Introduction

The case of Harish Polymer Product v. George Samuel And Another adjudicated by the National Company Law Appellate Tribunal (NCLAT) on June 18, 2021, serves as a pivotal reference in the realm of Corporate Insolvency Resolution Processes (CIRP). This commentary delves into the intricacies of the case, highlighting the stringent adherence to claim submission timelines within CIRP, even amidst unprecedented challenges like the COVID-19 pandemic.

The appellant, Harish Polymer Product, a sole proprietorship firm operating out of Meerut, Uttar Pradesh, sought to recover an outstanding amount of ₹33,23,718 from the corporate debtor, Jason Dekor Private Limited, based in Ahmedabad, Gujarat. The crux of the dispute lies in the appellant's claim submission, which was rejected by the Resolution Professional (RP) due to alleged delays caused by the nationwide lockdown.

Summary of the Judgment

The appellant contended that their claim was hindered by the COVID-19-induced lockdowns, which impeded timely submission. Citing the Supreme Court's precedent and Regulation 40C of the Insolvency Resolution Regulations, the appellant sought condonation for the delay. However, the NCLAT, referencing Regulation 12(2) and emphasizing the necessity for a time-bound resolution process, dismissed the appeal.

The Tribunal underscored the importance of maintaining the integrity and efficiency of CIRP, asserting that concessions for delays could jeopardize the entire resolution mechanism. Consequently, the NCLAT upheld the Adjudicating Authority's decision to reject the appellant's belated claim, reinforcing the non-negotiable nature of CIRP timelines.

Analysis

Precedents Cited

The appellant referenced the SMW (C) No. 3 of 2020 judgment by the Hon'ble Supreme Court, which temporarily excluded the lockdown period (15th March 2020 to 14th March 2021) from the computation of limitation periods for suits and applications. Additionally, the Tribunal highlighted the Arcelor Mittal India Private Limited v. Satish Kumar Gupta & Ors case, where the Supreme Court reaffirmed the non-extendable nature of CIRP timelines to ensure timely resolution of insolvency cases.

These precedents collectively emphasize the judiciary's stance on maintaining procedural timelines, especially within the framework of CIRP, to prevent protracted insolvency proceedings that could erode asset values and undermine the resolution objectives.

Legal Reasoning

The Tribunal's legal reasoning hinged on multiple regulatory provisions:

• Regulation 12(2): Mandates creditors to submit claims within 90 days from the insolvency commencement date.
• Regulation 40C: Introduced as a special provision acknowledging the COVID-19 lockdown, allowing certain activities' timelines to be extended if they were impeded by the lockdown.

Despite the appellant's arguments, the Tribunal reasoned that Regulation 40C could not be retroactively applied to extend the claim submission deadline in this scenario. The appellant's claim was filed eight months post the original and extended deadlines, with the lockdown period not sufficiently overlapping to warrant this relief. Furthermore, the approval of the Resolution Plan by the Committee of Creditors meant that accepting late claims could destabilize the resolution process, leading to potential liquidation and asset value deterioration.

Impact

This judgment reinforces the sanctity of procedural timelines within CIRP, underscoring that extensions are not arbitrarily granted, even in extenuating circumstances like a pandemic. For operational creditors, this serves as a cautionary tale to remain vigilant and proactive in monitoring insolvency proceedings to ensure timely claim submissions.

For insolvency professionals and tribunals, the decision affirms the imperative to prioritize the resolution process's integrity and timeliness, safeguarding against perpetual pendency and asset devaluation. Future cases will likely cite this judgment to advocate for strict adherence to CIRP timelines, limiting flexibility in procedural extensions.

Complex Concepts Simplified

Corporate Insolvency Resolution Process (CIRP)

CIRP is a structured process under the Insolvency and Bankruptcy Code, 2016, aimed at resolving the insolvency of corporate debtors. It involves the identification and appointment of a Resolution Professional, who facilitates the creation of a resolution plan to repay creditors and rescue the debtor enterprise.

Operational Creditor

An operational creditor is a creditor to whom the corporate debtor owes money in the ordinary course of business. This includes suppliers, service providers, and other entities that have extended credit for business operations.

Regulation 12(2) and Regulation 40C

Regulation 12(2) mandates that creditors must submit their claims within 90 days from the commencement of CIRP. Failure to do so may result in claim rejection unless specific conditions allow for extension.

Regulation 40C, introduced in response to the COVID-19 pandemic, provides special provisions for extending procedural timelines in CIRP if activities were hindered due to the lockdown. However, its applicability is subject to strict interpretations to prevent misuse.

Conclusion

The NCLAT's decision in Harish Polymer Product v. George Samuel serves as a decisive affirmation of the non-negotiable nature of CIRP timelines. By upholding the rejection of late claims, the Tribunal underscored the necessity of maintaining procedural discipline to achieve the Insolvency and Bankruptcy Code's core objectives: timely resolution and maximization of corporate value.

This judgment not only delineates the boundaries of procedural flexibility amidst crises but also reinforces the judiciary's commitment to expediting insolvency resolutions. Stakeholders within the insolvency ecosystem must heed this precedence, ensuring meticulous adherence to established timelines to facilitate effective and efficient resolution processes.