The Insolvency & Bankruptcy Code, 2016 (IBC) was introduced when insolvency resolution in India took around 4 years on an average. Therefore, completing the resolution process within a fixed timeline was at the heart of the new framework. But the instances of delays still kept cropping up and the code has been amended continually to impose stricter time frames and ensure compliance.
The aim of this Article is to analyze the timelines provided for corporate insolvency resolution process (CIRP) under the IBC and the latest amendments thereon.
With reference to the timeline for completion of CIRP under IBC, please note that generally the CIRP shall be completed within 330 days from the Commencement of Insolvency Proceedings. However, it is subject to certain exclusions.
The Relevant Provisions:
Section 12(2) of the IBC states that the Resolution Professional (RP) may file an application with National Company Law Tribunal (NCLT) to extend this 180-day period by a further 90 days if instructed to do so through a resolution passed by a vote of 66% of the voting shares of the Committee of Creditors (CoC). This extension can be given only once.
Section 12(3) of the IBC was amended by way of the Insolvency and Bankruptcy (Amendment) Act, 2019, and two provisos were added:
Proviso 1 states that a CIRP must mandatorily be completed within 330 days from the insolvency commencement date, including any extension of the period of the CIRP granted and the time taken in legal proceedings in relation to the resolution process.
Proviso 2 states that, when the CIRP of a Corporate Debtor (CD) has been pending for over 330 days, it must be completed within 90 days from the date of the amendment.
Thus, the overall timeline for completing a CIRP now stands at 330 days from the date of insolvency commencement date. However, it shall be noted that while calculating the number of 330 days the following shall be excluded.
Exclusions to the Timelines:
Pursuant to the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, CIRP timelines have been relaxed by virtue of the COVID-19 outbreak. The lockdown period, shall be excluded from computation of the time-line for any task that could not be completed due to such lockdown. The said 68 days has to be excluded for reckoning the timelines under the CIRP pursuant to the following dates of nationwide lockdown:
• Phase 1: 25 March 2020 – 14 April 2020 (21 days)
• Phase 2: 15 April 2020 – 3 May 2020 (19 days)
• Phase 3: 4 May 2020 – 17 May 2020 (14 days)
• Phase 4: 18 May 2020 – 31 May 2020 (14 days)
Period of Stay:
The Hon’ble NCLAT, in case of Quinn Logistics India Pvt Ltd, Vs. Mark Soft Tech Pvt. Ltd. has laid down the principle that the period of stay shall be excluded, if the CIRP is set aside by the Appellate Tribunal or order of the Appellate Tribunal is reversed by the Hon’ble Supreme Court, and corporate insolvency resolution process is restored. Therefore, the period of stay shall be excluded while reckoning the 330 days.
Extension of the Timelines:
In Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors., it was held that on the facts of a given case, if it can be shown to the Appellate Authority (AA) and/or the NCLAT that only a short period is needed beyond the 330 days to complete the CIRP and that it would be in the interest of all stakeholders for the CD to be put back on its feet instead of being liquidated; and further that the time taken in legal proceedings was largely due to factors that could not be ascribed to the litigants before the AA and/or the NCLAT, the delay or a large part thereof being attributable to the tardy process of the AA and/or the NCLAT itself, the AA and/ or the NCLAT may extend the time beyond 330 days.
Even under the newly added provisos to section 12, if for all these factors the grace period of 90 days from the date of commencement of the amending act of 2019 is exceeded, discretion can be exercised by the AA and/or the NCLAT to further extend the time, keeping the aforesaid parameters in mind.
Overlapping timelines, multiple interpretation and resultant litigation is still causing delays in resolution process and might continue for some more time until ambiguities are conclusively resolved through judicial analysis.