Vijendra Kumar Jain And anr. vs Transparent Energy System Private Limited

This is an Application filed u/s 12 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the I & B Code) by the Resolution

Professional of the Corporate Debtor seeking exclusion of time from period of Corporate Insolvency Resolution Process (CIRP) of the Corporate

Debtor.

It is submitted that period from 03.12.2019 to 24.01.2020 (i.e. 52 days) may be considered as litigation period and excluded from the CIRP period

and the period from 24.01.2020 to 06.03.2020 (i.e. 42 days) may also be excluded, as no RP was functioning during this period. On 11.03.2020, World

Health Organisation â€" WHO declared Novel Coronavirus Diseaseâ€"2019 (N-COVID-19) as ‘Pandemic’. The Government of India through

Ministry of Home Affairs and National Disaster Management Authority (NDMA) announced Nation-wide lockdown w.e.f. 25.03.2020. The

Hon’ble Supreme Court of India while exercising its power under Article 142 of Constitution of India, extended the limitation with effect from

15.03.2020 on account of the pandemic. Hence, period w.e.f. 15.03.2020 should not be included in the CIRP Period. The Applicant also faced

difficulty in carrying out its functions as RP from 15.03.2020 as restrictions on movement of people was imposed by the State Government in

Maharashtra as well.

Summary of exclusion sought by this Application

a. 03.12.2019 to 24.01.2020 (i.e. 52 days) be considered as litigation period.

b. 24.01.2020 to 06.03.2020 (i.e. 42 days) also excluded as there was no RP functioning in this period.

c. From 15.03.2020 till the lockdown is relaxed and offices resume normally.

Facts of the case:

It is submitted that vide order dated 08.03.2019 CIRP was initiated against the Corporate Debtor and Mr. Ashish Vyas (Registration No.

IBBI/IPA-001/IP/P01520/2018-19/12267) was appointed as the Interim Resolution Professional (hereafter ‘IRP’). The Committee of Creditors

(CoC) consisting of SBI, the only Financial Creditor was constituted. The first meeting of the CoC was held on 08.04.2019.

It is submitted that at the 1st meeting, the aforesaid IRP reported claims from Operational Creditors and Workmen and Employees.

Further in the 2nd CoC meeting held on 17.05.2019, SBI proposed to appoint Mr. Nimit Kalsi (Registration No. IBBI/IPA-002/IP- N00451/2017-

18/11267) as the Resolution Professional and the IRP was advised to conduct further proceedings in the CIRP until the appointment was approved by

this Tribunal.

The sole member of the CoC, SBI, filed MA No. 2421 of 2019, on 08.07.2019 for replacement of IRP Mr. Ashish Vyas by Mr Nimit Kalsi as the

Resolution Professional (hereafter “Erstwhile RP"") of the Corporate Debtor. The said MA was allowed by order dated 15.07.2019 of this Tribunal.

The RP received the order of his appointment on 25.07.2019.

Mr. Nimit Kalsi conducted 5th to 8th CoC meetings on 06.08.2019, 23.10.2019, 30.11.2019 and 31.12.2019 respectively. In the 7th CoC meeting the

CoC permitted the Erstwhile RP to file Application for exclusion of 69 days from 17.05.2019 (date of 2nd Meeting of CoC) to 25.07.2019 when the

Erstwhile RP took the charge as RP from the CIRP period. The RP filed MA No. 3936 of 2019 on 03.12.2019 (27t0h day) the MA was allowed by

this Tribunal by order dated 20.02.2020, allowing exclusion of 69 days from the CIRP period.

On 24.01.2020 the CoC resolved to replace the Erstwhile RP. Pursuant to this SBI filed MA No. 461 of 2020 for the purpose. This Tribunal by its

order dated 21.02.2020 replaced the Erstwhile RP with the present Applicant.

It is submitted that finally on 06.03.2020 the Applicant received the certified copy of the said order dated 21.02.2020 in MA No. 461 of 2020

The Applicant conducted 9th CoC meeting on 09.03.2020. In this meeting the Applicant was advised to file an Application before this Tribunal for

exclusion of 42 days from the CIRP Period i.e. from 24.01.2020 (the date on which the replacement of the Erstwhile RP was resolved by the CoC) to

06.03.2020 (the date on which Applicant received the order of his appointment).

It is also submitted that the total period from 03.12.2019 to 06.03.2020 is required to be excluded from the CIRP period. Out of which a period of

79 days (actually 80 days) between 03.12.2019 to 20.02.2020 is for reasons of litigation and delay in receiving the order. The other period is from

24.01.2020 (resolution of removal of the erstwhile RP) to 06.03.2020 (date when the Applicant was confirmed as RP) which comes to 42 days

(actually 43 days). The period from 24.01.2020 to 20.02.2020 (27 days) is overlapping, the period of 52 days (should be 53 days), as approved by the

CoC in its 11th meeting conducted on 11.05.2020, can only be counted for the exclusion period on account of litigation.

Currently, one prospective resolution applicant Mr. Ashok Atre is expected to submit the Resolution Plan within 30 days from the date of

circulation of amended Request for Resolution Plan (RFRP).

From the facts, it is observed that the period from 03.12.2019 till 24.01.2020 was already a part of the order in MA no. 3936 of 2019 passed by

this Tribunal dated 20.02.2020 wherein a period of 69 days was excluded. By the order dated 20.02.2020 in MA no. 3936 of 2019 a period of 69 days

was excluded from the CIRP period. Thus, the CIRP would ordinarily come to end on 10th February 2020 (69 days from 3rd December 2019).

