Tribunal rules in favor of applying amended Clause 12 to pending liquidation cases, deems Circular unenforceable.

The Tribunal held that the amended Clause 12 of Schedule I should apply to pending liquidation processes, regardless of their commencement date, to address practical difficulties faced by Liquidators. The Circular issued by IBBI restricting the applicability of the amendment was deemed legally unenforceable. The Tribunal's decision aimed to ensure procedural fairness and alleviate challenges in the liquidation process, aligning with the objectives of the Insolvency and Bankruptcy Code.

---

---

Issues Involved:
1. Applicability of amended Clause 12 of Schedule I of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016.
2. Validity and enforceability of the Circular issued by the Insolvency and Bankruptcy Board of India (IBBI) dated 26.08.2019.
3. Procedural fairness and practical difficulties in the liquidation process.

Issue-wise Detailed Analysis:

1. Applicability of Amended Clause 12 of Schedule I of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016:
The core issue revolves around whether the amended Clause 12, which extends the period for payment of balance sale consideration from 15 days to 90 days, applies to liquidation processes that commenced before the amendment date of 25.07.2019. The Appellant, acting as the Liquidator, argued that the previous 15 days period was too short given the economic slowdown due to the COVID-19 pandemic and the significant quantum of sale considerations involved. The amendment aimed to address these practical difficulties by extending the timeframe to 90 days.

The Tribunal noted that the amendment does not specify that it applies only prospectively. The regulation is procedural, and procedural amendments generally apply retrospectively unless explicitly stated otherwise. The Tribunal concluded that the amended Clause 12 should be applicable to pending liquidation processes, irrespective of whether they commenced before or after 25.07.2019. This interpretation aligns with the intent behind the amendment, which was to alleviate practical difficulties faced by Liquidators and bidders.

2. Validity and Enforceability of the Circular Issued by IBBI Dated 26.08.2019:
The Circular issued by IBBI stated that the amended regulations would apply only to liquidation processes that commenced on or after 25.07.2019. The Tribunal scrutinized the legal standing of this Circular, noting that while IBBI has the power to issue regulations under Section 196 of the Insolvency and Bankruptcy Code (IBC), a Circular does not hold the same legal weight as regulations laid before Parliament under Sections 240 and 241 of the IBC.

The Tribunal found that the Circular could not override or interpret the amended regulations in a manner that restricts their applicability. The power to interpret laws and regulations lies with the Courts, not with administrative Circulars. Therefore, the Tribunal held that the Circular dated 26.08.2019 is not legally enforceable to interpret the applicability of the amended Clause 12. The Circular cannot create a separate class of liquidation proceedings based on the commencement date, as this would be discriminatory and contrary to the purpose of the amendment.

3. Procedural Fairness and Practical Difficulties in the Liquidation Process:
The Tribunal acknowledged the practical difficulties highlighted by the Appellant and supported by the Amicus Curiae, related to the short 15-day period for payment of the balance sale consideration. The amendment to extend this period to 90 days was a response to feedback from stakeholders and aimed to make the liquidation process more practical and fair.

The Tribunal referred to the Discussion Paper issued by IBBI, which indicated that the 15-day period was considered too short by many Liquidators. The amendment was intended to provide a more reasonable timeframe, similar to the three months provided under the SARFAESI Act. The Tribunal emphasized that the amendment's purpose was to facilitate the liquidation process and maximize the value of the assets by providing bidders with sufficient time to arrange for the necessary funds.

Conclusion:
The Tribunal modified the order of the Adjudicating Authority, allowing the Liquidator to apply the amended Clause 12 of Schedule I to the liquidation process, even if it commenced before 25.07.2019. The Tribunal held that the Circular dated 26.08.2019 issued by IBBI is not legally enforceable to interpret the applicability of the amended regulations. The Tribunal's decision ensures procedural fairness and addresses the practical difficulties faced in the liquidation process, aligning with the objectives of the Insolvency and Bankruptcy Code.

---