2021 (5) TMI 731 - Tri - Insolvency and Bankruptcy

Time limitation of Resolution Plan - timelines set out in the Resolution Plan not adhered - HELD THAT - The new management of the Corporate Debtor could not be held liable and responsible for the malfeasance and misfeasance committed by the former promoters / directors of the Corporate Debtor. It could not be saddled with the repercussions of reprehensible actions of the erstwhile management. Though the present predicament faced by the Applicant is not in respect of any new claim, the principle and sentiment echoed by the Hon ble Court can be applied to resolve the present imbroglio. Rules of procedure are but handmaidens of justice. The Hon ble Court in Sardar Amarjit Singh Kalra v. Pramod Gupta 2002 (12) TMI 607 - SUPREME COURT observed that laws of procedure are meant to regulate effectively, assist and aid the object of doing substantial and real justice and not to foreclose even an adjudication on merits of substantial rights of citizens under personal, property and other laws. Procedure has always been viewed as the handmaid of justice and not meant to hamper the cause of justice or sanctify miscarriage of justice. The present management of the Corporate Debtor shall be permitted to approve the Accounts and Returns of the Corporate Debtor for the period prior to 16.10.2019 in its next meeting. The Applicant shall file the relevant Returns and Statements for the period within three months hence - Application allowed.

Issues Involved:
1. Compliance with regulatory requirements for periods prior to the approval of the Resolution Plan.
2. Extension of the timeline for implementing the Resolution Plan.
3. Waiver of penalties for non-compliance with statutory requirements before the approval date.
4. Acceptance of physical filing of returns and statements due to technical difficulties in e-filing.

Issue-wise Detailed Analysis:

1. Compliance with Regulatory Requirements for Periods Prior to the Approval of the Resolution Plan:
The Applicant sought directions against the Registrar of Companies (RoC) to not insist upon compliance with regulatory requirements of the Companies Act, 2013, for periods before October 19, 2019. The Tribunal acknowledged the Applicant's difficulty in accessing data and documents prior to the approval date due to the negligence of the former promoters. The Tribunal ordered that the present management of the Corporate Debtor be permitted to approve and file the relevant returns and statements for the period before October 16, 2019, in its next meeting without inviting any penalties from the RoC.

2. Extension of the Timeline for Implementing the Resolution Plan:
The Applicant requested an extension of the timeline for implementing the Resolution Plan due to delays caused by the Covid-19 pandemic. The Tribunal recognized the impact of the pandemic and extended the timeline for implementing the Resolution Plan until March 31, 2022. The Tribunal emphasized the need for all concerned parties to facilitate the implementation within this extended period.

3. Waiver of Penalties for Non-compliance with Statutory Requirements Before the Approval Date:
The Applicant argued that it would be unfair to expect compliance with statutory obligations for periods before the approval date due to the lack of access to necessary information. The Tribunal agreed and ruled that the present management would not be held accountable for defaults committed by the Corporate Debtor or its former promoters/directors before October 16, 2019. The Tribunal also directed that the relevant returns and statements for periods before the approval date be filed within three months without any penalties.

4. Acceptance of Physical Filing of Returns and Statements Due to Technical Difficulties in E-filing:
The Applicant faced technical difficulties in e-filing due to the previous use of extensible business reporting language (XBRL) and other issues. The Tribunal acknowledged these technical challenges and ordered that the RoC or the appropriate authority consider accepting returns and statements in physical form if online submission or e-filing was incompatible. This measure aimed to ensure compliance and facilitate the implementation of the Resolution Plan.

Conclusion:
The Tribunal's judgment addressed the Applicant's concerns comprehensively, providing relief from regulatory compliance for periods before the approval date, extending the timeline for implementing the Resolution Plan, waiving penalties for past non-compliance, and allowing physical filing of returns and statements due to technical difficulties. The Tribunal emphasized the importance of substantial justice over technical considerations and ensured that the new management was not penalized for the malfeasance of the former promoters.

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