I. Case Reference
| Case Citation | : | (2021) ibclaw.in 498 NCLAT |
| Case Name | : | Harish Taneja The RP of Cosmopolitan Technofab Textiles Pvt. Ltd. |
| Corporate Debtor | : | Cosmopolitan Technofab Textiles Pvt. Ltd. |
| Appeal No. | : | Company Appeal (AT) (Ins) No. 825 of 2021 |
| Judgment Date | : | 29-Oct-21 |
| Court/Bench | : | NCLAT New Delhi |
| Act | : | Insolvency & Bankruptcy Code 2016 |
| Present for Appellant(s) | : | Harish, Taneja, Advocate |
| Acting Chairperson | : | Mr. Justice Venugopal M. |
| Member (Technical) | : | Mr. V. P. Singh |
| Member (Technical) | : | Dr. Alok Srivastava |
| Original Judgment | : | Download |
II. Brief about the decision
NCLAT held that it is quite clear from the averments made in the appeal that the Resolution Professional could not receive necessary cooperation from the erstwhile director of the Corporate Debtor, and consequently he had to file an application under Section 19(2) before the Adjudicating Authority, which was decided by the Adjudicating Authority. The resolution of CoC relating to filing of application for exclusion of the time period in the 5th meeting of CoC held on 29.8.2020 did not approve the request of the Resolution profession for filing of application for exclusion of time period, but left it to the wisdom of Resolution Professional. The CIRP is a time bound process and once the process is initiated, the clock starts ticking. It cannot be allowed to remain unending process. IBC provides that if the CIRP does not lead to satisfactory resolution of the Corporate Debtor in the timeline specified in section 12 of the IBC, necessary consequences relating to Corporate Debtor such as liquidation should follow. It is, therefore, duty of the Resolution Profession to bring such agenda, as may be necessary before CoC for decision. In the instant matter, this does not seem to have been done. On the contrary, the Resolution Professional waited after filing of IA No. 933/2021, Thus the entire CIRP was kept handing.(p13)
The time period provided under IBC for completion of CIRP is 180 days as per section 12. If the CIRP is not completed within this time period, an explicit extension order is to be sought from the Adjudicating Authority, which can be of maximum of 90 days. From the averments made by the Resolution Profession and the arguments submitted before us, we do not find that after the expiry of 180 days from the date of commencement of CIRP, the Resolution Professional obtained approval of the CoC to file an application for extension of CIRP. Moreover, he never filed any application for extension of CIRP and waited for a decision on his section 19(2) application. Section 19(2) application was neither for exclusion of time period nor for extension of time period. We are of the very clear opinion that since the Resolution Professional could not receive any order in action with section 19(2) application, he should have filed an application for extension of CIRP as required under section 12, after a lapse of 180 days from the commencement of CIRP, after due approval of CoC. All this is requirement under Law, which cannot be lost sight of, and the Resolution Professional has been remiss in carrying out his responsibilities as per provisions of IBC. In such a situation, we find that he is seeking extension of time period of CIRP in the garb of “exclusion of time period” which cannot be permitted.(p14)
The Resolution Professional’s Learned Counsel has cited the order of Hon’ble NCLAT in Vivek Raheja Resolution Professional (2021) ibclaw.in 225 NCLAT to claim that exclusion of time spent in judicial intervention was allowed to be excluded, along with time lost on imposition of Covid-19 lockdown and time spent in filing Appeal. The facts of this case are different whereas in the present case the Resolution Professional has not, in his averments, provided sufficient justification for exclusion, neither did he seek the approval of CoC regarding such exclusion of time period. We thus find that the Resolution Professional took necessary action with alacrity and alertness and is now seeking exclusion of time, even though there is no averment, which can justify exclusion of time, such that it leads to proper resolution of the Corporate Debtor. We do not think it appropriate to interfere with the Impugned Order. The Resolution Professional has not provided necessary and satisfactory reasons and justification for exclusion of the prayed time period in the CIRP. The appeal is, therefore, dismissed at the admission stage.(p15-17)
III. Full text of the judgment
ORDER
(Through virtual mode)
The appeal was heard on 20.10.2021.
