Essar order a breather for 535 corporate debtors facing liquidation by December
Under the SC ruling, NCLT can grant an extension for debtors facing liquidation
Under IBC, initially proceedings had to finish within 270 days for the resolution of insolvency and bankruptcy cases after which liquidation shall be invoked. In September 2019, the deadline was extended to 330 days as most cases had breached the 270 days owing to delays due to litigations. Now, the mandatory deadline of 330 days has been done away. There are 1497 cases pending under IBC. Of these, 535 cases have crossed more than 270 days. Amendment of Section 12 brought in August said that if cases are not resolved within 330 days, it will go for liquidation.
The amended maximum resolution time limit of 330 days included litigation period to ensure that resolution professionals and the adjudicating authority take timely steps to complete the process. The SC has struck the mandatory part, and ruled that in exceptional cases, the time can be extended and the general rule of 330 days as the outer limit stays.
“By December all these 535 cases would have crossed additional 90 days over 270 days and forced into liquidation,” said Hari Hara Mishra. “Forced liquidation is likely to be stopped by this Supreme Court judgement. There is fresh breather for companies completing 330 days in December quarter.”
“This judgment will shape up the future resolution process including the cases where 330 or additional 90 days were over or about to get over, as the Supreme Court has struck down the mandatory effect under the amendment and NCLT and NCLAT can exercise their discretion to give further extension according to the parameters set in the judgment,” said Ashish Pyasi, associate partner, Dhir and Dhir Associates.