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Time limit or completing CIRP may be extended beyond 330 days only in exceptional circumstances
The National Company Law Appellate Tribunal, Chennai in the matter of Mr. Ravi Sankar Deverakonda v. Committee of Creditors of Meenakshi Energy Limited, REED 2021 NCLAT Chen 03608, vide its judgment, reiterated the principle laid down in the Committee of Creditors of Essar Steel India Limited v Satish Kumar Gupta and Others, REED 2019 SC 11505, and held that though ordinarily the Corporate Insolvency Resolution Process of the Corporate Debtor must be completed within a period of 330 days from the date of commencement of insolvency (including the extension and time consumed in legal proceedings), the exercise of power by the Adjudicating Authority to extend the time period in the negation of statutory provision of the Insolvency and Bankruptcy Code, 2016 may be desirable in exceptional/extraordinary circumstances of a given case by exercising sound judicial discretion with a view to find a suitable Resolution Plan to prevent an aberration of justice.
The Resolution Professional (RP)/Appellant had filed an application before the National Company Law Tribunal, Hyderabad Bench (NCLT) seeking an extension of the time period to complete the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor from 270 to 330 days. The NCLT granted the Appellant an extension of 60 days from 270 to 330 days to conclude the CIRP of the Corporate Debtor. However, the NCLT also observed that in the event that CIRP was not completed within the 330 days period, the Liquidation Proceedings against the Corporate Debtor would commence.
The RP filed an appeal before the National Company Law Appellate Tribunal, Chennai Bench (NCLAT) arguing that the observation made by NCLT in its order would deprive its right to seek an extension beyond the period of 330 days as per the dictum by the Hon’ble Supreme Court in Committee of Creditors of Essar Steel India Limited v Satish Kumar Gupta and Others, REED 2019 SC 11505 (Essar Steel case). The Appellant averred that the 330 days period mentioned in Section 12(3) of the Insolvency and Bankruptcy Code, 2016 (IBC) is not a mandatory one and further, the word ‘mandatorily’ appearing in the second proviso to Section 12(2) of the IBC has already been struck down in Essar Steel case.
The NCLAT, relying on the Essar Steel case, noted that ordinarily the CIRP of the Corporate Debtor must be completed within 330 days from the insolvency commencement date. However, under exceptional/extraordinary circumstances the said time limit can be extended where, inter-alia, only a short period is left for the completion of CIRP 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 which has serious implications.
After perusing the impugned order of NCLT, the Appellate Authority noted that the instant appeal was not maintainable, as it was a premature and otiose one. The NCLT had already granted an extension of 60 days and only after the expiry of 330 days’ time-frame, could a further extension based on principles laid down in the Essar Steel case be sought by the Appellant. Additionally, the Appellant agreed to withdraw the present application, and hence, it was accordingly dismissed.