Insolvency and Bankruptcy

Timeline for Corporate Insolvency Resolution Process

In the past, there have been times when one has observed a delay in the completion of the corporate insolvency resolution process. Many a time, the completion of the process has gone beyond the prescribed time period under the Insolvency and Bankruptcy Code, 2016. This has resulted due to multiple legal proceedings filed by the stakeholders, and due to the backlog of cases, the pendency also increases. The long pendency of the legal proceedings has affected the timely completion of the Corporate Insolvency Resolution Process (CIRP).

In order to tackle this challenge, the Insolvency and Bankruptcy Code (Amendment) Act, 2019 (Amendment Act) amended the Code to restrict the time period in which the CIRP shall be completed. A proviso has been included in sub-section 3 of section 12 by way of amendment. It states that the CIRP shall be completed within 330 days from the Insolvency Commencement date, including any extension of the corporate insolvency resolution process and the time taken in legal proceedings with respect to such CIRP. In order to understand the timeline and other relevant details, let us first have a clear understanding of the term corporate insolvency resolution process (CIRP).

What is the meaning of the Corporate Insolvency Resolution Process?

The insolvency resolution process of a corporate debtor is called the Corporate Insolvency Resolution Process. It is a recovery mechanism for creditors wherein if a corporate/company becomes insolvent, then a financial creditor, operational creditor, or the corporate may initiate CIRP. A company may be declared as insolvent if it is inefficient to pay off its debts to the creditors. CIRP is also a process through which it can be known whether or not the person who has defaulted is capable of repaying the debt.

The Corporate Insolvency Resolution Process may include ways to revive the company like raising funds for operation, seeking a new buyer to sell the company. The debts can be taken care of if another person submits a resolution plan to take over the company and pay the outstanding debts. In case the resolution plan is neither submitted nor approved by the committee of creditors, the CIRP process would fail.

How to apply for Corporate Insolvency Resolution Process?

The procedure for resolution or liquidation is as follows:

• A creditor of a corporate/company can request the National Company Law Tribunal. This is to admit that the company is entering into the CIRP.  The creditors must showcase the failure of payment of the debt that is in excess of one lakh rupees.
• Whenever a corporate debtor enters into the CIRP, the management is placed under an independent interim resolution professional. From here on, i.e., when it’s placed under the interim resolution professional till the end of the process (CIRP), the management ceases to have any control over the affairs of the company.
• Thereafter the interim resolution professional shall conduct verification and analysis of the corporate debtor’s creditors.
• The committee of creditors shall appoint an independent person to work as the resolution professional for the rest of the Corporate Insolvency Resolution Process. The resolution professional can be the same as the interim professional depending upon the committee of creditors.
• The resolution plan regarding the restructuring of the corporate should be approved within the prescribed time by the creditors.
• In case the plan is accepted and is sanctioned by the National Company Law Tribunal (NCLT) within the prescribed period, the resolution professional must take necessary approvals required under the law in one year’s time from the date of approval by adjudicating authority.
• In case the resolution plan is claimed, the NCLT shall order for the liquidation of the corporate debtor, and thereby the liquidator shall be appointed by the committee of creditors to sell the assets of the debtor and distribute it among the stakeholders.

Time Frame for completion of CIRP

The Insolvency and Bankruptcy Code provides that the Corporate Insolvency Resolution Process will be completed within one hundred eighty days from the date of the admission of the application to commence the process. The Code also provides for the extension of the CIRP period beyond the said one hundred eighty days period by filing an application to the adjudicating authority by the resolution professional. Thereafter, if the adjudicating authority thinks fit that due to the subject matter of the case, the process cannot be completed within one hundred eighty days, then the adjudicating authority may by order extend the time period of such process beyond one hundred eighty days, but it should not exceed ninety days.

The extension of the period of CIRP under this won’t be granted more than once. The amended proviso provides that the Corporate Insolvency Resolution Process will be completed mandatorily within three hundred thirty days from the insolvency commencement date, including the time taken in legal proceedings with respect to such process. It also provides that if the CIRP of a corporate debtor is pending, i.e., it has not completed within the period referred to in the above-mentioned lines, such resolution process shall be completed within ninety days from the commencement of insolvency and bankruptcy code (Amendment Act).

The 330 days period includes the following:

• Normal Corporate Insolvency Resolution Process period of 180 days,
• Extension of such period (only once) to 90 days granted by the adjudicating authority and,
• The time taken for legal proceedings with respect to the resolution process of the corporate debtor.

