Supreme Court rules on Insolvency and Bankruptcy Code
Resolution process to be completed within a stipulated period
The Supreme Court has held that the entire resolution process has to be completed within a stipulated period under the Insolvency and Bankruptcy Code (IBC).
The division bench of Justice M R Shah and Justice Sanjiv Khanna said that any deviation would defeat the object and purpose of providing a time limit. The court said that the corporate insolvency resolution process would have to be completed within 180 days from the date of admission of the application to initiate the process. It could be extended further to 180 days.
As per the a section of 2019 IBC, the insolvency process shall mandatorily be completed within a period of 330 days, including the time taken in legal proceedings in relation to such resolution process of the Corporate Debtor. According to another section, where the process has not been completed within 330 days, it would have to be completed within 90 days from the date of commencement of the IBC (Amendment) Act.
Pursuant to an application made under IBC, the corporate insolvency resolution process was initiated against corporate debtor Amtek Auto in 2017. Thereafter, a resolution professional was appointed, who inserted an advertisement inviting prospective resolution applicants to submit a Resolution Plan.
The Committee of Creditors of Amtek Auto (through the Corporation Bank) considered the Resolution Plans submitted by the respondents. However, the respondents withdrew the Plan and the revised plan of the UK-based industrial conglomerate Liberty House was considered and approved by the Bank in 2018.
Subsequently, the Chandigarh bench of the National Company Law Tribunal approved the Plan submitted by Liberty House. But the latter did not act as per the approved Plan. Thereafter, a number of proceedings were initiated against it.
The apex court has now directed the concerned parties to the approved resolution plan and/or connected with implementation of the approved plan, to complete the process within four weeks. It further said that on implementation of the approved plan, an amount of Rs.500 crores deposited by the resolution applicant Deccan Value Investors be transferred to the respective lenders/financial creditors as per the approved resolution plan.