ONE PAGE #15 – In the matter of M/s Meenakshi Energy Ltd (CD)
330 days-An outer limit: Is it mandatory or a general rule for completion of CIRP?
#Courts: NCLT Hyd & NCLAT Chennai Bench AT# 15/2021 Dt 24.03.2021
1. Facts of the Case:
a. Further to an application filed by the RP, for extension of CIRP period from 270 days to 330 days, NCLT directed the RP to complete the CIRP process in 330 days, (as per the amendment brought in Sec 12 of IB Code wef 16.08.2019), failing which the liquidation proceedings will commence.
b. Grievance of the Appellant is that NCLT erroneously noted that in the event, CIRP is not completed in 330 days, liquidation proceedings against the CD would commence and this statement in the order by NCLT would deprive the Appellant its right to seek an extension beyond the period of 330 days.
2. Case Laws:
a. Essar Steel India Limited V Satish Kumar Gupta (SC):SC struck down the word “mandatorily” as being manifestly arbitrary U/A14 of our Constitution and as being an excessive & unreasonable restriction on the litigant’s right to carry on business U/A 19(1)(g) of the Constitution. If it can be shown to the NCLT/NCLAT that only a short period is left for completion of CIRP beyond 330 days, and that it would be in the interest of all stakeholders & that the CD will be put back on its feet instead of being sent into Liquidation and that the time taken in legal proceedings is largely due to the factors owing to which the fault cannot be ascribed to the litigants & the delay being attributable to the tardy process of NCLT/NCLAT itself, it may be open in such cases for the NCLT/NCLAT to extend time beyond 330 days. However, only in exceptional cases the time can be extended; at the discretion exercised by NCLT/NCLAT.
b. Ritu Rastogi V Riyal Packers (NCLAT): This is a fit case to depart from the general rule of 330 days being outer limit prescribed for completion of CIRP. Failure to exercise discretion would have serious implications imperiling the legitimate interests of all stakeholders and inevitable conclusion would be to push the CD into liquidation which has to be avoided at all costs.
3. Analysis & Judgment by NCLAT:
a. In reality, extending the CIRP beyond the time limit is against the underlying policy of the code for ensuring timely insolvency resolution of the CD. The word mandatorily u/s 12(3) was struck down by SC in the matter of M/s Essar Steel India Limited V Satish Kumar Gupta and accordingly NCLAT concludes that generally CIRP must be completed in 330 days but in exceptional/extraordinary circumstances, exercising sound judicial discretion; time may be extended with a view to find a suitable Rplan to prevent aberration of justice.
b. However, NCLAT is of prime facie view that the instant appeal is not maintainable as it is a premature and otiose one at this stage. So, Appellant sought permission to withdraw the appeal and NCLAT dismissed the matter as withdrawn with No costs.
c. Also, NCLAT directed NCLT to dispose the application seeking extension of 60 days on merits by passing a reasoned order, in a fair, just and dispassionate manner.