Court rules multiple extensions of CIRP period impermissible under Insolvency and Bankruptcy Code

The court held that subsequent extensions of the Corporate Insolvency Resolution Process (CIRP) period beyond the initial extension are impermissible under the law, interpreting the relevant provisions of the Insolvency and Bankruptcy Code, 2016. The court emphasized that the restriction on multiple extensions is mandatory, citing precedents and statutory interpretation principles. Additionally, the court clarified that the non-obstante clause in Section 60(5) of the IBC does not override the limitation on extensions. The extension based on a Committee of Creditors (COC) resolution was deemed invalid as it did not meet the criteria set by the Supreme Court. The court set aside the extension granted by the NCLT and allowed further legal remedies.

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Issues Involved:
1. Permissibility of Subsequent Extension of CIRP Period
2. Interpretation of Section 60(5) of the IBC, 2016
3. Validity of Extension Based on COC Resolution

Detailed Analysis:

1. Permissibility of Subsequent Extension of CIRP Period:
The primary issue was whether a subsequent extension of the Corporate Insolvency Resolution Process (CIRP) period, beyond the initial extension, is permissible under the law. The court examined the first proviso to Section 12 of the Insolvency and Bankruptcy Code, 2016 (IBC), which states, "any extension of the period of CIRP under this section shall not be granted more than once." The court interpreted this to mean that no extensions beyond the first granted extension are permissible, irrespective of any circumstances presented. The court cited precedents like Laxman Lal vs. State of Rajasthan and Ashraf Khan vs. State of Gujarat to support the interpretation that negative words in statutes are rarely directory and usually mandatory.

The court also examined the second proviso to Section 12, which mandates that the CIRP must be completed within 330 days, including any extensions and time taken in legal proceedings. The court concluded that the second proviso does not dilute the first proviso's restriction on multiple extensions. The second proviso merely sets an outer limit for completing the CIRP but does not allow for successive extensions beyond the first granted extension.

2. Interpretation of Section 60(5) of the IBC, 2016:
The court addressed whether Section 60(5) of the IBC, which allows the National Company Law Tribunal (NCLT) to entertain or dispose of any application or proceeding by or against the corporate debtor, could be invoked to grant a subsequent extension. The court clarified that the non-obstante clause in Section 60(5) applies to any other law but not to other provisions within the IBC itself. The court cited the Supreme Court's interpretation in P. Virudhachalam vs. Management of Lotus Mills, which held that non-obstante clauses do not override provisions within the same statute. Therefore, the court concluded that Section 60(5) could not be used to bypass the explicit restriction in the first proviso to Section 12.

3. Validity of Extension Based on COC Resolution:
The court also examined whether the extension granted based on a resolution approved by 87.26% of the Committee of Creditors (COC) members was valid. The court referred to the Supreme Court's judgment in Essar Steel India Ltd, which allows for extensions beyond 330 days only if a short period is left for completing the CIRP and it is in the interest of all stakeholders to put the corporate debtor back on its feet instead of liquidation. The court found that the resolution plan presented did not indicate that only a short period was left for completing the CIRP or that it would bring the corporate debtor back to its feet. Instead, the resolution plan appeared to be a corporate takeover rather than a genuine effort to revive the debtor.

Conclusion:
The court set aside the NCLT's order dated 25.08.2022, which granted a subsequent extension, ruling it impermissible under the law. The court allowed the writ petition to the extent indicated and clarified that this decision does not preclude the corporate debtor or creditors from pursuing further legal remedies as permissible under the law.

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