DATE OF JUDGMENT:
- Hon’ble Justice DY Chandrachud
- Hon’ble Justice MR Shah
- Appellant: Ebix Singapore Private Limited.
- Respondent: Committee of Creditors of Edu comp Solutions Limited &Anr.
This judgement criticises the judicial delays caused by the Company Tribunals that hamper an efficient insolvency process in India. The Supreme Court has asked Company Law Tribunal-NCLAT/NCLT, to strictly follow the timeline and to ensure that the pending resolution plans are cleared within 330 days. These delays can have detrimental effects on the commercial assessment conducted during the negotiation process and must be taken into account seriously.
- The NCLAT, in July 2020, set aside an order of the Delhi Bench of the NCLT, which had allowed Ebix Singapore to withdraw its resolution plan related to Edu Comp Solutions.
- This order was then challenged in the Supreme Court by Ebix Singapore.The court noted that the delays were due to the time taken by the NCLT to admit CIRPs and late and unsolicited bids by the Resolution applicants.
- The complexity of the appeals and multiple litigations to the Supreme Court and the NCLAT also contribute to the delays that make the corporate insolvency process inefficient and costly.
- Section 12 of Insolvency and Bankruptcy Code: It states that the Corporate Insolvency Resolution Procedure (CIRP) should be completed within 180 days or within the extended period of 90 days and mandatorily be completed within 330 days including any extension and the time taken in legal proceedings.
- Section 60(5) of Insolvency and Bankruptcy Code: It ensures that the NCLT has jurisdiction to decide applications and proceedings by or against a corporate debtor, including claims by or against any of its subsidiaries situated in India; andany question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code.
- Do judicial delays in resolution processes lead to ineffectiveness of Insolvency and Bankruptcy Code?
- Objections to the delay in the approval of the resolution plan by the NCLT were raised, especially when the outbreak of COVID-19 pandemic had already led to a substantial delay. The applicant contented that such a delay was not permissible under Section 12 of the IBC and justifies withdrawal of plan. In one of the cases, it was submitted that the approval application was pending before the NCLT for 17 months.
- The Court referred to the report of the Ministry of Corporate Affairs' Standing Committee on Finance which talks about implementing the Insolvency and Bankruptcy Code. The report noted that the delay in the resolution process for over 70 percent of the cases is in deviation from the timeline and objective indicated by the Insolvency and Bankruptcy Code. The reasons for the delays were various:
(i) the time taken by the NCLT to admit CIRPs,
(ii) late and unsolicited bid by the Resolution applicants, and
(iii) the complexity of the appellate process to the Supreme Court.
- The Court ruled that a successful Resolution applicant cannot modify or withdraw its application for approval of the plan once it has submitted it to the Adjudicating Authority. The delays, if systemic, will have an impact on the party’s commercial assessment during the negotiation process.
The court noted that the delay in the resolution process was one of the main factors that led to the failure of the prior insolvency regime. It requested the NCLT and the NCLAT to refrain from adjournments and strive to follow the timelines laid down under the IBC.
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