Status as on 01/04/2020
The NCLAT taking the Suo moto cognizance of the unprecedented situation arising out of the spread of COVID-19 ordered for the exclusion of lockdown period from the Corporate Insolvency Resolution Process. Earlier to that IBBI also took a similar stance.
Introduction
The Coronavirus pandemic has resulted in nationwide lockdown which has been imposed by the Union as well as the respective state governments till 14th April 2020. The restrictions over movement and closure of institutions raised concerns over the completion of the Insolvency process. Section 12 of the Insolvency and Bankruptcy Code, 2016 provides a statutory time-limit for completion of the CIRP. Therefore, to safeguard the interest of the litigants and the resolution professionals. The much-awaited Order of National Company Law Tribunal has a sigh of relief.
NCLAT Order and its implication
The three-member bench comprising Acting Chairperson, Justice Bansi Lal Bhat; Member (Judicial), Justice Anant Bijay Singh and Member (Technical), Dr. Ashok Kumar Mishra delivered the Order. The Bench took Suo moto cognizance of the unprecedented situation arising out of the spread of the COVID- 19 virus which has been declared a pandemic. The pandemic has resulted in nationwide lockdown which has been imposed by the Union as well as the respective state governments till 14th April 2020. The NCLAT has amid the Coronavirus has directed via its Order dated 30.03.2020 to:
- Exclude the period of lockdown from the time-period for the purpose of completing the Corporate Insolvency Resolution Process as provided under Section 12 of the Code. in all cases where the CIRP has been initiated disregards to the pendency of it.
- The interim order or stay order passed under the Insolvency and Bankruptcy Code, 2016 shall continue to operate till the next date of hearing.
This comes a day later to the notification issued by the Insolvency and Bankruptcy Board of India.
IBBI Regulation 40C
The board in the exercise of the powers conferred by section 196(1)(t) read with section 240 of the Insolvency and Bankruptcy Code, the Insolvency and Bankruptcy Board of India has introduced Regulation 40C by way of an amendment to the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Section 40C provides: 40C. Special provision relating to time-line.
“Notwithstanding the time-lines contained in these regulations, but subject to the provisions in the Code, the period of lockdown imposed by the Central Government in the wake of COVID-19 outbreak shall not be counted for the purposes of the time-line for any activity that could not be completed due to such lockdown, in relation to a corporate insolvency resolution process”
However, the notification dated 29.03.2020 is yet to be notified in the Official Gazette.
Conclusion
Therefore, one thing becomes certainly clear that if activity in relation to CIRP could not be completed due to lockdown the time-period of 180 days as prescribed under Section 12 of the Insolvency and Bankruptcy Act, 2016 the same will stand extended to the period the lockdown persists in India. It remains to be seen how early economic activities resume and things can get back on track.
Disclaimer – The above article is based on the personal interpretation of related laws and relevant pronouncements. The readers are expected to take expert advice before putting reliance on it. For any clarification, please connect to the reader at support@centrik.in
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