Tribunal grants limited extension for Covid-19 impact, emphasizes exceptional circumstances

The Tribunal granted an exclusion of 83 days from the CIRP timelines due to the Covid-19 lockdown and pending application, extending the CIRP to 22.08.2021. However, it denied further extension, emphasizing the requirement for exceptional circumstances. The Resolution Professional was directed to finalize the Corporate Debtor's accounts by the extended date and proceed with liquidation if resolution was not achieved by then.

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Issues Involved:
1. Exclusion of time from the CIRP timelines.
2. Extension of the CIRP period.
3. Consideration of exceptional circumstances for extension beyond the statutory limit.
4. Compliance with the Companies Act, 2013 and other regulations.
5. Possibility of initiating liquidation proceedings.

Detailed Analysis:

Issue 1: Exclusion of time from the CIRP timelines

The Resolution Professional sought exclusion of 165 days from the CIRP timelines. The Tribunal noted that the CIRP had already exceeded 330 days, and the process had been extended multiple times due to various reasons, including the Covid-19 lockdown. The Tribunal referenced the Hon'ble Supreme Court's judgment in the Essar Steel case, which allows for extensions beyond 330 days only under exceptional circumstances. The Tribunal granted exclusion for the period from 08.05.2021 to 27.06.2021 due to the second wave of Covid-19 and the period during which the application was pending, totaling 83 days. Thus, the CIRP was extended to 22.08.2021.

Issue 2: Extension of the CIRP period

The Resolution Professional also sought an additional 15-day extension of the CIRP period. The Tribunal emphasized that the CIRP had already been extended twice and had surpassed 600 days, far exceeding the statutory limit of 330 days. The Tribunal reiterated that any further extension must be justified by exceptional circumstances, which were not demonstrated in this case. Consequently, the Tribunal did not grant the additional 15-day extension but extended the CIRP only up to 22.08.2021.

Issue 3: Consideration of exceptional circumstances for extension beyond the statutory limit

The Tribunal acknowledged the Supreme Court's decision in the Essar Steel case, which permits extensions beyond 330 days only in exceptional circumstances. The Tribunal found that the reasons provided by the Resolution Professional, such as the Covid-19 lockdown and difficulties in visiting centers for due diligence, did not constitute exceptional circumstances. The Tribunal also referenced the NCLAT's decision in the Meenakshi Energy case, emphasizing that extensions should be granted sparingly and only in extraordinary situations. Therefore, the Tribunal concluded that no further extension beyond 22.08.2021 was warranted.

Issue 4: Compliance with the Companies Act, 2013 and other regulations

The Tribunal noted that various compliances under the Companies Act, 2013, and other regulations were yet to be finalized by the Resolution Professional. The CoC had deliberated on these issues and recognized the need for additional time to complete the necessary compliances, revise the Information Memorandum, and obtain resolution plans. However, the Tribunal emphasized that the CIRP process could not be restarted afresh from the stage of issuing a new Expression of Interest, as it would disrupt the CIRP timelines.

Issue 5: Possibility of initiating liquidation proceedings

The Tribunal highlighted that if the insolvency resolution of the Corporate Debtor was not achieved by 31.05.2021, it would be constrained to initiate liquidation proceedings under Section 33 of the IBC, 2016. Given the failure to demonstrate exceptional circumstances for further extension, the Tribunal directed the Resolution Professional to finalize the accounts of the Corporate Debtor by 22.08.2021. If the resolution was not achieved by then, the Tribunal instructed the Resolution Professional to file an application for liquidation. The Tribunal also mentioned the possibility of exploring a Scheme under Section 230 of the Companies Act, 2013, during the liquidation process.

Conclusion:

The Tribunal granted an exclusion of 83 days from the CIRP timelines due to the Covid-19 lockdown and the period during which the application was pending, extending the CIRP to 22.08.2021. However, it denied any further extension beyond this date, emphasizing the need for exceptional circumstances to justify such extensions. The Tribunal directed the Resolution Professional to finalize the accounts of the Corporate Debtor by the extended date and to proceed with liquidation if the resolution was not achieved.

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