Liquidation revival under Section 230 may justify further time extension because Regulation 2B is directory, not mandatory.

Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016 was held to be directory, not mandatory, when read with Section 230 of the Companies Act, 2013. The provision is an enabling mechanism to facilitate a compromise or arrangement during liquidation, and liquidation remains a last resort under the Insolvency and Bankruptcy Code, 2016. Where a scheme is approved or substantially approved, revival remains feasible, and no express prohibition bars further extension, additional time may be granted. Earlier extensions do not, by themselves, prevent fresh consideration of extension on the facts. The refusal to grant further time was therefore unsustainable.

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Issues: Whether the time stipulation in Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016 for completing a scheme of compromise or arrangement under Section 230 of the Companies Act, 2013 is mandatory or directory, and whether further extension of time could be granted to enable completion of the scheme.

Analysis: Regulation 2B was read as an enabling provision intended to facilitate exploration of a compromise or arrangement during liquidation, not as an absolute bar to extension. The statutory object of the Insolvency and Bankruptcy Code, 2016, the linkage of liquidation with revival efforts under Section 230 of the Companies Act, 2013, and the principle that liquidation is a last resort were relied upon. The approved or substantially approved scheme, the commercial wisdom of stakeholders, and the absence of any express legislative prohibition against further extension were treated as material considerations. The earlier extensions did not create a legal bar to a fresh consideration of time extension on the facts of the case.

Conclusion: Regulation 2B is directory in nature, and the refusal to grant further time was unsustainable. Extension of time to complete the scheme could be granted.

Ratio Decidendi: A scheme of compromise or arrangement under Section 230 of the Companies Act, 2013 in liquidation may be permitted beyond the initial timeframe under Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016 where revival remains feasible, because the regulation is directory and not an absolute prohibition on further extension.

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