Important IBC Judgments by NCLTs this week (21-25 June 2021)

  June 27, 2021

Summaries of the noteworthy orders passed by the various NCLT benches in IBC matters ~ By Aaryan Mohan

Indore Bench

Extension of Timeline Owing to the Pandemic — Ritwik Finance Enterprise Pvt. Ltd. v. Patwa Automotive Pvt Ltd.

The Resolution Professional (“RP”) requested the NCLT to exclude the 50 days for which lockdown had been imposed in the state of Madhya Pradesh from the time prescribed under Section 12, to resolve the debtor’s insolvency. The RP supported his request by informing the NCLT that the invitation of interest had received three expressions of interests.

The NCLT, however, invoked the availability of an additional 60 days in addition to the 270 days (expired in this case on 6 June 2021)- and asked the resolution professional to utilize these 60 days effectively to resolve the debtor’s insolvency. They further added that the RP may ask for an extension at an appropriate time.  

The future of this resolution can rely upon the Supreme Court’s decision in Essar Steel India Ltd. v. Satish Kumar Gupta, [2020] SCC 8. By reading the timeline prescribed under section 12 as directory, the Supreme Court had held that the resolution process may be afforded the leeway to continue beyond the prescribed 330 days if it can be proved that the delay caused by legal proceedings is not attributable to the faults of the Committee of Creditors. In this case, the imposition of a lockdown hindered the progress of this insolvency resolution.

 

Ahmedabad Bench

Withdrawal of Insolvency Application through Rule 11 of NCLT Rules – Edge Biotech v. Angstrom Biotech Pvt Ltd.

Representation by the counsel of the IRP requested the withdrawal of the insolvency application owing to a settlement between the creditors and the corporate debtor. The NCLT relied on Rule 11 of the NCLT Rules to enable the withdrawal of this application instead of Section 12A of the Code, which first, was enacted to statutorily regulate the withdrawal of insolvency applications; and second, embodied the collective nature of the insolvency resolution process by requiring a majority of 90% of the committee of creditors to substantiate a withdrawal application. (Report (p.73))

In this case, the Tribunal has enabled a withdrawal using its inherent powers as under Rule 11 of the NCLT Rules to the detriment of the scheme of Section 12A of the code; especially since the order mentions just the “creditors”, and not a 90% majority of the creditors as per the stipulation of Section 12A.

See also: Mapaex Remedies Pvt. Ltd. v. Silventa Ceramic Tiles Ltd. (IRP advocated for withdrawal as CoC was not formed)

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