Kisanrao Kashiprasad Borele vs Ajay Gupta

Kisanrao Kashiprasad Borele ...Appellant(s)

Versus

Ajay Gupta ...Respondent(s) Erstwhile Resolution Professional & Anr.

Present: For Appellant : Mr. Raghav Sabharwal, Mr. Jatin Kumar, Ms. Yashita Dalmia, Advocates. For Respondents : Mr. Ankit Agarwal, Ms. Viyushti Rawat, Advocates for R-1. Mr. Dhiren Shah, Liquidator.

ORDER

(Hybrid Mode) 19.09.2024: This appeal is against the impugned order dated

14.08.2024 wherein an application filed by the Resolution Professional under

Section 60(5) of the Insolvency and Bankruptcy Code, 2016 and Rule 11 of

the NCLT Rules read with Regulation 40 of the Insolvency and Bankruptcy

Board of India (Insolvency Resolution Process for Corporate Persons)

Regulations seeking extension of the CIRP by 90 days from 06.06.2024 was

dismissed and instead the Ld. NCLT had directed to liquidate the Corporate

Debtor in terms of Section 33(1)(a) on account of failure to receive any

resolution plan till completion of 330 days which expired on 06.06.2024.

2. It is the submission of Learned Counsel for the Appellant that he is the

sole member of the CoC and the sole Financial Creditor and that the

impugned order incorrectly records that the representative of the CoC stated

that as there is a single resolution applicant and hence it may not lead to

value maximization.

-2-

3. It is the submission of Learned Counsel for the Appellant since the

Appellant was the representative of the CoC member, hence he could not

make such a submission and that it is wrongly recorded. In any case, the

Appellant was only one who had given EOI which was pending consideration

with the Resolution Professional, when the aforesaid application under

Section 60(5) was filed before the Ld. NCLT.

4. Admittedly, the Liquidator has since been appointed and who is present

as Respondent No. 2. The Ld. Liquidator submits that he has no objection to

allowing this appeal, subject to payment of cost incurred in the proceedings

and Liquidator's fees. Similarly, the Learned Counsel for the Resolution

Professional submits he has also no objection if the CIRP period is extended.

5. The Section 12(3) of the Code provides as under:

12. Time-limit for completion of insolvency resolution process. -

(3) On receipt of an application under sub-section (2), if the Adjudicating Authority is satisfied that the subject matter of the case is such that corporate insolvency resolution process cannot be completed within one hundred and eighty days, it may by order extend the duration of such process beyond one hundred and eighty days by such further period as it thinks fit, but not exceeding ninety days:

Provided that any extension of the period of corporate insolvency resolution process under this section shall not be granted more than once:

[Provided further that the corporate insolvency resolution process shall mandatorily be completed within a period of three hundred and thirty days from the insolvency -3-

commencement date, including any extension of the period of corporate insolvency resolution process granted under this section and the time taken in legal proceedings in relation to such resolution process of the corporate debtor:

Provided also that where the insolvency resolution process of a corporate debtor is pending and has not been completed within the period referred to in the second proviso, such resolution process shall be completed within a period of ninety days from the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019.]"

6. It is the submission of the Learned Counsel for the Appellant the word

'mandatorily' as appears in the second proviso has since been read down in

(2020) 8 SCC 531 - Committee of Creditors of Essar Steel India Ltd. vs.

Satish Kumar Gupta and Ors. which held as under:

"127. Both these judgments in Atma Ram Mittal [Atma Ram Mittal v. Ishwar Singh Punia, (1988) 4 SCC 284] and Sarah Mathew [Sarah Mathew v. Institute of Cardio Vascular Diseases, (2014) 2 SCC 62 : (2014) 1 SCC (Cri) 721] have been followed in Neeraj Kumar Sainy v. State of U.P. [Neeraj Kumar Sainy v. State of U.P., (2017) 14 SCC 136 : 8 SCEC 454] , SCC paras 29 and 32. Given the fact that the time taken in legal proceedings cannot possibly harm a litigant if the Tribunal itself cannot take up the litigant's case within the requisite period for no fault of the litigant, a provision which mandatorily requires the CIRP to end by a certain date -- without any exception thereto -- may well be an excessive interference with a litigant's fundamental right to nonarbitrary treatment under Article 14 and an excessive, arbitrary and therefore unreasonable restriction on a litigant's fundamental right to carry on business under Article 19 (1) (g) of the -4-

