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2022 (1) TMI 166 - AT - Insolvency and BankruptcySeeking extension of Corporate Insolvency Resolution Process (CIRP) - HELD THAT - The object of the IB Code is the resolution of the insolvency of a Corporate Debtor. Efforts of all stakeholders has to be towards resolution of insolvency. There can be no dispute that the law mandates that CIRP proceedings have to be concluded within 330 days. Hon ble Supreme Court, after noticing the above requirement of 330 days in Section 12, laid down in COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS 2019 (11) TMI 731 - SUPREME COURT that normally as per law, insolvency resolution process has to be completed within 330 days maximum, but in exceptional cases, the period can be extended by Adjudicating Authority/ Appellate Tribunal. From the materials on the record, it is clear that CIRP period along with extensions granted from time to time was to come to an end on 15th September, 2021/ 30th September, 2021 and in the Application filed by Resolution Professional, further extension was sought. There is no doubt that maximum period of 330 days has already come to an end in the month of September 2021. The Adjudicating Authority made observation that even after 730 days, there is no sight of completion of CIRP and RP and COC merely want to explore the possibility of Resolution. Adjudicating Authority lost sight that after extension given from time to time the period expired only in the month of September 2021 - Adjudicating Authority ought to have given reasonable extension of period for proceeding further with Resolution Project Wise for which 25 Expression of Interests have already been received with the Resolution Professional. Appeal allowed.
Issues Involved:
1. Rejection of the Application for extension of the Corporate Insolvency Resolution Process (CIRP). 2. Project-wise resolution of the Corporate Debtor's assets. 3. Legal precedents and statutory provisions regarding the extension of CIRP beyond 330 days. Issue-wise Detailed Analysis: 1. Rejection of the Application for Extension of CIRP: The appeals were filed against the judgment dated 29.09.2021 by the National Company Law Tribunal (NCLT), Mumbai Bench, which rejected the I.A. No.2118 of 2021 filed by the Resolution Professional seeking an extension of the CIRP. The appellants, comprising various homebuyers' associations and the ex-promoter/director of the Corporate Debtor, were aggrieved by this rejection. The CIRP was initiated by an order dated 20th August, 2019, under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IB Code), against the Corporate Debtor, a real estate company with several housing projects. Despite the issuance of Form-G and substantial efforts, no resolution plan was received. The Committee of Creditors (CoC) decided to consider a re-run of the CIRP and explore the possibility of project-wise resolution, which was put to e-voting on 08.09.2021. 2. Project-wise Resolution of the Corporate Debtor's Assets: The CoC, in its 18th meeting on 08.09.2021, approved the division of the Corporate Debtor's assets into eight projects for exploring the possibility of partial/piecemeal resolution. The Resolution Professional was authorized to invite Expressions of Interest (EOI) for the entire company as a going concern or for individual projects. Following this, 25 EOIs were received. However, the Adjudicating Authority observed that the CoC's decision was influenced by pressure from homebuyers and noted that even after more than 730 days, there was no sight of completion of the CIRP. The Authority thus rejected the application for an extension. 3. Legal Precedents and Statutory Provisions Regarding Extension of CIRP Beyond 330 Days: The appellants argued that the Adjudicating Authority failed to consider the ratio laid down by the Hon'ble Supreme Court in the case of "Committee of Creditors of Essar Steel India Ltd. vs. Satish Kumar Gupta and Ors. (2020) 8 SCC 531," which allows for the extension of the CIRP period beyond 330 days in exceptional cases. The Supreme Court held that the time taken in legal proceedings should not harm a litigant and that the CIRP should be completed within 330 days, including extensions, unless exceptional circumstances justify an extension. The appellants contended that the homebuyers, who had invested their finances and taken loans, would suffer the most if the Corporate Debtor was liquidated. They emphasized that the CoC's decision for project-wise resolution was in the best interest of all stakeholders and should have been given due consideration. Judgment: The Tribunal considered the submissions and noted that the CoC's decision for project-wise resolution was taken on 08.09.2021, and 25 EOIs were received, indicating interest in the project-wise resolution. The Tribunal observed that the Adjudicating Authority failed to give due weight to the CoC's decision and erred in not allowing a reasonable period for proceeding further with the project-wise resolution. The Tribunal emphasized that the object of the IB Code is to resolve insolvency and that liquidation should be a last resort. It cited previous judgments, including the Essar Steel case and the Tribunal's own decision in "Company Appeal (AT) (Insolvency) No. 926 of 2019 - Flat Buyers Association Winter Hills – 77, Gurgaon vs. Umang Realtech Pvt. Ltd through IRP & Ors.," which supported the extension of the CIRP period in exceptional cases. Conclusion: The Tribunal allowed the appeal, set aside the Adjudicating Authority's order dated 29.09.2021, and granted an extension of 90 days from the date of the order for the Resolution Professional and the CoC to complete the project-wise resolution as decided in their meeting on 08.09.2021. No order as to costs was made.
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