[IBC] CIRP has to be completed in 330 days; NCLT, NCLAT must comply with deadlines: Supreme Court

The Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC) has to be completed within the 330-day deadline prescribed under the law, the Supreme Court ruled on Monday ( Ebix Singapore v. Committee of Creditors of Educomp ).

. The Court held that since the 330 days outer limit of the Corporate Insolvency Resolution Process (CIRP) under Section 12(3) of the IBC, including judicial proceedings, can be extended only in exceptional circumstances, " this open-ended process for further negotiations or a withdrawal, would have a deleterious impact on the Corporate Debtor, its creditors, and the economy at large as the liquidation value depletes with the passage of time."

. The National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) should therefore, while deciding IBC matters, respect the deadline prescribed by the legislature, a Bench headed by Justice DY Chandrachud held.

"We urge the NCLT and NCLAT to be sensitive to the effect of such delays on the insolvency resolution process and be cognizant that adjournments hamper the efficacy of the judicial process. The NCLT and the NCLAT should endeavor, on a best effort basis, to strictly adhere to the timelines stipulated under the IBC and clear pending resolution plans forthwith. Judicial delay was one of the major reasons for the failure of the insolvency regime that was in effect prior to the IBC. We cannot let the present insolvency regime meet the same fate," the judgment said.

. The judgment was delivered on an appeal from a NCLAT judgment of July 2020.

The NCLAT had held that the application to withdraw from the Resolution Plan could not have been allowed since: (i) it was barred by res judicata; and (ii) the NCLT does not have jurisdiction to permit such a withdrawal.

This reasoning was under challenge in the present case.

. The top court held that the Adjudicating Authority lacks the authority to allow the withdrawal or modification of the Resolution Plan by a successful Resolution Applicant or to give effect to any such clauses in the Resolution Plan.

"Adjudicating Authority under Section 31(2) of the IBC can only examine the validity of the plan on the anvil of the grounds stipulated in Section 30(2) and either approve or reject the plan. The Adjudicating Authority cannot compel a CoC to negotiate further with a successful Resolution Applicant," the top court ruled.

. The Court further noted that if the Parliament intended to permit such withdrawals/modifications sought by successful Resolution Applicants as being beneficial to the economic policy, "which it has sought to pursue while enacting the IBC, it would have prescribed timelines for setting the clock-back or directing immediate liquidation if the withdrawals occur after a certain period."

. Further, permitting the Adjudicating Authority to exercise its residuary powers under Section 60(5) to allow for further modifications or withdrawals at the behest of the successful Resolution Applicant, would be in the teeth of the decision of the Supreme Court in Essar Steel .

. " We hold that the existing insolvency framework in India provides no scope for effecting further modifications or withdrawals of CoC-approved Resolution Plans, at the behest of the successful Resolution Applicant, once the plan has been submitted to the Adjudicating Authority. A Resolution Applicant, after obtaining the financial information of the Corporate Debtor through the informational utilities and perusing the IM, is assumed to have analyzed the risks in the business of the Corporate Debtor and submitted a considered proposal. A submitted Resolution Plan is binding and irrevocable as between the CoC and the successful Resolution Applicant in terms of the provisions of the IBC and the CIRP Regulations ," the judgment said.

. [Read Judgment]

[IBC] CIRP has to be completed in 330 days; NCLT, NCLAT must comply with deadlines: Supreme Court

Debayan Roy

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