Monday, 26 July 2021

Glix Securities Private Limited vs R.D. Rubber Reclaim Limited & Anr. - AA allowed Extension of implementation period invoking Rule 15 of NCLT Rules, 2016.

NCLT Kolkata (14.06.2021) in Glix Securities Private Limited vs R.D. Rubber Reclaim Limited & Anr. [IA(IB) 496/KB/2021 in CP (IB) No. 1724/KB/2018] held as under: 

  • There is no specific provision in the Insolvency & Bankruptcy Code, 2016, that specifies what should be done in cases where a successful resolution applicant applies to the court for extension of timelines either on account of force majeure circumstances or otherwise. Further, once a resolution plan has been approved by the adjudicating authority, the Committee of Creditors (CoC) ceases to exist. Therefore, there is no way that the Adjudicating Authority can direct the CoC to consider the request. It is upto the Adjudicating Authority to find a way out in such circumstances, by invoking rule 15 of the National Company Law Tribunal Rules, 2016. 

 

Excerpts of the order;

# 1. This Court convened through video conference today.

 

# 2. IA(IB) 496/KB/2020 is an application filed by Glix Securities Private Limited, the Successful Resolution Applicant of R.D.Rubber Reclaim Limited (the Corporate Debtor), inter alia praying for extension of timelines for implementation of the Resolution Plan.

 

# 4. Mr Ratnanko Banerji, learned Senior Counsel appearing for the Applicant, placed the following decisions for consideration, where the timelines given in the Resolution Plan were enlarged by the Adjudicating Authority after approval of the Resolution Plan:

  • (a) Order dated 11.05.2020 of NCLT Chandigarh Bench in the matter of FM Hammerle Textiles Limited (IA No.184 & 185/2020 in CP (IB) No.30/Chd/Pb/2017 dated 11.05.2020) granting exclusion of entire lockdown period from the compliances required to be made in terms of the order dated 13.03.2020 in CA No.893/2019 approving the resolution plan.

  • (b) Hon’ble NCLAT’s order dated 30.03.2020 in suo motu Company Appeal (AT) (Insolvency) No.01/2020 whereby the period of lockdown ordered by the Central Govt and State Govts including the period as may be extended either in whole or in part of the country where the registered office of the Corporate Debtor may be located, was excluded for the purpose of counting for resolution process under section 12 of the IBC, in all cases where CIRP has been initiated and pending before any Bench of the NCLT or in appeal before the Appellate Tribunal.

  • (c) Notification No.IBBI/2019-20/GN/REG059 dated 29.03.2020 issued by the Insolvency & Bankruptcy Board of India (IBBI) inserting regulation 40C to the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, excluding the period of lockdown imposed by the Central Govt in the wake of Covid-19 outbreak for the purposes of the timeline of for any activity that could not be completed due to such lockdown, in relation to the CIRP.

  • (d) Hon’ble Supreme Court’s order dated 23.03.2020 in suo motu Writ Petition (Civil) No.3/2020 extending the period of limitation prescribed under general or special law whether condonable or not, with effect from 15.03.2020 till further orders.

 

# 5. We have heard the learned Senior Counsel appearing for the Applicant and perused the records.

 

# 6. In Fincast Founders & Engineers Pvt Ltd (Consortium Resolution Applicant of Shaifali Rolls Ltd) v Rajat Mukherjee, RP of Shaifali Rolls Ltd & others,(IA No.240/AHM/2020 in IA No.352/AHM/2019 in CP (IB) No.162/AHM/ 2018 dated 22.07.2020)  the NCLT Ahmedabad Bench had occasion to consider relaxation of timeframe for payment as well as for completion of the Resolution Plan process. After considering the lockdown imposed due to the Covid-19 first wave and the resultant detriment to business, the NCLT Ahmedabad Bench had, vide order dated 22.07.2020, allowed the same.

