Corporate insolvency resolution process is time bound. The Adjudicating Authority is bound by a time-period of 14 days to accept or reject the application for CIRP. This timeline of 14 days provided under I&B code is extendable in special circumstances.
If the matter is admitted, the court must begin proceedings from the date of such admission. However, if it is rejected on the ground of some error, then the applicant is given a time of 7 days to correct the error in their application, as per Section 7 (5) of the Insolvency & Bankruptcy Code.
Within 14 days of commencement of proceedings, the court shall appoint an Interim Resolution Professional (IRP) whose term is limited to 30 days from the date of appointment.
In JK Jute Mills Company Limited V/s Surendra Trading Company, the issue before the Hon'ble NCLAT was "Whether the time limit prescribed in Insolvency & Bankruptcy Code, 2016 (hereinafter referred to as Code 2016) for admitting or rejecting a petition or initiation of insolvency resolution process is mandatory"
The Hon'ble NCLAT after discussing each legal provision under the I&B Code 2016 which prescribe the time limit, held that "the object behind the time period prescribed under Section 7 (5), Section 9 (5) and Section 10 (4), like Order VIII Rule 1 of CPC, is to prevent the delay in hearing and deciding the cases.
The Adjudicating Authority cannot ignore the provisions. But, in appropriate cases, for the reasons to be recorded in writing, it can admit or reject the petition after the period prescribed under Section 7 or Section 9 or Section 10."
The Hon'ble NCLAT while deciding the case held that "the time is the essence of the code and all the stakeholders, including the Adjudicating Authority, is required to perform its job within the time prescribed under the Code except in exceptional circumstances if the adjudicating authority for one or other good reason fails to do so. In the case in hand, we find that the Adjudicating Authority has unnecessarily adjourned the case from time to time which is against the essence of the code."
The entire process of insolvency resolution is required to be completed within a period of 180 days from the date of acceptance of the application. If the Adjudicating Authority is satisfied that the matter cannot be completed within 180 days, then an extension of not more than 90 days shall be granted to conclude the matter.
Need legal help? Consult the most experienced lawyers from MyAdvo anywhere in India and across the world! Email us at firstname.lastname@example.org or call now at 9811782573.