Covid-19: Lockdown period not to be counted for certain corporate insolvency timelines

The Insolvency and Bankruptcy Board of India (IBBI) has now ruled that the 21-day national lockdown period will not be counted for the purpose of timeline of completion of any activity under the corporate insolvency resolution process (CIRP) regulations.

However, the overall timeline prescribed under the Insolvency and Bankruptcy Code (IBC) such as 180 days, 270 days or 330 days will remain and have to be adhered to, said IBBI.

The insolvency regulator has allowed an extension in the timelines of various activities such as invitation, submission and verification of claims, preparation of memorandum, constitution of the committee of creditors, appointment of resolution professionals to replace interim resolution professional and invitation and receipt of expression of interest and resolution plans.

“The overall timeline for completing the CIRP, however, remains unchanged and can be extended only by an amendment to the IBC or judicially by the Supreme Court,” Gaurav Gupte, Partner, Cyril Amarchand Mangaldas told BusinessLine.

Depending on further developments, the regulator may have to consider extending timelines for specific activities in respect of lockdowns imposed by State governments or local governments as well, he said.

For instance, it may not be possible to complete valuation if the area where the assets of the company are situated continues to be in lockdown even after the national lockdown is lifted, said Gupte. The IBBI may also consider extending timelines under liquidation regulations, he added.

Aseem Chawla, Managing Partner, ASC Legal, said that the latest IBBI move highlights the much-needed respite due to preventive lockdown and suggests that the lockdown period would not be reckoned in calculating the time limit envisioned in the resolution process for accomplishment of various tasks provided the overall time limit is met.

Misha, Partner, Shardul Amarchand Mangaldas & Co, a law firm, added that timelines provided under the IBC have not been relaxed - the CIRP has to be completed within a period of 180 days extendable up to 270 days. Also, the entire CIRP including legal proceedings have to be completed within period of 330 days, Misha added.

Meanwhile, the National Company Law Appellate Tribunal (NCLAT) on Monday said that the lockdown period, including the period as may be extended in whole or part of the country where the registered office of the company may be located, would be excluded for the purpose of counting of the period of CIRP. This will be allowed in all cases where CIRP has been initiated and pending before any bench of NCLT or in appeal before NCLAT.