2. This Appeal has been filed under section 61 of Insolvency and Bankruptcy Code, 2016 arising out of the order dated 29.07.2021 in IA 933/2021 in C.P. No. IB/1626(PB)/2019 passed by NCLT, New Delhi.
3. The Resolution Professional has stated that he had filed an application under Section 65 of The Insolvency and Bankruptcy Code, 2016 (hereinafter called IBC) alongwith Section 12 of the IBC read with Regulation 40-C of The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate persons) Regulations, 2016 and Rule 11 of NCLT Rules, 2016 seeking exclusion of period of Covid 19 pandemic along with the period that had lapsed due to non-availability of records, assets and books of accounts during the on-going CIRP.
4. The Resolution Professional (RP) has stated in the appeal that Regulation 40-C of The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate persons) Regulations, 2016, the following relaxation/exclusion in the timeline has been provided:-
“Notwithstanding the time-lines contained in these regulations, but subject to the provisions in the Code, the period of lockdown imposed by the Central Government in the wake of Covid-19 outbreak shall not be counted for the purposes of the time-line for any activity that could not be completed due to such lockdown, in relation to a corporate insolvency resolution process.”
5. He has further stated that the issue relating to exclusion of time was discussed in the 5th meeting of the Committee of Creditors (in short CoC) on 29.8.2020 and the CoC decided as follows:-
“The CoC members stated that decision regarding whether to file an application or not for exclusion is in the powers of the RP and if the RP thinks fit that the application needs to be filed then RP should file the application. The same was noted by CoC.”
6. The RP has added that the Hon’ble NCLAT vide order dated 30.3.2020 had observed as follows:-
“That the period of lockdown ordered by the Central Government and the State Governments including thee period as may be extended either in whole or part of the country, where the registered office of the Corporate Debtor may be located, shall be excluded for the purpose of counting of the period for “Resolution Process under Section 12 of the Insolvency and Bankruptcy Code, 2016, in all cases where “Corporate Insolvency Resolution Process” has been initiated and pending before any Bench of the National Company Law Tribunal or in Appeal before this Appellate Tribunal.”
“It is further ordered that any interim order/stay order passed by this Appellate Tribunal in anyone or the other Appeal under Insolvency and Bankruptcy Code, 2016 shall continue till next date of hearing, which may be notified later.”
7. The RP has submitted that he faced issues relating to non-availability of records, assets, and books of accounts of the Corporate Debtor and also due to on-going Covid-19 pandemic, he could not take necessary actions from the commencement of CIRP from 5.11.2019. He further had to file an application under Section 19 (2) of the IBC on 7.12.2019 and hence this entire period starting from the commencement of CIRP on 5.11.2019 till the disposal of the application under Section 19(2) should be excluded from the time period of CIRP. He has cited the judgment of Hon’ble NCLAT in the matter of Quinn Logistics India Ltd. v. Mack Soft Tech Pvt. Ltd., Comp App. (AT)(INS) No. 185 of 2018, wherein the Hon’ble NCLAT held that “…it is open to the Adjudicating Authority/appellate Tribunal to ‘exclude certain period’ for the purpose of counting the total period of 270 days, if the facts and circumstances justify exclusion, in unforeseen circumstances.”
8. The RP in person has argued that he had to file an application under Section 19(2) of the IBC due to non-cooperation of the erstwhile Director of the Corporate Debtor in transferring books of accounts, records and assets. There was time span in this litigation. Furthermore, he could not carry out the designated dues with relation to the CIRP due to the imposition of ‘lock down’ in the on-going Covid-19 pandemic and hence the order of Adjudicating Authority granting an extension of 90 days w.e.f. 3.5.2020, so as to complete the CIRP in 70 days is not in accordance with his request for exclusion of time from the period from commencement of CIRP till the disposal of his application under Section 19(2) and therefore the Impugned Order should be set aside and exclusion time period as sought by him be granted by the Hon’ble NCLAT.
9. We have perused order dated 29.7.2021 as well as the grounds stated by the Resolution Professional in the present appeal and the written submissions.
10. Regulation 40-C of The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate persons) Regulations, 2016 is as under:-
“40-C. Special provision relating to time-line. –
Notwithstanding the time-lines contained in these regulations, but subject to the provisions in the Code, the period of lockdown imposed by the Central Government in the wake of Covid-19 outbreak shall not be counted for the purposes of the timeline for any activity that could not be completed due to such lockdown, in relation to a corporate insolvency resolution process.”
