2018 (5) TMI 1557 - Tri - Insolvency and Bankruptcy

Initiation of corporate insolvency resolution process - expiry of initiation of CIR process - Resolution Plan which has been originally failed for want of requisite voting percentage as required under Sub-Section (4) of Section 30 of the Code when put up for reconsideration obtained the required voting share so as to approve the resolution plan by the CoC - The last CoC meeting as per records available seems to have held on 21st December 2017. The extended period of CIR process of 270 days here in the case in hand expired on 25-12-2017. Whether this Adjudicating Authority has empowered to extend the time limit prescribed under section 12 of the Code?. If not whether this Adjudicating Authority has power to exclude the duration of continuation of stay order of Hon ble Appellate Tribunal and the period rendered for the disposal of interim applications by this Bench during the CIRP? - Held that - a Tribunal in its discretion from time to time in the interest of justice and for reasons to be recorded, enlarge such period, even though the period fixed by or under these rules or granted by the Tribunal may have expired. This is a case in which so many issues came up for consideration before us during the period of CIRP. The CoC has changed the IRP thereby there is change of IRP. During the consideration of the only one plan of the resolution applicant an amended Ordinance was notified laying down certain disqualification to promoter directors of a company like the promoter in the case in hand Extension of time limit - Held that - In Surendra Trading Company Vs. Juggilal Kamlapat Jute Mills Co. Ltd. 2017 (9) TMI 1566 - SUPREME COURT OF INDIA , the Hon ble Supreme Court in answering a question as to whether the time limit prescribed in Insolvency and Bankruptcy Code for admitting and rejecting a petition for initiating insolvency resolution process is mandatory. It has been held that Extension of time may be allowed if it is needed to be given for circumstances which are exceptional occasioned by reasons beyond the control of the defendant and grave injustice would be occasioned if the time was not extended - The period of CIRP as prescribed under section 12 of the Code cannot be extended in the facts of the case. Whether reconsideration of vote in respect of approval of the resolution plan already finalised on 22-12-2017 is permissible under law? - Held that - the basic premises on which l&B code is built is that on failure of the Company in discharging its dues, its debt is to be restructured, for continuing the Company as a going concern, by giving the Company to any person who is found financially and technically capable to take over the Company. No challenge from any corner raised before us regarding the technical and economical viability of the resolution applicant in taking over the company by him. This is a unique case in which CIRP could not completed with in 270 days. The exceptional circumstances occasioned beyond the control of the resolution applicant in the case in hand upon the reasons already led in prompt us to exclude the period of litigation and thereby we also found the plan came up for approval with in time. Application disposed off.

Summary

Issues Involved:
1. Extension of Corporate Insolvency Resolution Process (CIRP) beyond 270 days.
2. Exclusion of litigation period from the CIRP timeline.
3. Reconsideration of votes by dissenting creditors.
4. Approval of the Resolution Plan under Section 31(1) of the Insolvency and Bankruptcy Code (IBC).

Detailed Analysis:

1. Extension of Corporate Insolvency Resolution Process (CIRP) beyond 270 days:
The primary contention raised by dissenting financial creditors, IDBI, and Bank of Baroda, was that the resolution plan was submitted after the extended period of 270 days, as mandated by Section 12 of the IBC. They argued that the adjudicating authority has no power to extend the CIRP beyond 270 days. The tribunal noted that the resolution applicant did not seek an extension but rather the exclusion of the litigation period from the CIRP timeline. The tribunal emphasized that the object of the IBC is to resolve the insolvency of corporate debtors and not to liquidate them. It concluded that while Section 12 prohibits the extension beyond 270 days, it does not restrict the exclusion of the litigation period from the CIRP timeline.

2. Exclusion of litigation period from the CIRP timeline:
The tribunal considered whether the period spent in litigation should be excluded from the CIRP timeline. The resolution professional argued that delays were caused by stays and appeals filed by financial creditors, which should be excluded. The tribunal cited the Supreme Court's judgment in Macquarie Bank Ltd. v. Shilpi Cable Technologies Ltd., emphasizing the importance of interpreting the IBC provisions in light of their legislative intent. The tribunal also referred to the NCLAT's decision in Quantum Ltd. v. Indus Finance Corpn. Ltd., which allowed the exclusion of litigation periods. The tribunal concluded that the period of stay and litigation should be excluded, thereby extending the CIRP timeline by 106 days.

3. Reconsideration of votes by dissenting creditors:
The tribunal addressed the objection raised by IDBI and Bank of Baroda regarding the reconsideration of votes by dissenting creditors. The tribunal observed that the reconsideration was based on an order from the adjudicating authority, which was not challenged by any financial creditors. It held that there is no legal bar preventing creditors from changing their votes upon reconsideration. The tribunal found the reconsideration of votes by dissenting creditors to be valid and permissible under the law.

4. Approval of the Resolution Plan under Section 31(1) of the Insolvency and Bankruptcy Code (IBC):
The tribunal evaluated whether the resolution plan met the requirements of Section 30(2) of the IBC. It noted that the plan received a voting share of 78.50% from financial creditors and complied with all necessary regulations. The tribunal emphasized the importance of keeping the corporate debtor as a going concern and avoiding liquidation. It concluded that the resolution plan was economically and technically viable and met all statutory requirements. Consequently, the tribunal approved the resolution plan under Section 31(1) of the IBC.

Conclusion:
The tribunal allowed the exclusion of 106 days from the CIRP timeline due to litigation and approved the resolution plan with a voting share of 78.50%. The objections raised by IDBI and Bank of Baroda were dismissed, and the resolution plan was deemed binding on all stakeholders involved. The moratorium order under Section 14 ceased to have effect, and the resolution professional was directed to forward all records to the Insolvency and Bankruptcy Board of India.