Period Of Moratorium U/S 101 Of IBC Cannot Be Extended Beyond 180 Days: NCLAT

The NCLAT New Delhi bench of Justice Ashok Bhushan (Judicial Member), Mr. Barun Mita (Technical Member) and Mr. Arun Baroka (Technical Member) has held that the period of moratorium beyond 180 days as provided under section 101 of the IBC cannot be extended.It further held that “when the statutory scheme is clear and unambiguous, there is no role of any interpretive process to find out the jurisdiction of NCLT to extend the period of Moratorium when statute provides a date for cessation of the Moratorium it cannot be extended by the Adjudicating Authority or by this Tribunal against the statutory intendment under Section 101(1).”Brief FactsAn application under section 94 of the code was filed which came to be admitted by the Adjudicating Authority which in turn led to the operation of interim moratorium under section 96 of the code. Subsequently, the Resolution Professional submitted its report under section 99 of the IBC which was considered by the AA and the application under section 94 was admitted.Later, the RP was authorised to file an application seeking extension of the time period of PIRP by 90 days beyond 180 days.Appellant thereafter filed an I.A. 5719/2024 seeking extension of the PIRP by 90 days beyond 180 days, which Application came to be rejected by Adjudicating Authority on 04.12.2024, by which Application, the Adjudicating Authority has granted 90 days extension to complete the process, however, no views were expressed on the Moratorium. Contentions:The appellant submitted that the AA committed an error in not extending the time period of the moratorium as it shall enable the creditors to enforce their security interest or initiate recovery actions which will defeat the very purpose of the PIRP. It was contended that in the present case a repayment plan has already been received within 180 days during the moratorium provided under section 101 of the code. Lastly, it was submitted that the period provided under section 101 is directory and not mandatory therefore the AA has jurisdiction to extend this time period. Reliance was placed on 'Vikas Gautamchand Jain' (2024) and the Supreme Court judgment in 'P. Mohanraj & Ors.' Vs. 'Shah Brothers Ispat Pvt. Ltd.' (2021).The submissions of the appellant were also supported by the personal guarantor.Observations:The question before the tribunal was whether the moratorium period under section 101 can be extended.The tribunal while referring to section 101 of the code observed that it provides that the moratorium will commence in relation to all debts once an insolvency application under section 94 is admitted and shall cease to have effect after 180 days. This section provides both the commencement of the moratorium period as well as the cessation of the period and the word “shall” has been used.The tribunal while addressing the submission of the appellant that the period stipulated under this section is directory, observed that in 'State of UP & Ors.' Vs. 'Babu Ram Upadhyay',1961 the Supreme Court held that whether a statute is directory or mandatory, the court has to ascertain the real intention of the nature and consequences that would follow from construing it from one way or another.It was held that “for ascertaining the real intention of the Legislature the Court may consider, inter alia, the nature and the design of the statute, and the consequences which would follow from construing it the one way or the other, the impact of other provisions whereby the necessity of complying with the provisions in question is avoided, the circumstance, namely, that the statute provides for a contingency of the non-compliance with the provisions, the fact that the non-compliance with the provisions is or is not visited by some penalty, the serious or trivial consequences that flow therefrom, and, above all, whether the object of the legislation will be defeated or furthered.”The tribunal also referred to the Supreme Court judgment in 'Newtech Promoters & Developers Private Limited' Vs. 'State of Uttar Pradesh & Ors.'(2021) where it was held that it is always advisable to interpret the legislative wisdom in the literary sense as being intended by the legislature and the courts are not supposed to embark upon an enquiry and find out the solution in substituting the legislative wisdom.The tribunal further noted that in 'Kotak Mahindra Bank Ltd.' Vs. 'A. Balakrishnan & Anr.', (2022) the Supreme Court held that when the language of a provision is clear and unambiguous, it is not appropriate to add or subtract words to statute or read something into it which is not there.The tribunal also noted that Justice GP Singh in “Principle of the statutory interpretation”, opined that when consequences are provided by the statute and when the consequences of nullification are also provided by the statute, such statute must be interpreted as mandatory.It noted that section 101(1) of the code clearly provides that the moratorium will come into operation the moment...

Period Of Moratorium U/S 101 Of IBC Cannot Be Extended Beyond 180 Days: NCLAT

Mohd Malik Chauhan

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