Section 19 (2) of the IBC reads as hereunder:–
“Where any personnel of the corporate debtor, its promoter or any other person required to assist or co-operate with the interim resolution professional does not assist or cooperate, the interim resolution professional may make an application to the Adjudicating Authority for necessary directions.”
11. Section 12 specify the time limit for completion of CIRP. According to Section 12(1) and Section 12(2), the CIRP has to be ordinarily completed within a period of 180 days from the date of admission of the application to initiate the CIRP. Section 19(2) entitle the Resolution Professional to file an application to extend the period of CIRP beyond 180 days, if instructed to do so by a resolution passed at a meeting of the CoC by a vote of 66% of the voting share.
12. Sub-section 3 of section 12 empowers the Adjudicating Authority to extend the duration of CIRP beyond 180 days upto a period which shall not be more than 90 days.
13. It is quite clear from the averments made in the appeal that the Resolution Professional could not receive necessary cooperation from the erstwhile director of the Corporate Debtor, and consequently he had to file an application under Section 19(2) before the Adjudicating Authority, which was decided by the Adjudicating Authority. The resolution of CoC relating to filing of application for exclusion of the time period in the 5th meeting of CoC held on 29.8.2020 did not approve the request of the Resolution profession for filing of application for exclusion of time period, but left it to the wisdom of Resolution Professional. The CIRP is a time bound process and once the process is initiated, the clock starts ticking. It cannot be allowed to remain unending process. IBC provides that if the CIRP does not lead to satisfactory resolution of the Corporate Debtor in the timeline specified in section 12 of the IBC, necessary consequences relating to Corporate Debtor such as liquidation should follow. It is, therefore, duty of the Resolution Profession to bring such agenda, as may be necessary before CoC for decision. In the instant matter, this does not seem to have been done. On the contrary, the Resolution Professional waited after filing of IA No. 933/2021, Thus the entire CIRP was kept handing.
14. The time period provided under IBC for completion of CIRP is 180 days as per section 12. If the CIRP is not completed within this time period, an explicit extension order is to be sought from the Adjudicating Authority, which can be of maximum of 90 days. From the averments made by the Resolution Profession and the arguments submitted before us, we do not find that after the expiry of 180 days from the date of commencement of CIRP, the Resolution Professional obtained approval of the CoC to file an application for extension of CIRP. Moreover, he never filed any application for extension of CIRP and waited for a decision on his section 19(2) application. Section 19(2) application was neither for exclusion of time period nor for extension of time period. We are of the very clear opinion that since the Resolution Professional could not receive any order in action with section 19(2) application, he should have filed an application for extension of CIRP as required under section 12, after a lapse of 180 days from the commencement of CIRP, after due approval of CoC. All this is requirement under Law, which cannot be lost sight of, and the Resolution Professional has been remiss in carrying out his responsibilities as per provisions of IBC. In such a situation, we find that he is seeking extension of time period of CIRP in the garb of “exclusion of time period” which cannot be permitted.
15. The Resolution Professional’s Learned Counsel has cited the order of Hon’ble NCLAT in CA(AT)(Ins) No. 331/2021 to claim that exclusion of time spent in judicial intervention was allowed to be excluded, along with time lost on imposition of Covid-19 lockdown and time spent in filing Appeal. The facts of this case are different whereas in the present case the Resolution Professional has not, in his averments, provided sufficient justification for exclusion, neither did he seek the approval of CoC regarding such exclusion of time period.
16. We thus find that the Resolution Professional took necessary action with alacrity and alertness and is now seeking exclusion of time, even though there is no averment, which can justify exclusion of time, such that it leads to proper resolution of the Corporate Debtor.
17. We do not think it appropriate to interfere with the Impugned Order. The Resolution Professional has not provided necessary and satisfactory reasons and justification for exclusion of the prayed time period in the CIRP. The appeal is, therefore, dismissed at the admission stage.
(Justice M. Venugopal)
Acting Chairperson
(V.P. Singh)
Member (Technical)
(Dr. Alok Srivastava)
Member (Technical)
New Delhi
29th October, 2021
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