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TMI Blog2022 (1) TMI 717X X X X Extracts X X X X X X X X Extracts X X X X ..... en excluded, the Company would have gone into Liquidation, which stage of Corporate Death should be the last resort as envisaged by the Hon ble Supreme Court in a catena of Judgements; that keeping in view the scope, spirit and objective of the Code and reading Section 12 together with Regulation 40C and also the unforeseen pandemic in mind, the Adjudicating Authority has rightly excluded the period of 87 days from the CIRP period - Appeal dismissed. Nomination of IRP/RP for R-3 company - seeking a direction to remove the first Respondent as the IRP and forward the name of Mr. Munish Kumar Sharma to IBBI for its confirmation as the IRP - HELD THAT:- It is not in dispute that in the 1st CoC Meeting held on 18.03.2021, 6 out of the 9 Members of the CoC present at the Meeting voted in favour of the first Respondent to appoint him as RP of the Corporate Debtor . In the 2nd CoC Meeting held on 07.04.2021, 7 out of the 9 Members of the CoC voted in favour of the first Respondent to appoint him as the Resolution Professional of the Corporate Debtor. But it is seen that the first Respondent was neither appointed as the RP nor was he replaced. Hence, he has been continuing as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent No.1: Dr. U.K. Chaudhary, Sr. Advocate along with Mr. Nikhil Kumar Verma, Mr. Mansumyer Singh and Mr. Rahul Sharma, Advocates. For the Respondent No. 2: Mr. Vijay Nair, Mr. Manoranjan Sharma, Ms. Sakshi Kapoor, Advocates. For IRP:Mr. Sandeep Chandna, Advocate. JUDGEMENT [ Per; Shreesha Merla, Member (T) ] 1. Challenge in this Company Appeal (AT) (Insolvency) No. 619 of 2021 is to the Impugned Order dated 03.08.2021 passed by the Learned Adjudicating Authority (National Company Law Tribunal, New Delhi, Court III) in I.A. 3146/2021 U/s 11 in IB 1600/(ND)/2018, whereby and whereunder the Learned Adjudicating Authority has excluded 87 days from the calculation of 180 days exercising its powers under Rule 11 of the NCLT Rules, 2016, on an Application preferred by the IRP. By the Impugned Order, the Learned Adjudicating Authority has observed as follows: This is an Application filed under Rule 11 of the NCLT Rules, 2016 read with Regulation 40 (c) of the IBBI (CIRP) Regulations, 2016 for seeking exclusion of 87 days from the calculation of 180 days as provided by Section 12 of Insolvency Bankruptcy Code, 2016. The Counsel for the Insolvency Resolu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Settlement was arrived at on 14 January 2021 between the first respondent and second respondent; and (v) The agenda to the notice (page 62 of the paper book) would indicate that the claim of the appellant to the extent as acknowledged has been quantified at ₹ 840 crores (representing 44% of the dues), while the claim which is due to the second respondent is quantified at ₹ 297 crores (representing 15.4% of the dues). 2. Mr Shyam Divan has submitted that having due regard to the provisions of Section 12A of the Insolvency and Bankruptcy Code 2016, once the application has been admitted under Sections 7, 9 or 10, as the case may be, withdrawal of the application can be made by the applicant with the approval of a 90% voting share of the Committee of Creditors, in such manner as may be prescribed. Regulation 30A provides for the manner in which the withdrawal can take place. Section 12A was enforced with effect from 6 June 2018. Regulation 30A has been enforced with effect from 25 July 2019. 3. Apart from the above provisions, reliance has also been placed on Rule 8 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016, under wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 73 to 75 in support of his case. It is clear from Regulation 340 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, (hereinafter referred to as the Regulations ) that it is the CoC which has to instruct the IRP to file an Application for extension of time period for the CIRP and the IRP shall do so upon receiving the CoC s instructions. The commercial wisdom of the CoC is non-justiciable and judicial intervention is not permitted as per the ratio laid down by the Hon ble Supreme Court in K Sashidhar Vs. Indian Overseas Bank (2019) 12 SCC 150. The IRP is the facilitator of the CIRP and cannot go against the instructions of the CoC as observed by the Hon ble Supreme Court in Swiss Ribbons (P) Ltd. Vs. Union of India (2019) 4 SCC 17, para 91. The definition sought to be drawn by the IRP between extension and exclusion is without any basis. In both the cases, the time period for the IRP increases and therefore the CoC s approval is required. The contention of the IRP that the CoC s approval is not required for seeking exclusion of time is only an afterthought which is evident from the fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake away the right of the IRP/RP for filing an Application before the Adjudicating Authority to meet the ends of justice and keep the Corporate Debtor alive and as a going concern . In support of his contention, reliance is placed on decision of this Tribunal in Sudip Bhattacharya, Resolution Professional of Reliance Naval and Engineering Ltd. , Company Appeal (AT) (Insolvency) No. 858 of 2020, in which this Tribunal has excluded the period of lockdown with effect from 25th March 2020 till 31st August 2020 while computing the period of CIRP. The IRP could not work properly due to the lockdown imposed by the Govt. of Delhi and Govt. of Haryana from 19.04.20201 to 07.06.2021 and the IRP herein and his whole family tested positive and recovered only in end of May, 2021. Though the Appellant Counsel raised an objection during the hearing, the Adjudicating Authority took a view on the basis of the grounds mentioned, seeking exclusion and decided to allow the Application to keep the Corporate Debtor as the going concern . Regulation 40C of the CIRP Regulations in spirit also applies to the period of lockdown. This issue is squarely covered by the Judgement of this Tribunal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. To discuss and ratify the expenses/fees to Valuers to enable them to continue work on valuation exercise in the CIRP. 47.886 (No. of Voters 04) 14.648 (No. of Voters 05) Not approved Assessment: 5. The brief point which falls for consideration in this Appeal is whether the approval of the CoC under Section 12(2) of the Code is mandatory for seeking exclusion of time even if it is sought on grounds of lockdown/time lost during the period of any Stay /Status Quo /or for any other reason. It is the case of the Appellant that be it exclusion or extension, Section 12(2) i.e., approval of 66% of Voting Shares of the Members of the CoC is mandatory and that the act of the IRP in going ahead with the filing of the Application before the Adjudicating Authority seeking exclusion of the period of 87 days, even if it is on the ground of lockdown, is against the provisions of the Code. 6. In the Minutes of the 3rd CoC Meeting held on 07.07.2021 one of the matters to be discussed and listed in the Agenda was filing of Application/s before the NCLT for exclusion/extension of timelines . The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Share since it has to be read with Section 12(1) of the Code and there is no mandatory provision for exclusion of the period spent in lockdown and the period lost during any stay granted. Regulation 40C of Regulations is detailed as hereunder: 40C. Notwithstanding the time-lines contained in these regulations, but subject to the provisions in the Code, the period of lockdown imposed by the Central Government in the wake of Covid-19 outbreak shall not be counted for the purposes of the time-line for any activity that could not be completed due to such lockdown, in relation to a corporate insolvency resolution process 9. It is seen from the aforesaid Regulation that subject to the provisions of the Code, for the period of lockdown (imposed by the Central Government in the wake of COVID-19 outbreak), can be excluded for the purpose of timeline for any activity that could not be completed during such lockdown. 10. The period of 180 days of the Corporate Debtor /R-3 expired on 09.06.2021. For better understanding of the case, the calculation of 87 days is detailed as hereunder: S. No. Date Event ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . A perusal of the Impugned Order dated 03.08.2021, shows that the Adjudicating Authority had heard both the Counsels and exercised its discretion under Rule 11 of the NCLT Rules, 2016, and allowed the exclusion of 87 days. This Tribunal in its Order dated 19.08.2021 directed for maintaining Status Quo as it exists today qua the Impugned Order. It is the case of the IRP that it was interpreted that the Status Quo shall be maintained as it exists at the time of passing the Order on 19.08.2021. Therefore, as on 19.08.2021, 87 days had already been excluded from the CIRP period of 180 days by the Adjudicating Authority vide Impugned Order. This Tribunal in Bhim Sain Goyal Vs. The American Swan Lifestyle Co. Pvt. Ltd (Under CIRP) Company Appeal (AT) (Insolvency) No. 1067 of 2020, held as follows: We set aside the impugned order and while allowing the prayer direct exclusion of time w.e.f 20th March, 2020 to 2nd September, 2020 in reckoning of the ordinary Corporate Insolvency Resolution Process period viz. 180 days. Beyond that, if an occasion arises for seeking extension of time based on cogent reasons, the Resolution Professional shall be at liberty to seek the same from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extension shall not be granted more than once . 