Application for extension under IBC: 180 days’

timeline not applicable

Parul Chutani
Research Associate at Insolvency & Bankruptcy Board of India
 Summary:
That this article is an analysis of the recent judgment of NCLAT i.e., Quantum Limited Vs.
Indus Finance Corporation Ltd. Wherein the issue before the tribunal was whether Section
12 of the Insolvency and Bankruptcy Code mandates filing of application for extension of
time within the period of 180 days of Corporate Insolvency Resolution Process or not.
 Application for extension under IBC: 180 days’ timeline not
applicable
1. INTRODUCTION:

The new law on insolvency and bankruptcy has put new challenges before our judges,
lawyers and amicus curiae. Each day we are coming across different interpretations of the
code. We are in dire need to understand the law that is going to evolve a new era of
development for our economy. This Code is an asset to our economy which is expected to
bring financial stability by maximising the value of assets of corporate persons, partnership
firms and individual. In a recent judgment of NCLAT i.e., Quantum Limited Vs. Indus
Finance Corporation Ltd., wherein, the issue that came before the appellate authority was
whether section 12 mandates the filing of an application for extension within 180 days or not.
Albeit, this judgment has not received much heed but is important in understanding and
interpreting the code in its true spirit.

2. Application for extension of CIRP is one time only

The insolvency and bankruptcy code is a time specific code i.e., for each procedural
requirement there is certainly a timeline. The Corporate Insolvency Resolution Process has to
end within 180 days, however the same can be extended for a further period of 90 days. But,
this extension is one time and therefore a resolution process cannot go beyond 270 days.
Section 12 of the code specifies the timelines for corporate insolvency and procedure for the
extension of further 90 days. The proviso to section 12 of the code specifically provides that
the extension can be granted by the tribunal for one time only i.e., for a further period of 90
days. Needless to say, that time is the essence of this code.

Section 33 of the code which is quoted below:

“33. Initiation of Liquidation.-

(1) Where the Adjudicating Authority, —

a) before the expiry of the insolvency resolution process period or the maximum period
permitted for completion of the corporate insolvency resolution process under section
12 or the fast track corporate insolvency resolution process under section 56, as the
case may be, does not receive a resolution plan under sub-section (6) of section 30;
or
 b) rejects the resolution plan under section 31 for the non-compliance of the
requirements specified therein, it shall
i. pass an order requiring the corporate debtor to be liquidated in the manner as
laid down in this Chapter;
ii. issue a public announcement stating that the corporate debtor is in liquidation;
and
iii. require such order to be sent to the authority with which the corporate debtor is
registered.”

31. From the aforesaid provision we find that time is the essence of the Insolvency and
Bankruptcy Code, 2016.1 Therefore, when we say that time is the essence of the code then,
we must understand section 12 in the light of this decision of the Appellate Tribunal.

3. Accepting “Extension Application” filed after 180 days is not excess of

jurisdiction:

To understand the issue of extension application that came before NCLT it is important to
read Section 12 which prescribes the ‘time limit for completion of insolvency resolution
process’, and reads as follows:

12. Time-limit for completion of insolvency resolution process –

(1) Subject to sub-section (2), the corporate insolvency resolution process shall be completed
within a period of one hundred and eighty days from the date of admission of the application
to initiate such process.

(2) The resolution professional shall file an application to the Adjudicating Authority to
extend the period of the corporate insolvency resolution process 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 seventy-five per cent of the voting shares.

(3) On receipt of an application under sub-section (2), 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:

1
JK Jute Mills Company Ltd. Vs M/s Surendra Trading Company (Company Appeal (AT) No. 9 of 2017)
Provided that any extension of the period of corporate insolvency resolution process under
this section shall not be granted more than once.2

In a case before NCLT the question was whether NCLT has jurisdiction to accept an
application filed after the period of 180 days. Wherein the view of NCLT was that the
meeting of committee of creditors shall pass a resolution for extension of application under
section 12 and the application for the same shall be filed within the period of 180 days, it is
only then, that the Tribunal can accept the application but in this case, wherein the committee
of creditors passed a resolution within the period of 180 days but the application for the same
before the Tribunal was filed after 180 days. The NCLT’s stand was that the acceptance of
the application would mean revival of the Corporate Insolvency Resolution Process which is
beyond the power of the bench.

However, NCLAT has overruled the same and has stated that section 12 does not mandate the
filing of application for extension within 180 days. It is only the meeting of the committee of
creditors which is to take place within 180 days passing a resolution to that effect. Therefore,
it can be said that if a resolution is passed on the 180 th day and an application is filed after
that, the same can be accepted by the adjudicating authority. 3 The period between 181st day
and the date of passing of the order by the Adjudicating Authority shall not be counted for
any other purpose and is to be excluded for counting the extended period.4

4. Conclusion:

The view of NCLT that the acceptance of application for extension after 180 days of CIRP
are over would mean exercise of jurisdiction beyond the powers conferred upon this bench
under section 12 of the code as there is no provision for revival of CIRP period to provide
another 90 days. However, NCLAT has overruled the decision of NCLT and has given a
different interpretation of S.12 by holding the view that no where in S.12 it is mentioned that
the application for extension is required to be filed within the period of 180 days. Section 12
requires that the resolution is to be passed by Committee of Creditors by a majority share of
75%. However, this may give a leeway to the Resolution Professional for filing of application
for extension. Also, CIRP which is to end within a maximum period of 270 days (including
one-time extension) would be further extended as the Appellate Tribunal has left it open for

2
Insolvency & Bankruptcy Code, 2016
3
Quantum Limited Vs. Indus Finance Corporation Ltd. (Company Appeal (AT)(Insolvency) No. 35 of 2018)
4
Amit Basia & Anr. Vs Anant Overseas Ltd. & Anr (Company Appeal (AT)(Insolvency) No. 41 of 2018)
the Resolution Professional to file application after 180 days, if resolution for extension is
passed to that effect, this advantage could be misused for extending the period of CIRP.