Pranav B Prem

The Chennai Bench of the National Company Law Appellate Tribunal (NCLAT), comprising Justice Sharad Kumar Sharma (Judicial Member) and Mr. Jatindranath Swain (Technical Member), has held that the 90-day timeline prescribed under Regulation 2B(1) of the IBBI (Liquidation Process) Regulations, 2016 for completing a scheme of compromise or arrangement under Section 230 of the Companies Act, 2013, is directory and not mandatory. The Tribunal clarified that the regulation does not create an absolute bar on granting extensions and reiterated that timelines under subordinate legislation must not frustrate the objectives of the Insolvency and Bankruptcy Code, 2016 (IBC), which is primarily aimed at the revival of the Corporate Debtor.

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The appeal arose out of the impugned order dated 26.05.2025 passed by the National Company Law Tribunal (NCLT), Hyderabad Bench, which had dismissed an application filed by the Liquidator seeking an extension of 90 days to complete the scheme of arrangement. The Corporate Debtor, M/s. Sarda Agro Oils Limited, was ordered into liquidation on 09.01.2023. Subsequently, M/s. Prakash Oil Depot submitted a scheme under Section 230 on 25.01.2024. However, the NCLT held that the scheme was not completed within the prescribed 90-day window as mandated under Regulation 2B(1), despite multiple exclusions of time being granted earlier.

According to the NCLT, the scheme should have been filed within 30 days and completed within 90 days from the liquidation commencement date or extended date (31.07.2024), i.e., by 29.10.2024. Instead, the Liquidator filed the application seeking further extension only on 26.04.2025. The NCLT found this to be a clear violation of the statutory timeline and rejected the plea.

Before the NCLAT, the Appellants, including the Liquidator and the scheme proponent, contended that the delay was occasioned due to the late approval of the scheme by financial creditors, including a key secured creditor who granted consent only on 22.04.2025. They argued that the scheme had been approved by 100% of the secured creditors in the Stakeholder Consultation Committee (SCC) and offered higher value than what liquidation would fetch. It was also submitted that the delay was not intentional and that a cheque of ₹4.30 crores towards the earnest money deposit had already been submitted in May 2024.

The Appellate Tribunal examined whether the 90-day period under Regulation 2B(1) was to be treated as a rigid bar. Referring to its earlier decision in Bharat Sharma, Resolution Applicant v. Reshma Mittal, RP (Now Liquidator) [Company Appeal (AT) (Ins) No. 1275 & 1276 of 2022], the Bench noted that such timelines must be treated as directory if the circumstances and purpose of the Code justify leniency. It held that the objectives of IBC, including value maximisation and revival, outweigh a strict adherence to procedural timelines set in delegated legislation.

The NCLAT further cited the judgment in Y. Shivram Prasad v. S. Dhanpal & Ors [(2019) 214 Com. Cas 83], wherein it was observed that liquidation is not the primary objective of the Code, and courts must support efforts aimed at revival. It emphasized that the commercial wisdom of stakeholders and the SCC must be given due weight and that the Tribunal should not sit in appeal over the terms or viability of a scheme that has already been approved by them.

The Bench held that “there is no specific or absolute bar under law to consider such a scheme… and even if the said time period as stipulated for completion of the scheme is exhausted, then too the time period granted by the Adjudicating Authority could be further extended.” It stressed that flexibility is necessary where revival is possible, as the ultimate goal of IBC is not mere liquidation but the sustenance of viable businesses.

The Tribunal also referred to the Supreme Court’s observations in Arun Kumar Jagatramka v. Jindal Steel and Power Ltd [2021, volume 7, SCC, page 474]. that all efforts should be made to save a Corporate Debtor from corporate death, and once a scheme is sanctioned, it becomes binding upon stakeholders and the Liquidator.

While setting aside the NCLT’s order, the NCLAT observed that the delay in securing approvals did not reflect malafides. Since the scheme was already vetted and approved by all secured financial creditors and was not prejudicial to stakeholders, there was no legal justification to deny a further 90-day extension. It also reiterated that the Tribunal is not a forum to re-examine the commercial soundness of a scheme when the stakeholders themselves have found it viable.

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Accordingly, the Appellate Tribunal allowed the appeal, quashed the impugned order dated 26.05.2025, and granted an additional 90 days to complete the scheme of compromise or arrangement. The extension is subject to the scheme’s compliance with Section 230(5) of the Companies Act, 2013, read with Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.

Appearance

For M/S. Prakash Oil Depot: Mr. Satish Parasaran, Senior Advocate; Mr. Pavan Kumar Gandhi & Ms. Tanushree Arvind, Advocates.

For G. Madhusudhan Rao (Liquidator for M/s Sarda Agro Oils Limited): Mr. PH Arvindh Pandian, Senior Advocate; Mr. Avinash Krishnan Ravi, Advocate for Liquidator; Mr. G. Madhusudhan Rao, Liquidator.

Cause Title: M/S. Prakash Oil Depot V. G. Madhusudhan Rao & Anr.

Case No: Company Appeal (AT) (CH) (Ins) No.304/2025 (IA No.892/2025) with Company Appeal (AT) (CH) (Ins) No.306/2025 (IA No.901/2025)

Coram: Justice Sharad Kumar Sharma [Judicial Member], Jatindranath Swain [Technical Member]