 

# 7. In Kotak Mahindra Bank Ltd v AP Enterprises Pvt Ltd through Rajiv Khurana, RP & others,(Company Appeal (AT) (Insolvency) No.146/2021 dated 03.03.2021), the NCLAT considered a challenge to the order dated 12.01.2021 passed by the NCLT Chandigarh Bench, whereby it had allowed exclusion of the period of lockdown, i.e., 25.03.2020 to 31.07.2020 from the schedule of making payments under the approved Resolution Plan. The Appellant therein was the largest secured financial creditor, holding 84.35% voting share on the CoC. In that matter, the Hon’ble NCLAT held that once the resolution applicant takes over the corporate debtor, its supervision and control comes under the purview of the Monitoring Committee. The CoC becomes irrelevant. The Hon’ble NCLAT held that there is no infirmity in the impugned order for excluding the period of lockdown from the schedule of making payments under the approved Resolution Plan. The Appeal was dismissed.

 

# 8. The Applicant is the Successful Resolution Applicant in the CIRP of the Corporate Debtor. The Resolution Plan submitted by the Applicant was approved by the CoC on 06.11.2020 and it has passed muster of this Adjudicating Authority on 11.05.2021.

 

# 9. There is no specific provision in the Insolvency & Bankruptcy Code, 2016, that specifies what should be done in cases where a successful resolution applicant applies to the court for extension of timelines either on account of force majeure circumstances or otherwise. Further, once a resolution plan has been approved by the adjudicating authority, the Committee of Creditors (CoC) ceases to exist. Therefore, there is no way that the Adjudicating Authority can direct the CoC to consider the request. It is upto the Adjudicating Authority to find a way out in such circumstances, by invoking rule 154 of the National Company Law Tribunal Rules, 2016. 

 

# 10. After the Applicant submitted its Resolution Plan, the circumstances in the country have changed drastically. There has been a significant increase in Covid-19 cases in a second wave. The second surge of the pandemic has supervened in a major way, affecting lakhs of people. Multiple business and financial entities have suffered tremendously, and the resulting interruptions in cash flow and working capital cannot be gainsaid. Supply chains have been disrupted and the economy has also suffered. We are convinced that there is a force majeure circumstance necessitating our intervention in the best interests of the corporate debtor.

 

# 11. We also specifically note the undertaking given by Mr Ratnanko Banerji, learned Senior Counsel appearing for the Applicant, upon specific instructions that the Applicant shall not take any advantage of the alleged theft that is stated to have taken place in the premises of the corporate debtor, and that the present application has been made only due to the second wave of the Covid-19 pandemic. The Applicant shall file the undertaking by way of an affidavit in the Registry within a period of fifteen days from today, and the order passed herein shall have effect only if this part of the order is complied with, failing which the consequences for violation of the approved Resolution Plan shall swiftly follow.

 

# 12. The Applicant shall be bound by this undertaking, and also by the terms of the approved Resolution Plan, save to the extent that relaxation of timelines as indicated below, and he shall not be permitted to wriggle out of his obligations under the approved Resolution Plan:-

[where x = date of approval of Resolution Plan = 11.05.2021]

Clause

Payment schedule as per

Original

schedule


Extension

now being

granted


Extended

last date for

payment


7

Transfer of first tranche amounting to ₹1,99,94,840 (1,80,00,000 against equity and ₹19,94,480 against debt) in the designated bank account.

x + 10

days (i.e.,

on or before

21.05.2021)


x+70 days

20.07.2021

15

Transfer of second tranche

amounting to ₹1,80,75,000 in the designated bank account.


x + 100

days (i.e.,

on or before 19.08.2021)

x+160

days


18.10.2021

16

Issue of fresh equity share capital to the extent of 18,07,500 equity shares @ ₹10 each aggregating to

₹1,80,75,000 to the Resolution Applicant and necessary procedural compliances to be

done.

x + 100

days

(i.e., on or

before

19.08.2021)


x+160

days


18.10.2021

 

# 13. IA No.496/KB/2021 is, therefore, allowed with the above observations.

 

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The sole purpose of this post is to create awareness on the "IBC - Case Law" and to provide synopsis of the concerned case law, must not be used as a guide for taking or recommending any action or decision. A reader must refer to the full citation of the order & do one's own research and seek professional advice if he intends to take any action or decision in the matters covered in this post.