Introduction

The case of Mukesh Verma For Sab Global Entertainment Media Private Limited Applicant/resolution Professional v. Punjab National Bank Financial Creditor adjudicated by the National Company Law Tribunal (NCLT) on December 9, 2022, addresses critical issues surrounding the Insolvency and Bankruptcy Code (IBC) norms, especially in the context of unforeseen circumstances like the COVID-19 lockdown. The primary parties involved are Mr. Mukesh Verma, acting as the Resolution Professional (RP) for Sab Global Entertainment Media Pvt Ltd (the Corporate Debtor), and Punjab National Bank (PNB), representing the financial creditors.

Summary of the Judgment

The NCLT considered an interlocutory application filed by Mr. Mukesh Verma seeking several reliefs under Section 33 of the Insolvency Bankruptcy Code, 2016. Key reliefs included the exclusion of the COVID-19 lockdown period from the Corporate Insolvency Resolution Process (CIRP) timeframe, liquidation of the Corporate Debtor, payment of CIRP costs to the RP, and restoration of full professional fees during the lockdown period.

After thorough deliberation, the Tribunal granted the exclusion of the lockdown period, ordered the liquidation of the Corporate Debtor, mandated the Committee of Creditors (CoC) to pay the full CIRP costs, affirmed the professional fees to the RP without reduction, and permitted the filing of the Avoidance Transactions Report pending the Transaction Auditors' findings.

Analysis

Precedents Cited

The Tribunal referenced the decision of the Hon'ble Supreme Court in the matter of Mr. K. Sasidharan v. Indian Overseas Bank (2019 SCC OnLine SC 257). This precedent underscores the Tribunal's authority to order liquidation when no viable Resolution Plan is submitted by eligible Prospective Resolution Applicants (PRAs). The Supreme Court's emphasis on the sanctity of the CIRP process and the timely conclusion aligns with the Tribunal's decision to exclude the lockdown period, ensuring that the CIRP timelines are not unduly extended due to external disruptions like the COVID-19 pandemic.

Legal Reasoning

The Tribunal meticulously evaluated the grounds presented by the Applicant, primarily focusing on the impact of the COVID-19-induced lockdown on the CIRP's 180-day timeline. Recognizing that from March 25, 2020, to October 31, 2020, Mumbai was under lockdown, the Tribunal concluded that excluding these 221 days was justified under Section 33 of the IBC. This exclusion ensures that the Corporate Debtor is not penalized for circumstances beyond its control.

Furthermore, the Tribunal scrutinized the CoC's decision to reduce the RP's fees during the lockdown. Citing Regulation 34 of the Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the Tribunal held that once the CoC approves the RP's fees, they cannot unilaterally reduce them without the RP's consent. This decision reinforces the contractual obligations between the RP and the CoC, ensuring that professionals are fairly compensated for their services irrespective of unforeseen events like pandemics.

In addressing the liquidation request, the Tribunal noted the absence of any viable Resolution Plan despite multiple attempts, including the publication of Form G, and the CoC's unanimous decision favoring liquidation. The reliance on the aforementioned Supreme Court precedent further solidified the ruling towards liquidation.

Impact

This judgment has significant implications for the insolvency resolution landscape in India:

• Timeliness in CIRP: By allowing the exclusion of the lockdown period, the Tribunal ensures that CIRP timelines remain fair and just, preventing undue delays caused by circumstances beyond the debtor's control.
• Protection of Professional Fees: Upholding the RP's full fees during lockdowns sets a precedent that insolvency professionals will be rightfully compensated, discouraging CoCs from arbitrary fee reductions.
• Emphasis on Liquidation: The decision reinforces the stance that liquidation is a viable and sometimes necessary outcome when resolution efforts fail, ensuring that creditor interests are safeguarded.
• Regulatory Compliance: The judgment underscores the importance of adhering to IBC regulations, enhancing the overall integrity of the insolvency process.

Complex Concepts Simplified

• CIRP (Corporate Insolvency Resolution Process): A procedure outlined in the IBC for resolving insolvency of corporate entities, aiming to maximize returns to creditors.
• Form G: A public notice required to be published when seeking expressions of interest from potential resolution applicants to take over the debtor's business.
• Avoidance Transactions Report: A report detailing transactions that were attempted to be reversed because they may have been prejudicial to the corporate debtor's creditors.
• Resolution Professional (RP): An insolvency professional appointed to oversee and manage the CIRP, ensuring compliance with legal and procedural requirements.
• Committee of Creditors (CoC): A body comprising all financial creditors of the Corporate Debtor, responsible for making key decisions during the CIRP.

Conclusion

The NCLT's judgment in the Mukesh Verma for Sab Global Entertainment Media Pvt Ltd case serves as a pivotal reference point in navigating the complexities of insolvency resolution amid unprecedented challenges like the COVID-19 pandemic. By excluding the lockdown period from the CIRP timeline, the Tribunal demonstrated adaptability and fairness, ensuring that the resolution process remains efficient and just. Moreover, the unequivocal support for fair compensation of insolvency professionals fortifies the framework of the IBC, promoting professionalism and accountability. This ruling not only addresses the immediate concerns of the parties involved but also sets a robust precedent for future insolvency cases, reinforcing the resilience and effectiveness of India's insolvency and bankruptcy legal infrastructure.