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Judgment
Per: SANJIV JAIN, MEMBER (JUDICIAL)
This IA(IBC)/826(CHE)/2023 in IBA/706/2020 has been filed by the Applicant/Resolution Professional of the Corporate Debtor M/s. Maan Sarovar Properties Development Private Limited under Section 12(2) of the Insolvency and Bankruptcy Code, 2016 ("IBC, 2016") read with Regulation 40 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 seeking extension of the CIRP by 60 days and exclusion of 117 days from the CIRP period from 19.12.2022 to 14.04.2023.
It is stated that CIRP of the Corporate Debtor was initiated on the application under Section 7 of IBC, 2016 filed by the Financial Creditor, M/s. Reliance Net Limited vide an order dated 01.07.2022. Ms. J. Karthiga was appointed as the Interim Resolution Professional ("IRP") which order the IRP received on 05.07.2022. She caused a public announcement on 06.07.2022 calling the claims to be filed upto 19.07.2022. CoC was constituted. In the 1st CoC meeting held on 02.08.2022, it was resolved to replace the erstwhile IRP with one Mr. H.S. Chandrasekar as the Resolution Professional ("RP"). IA(IBC)/904(CHE)/2022 was filed which was allowed vide order dated 30.08.2022. In the 2nd CoC meeting held on 19.12.2022, a resolution was passed to replace the erstwhile RP viz., Mr. H.S. Chandrasekar and the name of Mr. Ashish Vyas was proposed as RP. Accordingly, IA(IBC)/33(CHE)/2023 was filed for replacement of the erstwhile RP. It is stated that during the pendency of the IA, no further steps were taken by the erstwhile RP and the CIRP period expired on 28.12.2022. The erstwhile RP preferred an IA(IBC)/37(CHE)/2023 for extension of the CIRP period by 60 days however, on 30.01.2023 he withdrew the application. This Tribunal vide order dated 30.01.2023, appointed Mr. Ashish Vyas, Applicant herein as the new RP of the Corporate Debtor. It is stated that order dated 30.01.2023 was uploaded on 20.02.2023 which was received by the Applicant on 21.02.2023, as a result, he could not begin to discharge his functions as RP. It is stated that since the CIRP period of 180 days had already expired on 28.12.2022, CoC in the 3rd meeting held on 27.03.2023, passed a resolution on the basis of which, the Applicant filed IA(IBC)448/2023 seeking extension of 90 days and exclusion of 21 days and the Tribunal vide an order dated 11.04.2023 granted the extension of the CIRP period by 90 days i.e. till 28.03.2023.
It is stated that by the time the order was passed, CIRP period had already expired. CoC in the 4th meeting held on 14.04.2023, discussed about filing of another application seeking extension and exclusion taking note of the periods details mentioned in para-10 of the application and passed a resolution with 99.88% voting from 16.04.2023 to 18.04.2023, instructing the RP/Applicant to file an application for exclusion as detailed in para-11(1), 11(2) and 11(3) and extension of CIRP period by 60 days. Therefore, this application has been filed.
It is stated that the Corporate Debtor is a going-concern engaged in the construction sector and has a high potential of being successfully resolved. Due to replacement of the erstwhile IRP/RP, no Form-G could be issued inviting the Expression of Interest ("EOI") from the Prospective Resolution Applicants ("PRAs"). It is stated that because of the aforesaid, no effective steps could be taken by the Applicant as required for CIRP. It is stated that in order to complete publishing of Form-G and other process, CIRP period may be extended taking into consideration the exclusions. Reference is made of the case "Quinn Logistics India Pvt. Ltd. Vs. Mack Soft Tech Pvt. Ltd." (2018 SCC Online NCLAT 243), to contend that in certain unforeseen circumstances, exclusion can be allowed. It is stated that the exclusion and extension as sought falls within 330 days which is the maximum period provided for the CIRP under Section 12(2) of IBC, 2016 and Regulation 40 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Reference is made of the case "Swizz Ribbons v Union of India" (2019 SCC Online SC 73) to contend that the primary focus of the legislation is to ensure revival and continuation of the Corporate Debtor by protecting it from a corporate death by liquidation.
We have heard Learned Counsel Mr. Manoj Kumar Mishra for the Applicant as well as the Applicant and perused the record.
