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Amar Remedies Ltd. v. Idbi Bank Ltd. & Ors.
Factual and Procedural Background
This appeal was filed by the Resolution Professional against the order dated 9th January, 2018 passed by the Adjudicating Authority (National Company Law Tribunal) Mumbai Bench. The Adjudicating Authority had dismissed an application under sub-section (2) of Section 12 of the Insolvency and Bankruptcy Code, 2016 (I&B Code), which sought an extension of the corporate insolvency resolution process (CIRP) period beyond 180 days. The Adjudicating Authority held that it lacked jurisdiction to revive the CIRP period already completed by 13th December, 2017 and dismissed the application as devoid of merit. The Committee of Creditors (CoC) supported the Resolution Professional’s appeal, stating that a resolution to file the extension application was passed on 6th December, 2017, but the application was filed on 15th December, 2017, two days after the 180-day limit.
Legal Issues Presented
- Whether the Adjudicating Authority has jurisdiction to extend the corporate insolvency resolution process period beyond 180 days when the application for extension is filed after the expiry of the 180-day period but based on a resolution passed within the 180 days.
- Whether an application for extension under sub-section (2) of Section 12 of the I&B Code must be filed strictly within the 180-day period or whether a delay in filing can be condoned if the CoC resolution was passed within the time limit.
- Whether the Adjudicating Authority was justified in dismissing the application without considering the merits of the case and the performance of the Resolution Professional and CoC during the 180 days.
Arguments of the Parties
Appellant's Arguments
- The Committee of Creditors passed a resolution on 6th December, 2017 instructing the Resolution Professional to file an application for extension under sub-section (2) of Section 12 of the I&B Code.
- The application for extension was filed on 15th December, 2017, only two days after the expiry of the 180-day period which ended on 13th December, 2017.
- Reliance was placed on the decision of this Appellate Tribunal in Quantum Limited vs. Indus Finance Corporation Limited (Company Appeal (AT)(Insolvency) No. 35 of 2018) to support the proposition that the application for extension can be filed after the 180-day period if the CoC resolution was passed within the period.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Quantum Limited (Corporate Debtor) vs. Indus Finance Corporation Limited, Company Appeal (AT)(Insolvency) No. 35 of 2018 | Interpretation of sub-section (2) of Section 12 of the I&B Code regarding the time limit and filing of application for extension of the insolvency resolution process. | The Court relied on this precedent to hold that the application for extension need not be filed strictly within the 180-day period if the CoC resolution was passed within that period, allowing some leeway to file the application after the 180th day in the interest of justice. |
Court's Reasoning and Analysis
The Court analyzed the provisions of Section 12 of the Insolvency and Bankruptcy Code, 2016. It noted that sub-section (2) of Section 12 allows the Resolution Professional to file an application for extension of the CIRP period if instructed by a resolution passed by at least 75% of the voting shares of the Committee of Creditors. The provision does not expressly require that the application must be filed before the expiry of the 180-day period, only that the resolution instructing the filing must be passed within that time.
The Court observed that the Adjudicating Authority did not reject the application on merits or on the basis that the subject matter did not justify extension. Nor was there any finding that the Resolution Professional or CoC had failed to justify their performance within the initial 180 days. Therefore, the Court held that the Adjudicating Authority erred in dismissing the application outright and that the proper course would have been to extend the CIRP period to enable the CoC to decide on a suitable resolution plan before resorting to liquidation, which is a last recourse.
The Court thus set aside the impugned order and extended the CIRP period by 90 days from the date of the judgment, excluding the period between the 181st day and the date of this order for all purposes. The Resolution Professional, CoC, and Adjudicating Authority were directed to proceed in accordance with law.
Holding and Implications
The Court allowed the appeal and set aside the order of the Adjudicating Authority dated 9th January, 2018. It extended the corporate insolvency resolution process period by 90 days from the date of this judgment.
The direct effect of this decision is that the CIRP period can be extended even if the application for extension is filed after the 180-day limit, provided the Committee of Creditors passed the requisite resolution within the 180 days. This prevents the premature dismissal of resolution efforts and avoids liquidation as the first recourse. The Court emphasized adherence to procedural fairness and the objectives of the I&B Code to complete resolution processes within prescribed timelines but with flexibility to ensure justice and effective resolution.
