Corporate insolvency resolution process can be extended by a further period of 180 days: SC

As per Section 12 of the IBC, the corporate insolvency resolution process shall be completed within a period of 180 days from the date of admission of the application, which can be extended by a further period of 180 days: SC

Issue

Petitioner filed the appeal before the hon’ble Supreme Court after feeling aggrieved and dissatisfied with the impugned judgment and order dated 16.08.2019 passed by the National Company Law Appellate Tribunal, New Delhi (Appellate Authority) in Company Appeal (AT) (Insolvency) No. 219 of 2019, the Committee of Creditors of Amtek Auto Limited through Corporation Bank (COC) has preferred the present appeal. The COC has preferred the present appeal contending inter alia that; 

(a) the Corporate Debtor is financially viable entity and there is enough interest in the market for submission of a resolution plan for the Corporate Debtor; 

(b) Resolution of the financial affairs of a distressed company is primary aim of the Code and a failure/infirmity on the part of a resolution applicant ought not to undermine the primary mischief sought to be resolved; 

(c) Maximization of the value of the assets of the Corporate Debtor is imbedded in the Code and even forms the part of its Preamble and therefore, an opportunity ought to be granted to the Committee of Creditors to make an attempt at resolution specially keeping in view the availability of suitable resolution applicants in the market; and 

(d) M/s Liberty House Group Private Limited by its deliberate failure in implementing the Approved Resolution Plan, has defrauded the Adjudicating Authority, the Committee of Creditors and all the stakeholders of the Corporate Debtor, hence, the period extended in proceeding with the CIR Process with Liberty as a Resolution Applicant ought to be excluded to uphold the principles underlining the Code. 

Facts

• In accordance with Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), the corporate insolvency resolution process was initiated against Amtek Auto Limited – Corporate Debtor on 24.07.2017.  
• A resolution professional was appointed he published an advertisement inviting prospective resolution applicants to submit a Resolution Plan by 31.08.2017. The Resolution Plans submitted by Deccan Value Investor LP and M/s Liberty House Group Private Limited were considered by the COC.  
• However, Deccan Value Investor LP withdrew its Resolution Plan and therefore the revised plan of M/s Liberty House Group Private Limited was considered and approved by the COC on 2.4.2018. Subsequently, the Resolution Plan submitted by M/s Liberty House Group Private Limited came to be approved by the National Company Law Tribunal, Chandigarh Bench, Chandigarh (Adjudicating Authority) vide order dated 25.07.2018.  
• However, the successful resolution of M/s Liberty House Group Pvt Ltd did not act as per the approved Resolution Plan. Thereafter, number of proceedings were initiated against the successful resolution of M/s Liberty House Group Pvt Ltd. 
• An application under Section 60(5) read with Section 74(3) of the IBC was filed by the COC/financial creditors before the Adjudicating Authority informing that the successful resolution by M/s Liberty House Group Pvt Ltd has failed to act as per the approved Resolution Plan and it was prayed to reinstate the COC and the resolution professional to ensure that the Corporate Debtor remain as a going concern. 
• The Adjudicating Authority held that Liberty has defaulted in its obligation under the approved Resolution Plan and granted liberty to the COC and the resolution professional to approach the appropriate authority under the IBC for the determination of the willful default. 
• Feeling aggrieved and dissatisfied with the order passed by the adjudicating authority dated 13.02.2019, the COC filed an appeal before the appellate authority – NCLAT. However, the same was rejected and DVI was declared as an ineligible resolution applicant. 

Findings

The approved resolution plan has to be implemented at the earliest and that is the mandate under the IBC. As per Section 12 of the IBC, subject to sub-section (2), the corporate insolvency resolution process shall be completed within a period of 180 days from the date of admission of the application to initiate such process, which can be extended by a further period of 180 days. As per proviso to Section 12 of the IBC, which has been inserted by Act 26 of 2019, the insolvency resolution process shall mandatorily be completed within a period of 330 days from the insolvency commencement date, including any extension of the period of corporate insolvency resolution process granted under Section 12 of the IBC and the time taken in legal proceedings in relation to such resolution process of the Corporate Debtor. As per the third proviso to Section 12 of the IBC, which is also inserted by Act 26 of 2019, where the insolvency resolution process of a Corporate Debtor is pending and has not been completed within a period stated hereinabove, i.e., within a period of 330 days, such resolution process shall be completed within a period of 90 days from the date of commencement of the IBC amendment Act, 2019, i.e., 16.08.2019.  

Judgement

Supreme Court held that all the concerned parties to the approved resolution plan and/or connected with implementation of the approved resolution plan including IMC to complete the implementation of the approved resolution plan, within a period of four weeks from today, without fail. It is further directed and it goes without saying that on implementation of the approved resolution plan and even as per the approved resolution plan, an amount of Rs. 500 crores now deposited by DVI-successful resolution applicant be transferred to the respective lenders/financial creditors as per the approved resolution plan and/or as mutually agreed. Any lapse on the part of any of the parties in implementing the approved resolution plan with the time stipulated hereinabove shall be viewed very seriously. 

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