By August Attorneys LLP | March 18, 2025
Introduction
In a significant ruling that reinforces procedural discipline in insolvency proceedings, the National Company Law Appellate Tribunal (NCLAT) has reaffirmed the sanctity of timelines in the Corporate Insolvency Resolution Process (CIRP). On March 17, 2025, the Principal Bench of NCLAT, comprising Justice Ashok Bhushan (Chairperson) and Technical Member Barun Mitra, delivered a judgment underscoring that resolution plans submitted after the prescribed deadline cannot be entertained without the Committee of Creditors’ (CoC) approval.
Case Background
The case arose from an appeal challenging an order of the National Company Law Tribunal (NCLT), Mumbai Bench, which had directed the CoC to consider a resolution plan submitted a day after the deadline. The CIRP of AA Estate Private Limited had commenced on December 6, 2022, with the Resolution Professional (RP) inviting Expressions of Interest and issuing the Request for Resolution Plan to prospective applicants.
The final deadline for submitting resolution plans was extended to February 14, 2024, 5:00 PM. While the appellant submitted its plan within this timeframe, Respondent No. 1 (Ashden Properties Private Limited) submitted its plan and Earnest Money Deposit (EMD) on February 15, 2024—one day late. In a CoC meeting held on February 16, 2024, members exercised their commercial wisdom and decided not to accept the late submission.
The Adjudicating Authority’s Intervention
Despite the CoC’s decision, Respondent No. 1 filed an application before the NCLT seeking condonation of the one-day delay. The NCLT allowed this application, directing the CoC to consider the late resolution plan. The NCLT held that the CoC should have exercised discretion under Regulation 36B(6) of the CIRP Regulations, 2016.
Meanwhile, the CoC proceeded with evaluating the timely submitted plans and declared the appellant as the H-1 bidder. Aggrieved by the NCLT’s interference with the CoC’s decision, the appellant filed an appeal before the NCLAT.
NCLAT’s Reasoning and Judgment
The NCLAT allowed the appeal and set aside the NCLT’s order, offering several important observations:
- CoC’s Commercial Wisdom is Paramount: The NCLAT emphasized that the CoC has exclusive commercial discretion to reject a resolution plan submitted beyond the prescribed deadline. The Adjudicating Authority cannot interfere with this decision unless it is found to be arbitrary or contrary to the provisions of the Insolvency and Bankruptcy Code (IBC) or the CIRP Regulations.
- Adherence to Timelines is Crucial: The Tribunal underscored the importance of adhering to the timelines prescribed under Regulation 36B(6) and Regulation 39(1B) of the CIRP Regulations. These regulations mandate that resolution plans can only be considered if submitted within the specified timeframe.
- Extension Requires CoC Approval: The NCLAT noted that Regulation 36B(6) requires CoC approval for extending deadlines, which had not been granted in this case.
- Distinguished from Previous Precedents: The Tribunal distinguished this case from Kalpraj Dharamshi v. Kotak Investment Advisors Limited and Another (2021), noting that in that instance, the CoC had itself resolved to allow revised plans, unlike the present scenario.
The NCLAT relied on precedents including Jindal Stainless Limited v. Shailendra Arora, Resolution Professional of Mittal Corporation Limited (2023) and Ngaitlang Dhar v. Panna Pragati Infrastructure Private Limited and Others(2021), which established that the CoC has the authority to set and enforce deadlines, and judicial interference is unwarranted unless the decision is arbitrary or perverse.
Legal Implications and Takeaways
This ruling has several important implications for insolvency practitioners and stakeholders:
- Sanctity of Timelines: The judgment reinforces that timelines in the CIRP are not merely directory but mandatory, requiring strict adherence.
- CoC’s Domain: The decision reaffirms that commercial decisions, including those related to procedural aspects like deadline extensions, fall within the exclusive domain of the CoC.
- Limited Judicial Review: The NCLAT has once again limited the scope of judicial review in matters involving the CoC’s commercial wisdom, intervening only if decisions are arbitrary, perverse, or contrary to law.
- Procedural Discipline: The ruling emphasizes the importance of procedural discipline in the CIRP framework, ensuring that all stakeholders adhere to the established timelines.
Conclusion
The NCLAT’s judgment serves as a reminder of the importance of timely compliance with procedural requirements in insolvency proceedings. Resolution Applicants must ensure that their submissions are made within the prescribed deadlines, as courts are increasingly reluctant to interfere with the CoC’s decision to reject late submissions.
This ruling aligns with the IBC’s objective of time-bound resolution of corporate insolvency and reinforces the legislative intent to vest commercial decisions with the CoC. As insolvency jurisprudence continues to evolve, this judgment will serve as a significant precedent emphasizing the sanctity of timelines and the supremacy of the CoC’s commercial wisdom in the CIRP framework.
Disclaimer: This blog post is for informational purposes only and should not be construed as legal advice. For specific legal guidance, please consult with qualified attorney.