2018 (2) TMI 885 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - Time limit for completion of insolvency resolution process - extension of the CIRP more than 90 days after the completion of 180 days - Held that - It is settled principle that the proviso cannot be torn apart from the main enactment nor can it be used to nullify by implication what enactment clearly says, nor set at naught the real object of main enactment, unless the words of proviso are such that it is its necessary effect. To support the view, a reference may be made to Maxwell on the Interpretation of Statues 10th Edition page 7 states thus if the choices is between two interpretations, the narrower of which would fail to achieve the manifest purpose of the legislation, we should avoid a construction which would reduce the legislation to futility and should rather accept the holder construction based on the view that Parliament would legislate only for the purpose of bring about an effective result. In view of the legal position stated above, the second objection raised by the Counsel for the Operational Creditor stands rejected. Therefore, this Authority is satisfied that the CIRP could not be completed during 180 days plus 30 days in this matter, so there is a requirement to grant extension of CIRP for a further period of sixty days. Hence, the CIRP period in relation to the Corporate Debtor, viz., M/s. Forward Shoes (India), private Limited, is hereby extended for a further period of 60 days w.e.f. 15.01.2018 onwards.

Summary

Issues Involved:
- Extension of Corporate Insolvency Resolution Process (CIRP) beyond 180 days
- Validity of granting further extension of 90 days
- Interpretation of Section 12 of the Insolvency and Bankruptcy Code, 2016

Analysis:

Issue 1: Extension of CIRP beyond 180 days
The Tribunal considered an application seeking a 90-day extension for the CIRP of a Corporate Debtor. The Resolution Professional (RP) had submitted a tentative Resolution Plan, but the Operational Creditor objected to the extension, citing lack of valid reasons and minimal activity during the CIRP period. The RP had not invited prospective lenders or investors timely, and the Operational Creditor argued that the request for extension lacked justification.

Issue 2: Validity of granting further extension of 90 days
The Operational Creditor contended that the Adjudicating Authority had already exercised discretionary powers by granting a 30-day extension previously. The Tribunal emphasized the importance of giving RP adequate time to explore business revival possibilities. It noted that the RP had submitted a tentative Resolution Plan, requiring further consideration by the Committee of Creditors (CoC).

Issue 3: Interpretation of Section 12 of the Insolvency and Bankruptcy Code, 2016
The Tribunal analyzed Section 12(3) of the I&B Code, which allows for extensions beyond 180 days if the Adjudicating Authority deems necessary. The Operational Creditor argued that the proviso to Section 12(3) restricts extensions to once after the initial 180 days. However, the Tribunal held that the language of the provision was clear and unambiguous, emphasizing that the proviso cannot expand or limit the main provision's meaning.

The Tribunal referred to legal principles and precedents to support its interpretation, highlighting that the proviso should not nullify the main enactment's purpose. It concluded that the CIRP in this case warranted a further extension of 60 days, totaling 270 days, to facilitate the completion of the resolution process effectively.

Overall, the Tribunal dismissed the objections raised by the Operational Creditor and granted the extension as requested by the RP, emphasizing the statutory provisions and the need to ensure a thorough resolution process for the Corporate Debtor.