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TMI Blog2024 (8) TMI 1152X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Adjudicating Authority. The statute makes one thing clear that there is no concept of automatic termination of PPIRP after expiry of 120 days. No exception, can be taken for providing 120 days of completion of PPIRP. Since all IBC process have timelines, which have its own importance. Completion of process in a timeline has its own object and purpose - the Application which was filed by the RP before the Adjudicating Authority was on the strength of resolution passed by the CoC in its 3rd CoC Meeting held on 30.04.2024. The CoC, in its 3rd CoC Meeting has noticed that revised base Resolution Plan submitted by the Corporate Debtor is under consideration of the CoC. The Hon ble Supreme Court had occasion to consider the said second proviso in `Committee of Creditors of Essar Steel India Ltd. [ 2019 (11) TMI 731 - SUPREME COURT ]. The second proviso which provided for mandatory completion of CIRP within 330 days came for consideration before the Hon ble Supreme Court in the above case and Hon ble Supreme Court has struck down the word mandatorily . It was held by the Hon ble Supreme Court that in appropriate case even after 330 days, Adjudicating Authority or Appellate Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der, I.A. No. 769/(AHM)/2024 filed by the Resolution Professional (`RP ) praying for extension of period of Pre-Package Insolvency Resolution Process (`PPIRP ) for 60 days has been rejected. 2. Comp. App. (AT) Ins. No. 1173/2024 has been filed by the RP of Kethos Tiles Pvt. Ltd. and Comp. App. (AT) Ins. No. 1323/2024 has been filed by the Promotor of Kethos Tiles Pvt. Limited. 3. Brief facts necessary for deciding these Appeals are: i. M/s. Kethos Tiles Pvt. Ltd., a Micro Small Medium Enterprises (`MSME ) had filed an Application under Section 54C of Insolvency and Bankruptcy Code, 2016, (for short `The IBC ) to initiate PPIRP of the Corporate Debtor. ii. The Adjudicating Authority vide Order dated 04.01.2024, initiated PPIRP of the Corporate Debtor. Vikas Gautam Chand Jain was appointed the Resolution Professional to conduct PPIRP. iii. In pursuance of the Order passed by the Adjudicating Authority, the RP initiated PPIRP by making public announcement dated 06.01.2024, Committee of Creditors (`CoC ) was constituted. Publication was issued for initiation of Resolution Plan. Several other steps were taken in the PPIRP. iv. 3rd Meeting of the CoC was held on 30.04.2024. Members of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncept of automatic termination of PPIRP and Court cannot be held to lack jurisdiction to extend the period of PPIRP for reasonable period on valid grounds. It is submitted that IBC contains various provisions which uses the expression shall but the Hon ble Supreme Court and this Tribunal while interpreting the said provisions have held the provisions as directory. Learned Counsel for the Appellant has referred to provisions of Section 7(5) proviso, Section 9(5) proviso and Section 10(4) proviso, which uses expression shall . It is submitted that Hon ble Supreme Court held the said provisions directory. Learned Counsel for the Appellant referred to various other provisions of IBC and the Regulations which although used the expression shall but have been held to be directory. It is submitted that the same interpretation has to be put to Section 54D also and the Court is not denuded from its jurisdiction to extend the period of completion of PPIRP for reasonable period. It is submitted that statute does not provide for an automatic termination on expiry of 120 days. 8. As noted above, submissions of Counsel for the RP as Counsel for the Promotor have been one of the same, they are bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m threshold of not more than one crore rupees for initiating pre-packaged insolvency resolution process; (b) disposal of simultaneous applications for initiation of corporate insolvency resolution process and pre-packaged insolvency resolution process, pending against the same corporate debtor; (c) inserting a new Chapter III-A containing sections 54-A to 54-P to facilitate pre-packaged insolvency resolution process for corporate persons that are Micro, Small and Medium Enterprises; (d) penalty for fraudulent or malicious initiation of pre-packaged insolvency resolution process or with intent to defraud persons; (e) penalty for fraudulent management of corporate debtor during pre-packaged insolvency resolution process; (f) punishment for offences related to pre-packaged insolvency resolution process; and (g) certain amendments to the relevant provisions, which are consequential in nature. 5. The Bill seeks to achieve the above objectives. 10. From the statement of objects and reasons of the enactment, it is clear that said Amendment has been brought to provide for efficient and alternate framework for MSME sector, which is clear from Para 4 (c) of the statement of objects and reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intimates the Adjudicating Authority of the decision of the committee of creditors, approved by a vote of not less than sixty-six per cent. of the voting shares, to terminate the pre-packaged insolvency resolution process, the Adjudicating Authority shall pass an order under sub-section (1). (3) Where the Adjudicating Authority passes an order under sub-section (1), the corporate debtor shall bear the pre-packaged insolvency resolution process costs, if any. (4) Notwithstanding anything to the contrary contained in this section, where the Adjudicating Authority has passed an order under sub-section (2) of section 54J and the pre-packaged insolvency resolution process is required to be terminated under sub-section (1), the Adjudicating Authority shall pass an order- (a) of liquidation in respect of the corporate debtor as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1) of section 33; and (b) declare that the pre-packaged insolvency resolution process costs, if any, shall be included as part of the liquidation costs for the purposes of liquidation of the corporate debtor. 13. The provisions of Section 54D(1) provide PPIRP shall be completed within a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porate Debtor is under consideration. In the said meeting, the CoC noted that the period of PPIRP comes to an end on expiry of 120 days from the date of admission of PPIRP. The CoC further noted that period of PPIRP was expired on 03.05.2024 and the CoC requested the RP to file an application seeking extension of PPRIP period of 60 days. The resolution for seeking extension of PPIRP period was passed with 91.75% voting on 02.05.2024 by E-voting. A copy of 3rd CoC meeting and copy of e-voting is annexed as Annexure- C and Annexure D respectively. 