NCLT Jaipur Replaces RP In Dropbase Liquidation, Says CIRP Beyond 330 Days Is Serious Lapse

The Jaipur National Company Law Tribunal (NCLT) on 17 July ordered liquidation of Dropbase Software Private Limited and replacing Resolution Professional Rajneesh Sharma with Anubha Singh as the Liquidator, citing his failure to adhere to the CIRP timeline.

A Bench of Judicial Member Reeta Kohli and Technical Member Kavita Bhatnagar held that continuing the Corporate Insolvency Resolution Process (CIRP) beyond the statutory period without following the prescribed procedure amounts to a “serious lapse in the professional conduct” of the Resolution Professional (RP). It observed:

“….the statutory period of 330 days under Section 12 of the Code is the rule and general outer limit, including extensions and time spent in legal proceedings.”

The CIRP against Dropbase Software Private Limited commenced in October 2022, with Rajneesh Sharma appointed as the RP. The RP reported that the suspended directors had failed to cooperate by not providing the books of accounts and other records. The Corporate Debtor was also found to be asset-less, with only outdated software that had no realisable value.

Several proposals concerning CIRP costs, the RP's remuneration, revival of the company and extension of the CIRP failed to secure approval from the Committee of Creditors (CoC). A subsequent proposal for early dissolution was also rejected by 77.62% of the voting share.

The RP further stated that Rs. 30.50 lakh in CIRP costs remained unpaid and that he had been bearing the expenses from his own pocket. He contended that the CoC members had refused to bear any expenses or cooperate with the process.

The Tribunal noted that the RP had not obtained any extension or exclusion of the CIRP period, although he claimed to have repeatedly sought the CoC's approval to apply for an extension. He also relied on an order of the National Company Law Appellate Tribunal (NCLAT) restraining the constitution of the CoC, followed by a subsequent order permitting him to proceed with the CIRP.

The Tribunal noted that the initial 180-day CIRP period expired on 18 April 2023, while the maximum 330-day period expired on 15 September 2023. It rejected the RP's reliance on the NCLAT proceedings to explain the delay, and observed that the NCLAT order did not stay the CIRP and merely restrained the constitution of the CoC.

It further noted that the RP had conducted only one CoC meeting during the initial 180-day period and four subsequent meetings thereafter, with the fifth meeting taking place 1,210 days after commencement of the CIRP. It held:

“It is clear that the RP never sought any extension and more than 3.5 years have lapsed since the initiation of CIRP. At this juncture, it is pertinent to mention that the Applicant herein was duty bound to inform this Adjudicating Authority 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 Adjudicating Authority.”

Further, the Bench referred to the Insolvency and Bankruptcy Board of India's (IBBI) Code of Conduct for Insolvency Professionals, which requires insolvency professionals to adhere to the timelines prescribed under the Insolvency and Bankruptcy Code, 2016. It observed that continuing the CIRP beyond the prescribed period without following due process amounted to a “serious lapse in the professional conduct” of the RP.

Finding that more than 3.5 years had elapsed, the CIRP had reached a deadlock and there was no likelihood of resolution in the near future, it held that it had no option but to order liquidation of the Corporate Debtor.

Accordingly, the NCLT ordered liquidation of Dropbase Software Private Limited and appointed Anubha Singh as the Liquidator, replacing Rajneesh Sharma.

For Resolution Professional: Advocate Nitesh Shrivastava