2025 (1) TMI 1099 - AT - IBC

Statutory interpretation of the provision of Section 101(1) of IBC - moratorium period prescribed under Section 101 of the Insolvency and Bankruptcy Code (IBC) is mandatory or directory - the period can be extended by the Adjudicating Authority or the Appellate Tribunal or not - error in not extending the moratorium period beyond 180 days during the Personal Insolvency Resolution Process (PIRP). HELD THAT - The principles for interpretation of statute are well settled. Reference made to the Constitution Bench Judgment of the Hon ble Supreme Court in the matter of State of UP Ors. Vs. Babu Ram Upadhyay 1960 (11) TMI 116 - SUPREME COURT Constitution Bench held that for determining as to whether statute is mandatory or directory the Court has to ascertain the real intention of the nature and the consequences which would follow from construing it from one way or other. Another Judgment of the Hon ble Supreme Court in the matter of Rajsekhar Gogoi Vs. State of Assam Ors. 2001 (5) TMI 979 - SUPREME COURT where Hon ble Supreme Court had occasion to consider Rule 206 of Assam Excise Rules 1945 which provided that tender must be in such form and contained such particulars as may be prescribed by the State Government and tenders not containing all the particulars shall be liable to be rejected. Arguments was raised before the Hon ble Supreme Court that the said provision is not mandatory which argument was rejected. Hon ble Supreme Court in the matter of Newtech Promoters Developers Private Limited Vs. State of Uttar Pradesh Ors. 2021 (12) TMI 892 - SUPREME COURT laid down that it is always advisable to interpret the legislative wisdom in the literary sense as being intended by the legislature and the Courts are not supposed to embark upon enquiry and find out the solution in substituting the legislative wisdom. The language of Section 101(1) is plain and clear outer limit of Moratorium is prescribed by providing that 180 days from date of commencement of admission of the Application or an Order is passed by the Adjudicating Authority on the Repayment Plan under Section 114 whichever is earlier thus on happening of the eventuality as prescribed as Section 101(1) Moratorium comes to an end. Conceding any power to the Adjudicating Authority or this Tribunal to extend the said period shall be plainly against the statutory scheme of Section 101(1). When the statutory scheme is clear and unambiguous there is no role of any interpretive process to find out the jurisdiction of NCLT to extend the period of Moratorium when statute provides a date for cessation of the Moratorium it cannot be extended by the Adjudicating Authority or by this Tribunal against the statutory intendment under Section 101(1). This Tribunal after noticing the provisions of Section 54D Section 54N relying on the Judgment of the Hon ble Supreme Court in Surendra Trading Company Vs. Jugilal Kamlapat Jute Mills Company Ltd. Ors. 2017 (9) TMI 1566 - SUPREME COURT and Judgment of the Hon ble Supreme Court in the matter of Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta Ors. 2019 (11) TMI 731 - SUPREME COURT came to the conclusion that the provisions of Section 54D does not contemplate any automatic termination of the PPIRP hence the Court had discretion to extend the time in an appropriate case. Conclusion - In view of the expressed provisions of Section 101(1) limiting the Moratorium period to 180 days on the date when the Order is passed by the Adjudicating Authority for Repayment Plan whichever is earlier. 180 days from commencement of the Moratorium has come to an end on 28.10.2024. The Moratorium has statutorily come to an end and could not be extended. Appeal dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the moratorium period prescribed under Section 101 of the Insolvency and Bankruptcy Code (IBC) is mandatory or directory, and if it can be extended by the Adjudicating Authority or the Appellate Tribunal.
• Whether the Adjudicating Authority erred in not extending the moratorium period beyond 180 days during the Personal Insolvency Resolution Process (PIRP).

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Nature of the Moratorium Period under Section 101 of IBC

• Relevant legal framework and precedents: Section 101 of the IBC prescribes a moratorium period of 180 days, which commences upon the admission of an application under Section 100. The provision states that the moratorium shall cease at the end of 180 days or when the Adjudicating Authority passes an order on the repayment plan, whichever is earlier.
• Court's interpretation and reasoning: The Tribunal interpreted Section 101 as providing a clear and unambiguous statutory scheme, where the moratorium period is mandatory and not subject to extension. The Tribunal emphasized that the language of the statute is plain and does not allow for interpretive processes to extend the moratorium.
• Key evidence and findings: The Tribunal considered the statutory language and previous judgments, including the Constitution Bench Judgment of the Supreme Court in 'State of UP & Ors.' Vs. 'Babu Ram Upadhyay', which established that the use of "shall" in a statute typically indicates a mandatory provision.
• Application of law to facts: The Tribunal applied these principles to conclude that the 180-day moratorium period prescribed by Section 101 is mandatory and cannot be extended by the Adjudicating Authority or the Tribunal.
• Treatment of competing arguments: The Tribunal rejected the appellant's argument that the 180-day period is directory and can be extended. It distinguished previous cases cited by the appellant, such as 'Vikas Gautamchand Jain' and 'P. Mohanraj & Ors.', as not applicable to the issue at hand.
• Conclusions: The Tribunal concluded that the moratorium period under Section 101 is mandatory and cannot be extended beyond 180 days.

Issue 2: Alleged Error by the Adjudicating Authority

• Relevant legal framework and precedents: The appellant argued that the Adjudicating Authority erred by not extending the moratorium, citing previous judgments and the objectives of the IBC.
• Court's interpretation and reasoning: The Tribunal held that the Adjudicating Authority's decision not to extend the moratorium was consistent with the statutory framework of the IBC.
• Key evidence and findings: The Tribunal considered the statutory language of Section 101 and the legislative intent behind the IBC, which aims to provide a time-bound resolution process.
• Application of law to facts: The Tribunal applied the statutory provisions to determine that the Adjudicating Authority acted within its jurisdiction by not extending the moratorium.
• Treatment of competing arguments: The Tribunal addressed the appellant's reliance on the judgment in 'Vikas Gautamchand Jain', clarifying that the case dealt with different provisions and circumstances.
• Conclusions: The Tribunal upheld the Adjudicating Authority's decision, finding no error in its refusal to extend the moratorium.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: "The language of Section 101(1) is plain and clear, outer limit of Moratorium is prescribed by providing that 180 days from date of commencement of admission of the Application or an Order is passed by the Adjudicating Authority on the Repayment Plan under Section 114 whichever is earlier thus on happening of the eventuality as prescribed as Section 101(1) Moratorium comes to an end."
• Core principles established: The moratorium period under Section 101 of the IBC is mandatory, and the Adjudicating Authority or Tribunal has no jurisdiction to extend it beyond the statutory 180 days.
• Final determinations on each issue: The Tribunal dismissed the appeal, affirming that no extension of the moratorium can be granted under the current statutory framework.