Adherence to specific timeline key to successful resolution of beleaguered Company
The Tribunal did not accept the grounds of lack of knowledge given by the Applicant for failing to submit the EoI within time and observed that no indulgence could be given to someone who hadn't been vigilant enough
In the matter of KGS Sugar and Infra Corporation Limited, the Application filed by the Applicant in the capacity of a Prospective Resolution Applicant being aggrieved by the decision of Respondent No. 1 in not accepting its submission of Expression of Interest (EoI) has been rejected by the National Company Law Tribunal, Mumbai Bench.
In this matter, the Tribunal by an order had admitted a Petition filed under section 7 of the Insolvency & Bankruptcy Code, 2016 (Code) and initiated the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor and appointed Mr. Balady Shekhar Shetty as the Interim Resolution Professional (IRP). He however was replaced by Mr. Pankaj Shyam Joshi (Respondent No. 1) as Resolution Professional (RP).
The IRP in accordance with Regulation 36A of IBBI (Insolvency Regulation Process for Corporate Persons) Regulations, 2016 (CIRP Regulations) made a public announcement inviting Prospective Resolution Applicants (PRAs) to express their interest in submitting the Resolution Plan. The said public announcement contemplated 10 February, 2020 as the cut-off date for submission of the Expression of Interest (EOI).
The Applicant submitted that due to the nationwide lockdown imposed by the Government of India in connection with the outbreak of the Covid-19 pandemic, the Applicant was thoroughly engaged in managing its operations and tackling the unexpected challenges and therefore, the Applicant despite the best possible efforts could not submit its EOI within time and therefore the delay in submitting its EOI deserved to be excused in light of Regulation 40C of the CIRP Regulations.
The Tribunal noted that the principle underlying the Code for Corporate Resolution of a Company is required to be kept in mind while going about the Resolution of the Corporate Debtor. The purpose of Resolution is to see that the Company and its assets are not wasted under an inefficient management.
The Resolution aims at putting the Company and its group entities in better hands which the Hon'ble Apex Court in Swiss Ribbons v. Union of India indicated that the timelines within which the Resolution Process takes place again protects the Corporate Debtor's assets from further dilution and also protects all its creditors and workers by seeing that the Resolution Process goes through as fast as possible so that another management can through its entrepreneurial skills resuscitate the Corporate Debtor to achieve its revival. It was indicated that the object of keeping a Company/ Corporate Debtor alive in the hands of another management through the Corporate Insolvency Resolution Process (CIRP) is in the interest of all stakeholders.
The adherence to a specific timeline for resolution is the essence, which in effect would bring about successful resolution of a beleaguered Company. The Applicant herein was informed by an email dated 4 August, 2020 that its request for submitting an EoI could not be considered. The invitation for an EoI was widely publicized in two newspapers namely 'Business Standard' and 'Lokmat', the last date of submission of the EoI was 10 February, 2020.
The grounds that the Applicant due to lack of knowledge failed to submit the EOI within time was not accepted by the Tribunal. It was also observed that no indulgence could be given to someone who hasn't been vigilant enough.
The Applicant had not shown any sufficient cause for its delay in submitting its EoI. Mere stating that it was engaged in tackling the unexpected challenges on account of the Covid-19 pandemic would not be considered sufficient reason to condone the delay.
The Tribunal also opined that no reason was assigned as to how the pandemic affected the efforts of the Applicant in approaching the R1 in submitting the EoI. The Tribunal was not persuaded by the submissions made on behalf of the Applicant to condone the delay and accept its EoI.
The Applicant had been negligent in submitting the EoI to the R1 and had not been able to satisfactorily explain such lapses. The present Applicant thus didn't merit consideration and was rejected.