Mumbai: The Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC) has to be completed within the 330-day deadline prescribed under the law, the Supreme Court ruled on Monday.
The apex court also held that a resolution plan approved by the committee of Creditors and submitted to the National Company Law Tribunal (NCLT) cannot be modified or withdrawn as it would create another tier of negotiations, which will be wholly unregulated by the statute.
The top court held that since the 330 days outer limit of the CIRP under Section 12(3) of the IBC, including judicial proceedings, can be extended only in exceptional circumstances, "this open-ended process for further negotiations or a withdrawal, would have a deleterious impact on the Corporate Debtor, its creditors, and the economy at large as the liquidation value depletes with the passage of time."
The court said that inordinate delays cause commercial uncertainty, degradation in the value of corporate debtor and makes the insolvency process inefficient and expensive. The bench of Justice D.Y. Chandrachud and M.R. Shah made these observations in the judgement viz- Ebix Singapore Pvt Ltd versus committee of creditors of Educomp Solutions in which it held that NCLT cannot permit modifications or withdrawals of CoC approved resolution plans at the behest of the successful resolution applicant, once the plan has been submitted to it.
According to Justice Chandrachud, the NCLT and the appellate tribunal (NCLAT) should therefore, while deciding IBC matters, respect the deadline prescribed by the legislature.
"We urge the NCLT and NCLAT to be sensitive to the effect of such delays on the insolvency resolution process…The NCLT and the NCLAT should endeavor, on a best effort basis, to strictly adhere to the timelines stipulated under the IBC and clear pending resolution plans forthwith,” the SC said.