NCLAT Chennai grants 90-day extension for Insolvency Resolution Process beyond 330 days protecting home buyers' interests

NCLAT Chennai allowed appeals challenging rejection of extension application for completing Insolvency Resolution Process beyond 330 days. The tribunal quashed the impugned order dated 26.04.2023 and granted 90-day extension to Resolution Professional, emphasizing home buyers' vital interests as stakeholders. The tribunal clarified proceedings were unnecessarily adjourned at financial creditors' behest and noted no further extensions would be granted. The decision followed precedent from NCLAT Principal Bench regarding stakeholder interests, while explicitly stating it did not examine merits of home buyers' claims or other matters beyond time extension.

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Issues Involved:
1. Extension of time for completion of the Insolvency Resolution Process (CIRP) u/s 12 of I & B Code, 2016.
2. Submission and approval of Resolution Plans by Home Buyers.
3. Legal provisions and precedents regarding extension beyond 330 days.

Summary:

Issue 1: Extension of time for completion of the Insolvency Resolution Process (CIRP) u/s 12 of I & B Code, 2016

These four Company Appeals, namely Comp. App (AT) (CH) (INS) No.192/2023, No.214/2023, No.215/2023, and No.212/2023, were filed by the Appellants challenging the respective Judgments passed by the Adjudicating Authority, which rejected their Applications u/s 12 of I & B Code, 2016, for extension of time for completing the CIRP.

The Adjudicating Authority declined to grant an extension of time beyond the statutory upper limit of 330 days prescribed u/s 12 of the I & B Code, 2016, despite the extensions already granted. The Tribunal noted that more than 5 years and 5 months had elapsed since the initiation of CIRP Proceedings.

The Tribunal considered the arguments that the period of 139 days automatically stood excluded from the Resolution period by an Order dated 01.07.2022, and further extensions were granted initially from 18.09.2022 to 17.12.2022, and subsequently, 60 days from 22.12.2022 to 15.02.2023, and another 60 days from 15.02.2023 to 16.04.2023. However, the Tribunal observed that no further extension could be granted as per the 1st proviso of sub-section 3 of Section 12 of the Act.

Issue 2: Submission and approval of Resolution Plans by Home Buyers

The Tribunal noted that the Home Buyers had constituted themselves into a Society and submitted their Resolution Plans, which were put for voting before the Committee of Creditors on 16.04.2023 and approved. However, the Adjudicating Authority recorded a finding that no single Resolution Plan had been received from the Prospective Home Buyers, which the Tribunal found to be perverse and contrary to the records.

The Tribunal emphasized that the Resolution Professional had submitted the approved Resolution Plans u/s 30(6) & 31 before the Committee of Creditors, but delays occurred due to procedural formalities and decisions by the Financial Creditors.

Issue 3: Legal provisions and precedents regarding extension beyond 330 days

The Tribunal referred to the Judgment of the Hon'ble Supreme Court in Committee of Creditors of Essar Steel (India) Ltd. v. Satish Kumar Gupta & Ors., which held that the time for completion of the Insolvency Resolution Process must be completed within the outer limit of 330 days, including extensions and time taken in legal proceedings. However, in exceptional cases, the Adjudicating Authority/Appellate Tribunal can extend the time beyond 330 days, considering the interest of all stakeholders.

The Tribunal also referred to the Judgment of the Principal Bench of NCLAT in Whispering Tower Flat Owner Welfare Association v. Abhay Narayan Manudhane and Ors., which emphasized that the object of IBC is to resolve insolvency and liquidation should be a last resort. The Tribunal noted that in cases where the Corporate Debtor is put to Liquidation without considering the Resolution Plan of the Stakeholders, the most sufferers would be the Home Buyers.

Conclusion:

Owing to the vital interest of the Home Buyers, the Tribunal allowed the respective Company Appeals, quashed the Impugned Orders dated 26.04.2023, and granted a further extension of 90 days to the Resolution Professional to complete the Insolvency Proceedings. The Tribunal made it clear that no further extension would be granted and did not delve into the merits of any of the Claims of Home Buyers, which is yet to be independently considered in the voting of the Committee of Creditors.

The Appeals were accordingly allowed, and all pending Interlocutory Applications were closed with no order as to costs.

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