2022 (5) TMI 1255 - AT - Insolvency and Bankruptcy

Initiation of CIRP - Period of Limitation - Exclusion of certain period - NCLT rejected the application - period during which winding up petition filed by the Appellant in the High Court of Delhi remained pending deserves to be excluded under Section 14 of the Limitation Act 1963 - exclusion for period during which winding up Petition remained pending in High Court of Delhi - HELD THAT - Winding up petition stood dismissed since the real entity that is Times Internet Ltd. with whom the Times Business Solutions Ltd. was merged from 26.09.2014 was neither noticed nor impleaded in winding up petition. No statutory notice having been sent to the Times Internet Ltd. the winding up petition was dismissed. Thus the winding up petition stood dismissed due to defect of procedure as noticed in paragraph 6 of the judgment of the High Court of Delhi. Present is not a case where High Court of Delhi had no jurisdiction to entertain the winding up petition but whether the proceedings were not entertained due to defect of jurisdiction and other causes of like nature is the issue to be answered. Hon ble Supreme Court in ROSHANLAL KUTHALIA ORS VERSUS RB. MOHAN SINGH OBEROI 1974 (10) TMI 98 - SUPREME COURT while interpreting Section 14 held that any circumstance legal or factual which inhibits entertainment or consideration by the court of the dispute on the merits comes within the scope of the section and liberal touch must inform the interpretation of the Limitation Act. The period during which the winding up petition filed by the Appellant was pending before the High Court needs to be excluded within the meaning of Section 14 sub-section (2). It is noticed that all details regarding winding up petition and the order of the High Court of Delhi passed in winding up petition dated 13.03.2019 were brought on record in the Section 9 Application. Thus ample foundation has been laid down for exclusion of time under Section 14(2) of the Limitation Act. Whether even if the Appellant is entitled for exclusion for period during which winding up Petition remained pending in High Court of Delhi the delay in filing Section 9 Application thereafter can be condoned under Section 5 of the Limitation Act 1963? - HELD THAT - Although in the Section 9 Application date for filing of the winding up petition has been mentioned as 14.07.2016 as noted above but in the affidavit dated 28.01.2022 the date of filing of winding up petition has been mentioned as 03.08.2016. Thus even if we take 03.08.2016 as the date of filing the winding up petition which got dismissed on 03.03.2019 and remained pending for period of two years seven months and 10 days the said period deserves to be excluded from the period of limitation under which Section 9 Application was to be field by the Appellant. It is also relevant to notice that the High Court while dismissing the winding up petition on 13.03.2019 granted liberty to the petitioners (Appellant herein) to take steps as per law against the actual entity. It was in exercise of the said liberty that subsequent Section 9 Application has been filed by the Appellant. Thus while considering the exercise of discretion for condonation of delay under Section 5 the above facts also have to be taken into consideration under which liberty was granted to the Appellant to proceed against the real entity that is Times Internet Ltd. The affidavit dated 28.01.2022 filed in this Appeal makes out sufficient cause for condonation of 79 days delay in filing Section 9 Application by the Appellant after giving the benefit of exclusion of period during which winding up petition of the Appellant remained pending. The present is a fit case to exercise discretion given under Section 5 of the Limitation Act to condone the short delay in filing Section 9 Application. The Adjudicating Authority has committed error in rejecting the Application filed under Section 9 by the Appellant as barred by time. A perusal of the order of the Adjudicating Authority indicates that only two grounds were considered by the Adjudicating Authority that is Application having barred by time and pre-existing dispute as raised by the Corporate Debtor - matter is remitted to the Adjudicating Authority to pass an order of admission on Section 9 Application after giving an opportunity to the parties to enter into settlement. Appeal allowed by way of remand.

Summary

Issues Involved:
1. Whether the period during which the winding-up petition was pending should be excluded under Section 14 of the Limitation Act, 1963.
2. Whether the delay in filing the Section 9 Application can be condoned under Section 5 of the Limitation Act, 1963.

Issue-wise Detailed Analysis:

Issue 1: Exclusion of Time under Section 14 of the Limitation Act, 1963

The primary issue was whether the period during which the winding-up petition filed by the Appellant remained pending before the High Court of Delhi should be excluded under Section 14 of the Limitation Act, 1963. The winding-up petition was dismissed by the High Court on 13.03.2019 due to the non-compliance with the statutory notice requirement under Section 434 of the Companies Act, 1956, as the notice was not served to Times Internet Ltd., the entity with which Times Business Solutions Ltd. had merged.

The Appellate Tribunal referred to Section 14 of the Limitation Act, which allows for the exclusion of time spent in prosecuting another civil proceeding in good faith in a court that is unable to entertain it due to a defect of jurisdiction or other similar causes. The Tribunal cited precedents from the Supreme Court, emphasizing that Section 14 should be interpreted liberally to advance justice. The Tribunal concluded that the winding-up petition was dismissed due to a procedural defect, which falls under "other cause of a like nature" as per Section 14(2) of the Limitation Act. Therefore, the period during which the winding-up petition was pending should be excluded from the limitation period.

Issue 2: Condonation of Delay under Section 5 of the Limitation Act, 1963

The second issue was whether the delay in filing the Section 9 Application could be condoned under Section 5 of the Limitation Act, 1963. The Appellant argued that the delay should be condoned, citing the affidavit dated 28.01.2022, which explained the delay and requested the exclusion of the time during which the winding-up petition was pending.

The Tribunal noted that the Adjudicating Authority had rejected the Section 9 Application primarily on the grounds of it being time-barred and the absence of an application for condonation of delay. The Tribunal referred to the Supreme Court's judgment in Sesh Nath Singh and Anr. vs. Baidyabati Sheoraphuli Co-operative Bank Limited and Anr., which held that Section 5 of the Limitation Act does not mandate a formal application for condonation of delay. The court can condone the delay if sufficient cause is shown, even in the absence of a formal application.

The Tribunal observed that the High Court had granted liberty to the Appellant to take steps as per law against the actual entity (Times Internet Ltd.), which justified the subsequent filing of the Section 9 Application. The affidavit provided by the Appellant made out a sufficient cause for condoning the 79 days' delay in filing the Section 9 Application after excluding the period during which the winding-up petition was pending.

Conclusion:

The Tribunal concluded that the Adjudicating Authority had erred in rejecting the Section 9 Application as time-barred. The Tribunal allowed the appeal, set aside the order dated 14.10.2021, and remitted the matter back to the Adjudicating Authority to pass an order of admission on the Section 9 Application after giving the parties an opportunity to settle, if any. No costs were imposed.