NCLAT held that while strict adherence to statutory timelines in a CIRP under IBC is essential, discretionary time extensions beyond 330 days are permissible in exceptional cases.
The National Company Law Appellate Tribunal (NCLAT), Chennai Bench comprising Justice Sharad Kumar Sharma (Judicial Member) and Jatindranath Swain (Technical Member) was hearing a series of consolidated appeals and observed that while strict adherence to statutory timelines under Section 12 of the Insolvency and Bankruptcy Code is essential, discretionary time extensions beyond 330 days are permissible in exceptional cases where delays are not litigant-caused, aiming to prioritize corporate revival over liquidation and safeguard stakeholders' interests.
In a series of consolidated appeals before the National Company Law Appellate Tribunal (NCLAT), various associations of home buyers challenged the rejection of their applications seeking time extensions to complete the Insolvency Resolution Process (IRP) under Section 12 of the Insolvency and Bankruptcy Code, 2016. The appeals, comprising Comp. App (AT) (CH) (INS) No. 192 / 2023, Comp. App (AT) (CH) (INS) No. 214 / 2023, Comp. App (AT) (CH) (INS) No. 215 / 2023, and Comp. App (AT) (CH) (INS) No. 212 / 2023, shared a common factual background involving home buyers who had invested in various real estate projects in Thiruvananthapuram.
The appellants' primary contention arose from the rejection by the Adjudicating Authority (NCLT, Kochi Bench) of their pleas for extending the IRP timelines beyond the statutory limits. They argued that despite fulfilling their obligations—such as paying the full sale consideration and possessing residential units—the corporate debtors failed to execute registered sale deeds as agreed. It further emerged that the corporate debtors had encumbered apartments already sold to home buyers to secure loans, resulting in financial complications.
Following the initiation of Corporate Insolvency Resolution Proceedings (CIRP), Resolution Professionals were appointed, and despite the submission of Resolution Plans approved by the Committee of Creditors (CoC), the CIRP could not conclude within the stipulated timelines due to procedural delays and adjournments at the behest of financial creditors.
The central issue in the appeals revolved around the denial of further time extensions beyond those initially granted under Section 12 of the I&B Code. The Adjudicating Authority's decisions were grounded in the belief that adequate extensions had already been provided, and additional extensions were impermissible under the law.
The appellants sought a more flexible interpretation of the statutory provisions, citing judicial precedents, including the Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta and Others, REEDLAW 2019 SC 11505 case, which highlighted the importance of stakeholders' interests over rigid adherence to procedural timelines. They argued that in complex cases involving real estate projects under CIRP, justice demanded consideration of the practical challenges faced by home buyers and other stakeholders.
In its judgment, the NCLAT emphasized the need to balance adherence to statutory timelines with the overarching goal of resolving insolvency cases effectively to avoid liquidation. While acknowledging the standard 330-day limit for completing CIRP, the Appellate Tribunal recognized that exceptional circumstances might necessitate extensions beyond this period to ensure the revival of the corporate debtor and protect stakeholders' interests.
The Appellate Tribunal underscored that any extension of time should be granted judiciously, guided by factors indicating that delays were not due to the appellants' actions but stemmed from procedural complexities or unavoidable legal hurdles. It referenced previous decisions where such extensions were granted in similar contexts, stressing that such decisions should be exceptions rather than the norm.
Ultimately, the NCLAT upheld the importance of upholding the I&B Code's statutory framework while acknowledging the need for flexibility in exceptional cases. By allowing for the continuation of the IRP in these appeals, the tribunal aimed to promote economic revival, safeguard stakeholders' rights, and ensure the fair resolution of insolvency disputes.
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