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2021 (2) TMI 720 - Tri - Insolvency and BankruptcySeeking to extend the CIRP for 90 days in order to get a Potential Resolution Applicant - Section 12 of the Insolvency and Bankruptcy Code 2016 - HELD THAT - From a reading of sub-section (2) of Section 12, it is clear that Resolution Professional should file an application to the Adjudicating Authority for extension of the period of the Corporate Insolvency Resolution Process, only if instructed to do so by a resolution passed at a meeting of the committee of creditors by a vote of 75% of the voting shares. In the present case, the subject matter of the case is regarding the extension of the CIRP period, when the CoC resolved for liquidation of the Corporate Debtor. It is seen that the resolution for further extension of time for submission of EoI has been rejected by the Committee of Creditors in the 3rd CoC meeting held on 30.11.2020 and the Resolution Professional have no power for seeking extension based on a letter submitted by the erstwhile Director or the potential Resolution Applicant, who has not submitted any credentials to the Resolution Professional to prove his net worth and interest in the matter. The underlying object and principle of the Code, in resolving a debt ridden Corporate Debtor, cannot be lost sight of. The adherence to specific timeline for resolution is the essence, which in effect would bring about successful resolution of a beleaguered Company. It is found that the invitation for EoI was widely published in two newspapers namely Indian Express and Kerala Kaumudhi , the last date of submission of EoI was 08.02.2020. The ground that the potential Resolution Applicant due to lack of knowledge failed to submit EOI within time cannot be accepted. Besides no indulgence can be given to someone who hasn t been vigilant enough. The Potential Resolution Applicant has not shown sufficient cause for its delay in submitting its EoI. Mere stating by the applicant herein that it is on account of Covid-19 Pandemic would not be considered as sufficient reason to condone the delay. No reason is assigned as to how the pandemic affected the efforts of the potential Resolution Applicant in approaching the Resolution Professional in submitting the EoI. The potential Resolution Applicant, if any, has been negligent in submitting the EoI to the RP and the present application filed by the erstwhile Directors to grant further time during the last minute of completion of CIRP is not acceptable - Application dismissed.
Issues Involved:
1. Extension of Corporate Insolvency Resolution Process (CIRP) period. 2. Authority of suspended Board of Directors to seek extensions. 3. Impact of COVID-19 pandemic on CIRP timelines. 4. Compliance with Section 12 of the Insolvency and Bankruptcy Code (IBC), 2016. 5. Committee of Creditors' (CoC) decision-making process regarding extension requests. 6. Evaluation of potential Resolution Applicant's delay in submitting Expression of Interest (EoI). Issue-wise Detailed Analysis: 1. Extension of Corporate Insolvency Resolution Process (CIRP) period: The applicants, who are suspended directors of the Corporate Debtor, filed an application seeking a 90-day extension of the CIRP to attract a potential Resolution Applicant. The Tribunal initially indicated that an extension might be considered if a genuine Resolution Plan was presented. However, due to the COVID-19 pandemic and subsequent lockdown, no prospective Resolution Applicant came forward. 2. Authority of suspended Board of Directors to seek extensions: The Resolution Professional argued that under the provisions of the IBC, 2016, the suspended Board of Directors is not empowered to seek an extension of the CIRP period. The Committee of Creditors (CoC) had already decided against granting an extension for receiving a Resolution Plan from a prospective applicant. 3. Impact of COVID-19 pandemic on CIRP timelines: The applicants cited the COVID-19 pandemic as a reason for the delay in receiving a Resolution Plan. However, the Tribunal noted that the timelines for the prospective Resolution Applicant expired before the lockdown was declared. The Resolution Professional had followed up with a potential applicant, Mr. N.V. George, who failed to submit the necessary credentials or EoI within the stipulated time. 4. Compliance with Section 12 of the Insolvency and Bankruptcy Code (IBC), 2016: Section 12 of the IBC, 2016, prescribes a 180-day time limit for completing the CIRP, extendable by 90 days if approved by 75% of the CoC's voting shares. The Tribunal referenced the order in Quantum Limited Vs. Indus Finance Corporation Limited, which emphasized that an extension should be granted only if a resolution is passed by the CoC within the initial 180 days. 5. Committee of Creditors' (CoC) decision-making process regarding extension requests: The CoC, in its meetings, discussed and ultimately rejected the extension of time for submitting the EoI. The major financial creditor, holding a 64.75% voting share, opposed further extensions. Only Standard Chartered Bank, with a 17.80% voting share, suggested a 15-day extension, which was insufficient to meet the required 75% threshold. 6. Evaluation of potential Resolution Applicant's delay in submitting Expression of Interest (EoI): The Tribunal found that the potential Resolution Applicant, Mr. N.V. George, did not submit the EoI within the deadline and failed to provide sufficient reasons for the delay. The argument that the pandemic caused the delay was not accepted, as the deadline expired before the lockdown. The Tribunal emphasized that the Resolution Applicant must demonstrate vigilance and sufficient cause for any delay. Conclusion: The Tribunal concluded that the applicants' request for a 90-day extension did not merit consideration. The potential Resolution Applicant's failure to submit the EoI on time and the lack of support from the CoC were decisive factors. The application filed by the suspended directors was dismissed, and the Tribunal upheld the adherence to the specific timelines prescribed under the IBC, 2016, for resolving the debt-ridden Corporate Debtor. Order: I.A. No. 218/KOB/2020 in M.A. No.22/KOB/2020 is dismissed.
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