Resolution-first insolvency process requires exclusion of procedural delay and consideration of pending plan before liquidation

The Insolvency and Bankruptcy Code's resolution-first approach was applied to hold that a pending resolution plan should be examined before liquidation where the corporate insolvency resolution process had been delayed by procedural impediments and external restraints. The period lost in appointing authorised representatives for homebuyers and plot-holders, and the period affected by stay and lockdown, was directed to be excluded for computing the CIRP timeline. The resolution professional and committee of creditors were directed to consider the pending resolution plan and the grievances of the concerned creditors and homebuyers, and the CIRP period was extended accordingly.

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Issues: Whether the corporate insolvency resolution process period should be extended by excluding the delay attributable to appointment of authorised representatives and the period during which proceedings were stayed, and whether the resolution plan pending before the Committee of Creditors and Resolution Professional should be considered instead of proceeding straight to liquidation.

Analysis: The applications arose from delays in constitution and functioning of the Committee of Creditors, including the time taken in appointing authorised representatives for homebuyers and plot-holders, and the period when the proceedings were affected by the lockdown. The record also showed that a resolution plan had been received and that liquidation had been sought without a completed final account. In these circumstances, the object of the Insolvency and Bankruptcy Code, namely resolution before liquidation, was treated as requiring that the pending resolution plan be examined first. The period lost due to the procedural delay in appointing authorised representatives and the period affected by the stay and lockdown were directed to be excluded for computing the insolvency period.

Conclusion: The applications were allowed. The Resolution Professional and the Committee of Creditors were directed to consider the pending resolution plan and the grievances of the concerned creditors and homebuyers, and the CIRP period was to be extended by exclusion of the relevant periods.

Ratio Decidendi: Where delay in the CIRP is attributable to procedural impediments and external legal restraints, and a resolution plan is available, the adjudicating authority may exclude the affected period and direct consideration of the resolution plan so that liquidation is not resorted to prematurely.

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