14. The aforenoted ratio is with respect to extension of the timelines keeping in view the strict timelines to be adhered to under the Code and is dated 04.10.2018 prior to the Pandemic, whereas Regulation 40C was inserted by Notification No. IBBI/2020 21/GM/Regulation 059 dated 20.04.2020, w.r.e.f. 29.03.2020. 15. Simply put, the dictionary meaning of extension is the act of lengthening, stretching out or enlarging the scope of something, the additional period of time given to one to meet one end; and dictionary meaning of exclusion is an instance of leaving something or someone out, barring, keeping out, eliminate, rule out, facing out etc. The extension of 87 days would necessarily mean 180+87 days and exclusion of 87 days would essentially mean 180-87 days and therefore we are of the view that there is a clear distinction between the words extension and exclusion and the Adjudicating Authority has rightly relied on Regulation 40C of the Regulations to keep the Company a going concern . We are also conscious of the fact that the Appellant itself constituted approximately 42% Voting Share and it was dissen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Admission of the Adjudicating Authority on the ground that it was passed by one single Member and remanded the matter back to the Adjudicating Authority to be heard afresh on merits relating to Admission of Application. As regarding the fee of Resolution Professional, it was directed that the Adjudicating Authority will decide the same in accordance with law and in case Section 7 Application is admitted, it will be decided by the Committee of Creditors as per the provisions of the Code. It is seen from the record that the present IRP/first Respondent continued to perform his functions under Section 16(5) of the Code. It is not in dispute that in the 1st CoC Meeting held on 18.03.2021, 6 out of the 9 Members of the CoC present at the Meeting voted in favour of the first Respondent to appoint him as RP of the Corporate Debtor . In the 2nd CoC Meeting held on 07.04.2021, 7 out of the 9 Members of the CoC voted in favour of the first Respondent to appoint him as the Resolution Professional of the Corporate Debtor. But it is seen that the first Respondent was neither appointed as the RP nor was he replaced. Hence, he has been continuing as the RP as per the provisions of Section 16(5) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any time during the corporate insolvency resolution process, the committee of creditors is of the opinion that a resolution professional appointed under section 22 is required to be replaced, it may replace him with another resolution professional in the manner provided under this section. (2) The committee of creditors may, at a meeting, by a vote of sixty-six per cent of voting shares, resolve to replace the resolution professional appointed under section 22 with another resolution professional, subject to a written consent from the proposed resolution professional in the specified form.] (3) The committee of creditors shall forward the name of the insolvency professional proposed by them to the Adjudicating Authority. (4) The Adjudicating Authority shall forward the name of the proposed resolution professional to the Board for its confirmation and a resolution professional shall be appointed in the same manner as laid down in section 16. (5) Where any disciplinary proceedings are pending against the proposed resolution professional under sub-section (3), the resolution professional appointed under section 22 shall continue till the appointment of another reso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the IRP. 23. Further, it is submitted that the Order of 19.08.2021 passed by this Tribunal directing the Status Quo , was uploaded on 23.08.2021 in the evening and the Meeting was convened in the morning of 23.08.2021 and within the time period extended by the Adjudicating Authority vide Impugned Order dated 03.08.2021. The Respondent drew our attention to the Order of the Hon ble Supreme Court in Indiabulls Housing Finance Limited Vs. Raj Singh Gehlot Ors. in Civil Appeal No. 717 of 2021, whereby, the Order of 18.01.2021 in Company Appeal (AT) (Insolvency) No. 06 of 2021 passed by this Tribunal was confirmed. 24. On perusal of the Minutes of the Meeting dated 23.08.2021, we observe that it was convened at 11:30 AM. The material on record also establishes that the notice for the Meeting of the CoC was admittedly given on 13.08.2021 but was later postponed due to repeated requests by various creditors, including the Applicant and was finally convened on 23.08.2021. Additionally, we also observe that the Order of this Tribunal dated 03.08.2021 states, in the meanwhile, Status Quo as exists today qua the Impugned Order shall be maintained . It was interpreted by the IRP ..... X X X X Extracts X X X X X X X X Extracts X X X X
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