As per Section 5(14) of the IB Code "Insolvency Resolution Process Period" is 180 days.
“Period of one hundred and eighty days beginning from the insolvency commencement date and ending on one hundred and eightieth day;”
COMPLETION OF INSOLVENCY RESOLUTION PROCESS - It must be noted that Section 12 of the IB Code prescribes the time limit for completion of Insolvency Resolution process.
“Corporate insolvency resolution process i.e. CIRP shall be completed within a period of one hundred and eighty days from the date of admission of the application to initiate such process.”
PROVISION OF EXTENSION
NCLT can further extend a period of 90 days.
CHALLENGE OF 180 DAYS
This can be substantiated from Section 85 (4) of the IB Code which states that “The moratorium ceases to have effect at the end of the period of one hundred and eighty days.”
Therefore, the time limit of 180 days is mandatory but such stipulated time period could not be strictly complied with by the Resolution Professional.
It must be also known that the time factor can be understood as below;
At present, there are only 2 timelines i.e. 180 days and with an extension of another 90 days totaling to an overall 270 days (180+90).
This time factor has so far prevented the resolution professional, in majority of the cases, to identify the resolution applicant within the stipulated time period.
The challenge to meet deadline also resulted in changing of identification process and criteria till the fag end of the resolution period. This has led to delays in the completion of the resolution process.
Therefore, in most of the cases the extension of 90 days was allowed by the NCLT and the purpose of 90 day extension i.e. extension by NCLT in exceptional circumstances was defeated.
SOLUTION OF 105 DAYS
The aforesaid challenge was realized and hence IBBI has come up with an introduction of Regulation 35A in Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2018;
“35A. Identification of Resolution Applicant – The resolution professional shall identify the prospective resolution applicants on or before the 105th day from the insolvency commencement date.”
Thus, a break-even point of 105 days has been set out to simultaneously find out a resolution applicant as well by the Resolution Professional.
POSSIBLE TIME LINES
With the introduction of Regulation 35A, there can be 3 possible timelines i.e.
First – 105 days for identification of resolution applicant,
Second – 180 for completion of resolution process, and
Third – 270 days for completion of resolution process in exceptional circumstances and if extended by 90 days by NCLT.
As per Section 5(25) of the Code, "resolution applicant" means any person who submits a resolution plan to the resolution professional.
It is a grand welcome change as this amendment will mandate that the resolution professional identify the prospective resolution applicants by the 105th day of the commencement of the process of insolvency.
This 105-day deadline will provide sufficient time to the Committee of Creditors to scrutinize potential resolution plans in a more in-depth manner, before submitting their final proposal for ratification before the NCLT.
This will also ensure timely completion of the resolution process i.e. within the stipulated 180 days and without going for an extension period of 90 days.