Now time taken from the admission of a case by the NCLT till the appointment of the Interim Resolution Professional (IRP), will also be excluded from the IBC timelines, the Mumbai Bench has held.
In the case of Say India Jeweller Pvt. Ltd., the application was admitted on August 1, 2017. However, the appointment of IRP was deferred to the Insolvency and Bankruptcy Board of India. The IRP was appointed only 62 days after the admission order was passed, on October 3, 2017. As a result, all actions that are required to be taken during the Corporate Insolvency Resolution Process (CIRP) were delayed.
The 270th day from admission of the case was April 28, 2018. By this time, the corporate debtor received only one resolution plan, from the suspended directors, which was rejected by the creditors committee. In view of this, a liquidation application was moved at the NCLT on May 4, 2018. However, the order goes on to record the dates in a manner, treating the 62 day period as a buffer period which the corporate debtor earned for not having an appointed IRP. From the order, it is unclear who was in charge of the corporate debtor during the 62 day period when CIRP had commenced, and no IRP was appointed.
Meanwhile, the suspended directors of the corporate debtor whose resolution plan was rejected filed an application with the NCLT for reconsideration of their resolution plan. The NCLT passed an order admitting the the directors application. While doing so, the NCLT noted principles laid down in cases of Bhushan Power and Steel, MBL Infrastructure and Adhunik Alloys & Power Limited. The NCLT further noted principles laid down in the Binani case by the NCLAT, which suggested preference of resolution over liquidation. Based on NCLT order dated December 5, 2018, the RP asked the suspended directors to resubmit resolution plan. After several rounds of negotiation, the plan submitted by the directors was approved by the committee of creditors and presented to the NCLT for approval.
Under the IBBI (CIRP) Regulations, a resolution plan is required to comply with various provisions. The order records all such compliances required to be met by the resolution plan. The order further lists down the provisions with which the resolution plan was compliant, and the provisions with which the plan wasn’t. To that extent, the NCLT made two suggestions: it first modified certain parts of the resolution plan to make it compliant with the Regulations. In the absence of the text of the resolution plan, it is unclear what these modifications are.
However, the second part to this is, the deletion of certain portions of the resolution plan. In this regard, the NCLT suggested deletion of portions such as: exemptions from dues under Income Tax Act; tax and stamp duty exemptions; writing off of investigations/ inquiry/ show cause obligations arising out of non-compliance of provisions of laws; extinguishment of rights and entitlements of the Central Government, State Government, any regulatory or local authority or body; extinguishment of rights & entitlements of Govt agencies on account of acquisition.; the resolution applicant will not be liable for Associate Companies.
The NCLT further recorded that, “It is clarified that only crystallised dues shall stand extinguished on approval of this plan“.
After having made all suggestions, the NCLT recorded that “we are of the considered view that the modified resolution plan may be sent to the Resolution Professional for seeking acceptance from the Resolution Applicant.” If the modified resolution plan will not be acceptable to the resolution applicant, liquidation would commence.
(Read the order)