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2018 (9) TMI 2103 - Tri - Insolvency and BankruptcyExtension of time period of Corporate Insolvency Resolution Process in respect of the corporate debtor by a further period of 90 days w.e.f. 02.10.2018 - Section 12(2) of IBC - HELD THAT - Section 25 (2) (h) added on 23.11.2017 by way of amendment does not contemplate floating of any expression of interest. It is beyond our understanding as to how the IBBI has taken upon itself the task of framing Regulation 36A of IBBI (Insolvency Resolution Process for Corporate Persons), Regulations, 2016 using the expression invitation of expression of interest along with Form G . Such an assumption of power would be beyond the competence of IBBI as the source of power to frame Regulation under the IBC is drawn from Section 240 of IBC, 2016. Section 240(1) in categorical terms provides that the IBBI may by notification make regulation consistent with the Insolvency and Bankruptcy Code, and further subject to the Rules framed by the Government under Section 239 of IBC, 2016 for carrying out the provisions of the Code. In the present case on 04.06.2018 expression of interest was invited and last date for expressing interest to submit the resolution plan was 18.06.2018 without in fact inviting any resolution plan. Such a course is negation of the salient features highlighted by Supreme Court that the speed is essence of the IBC, 2016, therefore, we have no other option except to declare Regulation 36A as ultra-vires of Section 240(1) of IBC, 2016. The IBBI is directed to frame Regulation according to its competence and the source of power as given to it by the Code. The period is extended by 90 days which shall now to come to an end on 31.12.2019 - application disposed off.
Issues:
1. Extension of time period for Corporate Insolvency Resolution Process. Analysis: The judgment pertains to an application filed under Section 12(2) seeking an extension of the time period for the Corporate Insolvency Resolution Process (CIRP) for a corporate debtor by an additional 90 days starting from 02.10.2018. The application was supported by a resolution passed by the Committee of Creditors (CoC) in its 4th meeting on 07.08.2018, where the reasons for extension were discussed. The Resolution Professional (RP) informed the CoC about the need for an extension due to various reasons such as the need for more time for potential resolution applicants to conduct meaningful diligence and the impact of a recent transporters' strike on the supply of key raw materials. The CoC approved the extension of the last date for submission of resolution plans from 10 August, 2018, to 31st August, 2018, with a significant majority vote of 96.99%. In addition to the extension of the time period, the CoC also passed a resolution authorizing the RP to file an application under Section 12 of the Insolvency & Bankruptcy Code, 2016 with the National Company Law Tribunal (NCLT) for an extension of the CIRP not exceeding 90 days. The judgment highlighted the importance of timely resolution of insolvency cases for maximizing the value of assets and promoting entrepreneurship, as outlined in the objectives of the Insolvency and Bankruptcy Code. It also referenced previous legal judgments emphasizing the need for a time-bound and consolidated resolution process without unnecessary complications like inviting expressions of interest before submission of resolution plans. Furthermore, the judgment criticized the practice of inviting expressions of interest before accepting resolution plans, stating that it hinders the speed and efficiency of the CIR process. It declared Regulation 36A, which allowed for the invitation of expressions of interest, as ultra vires of Section 240(1) of the Insolvency & Bankruptcy Code. The judgment directed the Insolvency and Bankruptcy Board of India (IBBI) to frame regulations in line with its competence and the provisions of the Code. Ultimately, the application for extension was granted, extending the CIRP period by 90 days until 31.12.2019. The judgment concluded by instructing the IBBI to comply with the order and report accordingly.
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