2021 (6) TMI 1085 - Tri - Insolvency and Bankruptcy

Tribunal restricts extension of Resolution Plan timelines, CoC must adhere to 330-day limit

State Bank of India and Ors. Versus Meenakshi Energy Limited

The Tribunal held that the Committee of Creditors (CoC) and the Resolution Professional violated the Insolvency & Bankruptcy Code by extending the ... Extension of timelines for RFRP while two Resolution Plans submitted before the CoC as per the earlier timelines are for consideration, by CoC - power of CoC to keep on extending timelines beyond 330 days in the guise of maximization of value - HELD THAT:- The two Resolution Plans pending before the committee were deliberated at length and the contents known to all the CoC members. The CoC in its commercial wisdom has requested the Resolution Professional to extend the RFRP timelines beyond 330 days with a view to give an opportunity to Vedanta Limited to submit their Resolution Plan in the name of value maximization of Corporate Debtor, albeit opportunity was given to the other two resolution applicants to revise their proposal. As this being status, the CoC and Resolution Professional have taken the process into their own hands even though they cannot extend timelines beyond 330 days unilaterally without the approval of the Adjudicating Authority. This action of Resolution Professional is contrary to the letter and spirit of the Code and its Regulations. The CoC and the Resolution Professional has categorically violated the timelines in the name of value maximization, thereby kept on extending the process beyond 330 days and CoC in its wisdom has stepped into the shoes of the Adjudicating Authority and extended the period without any rhyme or reason. The CoC has no business to extend RFRP beyond 330 days without the specific approval of the Adjudicating Authority - the Resolution Professional/CoC directed to consider the two plans received prior to last extension of RFRP timeline i.e. received before 330 days period to complete the CIRP. Application allowed. Issues Involved:1. Whether the CoC can extend the timelines for RFRP while two Resolution Plans submitted before the CoC as per the earlier timelines are for consideration before them.2. Whether the CoC is empowered to keep on extending timelines beyond 330 days in the guise of maximization of value.Detailed Analysis:Issue 1: Extension of Timelines for RFRPThe Applicant filed an application under Section 60(5) of the Insolvency & Bankruptcy Code, 2016, seeking directions to prevent the Resolution Professional from accepting any resolution plan after the closure of the due date for the Corporate Insolvency Resolution Process (CIRP), which was 08.03.2021. The Applicant argued that the CoC and the Resolution Professional extended the submission deadline multiple times, even after receiving two resolution plans by the original deadline. The Applicant claimed that the extensions were made to accommodate Vedanta Limited's resolution plan, which was submitted after the 330-day period had ended, violating the Code and its regulations. The Applicant relied on precedents such as the Hon'ble NCLAT's decision in Pioneer Rubchem Pvt. Ltd. v. Vivek Rajeha and the Hon'ble Supreme Court's judgment in Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta.Issue 2: Extension Beyond 330 DaysThe CoC extended the submission deadline for resolution plans beyond the 330-day period, which is the maximum time limit prescribed under Section 12 of the Code. The Applicant contended that the CoC does not have the authority to extend this period without the approval of the Adjudicating Authority. The Applicant argued that the CoC's decision to extend the timeline was arbitrary and illegal, relying on the Hon'ble Supreme Court's judgment in Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta, which states that any extension beyond 330 days requires the Adjudicating Authority's approval.Tribunal's Findings:The Tribunal referred to the relevant sections and regulations of the Insolvency & Bankruptcy Code, 2016, and the CIRP Regulations. It noted that Regulation 36A(6) mandates that expressions of interest (EoIs) received after the specified time should be rejected. Regulation 36B(6) allows for the extension of timelines for submission of resolution plans with the approval of the CoC, but such extensions should not exceed the 330-day period without the Adjudicating Authority's approval.The Tribunal observed that the CoC and the Resolution Professional extended the RFRP timelines beyond 330 days to accommodate Vedanta Limited's resolution plan, which was submitted after the 330-day period. The Tribunal held that this action was contrary to the letter and spirit of the Code and its regulations. The CoC and the Resolution Professional cannot unilaterally extend the timelines beyond 330 days without the Adjudicating Authority's approval.Conclusion:The Tribunal concluded that the CoC and the Resolution Professional violated the timelines specified in the Code and its regulations by extending the RFRP timelines beyond 330 days without the Adjudicating Authority's approval. The Tribunal directed the Resolution Professional and the CoC to consider only the two resolution plans received before the 330-day period and complete the CIRP accordingly. The application was allowed, and the IA was disposed of with the above direction.