Back
NCLT Jaipur Orders of Dropbase Software, Replaces Resolution Professional for CIRP Delay
The Jaipur Bench of the has ordered the of and replaced Rajneesh Sharma with Anubha Singh as the Liquidator, citing a “serious lapse” in adherence to the statutory timeline of the . The bench of Judicial Member Reeta Kohli and Technical Member Kavita Bhatnagar delivered the order on , marking the culmination of a CIRP that had dragged on for more than three and a half years.
A Deadlocked CIRP and a Non-Cooperative CoC
The CIRP against Dropbase Software commenced on , following an application by Rajneesh Sharma was appointed as the and later confirmed by the on . The CoC comprised four creditors, with government entities holding a combined voting share of 81.55%.
From the outset, the process was hobbled by the , Himanshu Meena and Akhil Sharma, who refused to hand over books of accounts and financial records. The was found to be asset-less, with the only identified asset—an outdated software—having no realisable value. The CoC repeatedly failed to pass resolutions, rejecting proposals for approval of CIRP costs, appointment of advisors, revival of the company, and even extension of the CIRP period. In a reconvened fourth CoC meeting on , a proposal for early dissolution was rejected by 77.62% of the voting share, leaving the RP without any mandate.
The RP's Predicament and the Tribunal's Scrutiny
The RP filed a status report covering the period from to , detailing the deadlock. He reported that CIRP costs of Rs. 30,50,569 remained unpaid, that he was bearing expenses from his own pocket, and that the legal counsel had not been remunerated. He further contended that he had repeatedly sought CoC approval to file for extension or exclusion under , but the CoC had refused to pass any such resolution.
The Tribunal, however, was critical of the RP's handling of the timeline. It noted that the initial 180-day CIRP period expired on , and the maximum 330-day outer limit—including all possible extensions—lapsed on . Yet, the RP conducted only one CoC meeting within the first 180 days and four subsequent meetings thereafter, with the fifth CoC meeting taking place 1,210 days after the commencement of the CIRP. The RP never sought any extension from the , even though he was duty-bound to inform it of the lapse of the statutory period even if the CoC did not pass a resolution.
“It is clear that the RP never sought any extension and more than 3.5 years have lapsed since the initiation of CIRP,” the bench observed. “At this juncture, it is pertinent to mention that the Applicant herein was duty bound to inform this regarding the lapse of statutory period of 180 days for completion of CIRP even if the CoC did not pass any resolution to file an application seeking extension before the .”
Legal Framework and the Essar Steel Precedent
The Tribunal relied on Section 12 of the IBC, which mandates completion of the CIRP within 180 days, extendable by a further 90 days upon a 66% CoC vote, with an absolute outer limit of 330 days from the . The judgment referenced the 's ruling in , which clarified that 330 days is the general rule and the outer limit for the resolution process, with extensions beyond that permissible only in exceptional circumstances where the delay is attributable to factors beyond the litigants' control.
The Tribunal also invoked the
Code of Conduct for Insolvency Professionals, which mandates that an IP
"adhere to the time limits prescribed in the Code"
and
"not act with
or be negligent."
Continuing the CIRP beyond the prescribed period without following due process, the bench held, amounts to a “serious lapse in the professional conduct” of the RP.
A Misleading Reliance on NCLAT Orders
The RP had sought to justify the delay by citing a order of the that directed the RP not to constitute the CoC if not yet constituted. The RP claimed this amounted to a stay, warranting exclusion of 184 days. The NCLT rejected this argument, observing that the NCLAT order did not stay the CIRP; it merely restrained the constitution of the CoC. The RP was nonetheless under a statutory mandate to proceed with the CIRP. The Tribunal further noted that the RP had never sought any extension or exclusion, and his repeated adjournments before the NCLT to file the timeline only compounded the delay.
Ordered and a New Liquidator Appointed
Given that the CIRP had reached a deadlock, more than 3.5 years had elapsed, and there was no likelihood of resolution, the Tribunal invoked Section 33(1)(a) of the IBC to order the of Dropbase Software. A fresh under Section 33(5) was declared, and Anubha Singh was appointed as the Liquidator, replacing the RP.
The Tribunal directed the Liquidator to file a preliminary report within 75 days, form the estate, and take charge of the 's assets and records. All powers of the and board were vested in the Liquidator, and the creditors and personnel were directed to extend full cooperation.
A Cautionary Tale for Resolution Professionals
This judgment underscores the strict judicial scrutiny imposed on insolvency professionals who fail to adhere to statutory CIRP timelines. Even when a CoC is uncooperative, an RP is not absolved from informing the about the expiry of the prescribed periods. The NCLT's decision serves as a reminder that the 330-day limit is not a mere guideline but a binding requirement, and any deviation without due process will attract consequences—including removal and .
