In a significant ruling under the Insolvency and Bankruptcy Code, 2016 (IBC), the National Company Law Appellate Tribunal (NCLAT) has allowed the exclusion of 87 days from the Corporate Insolvency Resolution Process (CIRP) timeline, emphasizing that liquidation should be a measure of last resort. The judgment underscores the importance of procedural fairness in transitions between Resolution Professionals (RPs) and the need to preserve the Corporate Debtor as a going concern.
Background & Facts
The Dispute
The appellant, Vivek Bansal, acting as the Resolution Professional (RP) of Senior Builders Ltd., sought exclusion of 87 days (from 15.12.2025 to 11.03.2026) from the CIRP timeline under Section 12(2) of the IBC read with Regulation 40 of the CIRP Regulations, 2016. The exclusion was necessitated by delays in transitioning between the erstwhile RP and the new RP, which left only 26 days for completing the CIRP upon the new RP taking charge.
Key Facts
- The Corporate Debtor, Senior Builders Ltd., was undergoing CIRP under C.P. (IB) No. 457/PB/2022 before the National Company Law Tribunal (NCLT), New Delhi.
- An application for removal of the erstwhile RP was filed on 15.12.2025 and allowed on 11.03.2026, with the new RP taking charge on 12.03.2026.
- Upon scrutiny, the new RP found substantial pending work, leaving only 26 days for completing the CIRP timeline as per Section 12 of the IBC.
- The appellant filed IA No. 1716/ND/2026 before the NCLT seeking exclusion of 87 days from the CIRP timeline to avoid exceeding the 330-day limit, which would trigger liquidation.
Procedural History
- 22.04.2026: NCLT Bench-IV dismissed the application (IA No. 1716/ND/2026) seeking exclusion of 87 days.
- 03.06.2026: The appellant filed Company Appeal (AT) (Ins.) No. 991 of 2026 before the NCLAT.
- The Committee of Creditors (CoC) supported the appeal through its authorized representative, Sumit Shukla.
Relief Sought
The appellant sought exclusion of 87 days from the CIRP timeline to prevent the Corporate Debtor from being pushed into liquidation due to the delay in RP transition.
The Legal Issue
The central question was whether the NCLT erred in rejecting the exclusion of 87 days from the CIRP timeline under Section 12(2) of the IBC, despite the delay being caused by procedural transition between Resolution Professionals, thereby risking mechanical liquidation of the Corporate Debtor.
Arguments Presented
For the Appellant
- Argued that the delay in transitioning between the erstwhile RP and the new RP was beyond the appellant's control, leaving insufficient time to complete the CIRP.
- Contended that liquidation should be a measure of last resort, citing catena of judgments by the Hon'ble Supreme Court emphasizing the preservation of the Corporate Debtor as a going concern.
- Submitted that excluding the 87-day period was necessary to comply with the 330-day timeline under Section 12 of the IBC and avoid unjust liquidation.
For the Respondent (CoC)
- The Committee of Creditors (CoC), through its authorized representative, supported the appeal, indicating no objection to the exclusion of the 87-day period.
The Court's Analysis
The NCLAT examined the procedural history and the circumstances leading to the delay in the CIRP timeline. The Tribunal noted that the transition between Resolution Professionals was a critical phase, and the delay in this transition was not attributable to any lapse on the part of the appellant. The Tribunal relied on the principle that liquidation should be avoided wherever possible, as established in multiple Supreme Court judgments.
The Tribunal observed:
"Admittedly an application for removal of the erstwhile Resolution Professional was filed on 15.12.2025 which application was allowed on 11.03.2026 and the new Resolution Professional took charge on 12.03.2026 from the erstwhile Resolution Professional who upon scrutiny of record of the proceedings conducted by the erstwhile Resolution Professional, found substantial part of the work is still pending but only 26 days were left for the completion of CIRP timeline per provisions of Section 12 of the Code."
The NCLAT emphasized that the 330-day timeline under Section 12 of the IBC is not absolute and must be interpreted flexibly to ensure justice and fairness in the resolution process. The Tribunal held that excluding the 87-day period was justified to prevent the Corporate Debtor from being mechanically liquidated due to procedural delays.
The Verdict
The NCLAT allowed the appeal, setting aside the impugned order dated 22.04.2026 passed by the NCLT. The Tribunal directed the exclusion of 87 days (from 15.12.2025 to 11.03.2026) from the CIRP timeline, thereby preventing the Corporate Debtor from being pushed into liquidation. Pending IA No. 3941 of 2026 was also disposed of.
What This Means For Similar Cases
Liquidation Is a Measure of Last Resort
- Practitioners must emphasize that liquidation under the IBC is not automatic and should be avoided wherever possible. Courts are inclined to preserve the Corporate Debtor as a going concern, especially when delays are procedural and not attributable to the RP.
- The judgment reinforces the principle that timelines under the IBC are not rigid and can be extended or excluded in the interest of justice.
Procedural Delays in RP Transition Can Be Excused
- Resolution Professionals can seek exclusion of time lost due to transitions between RPs, provided the delay is not due to their negligence. This ruling provides a precedent for excluding such periods from the CIRP timeline.
- Committees of Creditors (CoCs) should support such applications, as mechanical liquidation may not be in the best interest of creditors or the Corporate Debtor.
Flexible Interpretation of Section 12 of IBC
- Courts may adopt a flexible interpretation of Section 12 of the IBC to prevent unjust outcomes. Practitioners should argue for exclusion of time where delays are beyond the control of the RP or CoC.
- The judgment highlights the importance of documenting procedural delays and justifying exclusion requests with evidence of pending work and transition challenges.
