The Supreme Court on Monday has asked the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) to strictly adhere to the timelines stipulated under the Insolvency and Bankruptcy Code and clear pending resolution plans within the mandated deadline of 330 days.
The Court was hearing the case of Ebix Singapore PTE against the Committee of Creditors of Educomp Solutions. The NCLAT, in July 2020, set aside an order passed by the NCLT’s Principal bench and had held that the application to withdraw from the Resolution Plan could not have been allowed since: (i) it was barred by res judicata; and (ii) the NCLT does not have jurisdiction to permit such a withdrawal.
The bench of Justice DY Chandrachud and Justice MR Shah said that, “inordinate delays cause commercial uncertainty, degradation in the value of the Corporate Debtor and makes the insolvency process inefficient and expensive. We urge the NCLT and NCLAT to be sensitive to the effect of such delays on the insolvency resolution process and be cognizant that adjournments hamper the efficacy of the judicial process.”
“It would also be sobering for us to recognize that whilst this Court has declared the position in law to not enable a withdrawal or modification to a successful Resolution Applicant after its submission to the Adjudicating Authority, long delays in approving the Resolution Plan by the Adjudicating Authority affect the subsequent implementation of the plan. These delays, if systemic and frequent, will have an undeniable impact on the commercial assessment that the parties undertake during the course of the negotiation. The thirty-second report of the Ministry of Corporate Affairs’ Standing Committee on Finance (2020-2021) on the ‘Implementation of Insolvency and Bankruptcy Code- Pitfalls and Solutions’ represented a despondent state of affairs with regard to pendency of applications before the Adjudicating Authority.” reads the judgment.
The Apex Court also opined that it is pertinent to note that sub-Section (3) to Section 12 mandates that the CIRP process, including legal proceedings, must be concluded within 330 days. This three-hundred-and thirty-day period can be extended only in exceptional circumstances, if the process is at near conclusion and serves the object of the IBC, as held by a three judge Bench of this Court in Essar Steel.
The bench further said that “We urge the NCLT and NCLAT to be sensitive to the effect of such delays on the insolvency resolution process and be cognizant that adjournments hamper the efficacy of the judicial process. The NCLT and the NCLAT should endeavor, on a best effort basis, to strictly adhere to the timelines stipulated under the IBC and clear pending resolution plans forthwith. Judicial delay was one of the major reasons for the failure of the insolvency regime that was in effect prior to the IBC. We cannot let the present insolvency regime meet the same fate.”