2021 (7) TMI 494 - Tri - Insolvency and Bankruptcy

Seeking grant of 45 days' time to the Directors of the applicant company to clear off the debt due to the Respondent in the IBA and the other Creditor CSB Bank - re-structuring the applicant company - HELD THAT - To arrive at a conclusion whether further time can be granted to the applicants to settle the matter by restructuring the company, we have gone through the 2005 Report of the Expert Committee on Company Law (JJ Irani Committee Report) in which it is stated that to provide an opportunity for genuine effort to explore restructuring/rehabilitation of potentially viable businesses with consensus of stakeholders reasonably arrived at. Where revival/rehabilitation is demonstrated as not being feasible, winding up should be resorted to. Where circumstances justify, the process should allow for easy conversion of proceedings from one procedure to another. This will provide opportunity to businesses in liquidation to turnaround wherever possible. Similarly, conversion to liquidation might be appropriate even after a rehabilitation plan has been approved if such a plan was procured by fraud or the plan can no longer be implemented. Even though the time sought by the Applicants have already expired, taking into account the fact that the applicants have filed this application on 09.04.2021, exercising the discretionary power of this Tribunal under Rule 11 of the NCLT Rules, 2016, this Tribunal dispose of the application - The Applicants are granted 30 days' time from today to clear off the debt due to the Respondent in the IBA and another Creditor CSB Bank, so as to get re-structured the Applicant Company. Dated the 28th day of June, 2021.

Summary

Issues:
1. Application for granting time to clear off debts and restructure the company.
2. Dispute over liquidation proceedings and restructuring proposal.
3. Consideration of extension of time for restructuring efforts.
4. Application of discretionary power under NCLT Rules.

Analysis:

Issue 1: Application for granting time to clear off debts and restructure the company
The suspended directors of the Corporate Debtor Company filed an application seeking 45 days to clear debts owed to the Respondent and another Creditor to facilitate the restructuring of the company. The Applicants emphasized urgent steps to settle liabilities and revive the company, disputing the claims made by the Respondent.

Issue 2: Dispute over liquidation proceedings and restructuring proposal
The Liquidator countered the Applicants' claims, stating that a plan for restructuring under Section 230 of the Companies Act, 2013 should have been submitted within 90 days from the commencement of liquidation. Despite granting the Applicants 90 days to propose a restructuring plan, they failed to do so within the stipulated period, leading to a dispute over the extension of time.

Issue 3: Consideration of extension of time for restructuring efforts
The Tribunal deliberated on whether to grant additional time to the Applicants to settle debts and restructure the company. Referring to the JJ Irani Committee Report, the Tribunal highlighted the importance of allowing genuine efforts for restructuring viable businesses before resorting to winding up. The Tribunal also considered the precedent set by the NCLAT in directing liquidators to explore revival options before asset sale.

Issue 4: Application of discretionary power under NCLT Rules
Exercising its discretionary power under Rule 11 of the NCLT Rules, 2016, the Tribunal granted the Applicants 30 days to clear debts and restructure the company. The Tribunal emphasized that no further extension would be provided, and failure to comply would allow the Liquidator to proceed as per relevant rules.

In conclusion, the Tribunal balanced the interests of the parties involved by granting a limited extension for debt clearance and restructuring, emphasizing the need for timely compliance and adherence to legal procedures in insolvency proceedings.