CIRP in the present case was initiated vide an order dated 01.07.2022. IRP was appointed. She was replaced by the RP. On an application moved, the erstwhile RP was replaced and the Applicant was appointed as RP vide an order dated 30.01.2023 which order was uploaded on the website on 20.02.2023 and it was received by the Applicant on 21.02.2023. It is seen from the record that after the decision taken by the CoC to replace the erstwhile RP, no effective steps were taken by the erstwhile RP to carry out the CIRP process. 180 days period of CIRP expired on 28.12.2022. Though the erstwhile RP had preferred an application seeking extension vide IA(IBC)37(CHE)/2023, but it was withdrawn by him vide an order dated 30.01.2023, the day order for replacing the RP was passed by the Tribunal. It was only on 27.03.2023, the CoC in the 3rd meeting, took a decision to file an application seeking extension and exclusion and thereafter, the Applicant filed IA(IBC)/448(CHE)/2023. This Tribunal vide order dated 11.04.2023 granted the extension of the CIRP period by 90 days till 28.03.2023. In the aforesaid order, request for exclusion of 21 days for delay was declined.
It is pertinent to note that the Applicant/RP did not prefer any appeal against the order dated 11.04.2023 which thus became absolute.
The Applicant filed this application IA(IBC)/826(CHE)/2023 seeking exclusion of 117 days from 19.12.2022 till 14.04.2023 and extension by 60 days from 23.07.2023 to 21.09.2023 on the basis of the CoC resolution in the meeting held on 14.04.2023 with 99.88% voting but this Tribunal vide order dated 05.06.2023 finding no merit in the prayer for exclusion referring the "Quinn Logistics India Pvt. Ltd. Vs. Mack Soft Tech Pvt. Ltd." supra, rejected the prayer of exclusion, however extended the CIRP period by 60 days.
The Applicant preferred an appeal before the Hon'ble NCLAT vide Company Appeal (AT) (Insolvency) No, 185 of 2018. Hon'ble NCLAT vide an order dated 04.07.2023 held as under:
"Tribunal' is of the earnest view that Form-G was issued on 04.05.2023 and on-going through the materials available on record, it is quite evident that the fourth meeting of the 'Committee of Creditors' which took place on 14.04.2023 had approved the filing for extension of 90 days and also the exclusion period of 115 days of the' CIRP' before the 'Adjudicating Authority' and that apart, the date of filing of IA(IBC)/826(CHE)2023 in IBA/706/2020 before the 'Adjudicating Authority' for the extension of 90 days and exclusion period of 21 days of CIRP was on 21.04.2023 and considering the fact that this 'Tribunal' is of the candid view that Form 'G' which was filed on 04.05.2023 is to be taken into account and the very fact that the 'Committee of Creditors' had approved with 99.99% to extend the 'CIRP' period of 'Corporate Creditor' in its meeting dated 14.04.2023, on the simple ground alone 'Impugned Order' passed by the 'Adjudicating Authority' dated 05.06.2023 in IA(IBC)/826(CHE)2023 in IBA/706/2020 is set aside in so far as it relates to exclusion of time 107 days period in the 'CIRP'. The matter is remitted back to the 'Adjudicating Authority' who shall pass fresh orders in a just, fair and reasoned manner of course, in accordance with Law, after adverting to the contentions/pleas advanced on behalf of the 'Petitioner' in an objective manner and also to assign reasons, while passing a fresh order of course, uninfluenced, with any of the observations made by this 'Tribunal' in the instant Appeal."
We have perused the records in detail. In this case, Form-G was issued on 04.05.2023. 4th CoC meeting was held on 14.04.2023. There was replacement of IRP with erstwhile RP and erstwhile RP with RP/Applicant herein. Some orders were communicated to the Applicant/RP quite late as evident from the record. One of the exclusions claimed by the Applicant is for the period from 30.01.2023 the day the order was passed for replacing the RP to 21.02.2023 the day when the order was communicated to the Applicant/RP. This exclusion was denied by this Tribunal vide order dated 11.04.2023 which as observed above became absolute. That being the position, Applicant cannot be allowed to claim exclusion of aforesaid period of 21 days as prayed for in the application.
