2018 (2) TMI 1721 - AT - Companies Law

Time limit for completion of insolvency resolution process - empowered to extend such period up to 90 days beyond 180th day - Held that - If within 180 days including the last day i.e. 180th day, a resolution is passed by the committee of creditors by a majority vote of 75% of the voting shares, instructing the resolution professional to file an application for extension of period in such case, in the interest of justice and to ensure that the resolution process is completed following all the procedures time should be allowed by the Adjudicating Authority who is empowered to extend such period up to 90 days beyond 180th day. Adjudicating Authority has not hold that the subject matter of the case do not justify to extend the period. It has not been rejected on the ground that the committee of creditors or resolution professional has not justified their performance during the 180 days. In such circumstances, it was duty on the part of the Adjudicating Authority to extend the period to find out whether a suitable resolution plan is to be approved instead of going for liquidation, which is the last recourse on failure of resolution process. We set aside the impugned order dated 18th December, 2017 and extend the period of resolution process for another 90 days to be counted from today. The period between 181st day and passing of this order shall not be counted for any purpose and is to be excluded for all purpose

Summary

Issues:
1. Extension of time for Corporate Insolvency Resolution Process (CIRP) beyond 180 days.

Detailed Analysis:
1. The appeal was filed by the Corporate Debtor through Resolution Professional against the order of the Adjudicating Authority rejecting the application for extension of time beyond 180 days for CIRP. The Adjudicating Authority based its decision on the grounds that there is no provision for filing such an application after the completion of the initial 180 days of CIRP. The Authority emphasized that the application for extension should be filed before the completion of the CIRP period and not after. The Authority stated that allowing the application after the original 180 days would amount to reviving the CIRP period, which is not provided for in the Insolvency and Bankruptcy Code (IBC). The Authority highlighted the importance of adhering to the timelines set by the Code and concluded that there is no provision for condonation or revival under the Code.

2. The Resolution Professional argued that Section 12(2) of the IBC does not mandate that the application for extension must be filed before the completion of 180 days. It can be filed within 180 days if instructed by a resolution passed by the committee of creditors with a seventy-five percent majority vote. The respondent's advocate supported this argument, stating that the instruction for extension was given within the 180-day period. The Adjudicating Authority was urged to consider the resolution passed by the creditors within the stipulated time frame.

3. Section 12 of the IBC specifies the time limit for completing the insolvency resolution process. It allows for an extension of the CIRP period beyond 180 days if instructed by the committee of creditors with a seventy-five percent majority vote. The Adjudicating Authority has the power to extend the duration of the process by up to 90 days, but not more than once. The provision emphasizes the importance of timely completion of the resolution process while providing a mechanism for extension under specific conditions.

4. The Appellate Tribunal analyzed the provisions of Section 12(2) and emphasized that the resolution professional can file an application for extension based on the committee of creditors' resolution within the 180-day period. If the resolution is passed within this timeframe, the Adjudicating Authority has the discretion to extend the CIRP period for up to 90 days beyond the initial 180 days. The Tribunal noted that in the absence of justification to deny the extension and considering the interest of justice, the Adjudicating Authority should allow the extension to explore the possibility of a resolution plan before resorting to liquidation.

5. Consequently, the Appellate Tribunal set aside the Adjudicating Authority's order and extended the resolution process for another 90 days from the date of the judgment. The period between the 181st day and the judgment date was excluded for all purposes. The Tribunal directed the Adjudicating Authority to proceed in accordance with the law, emphasizing the importance of following the procedures and ensuring a fair resolution process. The appeal was allowed with no costs incurred.