6. In view of the above, the Applicant has filed this application seeking extension of time of PPIRP period by 60 days after the date of completion of PPIRP (120 days) i.e., on 03.05.2024. 17. It is thus clear that Application which was filed by the RP before the Adjudicating Authority was on the strength of resolution passed by the CoC in its 3rd CoC Meeting held on 30.04.2024. The CoC, in its 3rd CoC Meeting has noticed that revised base Resolution Plan submitted by the Corporate Debtor is under consideration of the CoC. 18. Now we need to look into the various Judgments of the Hon ble Supreme Court and this Tribunal where different provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure. However, we would like to enter a caveat. 19. We may also notice the Judgment of the Hon ble Supreme Court in the matter of `Committee of Creditors of Essar Steel India Ltd. Vs. `Satish Kumar Gupta Ors. in (2020) 8 SCC 531, in which case Hon ble Supreme Court had occasion to consider the provisions of Section 12 of the IBC. Section 12 of the IBC came to be amended by adding second proviso by Act 26/2019, which provided that Corporate Insolvency Resolution Process (`CIRP ) shall mandatorily be completed within a period of 330 days from the insolvency commencement date. The second proviso of Section 12 provides as follows: .Provided further that the corporate insolvency resolution process shall mandatorily be completed within a period of three hundred and thirty days from the insolvency commencement date, including any extension of the period of corporate insolvency resolution process granted under this section and the time taken in legal proceedings in relation to such resolution process of the corporate debtor . 20. The Hon ble Supreme Court had occasion to consider the said second proviso in `Committee of Creditors of Essar Steel India Ltd. (Supra). The second proviso which p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the corporate debtor must take place beyond which the corporate debtor is to be driven into liquidation. 21. The above Judgment of the Hon ble Supreme Court clearly indicates that where legislature provided for mandatorily completion of CIRP within 330 days the word mandatory was struck down and it was held that in appropriate cases, Adjudicating Authority shall have jurisdiction to extend the time beyond 330 days. 22. Adjudicating Authority while noticing the provisions of Section 54B which provides that Application of various provisions of Chapter II III of the Code to PPIRP held that Section 12 is not applicable to PPIRP. Even if Section 12 is not made applicable to PPIRP, the interpretation put by the Hon ble Supreme Court on the second proviso of Section 12 is very well applicable by interpreting the provisions of Section 54B. 23. Learned Counsel for the Appellant has relied on various Judgments of this Tribunal, where this Tribunal interpreting the different provisions of CIRP Regulations held that timeline provided therein is not mandatory. 24. We may refer to the Judgment of this Tribunal in the matter of `Aditya Kumar Tibrewal Vs. `Om Prakash Pandey Ors. in 2022 SSC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s clothed. The meaning and intention of the legislature must govern, and these are to be ascertained, not only from the phraseology of the provisions but also by considering its nature, its design, and the consequences which would follow from construing it the one way or the other Going further, this Tribunal in the same judgment also relied on the observations of the Hon ble Apex Court in (2016) 11 SCC 31 in Lalaram Vs. Jaipur Development Authority as below: 106. As noticed hereinabove, it is affirmatively acknowledged as well that where provisions of a statute relate to the performance of a public duty and where the invalidation of acts done in neglect of these have the potential of resulting in serious general inconvenience or injustice to persons who have no control over those entrusted with duty and at the same time would not promote the main object of the legislature, such prescriptions are generally understood as mere instructions of the guidance of those on which the duty is imposed and are regarded as directory. It has been the practice to hold such provisions to be directory only, neglect of those, though punishable, should not, however, affect the validity of the acts do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and shall may help the courts in ascertaining the legislative intent without giving to either a controlling or a determinating effect. The courts have further to consider the subject-matter, the purpose of the provisions, the object intended to be secured by the statute which is of prime importance, as also the actual words employed. 22. 9. Obviously where the legislature uses two words may and shall in two different parts of the same provision prima facie it would appear that the legislature manifested its intention to make one part directory and another mandatory. But that by itself is not decisive. [Ed. : Quoting from Ganesh Prasad Sah Kesari v. Lakshmi Narayan Gupta, (1985) 3 SCC 53, p. 59, para 9.] The power of court to find out whether the provision is directory or mandatory remains unimpaired. 28. Similar effect is the Judgment of the Hon ble Supreme Court in the matter of `P.T. Ranjan Vs. `T.P.M. Sahir Ors. in (2003) 8 SCC 498, the principle of interpretation with regard to expression shall or may was explained in Paragraph 47, 48 49, which are as follows: 47. The construction of a statute will depend on the purport and object for which the same had been used. In the insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y discretion while ordering termination of the proceeding. Thus, even if period of 120 days has been passed and the question of termination of proceeding comes for consideration before the Adjudicating Authority. Adjudicating Authority on sufficient reason can refuse termination and the proceeding and extend the period, which shall be within its jurisdiction. The Adjudicating Authority has taken the view in the Impugned Order that when the Resolution Plan is not approved within 90 days, RP was obliged to pray for termination of the proceeding and after expiry of 120 days, proceedings have to be terminated. 30. Learned Counsel for the Appellant have also referred to various Judgments of the Adjudicating Authority where extension with regard to time was granted to complete the process. Grant of extension is matter of facts of each case. In the Statutory Scheme, in Chapter III A, it is clear that the PPIRP has been provided for the benefit of MSME. The provisions is a beneficial provisions to resolve MSME which are in distress. Timeline period of 120 days for completion of the process is Statutory Scheme, but Statutory Scheme cannot be interpreted to interpret in a manner to mean that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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