2022 (2) TMI 623 - AT - Insolvency and Bankruptcy

Tribunal reinstates bid affected by Covid lockdown, emphasizes flexibility in timelines under IBC

The Tribunal allowed the appeal, setting aside the order dismissing the extension application and the termination of the Appellant's bid. The Tribunal ... Liquidation proceedings - Period of limitation - Auction of property of the corporate debtor - seeking time extension in complying with auction proceedings' completion, under Rule 11 of the NCLT Rules, 2016 - HELD THAT:- Undisputedly the Appellant had emerged as the successful bidder in the auction proceedings for the Pondicherry unit with a bid of ₹ 3.3 crores. The Liquidator had issued a letter of intent on 5 March 2021, stipulating 90 days timeline for making the full payment to complete the auction proceedings. The said 90 days was to expire on 3 June 2021. However, the Appellant had preferred IA 3377 of 2021 on 25 May 2021, i.e. before the expiry of the timeline provided for depositing the bid amount. In the instant case, the Appellant, i.e. successful auction purchaser by filing IA 3377 of 2021 dated 25 May 2021, sought an extension of 90 days for making the full payment to complete the auction proceedings. However, before the expiry of the 90 days timeline, the appellant/applicant filed the said Application on the ground of Regulation 47 A of Liquidation Process Regulation, 2016. 25. Regulation 47 A was brought by the amendment in liquidation process regulation by Government Notification dated 20 April 2020 with retrospective effect from 17 April 2020. This Regulation provided that the period of Lockdown imposed by the central government in the wake of the Covid 19 outbreak shall not be counted for computation of the timeline for any task that could not be completed due to such Lockdown in relation to any liquidation process - It is pertinent to mention that the Government of India vide notification dated 20 April 2020 brought similar notification 40 C, as a special provision relating to the timeline under the Insolvency Resolution Process Regulation 2016. Accordingly, this Regulation was effective with effect from 29 March 2020. In the instant case, the applicant had sought an extension of 3 months on the ground of the 2nd wave of the Covid 19 outbreak. The applicant stated that Lockdown had been imposed in Tamil Nadu since 10 May 2021 because of the 2nd wave of Covid 19. Regulation 47 A provided that the period of Lockdown imposed by the central government in the wake of the Covid 19 outbreak shall not be counted for computation of timeline for any task that could not be completed due to Lockdown in relation to any liquidation process. Although, the applicability of Regulation was dependent on the Lockdown declared by the Central Government - the relevance of Regulation 47 A in the instant case because Lockdown was declared by Tamil Nadu State and not the Central Government is under doubt. It is pertinent to mention that Liquidation Process Regulation 47 deals with the Model Timeline for Liquidation Process. Model Timeline is only a directory in nature. It cannot be considered a deadline. It is provided under Regulation as a guiding factor to complete the liquidation process in a time-bound manner. In exceptional circumstances, such a time limit can be extended. The Adjudication Authority did not consider that satisfaction of creditor claims while ensuring asset maximisation is the underlying principle of the IBC, which cannot be overridden on account of meagre delays induced by a force majeure event - It is further necessary to point out that the respondent liquidator has in its reply affidavit admitted that 'it has received two remittances of ₹ 3,39,02,732 on 8 September 2021 and 9 September 2021 respectively towards the bid consideration along with up-to-date interest at the rate of 12% till the payment was received in respect of any auction held on 2 March 2021 for Pondicherry unit of the corporate debtor. The appeal is allowed. Issues Involved:1. Justification of NCLT and Liquidator in refusing extension without considering Regulation 47 A of the Liquidation Process Regulation 2016.2. Entitlement of the Appellant to exclusion/extension of time for the period of Lockdown due to Covid-19 under Regulation 47 A of the IBBI (Liquidation Process) Regulation, 2016.Issue-wise Detailed Analysis:1. Justification of NCLT and Liquidator in refusing extension without considering Regulation 47 A of the Liquidation Process Regulation 2016:The Appellant, a successful auction purchaser of the Pondicherry unit of the Corporate Debtor, filed IA 3377 of 2021 seeking an extension of three months from the date of the application or one month from the lifting of the complete lockdown in Tamil Nadu. The Adjudicating Authority dismissed the application as infructuous without providing detailed reasons. The Tribunal emphasized the importance of reasoned judgments, referencing the Supreme Court's observations in the case of CCT v. Shukla & Bros., which highlighted that 'reasons are the real live links to the administration of justice.' The Tribunal criticized the NCLT's one-line order, indicating that it failed to consider the genuine difficulties faced by the Appellant due to the Covid-19 lockdown and other uncontrollable factors.2. Entitlement of the Appellant to exclusion/extension of time for the period of Lockdown due to Covid-19 under Regulation 47 A of the IBBI (Liquidation Process) Regulation, 2016:The Appellant argued that Regulation 47 A, introduced by an amendment effective from 17 April 2020, mandates that the period of lockdown imposed by the Central Government should not be counted in the timeline for any liquidation process task. Although the lockdown in Tamil Nadu was state-imposed, the Tribunal acknowledged the severe impact of the second wave of Covid-19 and the lockdown's effect on the Appellant's ability to secure a loan and complete the auction process. The Tribunal noted that the Liquidator had the discretion to extend timelines under the E-Auction Process Document and should have sought permission from the Adjudicating Authority for such an extension. The Tribunal also referenced the Supreme Court's stance in Pioneer Urban Land and Infrastructure Ltd. v. Union of India, which held that timelines under the IBC are directory and can be extended in exceptional circumstances.Conclusion:The Tribunal concluded that the appeal deserved to be allowed, setting aside the impugned order and the consequential letter from the Liquidator terminating the Appellant's bid and forfeiting the earnest money deposit. The Tribunal declared the bid still valid, recognizing the Appellant's compliance with the payment requirements despite the delays caused by the Covid-19 lockdown. The decision underscores the need for flexibility and reasoned decision-making in the face of extraordinary circumstances like the pandemic.