2022 (1) TMI 398 - AT - Insolvency and Bankruptcy

Tribunal extends CIRP period, emphasizes resolution plans to avoid liquidation, and maximize asset value

The Tribunal allowed the appeals, setting aside the Adjudicating Authority's order and extending the Corporate Insolvency Resolution Process (CIRP) period ... Seeking exclusion of 165 days and for extension of CIRP period by another 15 days constituting a total of 180 days - HELD THAT:- This Tribunal without going into the merits of the applications and it is not desirable to decide the aspect of who filed the plan before the cut-off date, etc., which is not subject matter before this Bench. However, in both the applications the common object and the stand taken by the applicants, i. e., to consider all the prospective resolution applications by the committee of creditors on par along with other applications. Therefore, this Tribunal is not going into dwelt the issue which is not before this Tribunal. It is unequivocal that the appellants have shown exceptional circumstances, i. e., pendency of judicial proceedings before the hon'ble courts, imposition of nationwide lockdown, change of RP, calling fresh expression of interest and the nature of business of the corporate debtor which admittedly spread over to many parts of the country. It is also an admitted fact that many interested prospective resolution applicants have submitted their plans evincing their interest in the bid process of the corporate debtor. This Tribunal is of the view that the corporate debtor cannot be pushed into liquidation. This Tribunal comes to a resultant conclusion that based on the facts and keeping in view of exceptional circumstances existed, viewing in that perspective and to avoid liquidation as a last resort and to comply with the object of the Code, i. e., maximization of value of asset of the corporate debtor and the law laid down by the hon'ble Supreme Court in the matter of SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [2019 (1) TMI 1508 - SUPREME COURT] and COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA & OTHERS [2019 (11) TMI 731 - SUPREME COURT], that the outer limit of 330 days can be extended in an exceptional circumstances. Application allowed. Issues Involved:1. Exclusion and extension of the Corporate Insolvency Resolution Process (CIRP) period.2. Exceptional circumstances justifying the extension of the CIRP period.3. Compliance with the timelines prescribed under Section 12 of the Insolvency and Bankruptcy Code (IBC), 2016.4. Consideration of resolution plans submitted by prospective resolution applicants.5. Avoidance of liquidation as a last resort.Detailed Analysis:1. Exclusion and Extension of the CIRP Period:The appeal was filed against the order dated August 3, 2021, by the Adjudicating Authority (NCLT, Chennai), which did not grant the relief sought for exclusion of 165 days and extension of the CIRP period by another 15 days, totaling 180 days. The appellant, the resolution professional of the corporate debtor, argued that the CIRP faced interruptions due to a stay order by the Madras High Court and the nationwide lockdown due to COVID-19.2. Exceptional Circumstances Justifying the Extension:The appellant highlighted several exceptional circumstances, including:- The CIRP was stayed by the Madras High Court and later disrupted by the COVID-19 pandemic.- The first expression of interest received only one resolution plan, which was rejected by the CoC.- The transition of resolution professionals was delayed due to COVID-19.- The corporate debtor is in the healthcare industry, with significant contributions from over 200 doctors and 2,000 staff during the pandemic.3. Compliance with Timelines Under Section 12 of IBC, 2016:The appellant cited the Supreme Court's decision in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, which held that in exceptional circumstances, the time for completing the CIRP can be extended beyond the outer limit of 330 days. The Supreme Court struck down the word 'mandatorily' from the proviso to Section 12(3) of the IBC, recognizing the need for flexibility in exceptional cases.4. Consideration of Resolution Plans Submitted by Prospective Resolution Applicants:The applications by Max Vision Eye Hospitals P. Ltd. and ASG Hospitals P. Ltd. sought consideration of their resolution plans submitted within the prescribed timelines. The Tribunal noted that the corporate debtor received significant interest from prospective resolution applicants, with seven shortlisted bidders expected to submit their plans by September 13, 2021.5. Avoidance of Liquidation as a Last Resort:The Tribunal emphasized the object of the IBC, which is to ensure the revival and continuation of the corporate debtor rather than liquidation. The Supreme Court's judgment in Swiss Ribbons P. Ltd. v. Union of India underscored the importance of maximizing the value of the corporate debtor's assets and avoiding liquidation unless no viable resolution plans are available.Conclusion:The Tribunal concluded that the appellants demonstrated exceptional circumstances justifying the extension of the CIRP period. The Tribunal set aside the Adjudicating Authority's order dated August 3, 2021, and extended the time for completing the CIRP until November 30, 2021. The time spent in filing the appeals was also excluded. The Tribunal reiterated that liquidation should be a last resort, and the extension was necessary to consider the resolution plans submitted by prospective applicants. The appeals were allowed, and all pending applications were disposed of accordingly.