India: Scope Of Court Intervention In The Insolvency Resolution Process Timeline

According to the recent Ease of Business Report 2017 released by the World Bank, India ranks a poor 136th on the Insolvency Resolution component out of a possible 190.1 The major reason for this poor ranking is the undue long time it takes for insolvency resolution process to be completed in India – averaging at 4.3 years.2 This problem has been addressed in the Insolvency and Bankruptcy Code, 2016. The legislative debates, the statement of object and reasons and the preamble to the Insolvency and Bankruptcy Code - all show that the Code intends to complete the corporate insolvency resolution process in a "time bound manner". In order to achieve this objective of "time bound" resolution, Section 12 lays down the time period for completion of the insolvency resolution process.

Section 12 reads –

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 - provided that any extension of the period of corporate insolvency resolution process under this section shall not be granted more than once.

Thus u/s 12, the corporate insolvency resolution process has to be completed within 180 days from the date of admission of application. Arguments have been raised in favour of such a short time period as a long drawn out liquidation period reduces the liquidation value.3

This period might be extended by not more than 90 days. However, the procedure to avail of this extension is fairly difficult and rigid. First, the Committee of Creditors has to pass a resolution for an extension of time by a 75% majority. Following such a resolution by the Committee of Creditors the resolution professional has to make an application before the Adjudicating Authority. The Adjudicating Authority then, has to satisfy itself that in the given matter, the facts are such that the insolvency resolution process cannot be completed within 180 days and once it is satisfied, it may extend the time period beyond 180 days for such duration it deems fit, but not more than 90 days. Further, this extra time given by the Adjudicating Authority cannot be extended or granted more than once.

Thus, we see that the code lays down a very high threshold of requirements that have to be met before the 180-days time period can be extended. Accordingly, u/s 12 only the Adjudicating Authority can intervene to extend the period of the resolution if and only if the law laid down in Section 12 is followed. No other court can extend this timeline. This contention is further supported by S. 63 which puts an express bar on the jurisdiction of civil courts to entertain any proceedings with respect to any matter under the code, meaning no other court can interfere with respect to the 180-days timeline under this Code.

Additionally, it has been clarified by the NCLAT that the time period u/s 12 is mandatory and cannot be extended past a total of 270 days. In JK Jute Mills Company Limited v M/s Surendra Trading Company4 the NCLAT held –

"45. Section 12 is a "time limit for completion of insolvency resolution process" which is to be completed within 180 days from the date of admission of the application. An extension of the period of corporate insolvency resolution process can be granted by the Adjudicating Authority but it cannot exceed 90 days and cannot be granted more than once.

46. The resultant effect of non-completion of insolvency resolution process within the time limit of 180 days + extended period of 90 days i.e. total of 270 days will result in to initiation of liquidation proceedings under section 33. As the end result of the Resolution Process is approval of the resolution plan or initiation of liquidation proceedings, we hold that the time granted under section 12 of 'the Code' is mandatory."

Because this judgment was passed by the NCLAT it is binding on all the benches of the NCLT and consequently, the NCLT benches cannot extend the time beyond 270 days.

Thus, to conclude, we see that there is not much scope for court intervention with respect to the extension of timeline of the insolvency resolution process. Intervention is allowed by the NCLT, but the same has to be in accordance with the law laid down by Section 12. This view is further supported by Section 64 – "Expeditious disposal of applications". Section 64(2) states that – "No injunction shall be granted by any court, tribunal or authority in respect to any action taken, or to be taken, in pursuance of any power conferred on the National Company Law Tribunal or the National Company Law Appellate Tribunal under this Code." Read harmoniously with Section 12, this section removes any doubt regarding the interference of Courts regarding the 270-days period given u/s 12 for completion of the insolvency resolution process.


1  World bank,'Resolving Insolvency' (,2017) accessed 17 July 2017

2  Ibid

3  The Financial Express, 'Insolvency and Bankruptcy Code: Here's why resolution must be strictly timebound' (Financialexpresscom, 19 May 2017) accessed 17 July 2017

Company Appeal (AT) No. 09 of 2017 (NCLAT)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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