2020 (2) TMI 1386 - Tri - Insolvency and Bankruptcy

Tribunal denies exclusion of 173 days in CIRP, directs liquidation initiation under Section 33(1)(a)

The Tribunal rejected the application to exclude 173 days lost due to legal proceedings during the Corporate Insolvency Resolution Process (CIRP), citing ... Exclusion of the time period of 173 days which were lost due to lis pendens - Section 60(5) read with second proviso to Section 12 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- No application for extension of period of CIRP beyond 180 days has been filed under Section 12(2) of the Code. The second proviso to Section 12(3) of the Code provides that the CIRP shall mandatorily be completed within a period of 330 days from the insolvency commencement date. As on date, this period of 330 days has expired. The instant application for exclusion of time period was filed on 11.11.2019 and was first listed on 19.11.2019, when none for the applicant-IRP was present and the CA was directed to be listed on 09.12.2019. On that date, at the request of the applicant-IRP's counsel, the matter was adjourned to 16.01.2020 and again on request, the matter was further adjourned to 07.02.2020. On 07.02.2020, the IRP was inter alia directed to file an affidavit explaining the delay. The compliance affidavit was taken on record on 10.02.2020 and order was reserved. Therefore, the delay after filing of the instant application is mainly attributable to the applicant-IRP. In the present case, the insolvency commencement date (Section 5(12) of the Code) is 22.02.2019, when the applicant-IRP was appointed as IRP by the AA. The applicant-IRP is stated to have sent intimation to the suspended Board of the corporate debtor on 02.03.2019 and 04.03.2019 requesting them for cooperation, but the directors/promoters are stated to have neither come forward to cooperate nor given access to the books/records of the corporate debtor. Thereafter, the first CoC meeting is stated to be held on 24.03.2019 - The applicant-IRP has filed a copy of notice for holding CoC meeting on 31.03.2019. However, there is no evidence on record to show that there was any oral request of the member of the CoC for adjourning sine die the second CoC meeting till the proceedings before the Hon'ble NCLAT are pending. Even the member of the CoC giving the oral request has not been specified. The period of 330 days for completion of CIRP has already expired and as on date, the complete process starting with appointment of valuers, preparation of Information Memorandum, invitation for Expression of Interest, request for resolution plan, consideration of the resolution plan etc. is still to be done. Therefore, in the instant case, it cannot be said that only a short period is left for the completion of the CIRP beyond 330 days - It is concluded that exceptional circumstances for extension of CIRP beyond 330 days are not made out. Issues Involved:1. Exclusion of time period lost due to legal proceedings during the Corporate Insolvency Resolution Process (CIRP).2. Misinterpretation of NCLAT orders by the Interim Resolution Professional (IRP).3. Non-cooperation from the directors/promoters of the corporate debtor.4. Replacement of the Interim Resolution Professional (IRP).5. Compliance with the 330-day mandatory period for completion of CIRP.Issue-wise Detailed Analysis:1. Exclusion of time period lost due to legal proceedings during the CIRP:The application was filed under Section 60(5) read with the second proviso to Section 12 of the Insolvency and Bankruptcy Code, 2016, seeking exclusion of 173 days lost due to the pendency of legal proceedings before the NCLAT. The IRP argued that the period from 28.03.2019 to 17.09.2019 should be excluded from the CIRP timeline. However, the Tribunal noted that the orders of the NCLAT did not stay the CIRP proceedings, and thus, the claim for exclusion of this time period was not accepted.2. Misinterpretation of NCLAT orders by the IRP:The IRP misinterpreted the NCLAT's interim order dated 28.03.2019 as a stay order against the CIRP proceedings. This misinterpretation led to the adjournment of the second CoC meeting sine die. The Tribunal found no evidence on record to support the claim that there was an oral request from the CoC members to adjourn the meeting. The Tribunal emphasized that the NCLAT's orders did not stay the CIRP proceedings.3. Non-cooperation from the directors/promoters of the corporate debtor:The IRP stated that the directors/promoters of the corporate debtor did not cooperate or provide access to the books/records despite multiple requests. The Tribunal noted that only initial intimations sent on 02.03.2019 and 04.03.2019 were brought on record, and no further actions were documented to show efforts to obtain cooperation.4. Replacement of the Interim Resolution Professional (IRP):The CoC resolved to replace the IRP with Shri Vikas Garg as the Resolution Professional (RP) during the second CoC meeting on 30.09.2019. However, applications filed for the appointment of Shri Vikas Garg were withdrawn on 22.10.2019 and 05.11.2019. The Tribunal observed that the IRP did not perform any substantial work beyond constituting the CoC and noted the lack of progress in preparing the Information Memorandum, appointing valuers, and issuing invitations for Expression of Interest.5. Compliance with the 330-day mandatory period for completion of CIRP:The Tribunal referred to the Supreme Court's judgment in the case of CoC of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors., which held that the 330-day period for completing the CIRP is the general rule, with extensions allowed only in exceptional cases. The Tribunal found that the period of 330 days had already expired, and the complete process for CIRP was still pending. It was also noted that the corporate debtor's status as a going concern was unclear. Consequently, the Tribunal concluded that exceptional circumstances for extension beyond 330 days were not made out and rejected the application for exclusion of the time period.Conclusion:The Tribunal rejected the application for exclusion of the 173-day period lost due to legal proceedings, citing the lack of exceptional circumstances and misinterpretation of NCLAT orders by the IRP. The Tribunal directed the listing of the case for considering the initiation of liquidation under Section 33(1)(a) of the Code and instructed the IRP to notify the CoC members and file a compliance affidavit of service.