2021 (11) TMI 25 - AT - Insolvency and Bankruptcy

Seeking exclusion of period of Covid 19 pandemic along with the period that had lapsed due to non-availability of records - Section 65 of The Insolvency and Bankruptcy Code, 2016 (hereinafter called IBC) alongwith Section 12 of the IBC read with Regulation 40-C of The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate persons) Regulations, 2016 and Rule 11 of NCLT Rules, 2016 - HELD THAT - Sub section 3 of section 12 empowers the Adjudicating Authority to extend the duration of CIRP beyond 180 days upto a period which shall not be more than 90 days - It is quite clear from the averments made in the appeal that the Resolution Professional could not receive necessary cooperation from the erstwhile director of the Corporate Debtor, and consequently he had to file an application under Section 19(2) before the Adjudicating Authority, which was decided by the Adjudicating Authority. The resolution of CoC relating to filing of application for exclusion of the time period in the 5th meeting of CoC held on 29.8.2020 did not approve the request of the Resolution profession for filing of application for exclusion of time period, but left it to the wisdom of Resolution Professional. IBC provides that if the CIRP does not lead to satisfactory resolution of the Corporate Debtor in the timeline specified in section 12 of the IBC, necessary consequences relating to Corporate Debtor such as liquidation should follow. It is, therefore, duty of the Resolution Profession to bring such agenda, as may be necessary before CoC for decision. In the instant matter, this does not seem to have been done - The time period provided under IBC for completion of CIRP is 180 days as per section 12. If the CIRP is not completed within this time period, an explicit extension order is to be sought from the Adjudicating Authority, which can be of maximum of 90 days. From the averments made by the Resolution Profession and the arguments submitted before us, we do not find that after the expiry of 180 days from the date of commencement of CIRP, the Resolution Professional obtained approval of the CoC to file an application for extension of CIRP. Since the Resolution Professional could not receive any order in action with section 19(2) application, he should have filed an application for extension of CIRP as required under section 12, after a lapse of 180 days from the commencement of CIRP, after due approval of CoC. All this is requirement under Law, which cannot be lost sight of, and the Resolution Professional has been remiss in carrying out his responsibilities as per provisions of IBC. In such a situation, it is found that he is seeking extension of time period of CIRP in the garb of exclusion of time period which cannot be permitted. The Resolution Professional has not provided necessary and satisfactory reasons and justification for exclusion of the prayed time period in the CIRP - appeal dismissed.

Summary

Issues involved:
- Appeal under section 61 of Insolvency and Bankruptcy Code, 2016 regarding exclusion of time period due to Covid-19 pandemic and non-availability of records during Corporate Insolvency Resolution Process (CIRP).
- Interpretation of Regulation 40-C of The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate persons) Regulations, 2016.
- Decision-making authority regarding filing applications for exclusion of time period during CIRP.
- Application under Section 19(2) of IBC due to non-cooperation of Corporate Debtor's director.
- Compliance with time limits specified in IBC for completion of CIRP and seeking extension orders.
- Justification for exclusion of time period in CIRP and approval requirements from Committee of Creditors (CoC).

Analysis:
The appeal before the National Company Law Appellate Tribunal involved a Resolution Professional seeking exclusion of time period during the Corporate Insolvency Resolution Process (CIRP) due to Covid-19 pandemic and non-availability of records. The Resolution Professional relied on Regulation 40-C of The Insolvency and Bankruptcy Board of India Regulations, 2016, which allows for exclusion of lockdown period for activities affected by the pandemic. The Resolution Professional faced challenges due to non-cooperation from the Corporate Debtor's director, leading to an application under Section 19(2) of IBC. However, the Tribunal noted that the Resolution Professional did not seek approval for extension of CIRP within the specified time limits, as required by the law.

The Tribunal emphasized that the CIRP is a time-bound process, and any extension beyond the initial 180 days requires approval from the Committee of Creditors (CoC). In this case, the Resolution Professional failed to obtain CoC approval for extension of CIRP and instead sought exclusion of time period, which was not justified. The Tribunal highlighted the importance of following the procedural requirements under the IBC to ensure the timely resolution of Corporate Debtors.

Despite arguments citing judicial interventions in other cases for exclusion of time, the Tribunal found that the Resolution Professional did not provide sufficient justification or seek CoC approval for exclusion of time period in the present case. The Tribunal concluded that the Resolution Professional's actions did not warrant interference with the impugned order, and the appeal was dismissed at the admission stage. The judgment underscores the significance of adherence to statutory provisions and procedural requirements in insolvency proceedings to maintain the integrity and efficiency of the resolution process.