As to the exclusion of 41 days i.e. for the period from 19.12.2022 to 30.01.2023, though there was no such prayer in IA(IB)/448(CHE)/2023 but it is evident from the record that the CoC in the 2nd meeting held on 19.12.2022, had passed a resolution for replacement of the erstwhile RP and proposed the name of the Applicant and accordingly, the IA was filed. Record shows that no effective steps were taken by the erstwhile RP to carry out the CIRP. The order appointing the Applicant as RP was passed on 30.01.2023. In the case of "Quinn Logistics India Pvt. Ltd. Vs. Mack Soft Tech Pvt. Ltd." supra the Hon'ble NCLAT has laid down certain unforeseen circumstances which include inter alia the period between the date of order and the actual date on which RP takes charge, etc. can be excluded. These also include that if no RP is functioning for one or other reason during CIRP, such as removal, the period can also be excluded. It is clearly evident from the record that during the period from 19.12.2022 to 30.01.2023, there was no effective progress in the CIRP. We are of the view that this period needs to be excluded from the CIRP period.
Now the period from 21.02.2023 to 14.04.2023, it is seen from the record that the application for extension vide IA(IB)/448(CHE)/2023 was filed on 10.03.2023 seeking extension for another 90 days on the expiry of 180 days of CIRP on 28.12.2022. The application was allowed vide an order dated 11.04.2023 thereby extending the CIRP period up to 28.03.2023. There was no order to the effect that CIRP was to continue during the period from 28.12.2022 till 28.03.2023. There was no extension after 28.03.2023. This application for extension was filed only on 21.04.2023. It was never brought to the notice of this Tribunal that the period of 90 days which was allowed vide order dated 11.04.2023 already lapsed on 28.03.2023. Fact of the matter is that because of the above, no effective steps could be taken to carry out the CIRP. Form-G was issued only on 04.05.2023 inviting the EOI. We are of the view that the Applicant/RP has made out a case for exclusion of period from 21.02.2023 to 11.04.2023 i.e. for a period of 50 days. Adding the exclusions and extension, the CIRP period i.e. T+270 expires on 27.06.2023.
It is seen from the record that Form-G has been issued inviting the EOI. The RP has stated that the Corporate Debtor is a going-concern engaged in the construction sector and has a high potential being successfully resolved. He has also submitted that he has received many enquiries regarding the Corporate Debtor who are interested in buying the Corporate Debtor as a going-concern. He has submitted that most of the projects which the Corporate Debtor has carried out are at the final stage of completion and in case the Corporate Debtor is sold as a going-concern, it may fetch a substantial amount to meet the financial/debt of the Corporate Debtor. It has held in catena of judgments that primary focus of the legislation is to ensure revival and continuation of the Corporate Debtor by protecting it from its own management and corporate death by liquidation. It is a beneficial legislation to put the Corporate Debt back on its feet.
In the case of "Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta &Ors., 2019 SCC Online SC 1478, Axis Bank Ltd. V. Lanco Mandakani Hydro Power Energy Private Limited", it has been held that if it can be shown to the adjudicating authority that only a short period is left for completion of the CIRP beyond 330 days and that it would be in the interest of all the stakeholders that the corporate debtor be put back on its feet instead of being sent into liquidation, in such cases, it is open to the adjudicating authority to extend time beyond 330 days or where the liquidation of the corporate debtor would not unlock the real value, another attempt be made at resolution and only if that fails, liquidation be considered. Similar observations have been made in the case of “Axis Bank Ltd v. Lanco Amarkantak Power Ltd. (I.A. 2 of 2022 in C.P.(IB) No.420/7/HDB/2018), Govindarajula Venkata Narasimha Rao, RP of Viceroy Hotels Limited v. Committee of Creditors (Viceroy Hotels Limited), Whispering Tower Flat v. Abhay Narayan Manudhane and others (Company Appeal (AT) (Ins) No.896 of 2021, Earthin Projects Limited v. Anup Kumar Singh, RP of Indu Projects Limited and Ors, Tarachand Agarwal, In Re, Company Appeal (AT) (INS) No.637 of 2021 and Ritu Rastogi, Resolution Professional, Benlon India Ltd. V Riyal Packers in Company Appeal (AT) (INS) 482 of 2020 in page nos. 9 to 12 of the application”.
Taking into consideration totality of circumstances and that the Corporate Debtor is a going-concern and it is engaged in infrastructure projects, and that because of replacement of IRP by erstwhile RP and erstwhile RP by the Applicant, no effective steps could be taken for the CIRP for no fault, it would be expedient that CIRP period be extended for a period of 60 days from today i.e. up to 30.10.2023 including the exclusions as above.
The RP is directed to effectively carry out and speed up the CIRP process.
Accordingly, IA(IBC)/826(CHE)2023 is allowed and disposed off.