2021 (5) TMI 734 - Tri - Insolvency and Bankruptcy

Condonation of delay in filing application - Liquidation of Corporate Debtor - Section 42 of IBC - HELD THAT - Debt is defined u/s 3(11) of the Code as a liability or obligation is respect of a claim which is due from any person and inter alia includes an operational debt. Operational Debt defined u/s 5(21) of the Code inter alia means a claim in respect of provision of goods or services. For the present purpose claim would mean right to remedy for breach of contract under any law for the time being in force if such breach gives right to payment. The breach on the part of the Corporate Debtor gave rise to a right to the Applicant to payment. Meanwhile however, the Corporate Debtor issued another cheque dated 15.12.2002 for the balance amount of ₹. 4,62,066/-. It was dishonoured by the bank on 05.06.2003. The said claim amount of ₹. 4,62,066/- thus became due and payable with effect from 05.06.2003. It could only be realized in terms of Article 31 of the Limitation Act, within three years thereof. The Applicant did not take any action/step for realization of the amount within that period nor did he issue any demand for the said amount. Considering the broad sentiments expressed by the Hon ble Courts with respect to adjudication of claim on merits and the fact that the Applicant was a retired employee, it was possible that he could not pursue for recovery of his claim from the Corporate Debtor in right earnest. We feel it appropriate that the interest of justice would be best served by invoking the inherent powers of this Authority available under Rule 11 of the NCLT Rules, 2016. Application allowed.

Summary

Issues:
Application seeking directions to the Liquidator to accept the claim of the operational creditor.

Analysis:

1. Delay in Filing Claim:
The Applicant filed an Application seeking directions for the Liquidator to accept his claim against the Corporate Debtor. The Applicant, an operational creditor, had a dispute with the Corporate Debtor regarding payments due. The Corporate Debtor issued multiple instruments like postdated cheques and promissory notes for the settlement of the debt. However, the cheques were dishonored due to insufficient funds. The Applicant failed to take timely action for recovery, leading to rejection of the claim by the Liquidator due to inordinate delay. The Applicant argued that being a senior citizen, he faced difficulties in pursuing the claim promptly. The Tribunal considered the delay and the circumstances of the Applicant, emphasizing the need for adjudication on merits rather than default terminations.

2. Legal Considerations:
The Tribunal referred to the Limitation Act, defining the period within which a claim must be made. The debt owed by the Corporate Debtor to the Applicant fell due on a specific date, and subsequent actions by the Corporate Debtor extended the timeline for payment. However, the Applicant failed to take necessary steps for realization within the prescribed time limit. The Tribunal highlighted the importance of adhering to statutory timelines for filing claims in insolvency proceedings. The Tribunal also considered the provisions of the Insolvency and Bankruptcy Code regarding operational debts and the rights of creditors to make claims within the stipulated time frame.

3. Decision and Ruling:
Despite the delay in filing the claim and the expiration of the statutory time limit, the Tribunal invoked its inherent powers under Rule 11 of the NCLT Rules, 2016, to ensure justice. The Tribunal directed the Liquidator to consider the claim of the Applicant, amounting to ?4,62,066, without being influenced by the delay in submission. The Tribunal emphasized the need to balance legal requirements with the interests of justice, particularly considering the circumstances of the Applicant as a retired individual. The ruling allowed the Application on contest, condoning the delay in filing the claim and directing the Liquidator to process the claim without imposing any costs.

In conclusion, the Tribunal's judgment addressed the issues of delay in filing the claim, legal considerations under the Limitation Act and the Insolvency and Bankruptcy Code, and the balancing of legal requirements with the interests of justice in insolvency proceedings. The ruling provided relief to the Applicant while upholding the principles of fairness and due process in resolving operational debt disputes.