Richa Infrastructure Limited engaged in the construction of roads is in default in repayment of loans due to general slowdown in construction industry. Repeated follow-up by the financial institutions with the Corporate

CS Professional · Insolvency - Law and Practice · PYQS · December 2019
Richa Infrastructure Limited engaged in the construction of roads is in default in repayment of loans due to general slowdown in construction industry. Repeated follow-up by the financial institutions with the Corporate Debtor, 'Richa Infrastructure Ltd.' for submitting its specific plan for repayment of dues did not evoke any response. One of the financial creditors filed a case against Richa Infrastructure Ltd. before the Debt Recovery Tribunal. Richa Infrastructure Ltd. had issued some cheques to some Operational Creditors. All the cheques issued to creditors were dishonored/returned by the banker due to insufficient funds in the account. Consequently, Operational Creditors issued legal notices to Richa Infrastructure Ltd, with clear intimation that if due amount is not paid within 15 days from the date of receipt of legal notice, criminal complaint shall be filed against Richa Infrastructure Ltd. under the Negotiable Instrument Act, 1881 and criminal complaints were filed. After a joint lenders meeting, all the financial institutions unanimously decided to apply under the provisions of the Insolvency and Bankruptcy Code, 2016 to the National Company Law Tribunal (NCLT) for starting the process of Insolvency Resolution. Their application was admitted by NCLT on 30th June, 2018 and orders were issued for commencement of a moratorium period of 180 days, appointment of an Interim Resolution Professional and issue of public announcement inviting claims from all concerned. After public announcement and the responses thereto, following details were brought out: (1) Financial debts due to unsecured creditors (F1) - ₹15 Crores. (2) Workmen's due for the period of 24 months preceding the liquidation commencement date (F2) - ₹25 Crores. (3) Debts due to a secured creditor who has relinquished his security (F3) - ₹30 Crores. (4) Amount due to the Central Government (F4) - ₹27 Crores. (5) Debts due to a secured creditor after the enforcement of security interest (F5) - ₹36 Crores. Insolvency Resolution Professional (IRP) approached the promoters, directors and officials of Richa Infrastructure Ltd to provide the necessary information, documents, statutory records, books of accounts to verify the claims filed by creditors. The promoters, directors and officials of Richa Infrastructure Ltd. ignored the request of Resolution Professional. M/s ANG & Associates, Chartered Accountants were the Statutory Auditors of Richa Infrastructure Ltd. They audited the accounts for the financial year end March, 2018 of Richa Infrastructure Ltd. and submitted the Annual Accounts for approval of the Board of Directors. The Resolution Professional has appointed valuers and has received the valuation reports. The Resolution Professional then started the efforts to get resolution proposals. However during the normal resolution process period of 180 days, no resolution proposal could be finalized. The Committee of Creditors decided that Resolution Professional should get the extension as per the provisions of Insolvency and Bankruptcy Code, 2016. Based on the above facts, answer the following questions: Is it necessary that application for extension of time period of 90 days must be filed before the completion of 180 days? What precautions should be taken by Insolvency Professional while applying to NCLT for extension of time period by 90 days ? Examine the issue by referring to decided case law, if any.

Answer & Explanation:

Section 12(2) of the Insolvency and Bankruptcy Code, 2016 provides that the Resolution Professional shall file an application to the Adjudicating Authority to extend the period of the Corporate Insolvency Resolution Process (CIRP) beyond one hundred and eighty days, if instructed to do so by a resolution passed at a meeting of the committee of creditors by a vote of sixty-six per cent of the voting shares. However, reading the aforesaid provision, it appears that provision does not stipulate that such application for extension of period of CIRP is to be filed before NCLT within 180 days. The very same issue had come up for consideration before the NCLAT in case of 'Quantum Ltd. v. Indus Finance Corporation Ltd.' decided on 20th February, 2018, wherein NCLAT allowed an application filed after 180 days. However, the resolution of the committee of the creditors has to be passed within 180 days. In view of the aforesaid judgment passed by NCLAT, when it becomes clear to the Resolution Professional that CIRP cannot be completed within the specified period of 180 days, he should propose to the Committee of Creditors for direction to seek extension of time from the Adjudicating Authority so that the process does not get derailed because of technical reasons. On receipt of an application under sub-section (2) of section 12 of the Code, if the Adjudicating Authority is satisfied that the subject matter of the case is such that Corporate Insolvency Resolution Process cannot be completed within one hundred and eighty days, it may by order extend the duration of such process beyond one hundred and eighty days by such further period as it thinks fit, but not exceeding ninety days. [Section 12(3)]

Topics: Corporate Insolvency Resolution Process (CIRP)

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