September 14, 2021
The Hon’ble Supreme Court of India in the matter of Ebix Singapore Private Limited vs Committee of Creditors (“CoC”) of Educomp Solutions Limited held that the corporate insolvency resolution process (“CIRP”) has to be completed in a mandatory time-framed i.e. within a period of 330 days as provided under the Insolvency and Bankruptcy Code, 2016 (“IBC”).
It further urged the adjudicating authority i.e. National Company Law Tribunal (“NCLT”) and National Company Law Appellate Tribunal (“NCLAT”) to strictly adhere to the timelines stipulated under the IBC and clear the pending resolution plan forthwith. The Court has ruled that the CIRP cannot be carried out as an ‘open-ended process’ and matters to be decided to keep in mind the sanctity of the timeline framed under the IBC.
As per Section 12 of the IBC, the CIRP is required to be concluded within a period of 180 days which can be further extended to 90 days. The IBC was amended in 2019 to require that CIRP must be completed within 330 days including any extension and time taken in legal proceedings of the process. The apex Court reiterated its stand taken in the matter of CoC of Essar Steel India Ltd. v. Satish Kumar Gupta & Ors. that only in exceptional cases this time can be extended.
It has further ruled that the submitted Resolution Plan is binding and irrevocable as between the CoC and successful Resolution Applicant in terms of the provisions of the IBC and the CIRP. In other words, the submitted resolution plan approved by the CoC cannot be modified or withdrawn by the resolution applicant.
The main objective of the IBC is to deal with the insolvency cases in a timely and efficient manner which was one step ahead towards unravelling the financial failures and systems existing before the IBC since the judicial delay was one of the main reasons which led to the failure of the insolvency laws prior to the IBC. However, with non-adherence to the timeline given towards disposing off the CIRP under the IBC, the corporate debtors found ways to delay the process by filing appeals and submitting fresh resolution plans.
The time-bound process enumerated under the IBC helps to preserve the economic value of the assets of the company. The court said that inordinate delays cause commercial uncertainty, degradation in the value of the Corporate Debtor and makes the insolvency process expensive.
With the apex Court’s verdict, we may expect the CIRP to be concluded on a more transparent, efficient and timely basis.
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