2021 (5) TMI 215 - AT - Insolvency and Bankruptcy

Exclusion from the period of CIRP - exclusion of period commencing from 5 May 2020 till 31 October 2020, from the CIRP, to provide the benefit under Regulation 40 C - Section 12 (2) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - Based on Regulation 40C, it is clear that the Regulator, the IBBI brought this Regulation to meet the eventualities of the Covid 19 pandemic. It is stated that the period of lockdown imposed by the Central Government in the wake of the Covid-19 outbreak shall not be counted for the timeline for any activity that could not be completed due to such lockdown about a Corporate Insolvency Resolution Process - In the instant case, the IRP/RP conducted the CIR Process in the timeline with the provisions of the Code and the Regulations and, when required, invoked Regulation 40 C. The RP doesn't need to invoke Regulation 40 C as a matter of routine. Regulation 40 C provides exclusion of the timeline for completion of CIRP during the Covid-19 outbreak for any activity that could not be completed due to such lockdown. It excludes the timeline for the activities that could not be performed due to the lockdown during the Corporate Insolvency Resolution Process. On perusal of the minutes of the CoC, it appears that the RP apprised the CoC about the legal options available either to seek an extension of the timeline for submission of Resolution Plan or to make the decision for publication of fresh Form-G. It was the CoC's commercial decision that no extension of time for submission of Resolution Plan should be done and RP was directed to expedite the valuation process and check the feasibility and viability of the Resolution Plan already submitted and present the eligible Resolution Plan before the CoC for consideration. -In its commercial wisdom, the CoC discussed the viability and feasibility of the Resolution Plan and had taken such a decision which is pending consideration before the Adjudicating Authority. In the instant case, even though it is found that Regulation 30 C could have been applied for exclusion of 179 days on account of the unprecedented situation created by the Covid 19 pandemic and some of the Financial Creditors opined for fresh publication of form G for the invitation of EOI. But the COC had unanimously decided only for seeking exclusion of 179 days, i.e. from 5 May 2020 to 31 October 2020, for completion of CIRP. But the CoC, under its commercial wisdom, did not prefer for publication of Form-G afresh to invite Expression of Interest. Therefore such a decision of the CoC is not justifiable. The decision taken by the Adjudicating Authority needs no interference - Appeal dismissed.

Summary

Issues Involved:
1. Exclusion of the period from CIRP due to Covid-19 lockdown.
2. Alleged violation of Regulation 40 C by the Resolution Professional.
3. Commercial wisdom of the Committee of Creditors (CoC).
4. Judicial review of CoC's decisions.
5. Interests of all stakeholders in the Corporate Debtor.

Issue-wise Detailed Analysis:

1. Exclusion of the period from CIRP due to Covid-19 lockdown:
The Corporate Insolvency Resolution Process (CIRP) for the Corporate Debtor was initiated on 5 May 2020 during the Covid-19 lockdown. Due to the lockdown, various CIRP activities could not be completed within the prescribed timelines. The CoC resolved to seek an extension by excluding the period from 5 May 2020 to 31 October 2020. The Adjudicating Authority allowed the exclusion under Section 12(2) of the Insolvency and Bankruptcy Code, 2016, and Regulation 40 C of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

2. Alleged violation of Regulation 40 C by the Resolution Professional:
The Appellant, a shareholder, contended that the Resolution Professional (RP) violated Regulation 40 C by not considering the interests of all stakeholders and merely seeking an exclusion to complete formalities. The RP was accused of not considering the Corporate Debtor's interests as a going concern or the stakeholders' investments. The RP's actions were deemed unilateral and against the regulation's intended purpose.

3. Commercial wisdom of the Committee of Creditors (CoC):
The CoC, in its commercial wisdom, decided not to extend the timeline for submitting the Resolution Plan or re-issue Form G but to expedite the valuation process and consider the already submitted Resolution Plans. This decision was based on the understanding that the lockdown had impacted potential Resolution Applicants' ability to submit Expressions of Interest (EOI). The CoC's decision was unanimous and not justiciable as per the Supreme Court's precedent in K. Sashidhar v. Indian Overseas Bank.

4. Judicial review of CoC's decisions:
The Supreme Court has held that the commercial wisdom of the CoC is paramount and not subject to judicial review. The CoC's decision to seek exclusion of time from the CIRP was a commercial decision that the Adjudicating Authority or the Appellate Authority cannot question. The decision to exclude the period was based on the CoC's commercial assessment and was therefore upheld.

5. Interests of all stakeholders in the Corporate Debtor:
The Appellant argued that the RP acted solely to recover bad loans and repay creditors without safeguarding the Corporate Debtor's assets or considering the stakeholders' interests. The Appellant also contended that the RP should have sought a complete exclusion of the timeline and activities during the excluded period. However, the CoC's decision to exclude the period was based on a commercial assessment, and the RP's actions were in line with the Code and Regulations.

Conclusion:
The Appellate Tribunal dismissed the Appeals, upholding the Adjudicating Authority's decision to exclude the period from 5 May 2020 to 31 October 2020 from the CIRP. The Tribunal emphasized the commercial wisdom of the CoC and the limited scope for judicial review of such decisions. The Tribunal found no merit in the Appellant's contentions regarding the RP's alleged violations and the interests of stakeholders. The decision of the CoC was deemed not justiciable, and the exclusion of the period was upheld as necessary and appropriate under the circumstances.