The Supreme Court of India held that application of the COVID-19 pandemic extension is available to delayed auction purchase deposits under the Insolvency and Bankruptcy Code ( IBC ).
In this case, M/s KMC Specialty Hospitals (India) Limited, the successful auction purchaser of a property, was initially required to deposit the balance sale consideration within 90 days, as per Rule 12 of Schedule I under the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016.
However, due to the nationwide lockdown imposed to curb the spread of COVID-19, the extension of limitation periods by the Supreme Court through its Suo Motu Writ Petition on March 23, 2020, and Regulation 47A of the IBBI Regulations allowed the Auction Purchaser to deposit the balance after the original deadline had passed.
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The Supreme Court held that the COVID-19 pandemic and resultant lockdown qualified as a valid reason for extending the timeline, especially since the nationwide lockdown had halted many economic activities and restricted movements.
The Supreme Court bench of Justice Hima Kohli and Justice Ahsanuddin Amanullah noted that the IBC’s timelines, though stringent, are directory rather than mandatory, particularly in unprecedented situations like the pandemic. The Liquidator was also found to have acted within the provisions of the law by accommodating the delayed deposit.
It was thus held that the “The said amount shall be deposited by the Auction Purchaser with the Liquidator within eight weeks from today. Thereafter, the Liquidator shall disburse the amount received in terms of the orders passed/may be passed by the Adjudicating Authority, as contemplated under the IBC.”
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The estimated value of the subject property in terms of the Reports submitted by the Registered Valuers appointed by the Liquidator was taken into consideration by the Supreme Court for arriving at a fair and just figure.
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