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2021 (6) TMI 46 - Tri - IBCPublication of Invitation for Expression of Interest - forbearance from functioning as Resolution Professional in respect of the 3rd Respondent M/s. Kamachi Industries Limited. - Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 r/w Rule 11 of the National Company Law Tribunal Rules, 2016 and Regulation 40A C of the Insolvency And Bankruptcy Board of India (Insolvency Resolution Process For Corporate Persons) Regulations, 2016 - HELD THAT - In relation to the timelines as fixed by the IBC, 2016 primarily under Section 12 of the IBC, 2016, the Hon'ble Apex Court in the judgement of COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS 2019 (11) TMI 731 - SUPREME COURT had an occasion to consider in light of the amendment made to Section 12 of IBC, 2016 by virtue of Insolvency Bankruptcy Code (Amendment Act), 2019 with effect from 16.08.2019 as to whether 330 days period is mandatory or directory. It is also required to be seen that in the present instance, apart from the delay arising out of any litigation, the nation itself is confronted with a pandemic and in the circumstances the applicability of timelines which had been fixed under Regulation 40A for the completion of the CIR Process by IBBI, the Regulation itself had chosen to exclude from CIR Process the timelines in the wake of COVID-19 under Regulation 40C - it is seen that the outer limit of 330 days has not been completed (i.e.,) at the time when this Application had been moved before this Tribunal. It is also required to be seen that even as per the submission of the Ld. Senior Counsel for the Applicant, the nation is facing an extraordinary situation due to COVID-19 pandemic and a sporadic lockdown is being imposed by the Central Government as well as the State Government which in effect cripples the functioning of RP during the CIRP in a seamless manner. In relation to the claim of the Applicant that because of the overshooting of the timeline and in the circumstances as to whether the CIR Process would become a nullity and that the CIRP is required to be suspended, the Hon'ble NCLAT in the matter of Committee of Creditors of Rosewood Trexim Pvt. Ltd. Through Resolution Professional in Company Appeal (AT) (Insolvency) No. 1066 of 2020 has held that the CoC which was in existence at the time when the lockdown came into force as a sequel to the outbreak of COVID-19 declared as pandemic resulting in all activities related to trade and commerce business reaching to a grinding halt, CoC as an institution cannot be said to have got dissolved, more so, when taking factors of the pandemic into consideration and also in exercise of suo-moto jurisdiction of the Hon'ble Apex Court and the Hon'ble NCLAT wherein the limitation stood excluded - the CoC would not be deemed to have been dissolved at least for the purposes of passing of a resolution seeking exclusion of lockdown period and extension of the CIRP period beyond the prescribed time of 180 days and also allowed exclusion of 203 days due to COVID-19 pandemic has also granted extension of the CIRP period by 90 days. This Application stands dismissed.
Issues Involved:
1. Request for stay of proceedings pursuant to publication of Invitation for Expression of Interest. 2. Forbearance of the Resolution Professional from functioning. 3. Adherence to timelines prescribed under the Insolvency and Bankruptcy Code (IBC), 2016. 4. Applicability of Section 10A of IBC, 2016. 5. Suspension of the Corporate Insolvency Resolution Process (CIRP). Detailed Analysis: 1. Request for Stay of Proceedings: The application sought a stay of all further proceedings following the publication of the Invitation for Expression of Interest dated 11.08.2020. The Tribunal noted that the CIRP of the Corporate Debtor was initiated on 19.02.2020 based on an application by the State Bank of India, a Financial Creditor. The Interim Resolution Professional (IRP) was appointed by the Tribunal on the same date. Despite an appeal, the Hon'ble NCLAT did not grant a stay on the Tribunal's order. The Tribunal emphasized that the IRP was directed to ensure the company remained a going concern. 2. Forbearance of the Resolution Professional from Functioning: The applicant contended that the IRP had not adhered to the mandatory timelines prescribed under the IBC, 2016, and the associated regulations. It was argued that the IRP conducted the CIRP proceedings without necessary permissions from the Tribunal. The Tribunal, however, noted that the IRP's actions were under the supervision of the Committee of Creditors (CoC) and that the lockdown due to the COVID-19 pandemic was a valid impediment to adhering to the timelines. The IRP had also sought an extension of the timeline from the Tribunal. 3. Adherence to Timelines Prescribed under IBC, 2016: The Tribunal referred to the Hon'ble Supreme Court's judgment in the case of Committee of Creditors of ESSAR Steel India Limited vs. Satish Kumar Gupta & Ors, which held that the 330-day period for completing the CIRP is directory, not mandatory. The Tribunal noted that the nation was facing an extraordinary situation due to the COVID-19 pandemic, which justified the non-adherence to the strict timelines. The Tribunal also highlighted that Regulation 40C of the IBBI regulations allowed for the exclusion of the lockdown period from the CIRP timelines. 4. Applicability of Section 10A of IBC, 2016: The applicant argued that the CIRP should be suspended based on the insertion of Section 10A of the IBC, 2016, which bars the initiation of CIRP for defaults occurring after 25.03.2020. The Tribunal clarified that Section 10A does not apply to CIRP proceedings already initiated before this date. It only prevents the filing of new CIRP applications for defaults occurring post-25.03.2020. This interpretation was consistent with the Tribunal's earlier decision in the case of M/s. Siemens Gamesa Renewable Power Pvt. Ltd. vs. Ramesh Kymal, upheld by both the Hon'ble NCLAT and the Hon'ble Supreme Court. 5. Suspension of the CIRP: The Tribunal dismissed the claim that the CIRP should be suspended due to the overshooting of the timeline. It referred to the Hon'ble NCLAT's decision in the Committee of Creditors of Rosewood Trexim Pvt. Ltd., which held that the CoC would not be deemed dissolved due to the pandemic and allowed for the extension of the CIRP period. The Tribunal found that the IRP had acted diligently despite the constraints imposed by the lockdown and that the continuation of the CIRP was justified. Conclusion: The Tribunal dismissed the application, finding no merit in the claims. The IRP's actions were deemed appropriate given the extraordinary circumstances of the COVID-19 pandemic, and the timelines prescribed under the IBC, 2016, were considered directory rather than mandatory. The application was dismissed without costs.
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