Super Ltd. is engaged in the business of producing auto ancillary products and has a plant near Mumbai. As per the latest audited financial statements the turnover of Super Ltd. was ₹200 crore and investment in plant and

CS Professional · Insolvency - Law and Practice · PYQS · June 2023
Super Ltd. is engaged in the business of producing auto ancillary products and has a plant near Mumbai. As per the latest audited financial statements the turnover of Super Ltd. was ₹200 crore and investment in plant and machinery was ₹35 crore. Turnover and investment in plant and machinery never crossed ₹200 crore and ₹35 crore respectively. Due to reduction in the demand of the products by the auto companies, Super Ltd. started facing financial difficulties. It evaluated many options for rescuing the business and discussed on multiple occasions with the lenders. In one of the consortium meeting, lenders decided to take action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI). During the said meeting one of the lenders holding 30% share in the consortium suggested that in the present circumstances it would be apt to proceed under the provisions of the Insolvency and Bankruptcy Code, 2016 (the Code) since the Code is one of the effective tools for resolution of the debt. However, due to the difference in opinion amongst the lenders few of them decided to move ahead under the SARFAESI and others decided to file an application under the Code. Legal counsel of Super Ltd. intervened and informed that once proceedings are initiated under both the laws, SARFAESI being an old law will prevail and the lenders may be in a position to quickly recover their outstanding dues. Considering the circumstances, Rohan, promoter of Super Ltd. suggested to provide one last chance to Super Ltd. to submit a resolution plan for its revival and requested the lenders to consider the Pre-Packaged Insolvency Resolution Process. Rohan is now fully active in the business and making all possible attempts for revival of Super Ltd. and Duper Ltd. (wholly owned subsidiary of Super Ltd.) which is also classified as non-performing asset for last 5 years. On the option given by Rohan, one of the lenders informed that law relating to Pre-Packaged Insolvency Resolution Process is still at a nascent stage and may take years to complete. In response, Rohan clarified that it may not take years, since the process of filing an application is very simple and no documents are required to be attached to the application. Therefore, the adjudicating authority will be in a position to quickly consider and dispose off the case. Consider the above facts and answer the following questions: (iii) Considering the timelines provided under the Code, whether the contention of one of the lenders that the process may take years to complete legally correct?

Answer & Explanation:

The contention of one of the lenders that the Pre-Packaged Insolvency Resolution Process (PPIRP) may take years to complete is not legally correct . The Insolvency and Bankruptcy Code, 2016, specifically Section 54D, prescribes strict timelines for the completion of the PPIRP: Overall Completion Period: The PPIRP must be completed within a period of one hundred and twenty days (120 days) from the pre-packaged insolvency commencement date. Resolution Plan Submission: The Resolution Professional (RP) must submit the resolution plan, as approved by the Committee of Creditors (CoC), to the Adjudicating Authority (AA) within a period of ninety days (90 days) from the pre-packaged insolvency commencement date. These statutory timelines are designed to ensure a swift and time-bound resolution, which is a core objective of the IBC and particularly of the PPIRP framework. The process is intended to be faster than the traditional Corporate Insolvency Resolution Process (CIRP) due to its debtor-in-possession model and pre-negotiated base resolution plan. Therefore, the lender's apprehension that the process could take years is unfounded given the clear and concise timelines stipulated in the Code.

Topics: Pre-Packaged Insolvency Resolution Process (PPIRP)

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