Constitution of India. This being the case, we would ordinarily have struck down the provision in its entirety. However, that would then throw the baby out with the bath water, inasmuch as the time taken in legal proceedings is certainly an important factor which causes delay, and which has made previous statutory experiments fail as we have seen from Madras Petrochem [Madras Petrochem Ltd. v. BIFR, (2016) 4 SCC 1:

(2016) 2 SCC (Civ) 478]. Thus, while leaving the provision otherwise intact, we strike down the word "mandatorily" as being manifestly arbitrary under Article 14 of the Constitution of India and as being an excessive and unreasonable restriction on the litigant's right to carry on business under Article 19(1)(g) of the Constitution. The effect of this declaration

is that ordinarily the time taken in relation to the corporate resolution process of the corporate debtor must be completed within the outer limit of 330 days from the insolvency commencement date, including extensions and the time taken in legal proceedings. However, on the facts of a given case, if it can be shown to the Adjudicating Authority and/or Appellate Tribunal under the Code that only a short period is left for completion of the insolvency resolution process beyond 330 days, and that it would be in the interest of all stakeholders that the corporate debtor be put back on its feet instead of being sent into liquidation and that the time taken in legal proceedings is largely due to factors owing to which the fault cannot be ascribed to the litigants before the Adjudicating Authority and/or Appellate Tribunal, the delay or a large part thereof being attributable to the tardy process of the Adjudicating Authority and/or the Appellate Tribunal itself, it may be open in such cases for the Adjudicating Authority and/or Appellate Tribunal to extend time beyond 330 days.

Likewise, even under the newly added proviso to Section 12, if by reason of all the aforesaid factors the grace period of 90 days from the date of commencement of the Amending Act of -5-

2019 is exceeded, there again a discretion can be exercised by the Adjudicating Authority and/or Appellate Tribunal to further extend time keeping the aforesaid parameters in mind. It is only in such exceptional cases that time can be extended, the general rule being that 330 days is the outer limit within which resolution of the stressed assets of the corporate debtor must take place beyond which the corporate debtor is to be driven into liquidation."

7. Further Learned Counsel for Appellant made reference to West Bengal

Financial Corporation Vs. Bijoy Murmuria & Ors. in Company Appeal (AT)

(Insolvency) No. 1012 of 2021 which records as under:

"22. The Hon'ble Supreme Court in the above case has held that it would be in the interest of all stakeholders that the Corporate Debtor will be back on its foot instead of being sent into liquidation. It was further held that time taken in legal proceedings is largely due to factors owing to which the fault cannot be ascribed to the litigants before the Adjudicating Authority and/or Appellate Tribunal.

23. The Hon'ble Supreme Court has held that in exceptional cases, time can be extended. The general rule being that 330 days is the outer limit within which resolution of the stressed assets of the Corporate Debtor must take place beyond which the Corporate Debtor is to be driven into liquidation and also held that in 2nd proviso to sub-section (3) of Section 12 the word mandatorily as being manifestly arbitrary under Article 14 of Constitutional of India and as being an excessive and unreasonable restriction on the litigant's right to carry on business under Article 19 (1)(g) of the Constitution. Therefore, strike down the word "mandatorily".

24. With the aforesaid now it is settled law that the time limit for completion of Insolvency Resolution Process provided in -6-

Section 12 of IBC is not mandatory. Therefore, we are unable to be convinced with the argument of learned Counsel for the Appellant that in time limit of 330 days provided in Section 12(3) if the resolution is not completed, the Adjudicating Authority is bound to order for liquidation.

With the aforesaid, we find no ground to interfere in this Appeal. Thus, the Appeal is dismissed. No orders as to costs."

8. In view of the above, as the EOI is pending consideration with the

Resolution Professional, and considering that the primary objective of the I&B

Code, 2016 is resolution of the Corporate Debtor, we consider it expedient to

allow extension of time for CIRP. The Financial Creditor is the sole member of

the CoC and per provisions of Section 30(5), he may have right to vote since

the proposed resolution applicant is also a Financial Creditor, there is no

impediment in allowing the application so filed by the Resolution Professional

before the Ld. NCLT. Thus, we, extend time for completion of the CIRP process

by 60 days from today. Consequently, the impugned order dated 14.08.2024

is set aside and the appeal is allowed. Pending application(s), if any, are closed.

[Justice Yogesh Khanna] Member (Judicial)

[Mr. Ajai Das Mehrotra] Member (Technical)

R.N./Manu