Case Note & Summary
The Supreme Court dismissed appeals against the NCLAT order dated 30th July 2019, which had excluded 90 days from the 270-day Corporate Insolvency Resolution Process (CIRP) period for Jaypee Infratech Ltd. (JIL). The background involves JIL becoming a Non-Performing Asset, leading IDBI Bank to file an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) before the NCLT, Allahabad. During this, home buyers filed writ petitions in the Supreme Court, which were disposed of on 9th August 2018 in Chitra Sharma v. Union of India, directing that the CIRP period commence from that date and that a fresh Committee of Creditors (CoC) be constituted. The IRP submitted a report showing 62.3% home buyers as financial creditors. On 17th September 2018, a home buyers' association sought clarification on voting share calculation, leading to a difference of opinion between NCLT members and a reference to a third member, who decided on 24th May 2019. Meanwhile, IDBI Bank sought exclusion of the pendency period from the 270-day limit. The NCLT on 6th May 2019 directed proceeding with CIRP despite pending applications. IDBI Bank appealed to NCLAT, which consolidated the appeals and, applying the Quinn Logistics principle, excluded 90 days from the CIRP period to avoid liquidation and protect allottees' interests. The Supreme Court upheld this, noting the extraordinary situation where the law was silent on voting share, and dismissed the appeals, allowing the CIRP to continue.
Headnote
A) Insolvency Law - Corporate Insolvency Resolution Process - Exclusion of Time - Section 12, Insolvency and Bankruptcy Code, 2016 - The NCLAT excluded 90 days from the CIRP period due to an extraordinary situation where the law was silent on voting share of allottees, causing a difference of opinion between NCLT members. The Supreme Court upheld this exclusion, noting that the period from 17th September 2018 to 4th June 2019 was spent in resolving the voting share issue, and the exclusion was in the interest of allottees to avoid liquidation. (Paras 7-8) B) Insolvency Law - Home Buyers as Financial Creditors - Voting Share - Sections 7, 30, Insolvency and Bankruptcy Code, 2016 - The NCLT had to determine the voting share of thousands of allottees who are financial creditors. The absence of regulations led to a reference to a third member, causing delay. The court held that such extraordinary circumstances justify exclusion of time under the Quinn Logistics principle. (Paras 5-7) C) Insolvency Law - Liquidation vs. Resolution - Interest of Allottees - Section 12, Insolvency and Bankruptcy Code, 2016 - The court emphasized that the primary interest of allottees (home buyers) must be protected, and allowing liquidation due to expiry of 270 days would be detrimental. Therefore, exclusion of time was necessary to enable consideration of fresh resolution plans. (Paras 7-8)
Issue of Consideration
Whether the period from 17th September 2018 to 4th June 2019 during which the NCLT was considering the voting share of allottees should be excluded from the 270-day CIRP period under the Insolvency and Bankruptcy Code, 2016.
Final Decision
The Supreme Court dismissed the appeals, upholding the NCLAT order dated 30th July 2019, which excluded 90 days from the 270-day CIRP period for Jaypee Infratech Ltd. The court directed that the CIRP continue and that fresh resolution plans be invited.
Law Points
- Exclusion of time for CIRP
- Section 12 IBC
- Section 7 IBC
- Section 30 IBC
- Section 29A IBC
- Article 142 Constitution
- Quinn Logistics principle
- home buyers as financial creditors
