Filing an insolvency petition is crucial, and timing plays a vital role in avoiding unnecessary delays. It’s understandable for someone unfamiliar with legal procedures to feel perplexed by the complexities of time limits and their significance in such cases. This is where seeking the assistance of any reputable insolvency professional becomes highly advisable. Entrusting your representation to experienced experts ensures your legal matters are handled diligently.
It’s crucial to emphasise that insolvency proceedings can have serious consequences, even leading to bankruptcy if mishandled. Navigating this legal landscape requires the expertise of seasoned professionals who can steer you clear of potential pitfalls and prevent undesirable outcomes. Looking for professionals who use advanced insolvency technology is a good choice; this will ensure your claim moves automatically with little to no human error.
Now, let’s explore some pertinent time limits that must be considered when filing an insolvency petition.
The Time Limit for Filing Insolvency Petition
The 2016 Insolvency and Bankruptcy Code, also known as the Code, is an essential law in India. It deals with insolvency and bankruptcy issues faced by companies and individuals. The Code aims to help financially distressed entities by providing a quick and efficient resolution process while safeguarding the interests of all the involved parties. The Corporate Insolvency Resolution Procedure (CIRP) is a structured approach used for this purpose. The main aim of this Code is to guarantee that insolvency cases are resolved fairly and promptly. It helps struggling companies and individuals get back on their feet by systematically managing their debts and assets within a fixed time. Any insolvency professional is expected to follow such a time limit.
- The CIRP sets a strict time limit of 180 days to complete the resolution process. An additional 90 days may be granted in exceptional cases, but the entire process should be finished within 330 days.
- The company faces liquidation if a resolution plan is not achieved within the specified time frame. Liquidation means winding up the company’s affairs and distributing its assets among the creditors according to the Code’s provisions. When you entrust any professional with advanced insolvency technology handy, you can rest easy on the fact that the timeline is strictly followed.
- In 2020, the Insolvency and Bankruptcy Board of India amended the CIRP Regulations, introducing Regulation 40C. It specified that the period of lockdown imposed by the Central Government due to COVID-19 should not be counted towards the CIRP timeline for activities that couldn’t be completed during the lockdown, subject to provisions in the Insolvency and Bankruptcy Code.
- In the case of Federal Bank Ltd vs Sargam Builders Pvt Ltd [2020] NCLT, a Resolution Professional filed an application seeking an extension of the CIRP period. The NCLT ruled in favour of the Resolution Professional, granting an extension under CIRP Regulation 40C. After this date, the special provision relating to the timeline issued in the notification dated
- The significant ruling in the case of Arcelormittal India Pvt. Ltd. vs Satish Kumar Gupta & Ors by the Hon’ble Supreme Court clarified that the timeframe specified in Section 12(1) of the Insolvency and Bankruptcy Code must be adhered to strictly. Failure to complete the process within the specified period may result in the corporate debtor’s liquidation under Section 33. The maximum statutory extension allowed for the 180-day timeline is 90 days, not to be granted more than once.
The Hon’ble Supreme Court’s judgments highlight the importance of timely resolution under the Insolvency and Bankruptcy Code, supporting credit markets, entrepreneurship, investment, economic growth, and development. The insolvency resolution process duration provided to any insolvency professional, including legal proceedings, should be at most 330 days from the insolvency commencement date. Failure to complete the process within this period may lead to the liquidation of the corporate debtor.
Conclusion
In conclusion, the insolvency and bankruptcy process is a critical undertaking that demands careful consideration of time limits and procedural requirements. Seeking the guidance of an experienced insolvency professional with any advanced insolvency technology handy is paramount to navigating the complexities and avoiding detrimental consequences. In exceptional cases, the primary time limit is 180 days, extendable to 330 days. Temporary COVID-19 exceptions were made, but a Supreme Court ruling affirmed the mandatory timeline.
