2023 (12) TMI 443 - AT - Insolvency and Bankruptcy

Exclusion of the time spent by the Appellant in the earlier litigation - invocation of Section 14 of IBC Act - HELD THAT - Section 14(1) of the Act deals with the suit, Section 14(2) deals with the application and Section 14(3) is in respect of filing a fresh suit instituted upon permission granted by the Court. In Section 14(1) (2) the terms which are to be noticed and highlighted are prosecuting with due diligence and prosecuting in good faith . It has also been held that due diligence and caution are essential prerequisites for attracting Section 14 but due diligence cannot be measured by any absolute standards rather it is measured with prudence or activity expected from and ordinarily exercised by a reasonable and prudent person under the particular circumstances and in respect of good faith it has been observed that nothing shall be deemed to be done in good faith which is not done with due care and attention. It is further held that Section 14 will not help a party who is guilty of negligence, lapse or inaction. It cannot be said that the order passed by the Adjudicating Authority was without jurisdiction. The Adjudicating Authority had the jurisdiction to pass the order on an application filed under Section 60(5) of the Code. In the present case, the Applicant/Respondent invoked not only Regulation 31A(6) of the Regulations but also Section 60(5) of the Code - The Tribunal has recorded the reasons while disposing of the application which cannot be said to be an order having been passed without jurisdiction and the contention of the Appellant in this regard is totally incorrect. The order of the Adjudicating Authority may be, in the opinion of the Appellant, illegal but for that matter the Appellant has to prefer an appeal and not the writ petition and then a special leave petition before the Hon ble Supreme Court even against the order of the Hon ble High court by which the Appellant was relegated to avail his remedy of appeal and also granted stay till the appeal is filed. If this procedure is allowed to be followed then there would be no end to the filing of the writ petitions against the order of the Adjudicating Authority of the NCLT before the Hon ble High Courts and thereafter the orders of the Hon ble High Courts would be challenged before the Hon ble Supreme Court. There are no merit in the submission of the Appellant for excluding the period under Section 14 of the Act and since the appeal has been filed after the period of 53 days from the date of passing of the impugned order - appeal dismissed.

Summary

Issues Involved:
1. Replacement of the Liquidator.
2. Jurisdiction of the Adjudicating Authority.
3. Applicability of Section 14 of the Limitation Act, 1963.
4. Timeliness of the appeal filed under Section 61 of the Insolvency and Bankruptcy Code, 2016.

Summary:

1. Replacement of the Liquidator:
The appeal contests the order dated 20.09.2023 by the National Company Law Tribunal (NCLT), Chennai, which directed the replacement of the liquidator for the Corporate Debtor. The NCLT observed that due to non-consensus among the Secured Financial Creditors and the vacillation of the liquidator in appointing an Authorized Representative for the class of creditors, the liquidation process was stalled, causing detriment to the liquidation estate. Consequently, the NCLT appointed "SPP Insolvency Professionals LLP" to carry out the liquidation process and directed the new liquidator to complete the process in a time-bound manner, with monthly progress reports.

2. Jurisdiction of the Adjudicating Authority:
The appellant, erstwhile liquidator, filed a writ petition before the Madras High Court, challenging the NCLT's order on the grounds of lack of jurisdiction, arguing that the NCLT removed the liquidator suo motu without an application for removal. The High Court initially granted interim relief but later dismissed the writ petition, directing the appellant to avail the statutory remedy under Section 61 of the Insolvency and Bankruptcy Code (IBC).

3. Applicability of Section 14 of the Limitation Act, 1963:
The appellant sought exclusion of the period spent in litigation before the High Court and the Supreme Court under Section 14 of the Limitation Act, claiming the proceedings were pursued with due diligence and in good faith. The appellant argued that the delay in filing the appeal should be condoned as the time spent in bona fide prosecution of the remedy before the courts should be excluded.

4. Timeliness of the appeal filed under Section 61 of the Insolvency and Bankruptcy Code, 2016:
The appeal was filed after 53 days from the date of the NCLT's order. The respondent contended that the appeal was barred by limitation as the statutory period for filing an appeal under Section 61 of the IBC is 30 days, extendable by a maximum of 15 days. The NCLAT held that the appellant was not entitled to the benefit of Section 14 of the Limitation Act, as the appellant, being a liquidator, was aware of the statutory provisions and chose to pursue alternative remedies despite knowing the availability of a statutory appeal. Consequently, the appeal was dismissed as time-barred, citing the Supreme Court's decision in National Spot Exchange Limited Vs. Anil Kohli, which emphasized that the delay beyond the prescribed period of 30+15 days cannot be condoned.