2022 (1) TMI 265 - AT - Insolvency and Bankruptcy

Approval of Resolution Plan - seeking modification in the Resolution Plan - time limit of 330 days provided in Section 12 of IBC is mandatory or not? - Whether the subject matter of present Application IA No.479/KB/2021 is different to the prayer in IA No.426/KB/2021? - HELD THAT - In the present case, the Adjudicating Authority vide Order dated 16.03.2021 condoned the delay of 43 days in submitting the Resolution Plan by the CP Ispat Pvt. Ltd. (R2) and RP was directed that the Resolution Plan be placed before the COC for consideration on or before 22.03.2021 and the COC shall be deliberate on the Resolution Plan in its feasibility and viability and take a decision on or before 25th March, 2021. This Order was not challenged by the Appellant - In the earlier Application (I.A. No. 426/KB/2021), it was prayed that the COC be restrained from considering the Resolution Plan because at that time the Resolution Plan was pending before the COC for consideration. However, the Adjudicating Authority vide Order dated 30.04.2021 has dismissed the Application holding that voting has already been taken place on resolution plan and against that order when the Appeal came for hearing before this Appellate Tribunal at that time the resolution plan has already been approved by the CoC and the Application was pending before the Adjudicating Authority for approval of Resolution Plan. Therefore, this Appellate Tribunal declined to interfere in the order passed by the Adjudicating Authority. When this Appellate Tribunal has already overruled all the objections of the Appellant and directed the Adjudicating Authority to consider the Application for approval of Resolution Plan then there is no occasion for the Appellant to file the Application praying that the Application filed by the RP for approval of plan be dismissed and liquidation order be passed. We are in agreement with the finding of Ld. Adjudicating Authority that the subject matter of this Application is similar to the prayer in earlier Application I.A. No. 426/KB/2021 and the issue was settled on 30.04.2021 which is upheld by this Appellate Tribunal on 02.08.2021. Whether the time limit of 330 days provided in Section 12 of IBC is mandatory? - HELD THAT - The object of the IBC 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. The Hon ble Supreme Court has held that in exceptional cases, time can be extended. The general rule being that 330 days is the outer limit within which resolution of the stressed assets of the Corporate Debtor must take place beyond which the Corporate Debtor is to be driven into liquidation and also held that in 2nd proviso to sub-section (3) of Section 12 the word mandatorily as being manifestly arbitrary under Article 14 of Constitutional of India and as being an excessive and unreasonable restriction on the litigant s right to carry on business under Article 19 (1)(g) of the Constitution. Therefore, strike down the word mandatorily Thus, it is settled law that the time limit for completion of Insolvency Resolution Process provided in Section 12 of IBC is not mandatory. Therefore, we are unable to be convinced with the argument of learned Counsel for the Appellant that in time limit of 330 days provided in Section 12(3) if the resolution is not completed, the Adjudicating Authority is bound to order for liquidation. Appeal dismissed.

Summary

Issues Involved:
1. Whether the subject matter of present Application IA No.479/KB/2021 is different from the prayer in IA No.426/KB/2021?
2. Whether the time limit of 330 days provided in Section 12 of IBC is mandatory?

Issue-wise Detailed Analysis:

Issue No. (i): Whether the subject matter of present Application IA No.479/KB/2021 is different from the prayer in IA No.426/KB/2021?

The Adjudicating Authority, in its order dated 16.03.2021, condoned the delay of 43 days in submitting the Resolution Plan by CP Ispat Pvt. Ltd. (R2) and directed the Resolution Professional (RP) to place the Resolution Plan before the Committee of Creditors (CoC) for consideration by 22.03.2021, with the CoC to deliberate and decide by 25.03.2021. This order was not challenged by the Appellant, thus attaining finality. The CoC did not strictly adhere to this timeline and approved the Resolution Plan on 08.04.2021. The Appellant challenged this action through IA No.426/KB/2021, seeking an injunction to restrain the CoC from considering the Resolution Plan, which was dismissed by the Adjudicating Authority on 30.04.2021. This dismissal was upheld by the Appellate Tribunal on 02.08.2021. Subsequently, the Appellant filed IA No.775/KB/2021, seeking dismissal of the RP's application for approval of the Resolution Plan and an order for liquidation. The Adjudicating Authority dismissed this application on 08.10.2021, noting that the subject matter was similar to IA No.426/KB/2021 and had already been settled. The Appellate Tribunal agreed, finding no new grounds to consider and affirming the finality of the previous decisions.

Issue No. (ii): Whether the time limit of 330 days provided in Section 12 of IBC is mandatory?

The object of the IBC is the resolution of the insolvency of a Corporate Debtor, and efforts must be directed towards this goal. While the law mandates that CIRP proceedings should conclude within 330 days, the Supreme Court in the case of Committee of Creditors of Essar Steel India Ltd. vs. Satish Kumar Gupta and Ors. (2020) 8 SCC 531, recognized that in exceptional cases, this period can be extended by the Adjudicating Authority or Appellate Tribunal. The Supreme Court struck down the term "mandatorily" in Section 12(3) as manifestly arbitrary, holding that in exceptional cases, where delays are due to factors beyond the control of the litigants, the period can be extended beyond 330 days. The general rule remains that 330 days is the outer limit, but exceptions can be made in the interest of all stakeholders to avoid liquidation. Thus, the Appellate Tribunal found that the time limit in Section 12 is not mandatory and dismissed the Appellant's argument that failure to complete the resolution within 330 days necessitates liquidation. Consequently, the appeal was dismissed with no orders as to costs.