90-Day Time Limit under Regulation 2B for Completing Section 230 Scheme of Arrangement is Directory: NCLAT grants 90 More Days [Read Order]
NCLAT held that the 90-day limit under Regulation 2B for completing a Section 230 scheme is directory, granting 90 more days to complete the arrangement
The Chennai Bench of the National Company Law Appellate Tribunal (NCLAT) ruled that the 90-day time limit under Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016 for completing a scheme of arrangement under Section 230 of the Companies Act, 2013 is directory in nature and not mandatory, and granted additional time for completion of the scheme proposed for revival of Sarda Agro Oils Ltd.
Prakash Oil Depot, the scheme proponent, had filed an appeal after the NCLT Hyderabad rejected its application for extension of time to complete the scheme of arrangement. The liquidation of Sarda Agro Oils Ltd. had been ordered on 9 January 2023, and under Regulation 2B, a compromise or arrangement is expected to be proposed within 30 days and completed within 90 days.
The appellant’s counsel explained that although the scheme of arrangement was submitted beyond this period, it had been subsequently approved by 100% of the secured creditors, including Indian Bank and Bank of Baroda, and the delay was largely due to the time taken by the creditors to grant their approvals. The counsel argued that since the scheme promised greater value than liquidation, extension Bank of Baroda ought to be granted.
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The respondents opposed the appeal, arguing that Regulation 2B was clear in its timelines, that extensions had already been granted earlier, and that further delay would defeat the purpose of liquidation under the Insolvency and Bankruptcy Code, which is intended to be time-bound.
The two-member bench comprising Justice M. Venugopal (Judicial Member) and Ms. S. Rajeswari (Technical Member) observed that Regulation 2B prescribes timelines but they are meant to be directory and not mandatory.
The tribunal observed that both the Supreme Court and NCLAT had, in earlier judgments, explained that revival through a scheme of arrangement should be given preference over liquidation, since liquidation results in the corporate death of the company.
It further pointed out that Section 230 of the Companies Act itself does not provide any outer time limit for a scheme of compromise or arrangement, and a subordinate regulation cannot impose an absolute bar.
On this basis, the tribunal set aside the order of the NCLT Hyderabad dated 26 May 2025 and granted an additional 90 days from the date of uploading of its order to complete the scheme of arrangement, subject to compliance with statutory requirements under Section 230(5) of the Companies Act and Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. The appeals were allowed.
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