Accordingly, the period from 3.12.2019 to 24.01.2020 gets covered within this period. The same period need not be excluded. The period of 10 days

from 11.02.2020 to 20.02.2020 however can be excluded from the CIRP. From the records, it is also ascertained that order dated 20.02.2020 in MA

No. 3936 of 2019 was uploaded on the same date. Therefore, the contention of the Applicant that the certified copy of the order was received on

06.03.2020 cannot be accepted. The period from 20.02.2020 to 06.03.2020 is not eligible for exclusion. Therefore, the prayer for exclusion of this 52

days does not merit consideration of this bench.

The second period of exclusion of 42 days sought by the Applicant from 24.01.2020 to 06.03.2020 is on the ground that there was no RP

functioning in this period. This contention is factually incorrect since till the appointment of the Applicant as RP the erstwhile RP Mr. Nimit Kalsi was

functioning as such. As per the framework of I & B Code there cannot be any gap/no period during which the IRP/RP would not be functioning.

Failing which the assets of the Corporate Debtor and the Corporate Debtor itself would be put to jeopardy. In our considered view IRP/RP has to

ensure the Corporate Debtor Company as a going concern. Therefore, there cannot be any gap/interim period wherein a vacuum will be created. If

so, the concept of going concern as envisaged in the I & B Code would fail. Therefore, the period of exclusion of 42 days sought by the RP is without

any merit and therefore, the same is rejected. In this case CoC has passed a resolution to replace the previous RP on 24.01.2020 but the IA was filed

only on 03.02.2020. We make it clear that exclusion can be sought for the period of litigation.

The Bench also Considered present IA in the light of the Hon’ble Supreme Court’s judgement of ArcelorMittal India Private Limited v.

Satish Kumar Gupta: (2019) 2 SCC 1. Relevant portion of the judgement dated 15.11.2019 is reproduced herein below:

“98. So far as Section 4 is concerned, it is clear that the original timelines in which a CIRP must be completed have now been extended

to 330 days, which is 60 days more than 180 plus 90 days (which is equal to 270 days). But this 330-day period includes the time taken in

legal proceedings in relation to such resolution process of the corporate debtor. This provision is to get over what is stated in the judgment in

ArcelorMittal India (supra) at paragraph 86, that the time taken in legal proceedings in relation to the corporate resolution process must be

excluded from the timeline mentioned in Section 12. Secondly, the third proviso added to the Section also mandates that where the period of

330 days is over on the date of commencement of the Amending Act of 2019, a further grace period of 90 days from such date is given,

within which such process shall either be completed or the corporate debtor be sent into liquidation.â€​

“108 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 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.â€​

In addition to the above general principle, The Hon’ble Apex Court on 23.03.2020 in Suo Moto Writ Petition (C) No. 3/2020 passed the

following order.

“This Court has taken Suo Motu cognizance of the situation arising out of the challenge faced by the country on account of Covid-19 Virus and

resultant difficulties that may be faced by litigants across the country in filing their petitions/applications/ suits/appeals/all other proceedings within the

period of limitation prescribed under the general law of limitation or under Special Laws (both Central and/or State).

To obviate such difficulties and to ensure that lawyers/ litigants do not have to come physically to file such proceedings in respective Courts/Tribunals

across the country including this Court, it is hereby ordered that a period of limitation in all such proceedings, irrespective of the limitation prescribed

under the general law or Special Laws whether condonable or not shall stand extended w.e.f. 15th March 2020 till further order/s to be passed by this

Court in present proceedings.

We are exercising this power under Article 142 read with Article 141 of the Constitution of India and declare that this order is a binding order within

the meaning of Article 141 on all Courts/Tribunals and authorities.

This order may be brought to the notice of all High Courts for being communicated to all subordinate Courts/Tribunals within their respective

jurisdiction.â€​

Further the Hon’ble NCLAT on 30.03.2020 in Suo Moto Company Appeal (AT) (Insolvency) No. 01 of 2020 ordered as follows.

“(1) That the period of lockdown ordered by the Central Government and the State Governments including the period as may be extended either in

whole or part of the country, where the registered office of the Corporate Debtor may be located, shall be excluded for the purpose of counting of the

period for ‘Resolution Process under Section 12 of the Insolvency and Bankruptcy Code, 2016, in all cases where ‘Corporate Insolvency

Resolution Process’ has been initiated and pending before any Bench of the National Company Law Tribunal or in Appeal before this Appellate

Tribunal.

(2) It is further ordered that any interim order/ stay order passed by this Appellate Tribunal in anyone or the other Appeal under Insolvency and

Bankruptcy Code, 2016 shall continue till next date of hearing, which may be notified later.â€​

Taking into consideration the difficulty faced due to the pandemic, the Government also inserted an appropriate amendment in the Insolvency and

Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (the Regulations for short) as under.

“40C. Special provision relating to time-line.

Notwithstanding the time-lines contained in these regulations, but subject to the provisions in the Code, the period of lockdown imposed by the Central

Government in the wake of Covid-19 outbreak shall not be counted for the purposes of the time-line for any activity that could not be completed due to

such lockdown, in relation to a corporate insolvency resolution process.â€​

In view of the law laid down as above and the possibility that there may be a successful resolution of the Corporate Debtor, the exclusion can be

allowed. In view of the delay, the CIRP period may also be extended. Hence ordered.

ORDER

The IA be and the same is partly allowed. The exclusion sought for the time taken in litigation is allowed. Considering the delay, the CIRP period is

extended by 105 (One hundred and five) days from this day. The Applicant shall make all endeavour to complete the CIRP within this period.