.74% voting share resolved to seek extension of time of the CIR Proceedings by 60 days i.e. beyond 270 days after deducting the lockdown period from 25.03.2020 to 30.07.2020.

In view of the orders referred above and the IBBI Regulations and also in view of the receipt of resolution plans, the instant IA is disposed of by extending the period of corporate insolvency resolution process by 60 days beyond 270 days, after deducting the period from 25.03.2020 to 31.07.2020.

Exclusion of days

It is on one side to apply for extension of corporate insolvency resolution process and on the other side there are some periods that may be excluded from the time line of corporate insolvency resolution process which paves the way for the elongation of the corporate insolvency resolution process.

If an application is filed by the Resolution Professional or the Committee of Creditors or any aggrieved person for justified reasons, it is always open to the Adjudicating Authority /Appellate Tribunal to exclude certain periods for the purpose of counting of total period of 270 days.

Conclusion

Even though there are provisions in the Code as well as in the regulations for the extension of corporate insolvency resolution process it is the duty of resolution professional to keep the timeline as stipulated in the Code.  The extension sought for shall be a last resort.