05.03.2018 This appeal has been preferred by the Resolution Professional against order dated 9th January, 2018 passed by the Adjudicating Authority (National Company Law Tribunal) Mumbai Bench, Mumbai whereby and whereunder the Adjudicating Authority dismissed the application preferred under sub-section (2) of Section 12 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the I&B Code) with the following observations: Since speed and time lines are hallmark of this Code and there being no provision either for condonation or Company Appeal (AT) (Insolvency) No. 59 of 2018 revival under any of the Provisions of this Code, we are of the view that this Adjudicating Authority is devoid of jurisdiction to revive the CIRP period already completed by 13.12.2017, i.e. by the time this application has come before this Bench, therefore, we dont find any merit in this application, whereby this application is hereby dismissed.
2. On notice, the members of Committee of Creditors (CoC) have appeared and supported the case of the appellant Resolution Professional and submitted that the Committee of Creditors, decided by resolution dated 6th December, 2017 and requested the Resolution Professional to file an application for extension of time under sub-section (2) of Section 12, which was filed on 15th December, 2017
i.e. 2 days after 180 days. In fact 180th day completed on 13th December, 2017. Reliance has been placed on decision of this Appellate Tribunal in Quantum Limited (Corporate Debtor) vs. Indus Finance Corporation Limited Company Appeal (AT)(Insolvency) No. 35 of 2018 wherein by judgment dated 20th February, 2018, this Appellate Tribunal observed and held as follows:
3. Section 12 prescribes the time limit for completion of insolvency resolution process, which reads as follows:
12. Time-limit for completion of insolvency resolution process - (1) Subject to sub-section (2), the corporate insolvency resolution process shall be completed within a period of Company Appeal (AT) (Insolvency) No. 59 of 2018 one hundred and eighty days from the date of admission of the application to initiate such process. (2) The resolution professional shall file an application to the Adjudicating Authority to extend the period of the corporate insolvency resolution process beyond one hundred and eighty days, if instructed to do so by a resolution passed at a meeting of the committee of creditors by a vote of seventy-five per cent of the voting shares. (3) On receipt of an application under sub-section (2), if the Adjudicating Authority is satisfied that the subject matter of the case is such that corporate insolvency resolution process cannot be completed within one hundred and eighty days, it may by order extend the duration of such process beyond one hundred and eighty days by such further period as it thinks fit, but not exceeding ninety days: Provided that any extension of the period of corporate insolvency resolution process under this section shall not be granted more than once.
4. From sub-section (2) of Section 12, it is clear that resolution professional can file an application to the Adjudicating Authority for extension of the period of the corporate insolvency resolution process, only if instructed to do so by a resolution passed at a meeting of the committee of creditors by a vote of 75% of the voting shares. The provision does not stipulate that Company Appeal (AT) (Insolvency) No. 59 of 2018 such application is to be filed before the Adjudicating Authority within 180 days. If within 180 days including the last day i.e. 180th day, a resolution is passed by the committee of creditors by a majority vote of 75% of the voting shares, instructing the resolution professional to file an application for extension of period in such case, in the interest of justice and to ensure that the resolution process is completed following all the procedures time should be allowed by the Adjudicating Authority who is empowered to extend such period up to 90 days beyond 180th day.
3. In the present case, the Adjudicating Authority has not hold that the subject matter of the case do not justify to extend the period. It has not been rejected on the ground that the committee of creditors or resolution professional has not justified their performance during the 180 days. In such circumstances, the Adjudicating Authority was required to extend the period of Resolution process to enable the Committee of Creditor to find out whether a suitable resolution plan is to be approved or not instead of passing order for liquidation, which is the last recourse to be taken on failure of resolution process.
4. For the reasons aforesaid, we set aside the impugned order dated 9th January, 2018 and extend the period of resolution process for another 90 days to be counted from today. The period between 181st day and passing of this order shall not be counted for any purpose and is to be excluded for all purpose. Now Company Appeal (AT) (Insolvency) No. 59 of 2018 the Resolution Professional, Committee of Creditors and the Adjudicating Authority will proceed in accordance with law. The appeal is allowed with the aforesaid observations. No cost. [Justice S.J. Mukhopadhaya] Chairperson [ Justice Bansi Lal Bhat ] Member (Judicial) /ns/gc
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