2020 (12) TMI 1232 - AT - Insolvency and Bankruptcy

Appellate Tribunal Grants Exclusion & Extension in CIRP Due to COVID-19

The Appellate Tribunal allowed the appeal by the Committee of Creditors, granting an exclusion of 203 days from the Corporate Insolvency Resolution ... Seeking exclusion of period and extension of Corporate Insolvency Resolution Process (CIRP for short) period - Resolution Professional had fallen sick around 01st September, 2020, and subsequently tested positive for COVID-19 on 18th September, 2020, which hampered progress in the conduct of CIRP - HELD THAT:- The Appellant was, in the wake of outbreak of COVID-19 declared as Pandemic culminating in imposition of Nationwide lockdown w.e.f 25th March, 2020, prevented from undertaking further steps for bringing the CIRP to logical conclusion. There is ample proof on record to hold that the Appellant was tested positive for COVID-19 after falling sick and he became inactive due to medical reason being on self-isolation and quarantined. Thus, despite his earnest effort he was unable to convene meeting of the COC. Even an attempt made at convening such meeting through digital platform proved futile due to falling ill. In the given circumstances, the Adjudicating Authority should have taken these factors into consideration which warranted mitigating the hardship and not compounding the same. The COC, which was in existence, had not been dissolved and once the Nationwide lockdown was imposed as a sequel to outbreak of COVID-19 declared as Pandemic resulting in all activities related to trade and commerce business coming to a grinding halt, COC as an institution cannot be said to have got dissolved. The COC would not be deemed to have been dissolved, at least for the purposes of passing of Resolution seeking exclusion of Lockdown period and extension of CIRP period beyond the prescribed time of 180 days. There being cogent reasons for acceding to the prayer made in this appeal, we find that the impugned order cannot be sustained. The exclusion of 203 days w.e.f. 15th March, 2020 till 4th October, 2020 (inclusive of the period for which the petitioner was immobilized as a victim of COVID-19) from CIRP period of 180 days is allowed - Appeal is accordingly allowed with direction to the Appellant to carry forward the CIRP with expedition. Issues:1. Exclusion of period and extension of Corporate Insolvency Resolution Process (CIRP) due to COVID-19 lockdown.Analysis:The appeal was filed by the Committee of Creditors (COC) of a Corporate Debtor seeking exclusion of the lockdown period and extension of the CIRP period due to the impact of COVID-19. The Resolution Professional had fallen sick and tested positive for COVID-19, which hindered the progress of the CIRP. The Appellant argued that despite efforts to continue work during quarantine, his ill health impeded the process. The COC passed a resolution for exclusion of the lockdown period and extension of time to conclude the CIRP. The Appellate Tribunal considered the circumstances, including the impact of the pandemic and the nationwide lockdown, on the Resolution Professional's ability to conduct the CIRP effectively. The Tribunal noted that the COC had not been dissolved and that the lockdown had halted business activities, justifying the need for an extension. The Tribunal held that the impugned order dismissing the application for exclusion and extension could not be sustained.The Tribunal allowed the appeal, setting aside the impugned order. It granted an exclusion of 203 days from the CIRP period, starting from 15th March, 2020, until 4th October, 2020, inclusive of the period when the Resolution Professional was incapacitated due to COVID-19. Additionally, the Tribunal allowed an extension of the CIRP period by 90 days. The Appellant was directed to proceed with the CIRP promptly. The Tribunal ordered the copy of the judgment to be sent to the Adjudicating Authority for compliance.