In a significant and pragmatic decision, the National Company Law Appellate Tribunal (NCLAT), Chennai Bench, in Prakash Oil Depot v. G. Madhusudhan Rao & Anr. [(2025) ibclaw.in 569 NCLAT], has breathed fresh life into the evolving jurisprudence around Section 230 of the Companies Act, 2013 and Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016.
The Tribunal has clarified that the 90-day limit for enforcement of a scheme of arrangement under Regulation 2B is directory and not mandatory, thereby reinforcing the overarching objective of insolvency law — revival of the corporate debtor, not its demise.
Factual Backdrop
The Corporate Debtor, Sarda Agro Oils Ltd., was ordered into liquidation on 09.01.2023. Although several exclusion orders extended the effective timeline, the Appellants failed to finalize the compromise scheme within 90 days of the last excluded date. A further extension application was dismissed by NCLT Hyderabad on grounds of violating the strict 90-day window under Regulation 2B.
NCLAT’s Key Findings
1. Regulation 2B Is Not Cast in Stone
The NCLAT held that Regulation 2B must not be interpreted rigidly. Doing so would frustrate the very essence of Section 230, which empowers stakeholders to revive the corporate debtor via compromise or arrangement, even during liquidation.
“The provision under Regulation 2B… has been held to be directory in nature and not mandatory.” – Para 14
2. Extension Is Not Absolutely Barred
The Tribunal cited Bharat Sharma, Y. Shivram Prasad, and Sanjeev Mitla, to reaffirm that the statute permits extensionof time where circumstances warrant it and where revival is viable and commercially approved.
“Grant of extension… beyond 90-days period is not absolutely barred.” – Para 11
3. Commercial Wisdom of Stakeholders Prevails
In line with precedents such as Swiss Ribbons and Miheer Mafatlal, the NCLAT respected the commercial wisdom of the Stakeholders Consultation Committee, which had approved the scheme by a majority. Judicial intervention, it emphasized, must be minimal.
“The Tribunal is not supposed to act as a court of appeal… when the scheme stands approved by SCC.” – Para 14
4. Liquidator’s Conduct Not a Bar
The Appellate Tribunal rejected the NCLT’s reasoning that the Liquidator’s interactions with parties connected to suspended directors tainted the process. It clarified that mere association does not negate the legality of an otherwise valid scheme.
Legal Implications
This decision is a landmark reaffirmation of revival-oriented interpretation of the IBC and its allied regulations. Several critical legal positions emerge:
- Regulatory timelines are procedural, not sacrosanct.
- The revival of the corporate debtor takes precedence over liquidation, consistent with the preamble and spirit of the IBC.
- Section 230 remains a potent tool even post-liquidation, and its utility is not shackled by Regulation 2B’s wording.
- Judicial discretion can and should enable meaningful enforcement of viable schemes.
Conclusion
The NCLAT has quashed the impugned NCLT order and granted 90 more days to complete the scheme, recognizing that such flexibility serves the Code’s ultimate goal — resolution over liquidation.
This judgment is a compelling precedent for insolvency professionals, creditors, and liquidators, urging them to look beyond formalities and toward substantive revival. The message is clear: when commercial wisdom aligns with revival, the law must pave the way, not place hurdles.
Disclaimer
This blog is a general commentary based on publicly available judicial pronouncements. It is intended for informational purposes only. Readers are advised to consult appropriately qualified professionals for specific legal advice.