Implications of non-completion of the resolution process within the prescribed period

In case the resolution professional fails to submit the resolution plan within the prescribed time period of 180 days or 330 days, including the extension granted under the section, the adjudicating authority has the right to initiate liquidation procedure. Initiation of liquidation procedure may result in winding up of the company, and further, the proceeds shall be distributed among the creditors as per the Code.

Serious consequences shall be followed if the resolution process is not completed within the prescribed time period; therefore, it is critical to ensure timely completion of the process.

Model Timeline for CIRP

The table below represents a model timeline for Corporate Insolvency Resolution Process:

Section/Regulation		Description		Norm			TimeLine
Section 16(1)		CIRP Commencement and appointment of Interim resolution professional					T
Section 6(1)		Public announcement inviting claims		In 3 days after the appointment of Interim resolution professional			T+3
Section 15(1)(c)/ Regulation 6(2)(c) and 12(1)		Claims submission		For 14 days from appointment of Interim resolution professional			T+14
Regulation 12(2)		Claims submission		Till 90th day of commencement			T+90
Regulation 13(1)		Claims verification received under section 12(1)		In 7 days after receipt of the claim			T-21
Regulation 13(2)		Claims verification received under section 12(2)		In 7 days after receipt of the claim			T+97
Section 21 6(a) (b)/ regulation 16A		Application for appointment of authorised representative		In 2 days from verification of claims received under 12 (1)			T-23
Regulation 17 (1)		Report certifying constitution of committee of creditors	In 2 days from verification of claims received under 12 (1)				T-23
Section 22 (1)/ Regulation 19 (1)		First meeting of the Committee of creditors		In 7 days of the constitution of Committee of creditors with seven days notice			T+30
Section 22 (2)		Resolution to Appoint resolution professional by the committee of creditors		In the first meeting of committee of creditors			T-30
Section 16 (5)		Appointment of resolution professional		On approval by the adjudicating authority			…
Regulation 17 (3)		Interim resolution professional performs the functions of resolution professional till its appointment		If a resolution professional is not appointed by 40th day of commencement			T-40
Regulation 27		Appointment of valuer		In 7 days of appointment of the resolution professional but not late than 40th day of commencement			T-47
Section 12 (A) / Regulation 30A		Application submission for withdrawal of application admitted		Before issuance of expression of interest			W
		Committee of creditors to dispose the application		In 7 days of constitution of committee of creditors or within 7 days of receipt of application disposal			W+7
		If approved by Committee of creditors, filing of application of withdrawal by resolution professional to Adjudicating authority		In 3 days of approval by committee of creditors			W+10
Regulation 35 A		Resolution professional to form an opinion on preferential and other transactions		In 75 days of commencement			T+75
		Resolution professional to form a determination on preferential and other transactions		In 115 days of the commencement			T+115
		Resolution professional to file applications to adjudicating authority for appropriate relief		In 135 days of the commencement			T+135
Regulation 36 (1)		Submission of information memorandum to committee of creditors		In 2 weeks of appointment of resolution professional and not late than 54th day of commencement			T-54
Regulation 36 A		Publish form G		In 75 days of the commencement			T+75
		Invitation of expression of interest		In 75 days of the commencement			T+75
		Submission of expression of interest		Minimum 15 days from issue of expression of interest			T+90
		Provisional list of resolution applicants by resolution professional		In 10 days from the last day of receipt of expression of interest			T+100
		Objection submission to provisional list		For 5 days from the date of provisional list			T-105
		Final list of resolution applicants by resolution professional			In 10 days of receipt of objection			T-115
	Regulation 36 B	Issuance of request for resolution plan, including evaluation matrix and information memorandum			In 5 days of issuance of provisional list			T+105
		Receipt of resolution plans			Minimum 30 days from issuance of request for resolution plan			T+135
Regulation 39 (4)		Submission of committee of creditor approved resolution plan to adjudicating authority				As soon as it is approved by the committee of creditors		T+165
Section 31 (1)		Approval of resolution plan by adjudicating authority				….		T=180

Conclusion

Earlier, there were many confusing timelines, and it leads to multiple interpretations, thereby not only causing confusion to the stakeholders, but frequent litigations hampered the entire process. The new timelines may help in avoiding such inconvenience and delays. The amendment contains enough teeth to ensure timely completion of the process. An official finding suggests that this insolvency law has improved the resolution process in India as compared to earlier measures. The government has been proactive in taking steps to improve the efficiency of the insolvency and bankruptcy code by increasing the number of NCLT benches and the number of insolvency professionals. It shall also help in facilitating the process of CIRP.