India – NCLT Can Grant Time To Objectors To File Objection During Initiation Of Pre-Pack Insolvency. Resolution Process.

Order dated: 21 December 2021

Summary:

Due to debt, Krrish Realtech Pvt. Ltd. (Krish Realtech) issued email to all stakeholders informing that it was intending to take recourse to pre-packaged insolvency resolution process (PIRP). Krrish Realtech issued an email notice at 3:30 am for a meeting of the financial creditors to be held at 5:00 pm on the same day. Another notice was issued on 02 October 2021 convening a meeting for 03 October 2021. Krrish Realtech claimed that the resolution professional was appointed and approval of financial creditors for PIRP was also obtained. A report was submitted by the insolvency professional and accordingly, Krrish Realtech instituted an application for PIRP under the Code. Several objectors opposed the PIRP application during the hearing. The NCLT granted time to these objectors to file replies to the PIRP application. Krrish Realtech filed an appeal against this order of the NCLT

The issue under consideration before the NCLAT was whether the NCLT has jurisdiction to give time to the objectors to file objection / reply. The NCLAT took note of the provisions related to PIRP under the Code and made the following observations:

(a) If statutory requirements to file a PIRP application are not met, it is always open for a person, who has a claim in the PIRP to point out that the application does not follow the statutory provisions;

(b) The Code provides that five days’ notice is required to convene a meeting of the financial creditors. A shorter notice is permitted only when all have agreed. There is no material to indicate that there was any agreement with all financial creditors to hold the meeting on the same day on which notice was issued. Therefore, there is breach of the Code and no valid meeting was convened.

(c) The cardinal principal of procedure to be followed is the adherence of the rules of natural justice which is provided under the company law.