2025 (2) TMI 273 - AT - IBC

Condonation of delay of 115 days in refiling the Company Appeal - sufficient cause for delay or not - HELD THAT - In the present case it is an admitted fact that defects were notified by the NCLAT Registry on 12.08.2024 with directions to cure the defects by 19.08.2024. However the defects were cured after an efflux of 115 days. The question of condoning this delay in refiling would therefore need to be seen in the context of explanation offered as to whether the reasons causing the delay were beyond the control of the Applicant and that the defects could not be cured inspite of genuine efforts put in by the Applicant. It is noticed that one of the principal grounds adduced to explain the delay was that since the Applicant and their counsel were based out of Ahmedabad they could not physically inspect the record in person. Equally facile is the explanation that despite constant coordination and follow up the process of obtaining a certified copy of the impugned order took a lot of time. This feeble defence is belied by the fact that when we look at page 62 of Appeal Paper Book (APB) it is found that the date on which the application for certified copy was reapplied was 09.12.2024 and the NCLT Registry had delivered the certified copy on the same date. This clearly demonstrates that had the Applicant been serious and earnest in their efforts in pursuing the matter with the NCLT Registry there would have been no need to wait for nearly four months to obtain certified copy of the impugned order which was pronounced as early as 21.06.2024. It is not persuaded to accept that the Applicant had been prevented by any exceptional reason beyond its control in obtaining certified copy of the impugned order in a timely fashion. It is well recognised that speed is of essence in IBC. It is a given that the need of speed is important both for insolvency as well as for liquidation process. It flows therefrom that once the liquidation process is set into motion the liquidator is expected to act swiftly and ensure that minimal time is lost in procedural technicalities including curing of defects etc. while conducting the liquidation exercise. The initiation and closure of liquidation is a time-bound process which is to be completed within one year. A liquidator therefore has the principal responsibility of completing the liquidation process as quickly as possible by adhering to the legal regulations and time-frame set therein for conduct of the liquidation process and not allow scope of any unnecessary delay. Conclusion - The delay in refiling by nearly four months has been occasioned by rather perfunctory reasons. The Applicant is found to have remained nonchalant and callous about the need to correct the defects pointed out in the Appeal Petition by the NCLAT Registry in a timely manner. In such circumstances allowing refiling delay condonation on such frivolous grounds would be an anathema to the timeliness and integrity of the liquidation process. There are no merit in the Application filed for seeking condonation of 115 days delay in refiling the appeal. Sufficient grounds have not been made out for condonation of delay in refiling - appeal dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

The primary issue considered by the National Company Law Appellate Tribunal (NCLAT) was whether the delay of 115 days in refiling the Company Appeal (AT) (Insolvency) No. 2316 of 2024 should be condoned. The Tribunal examined whether the reasons provided by the Applicant for the delay constituted a "sufficient cause" under the legal framework governing the condonation of delays.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The Tribunal referred to Rule 26(2) of the NCLAT Rules, which prescribes a period of seven days for rectification of defects. The Tribunal also considered precedents such as the judgments in Adisri Commercial Private Limited vs. Reserve Bank of India and Dy. CE/C/ Jalandhar City Vs. Spacechem Enterprises, which discuss the requirements for condoning delays and the necessity for applicants to demonstrate due diligence and sufficient cause.

Court's Interpretation and Reasoning

The Tribunal acknowledged that the seven-day period for rectifying defects is directory and not mandatory, allowing for a liberal approach to condonation if justifiable cause is shown. However, it emphasized that any condonation must be based on reasonable, justifiable, and sufficient cause, without compromising the principle of timeliness, a cornerstone of the Insolvency and Bankruptcy Code (IBC).

Key Evidence and Findings

The Applicant cited multiple reasons for the delay, including geographical distance between Ahmedabad and Delhi, misplacement of documents by a local clerk, and technical issues with email communication. The Tribunal found these explanations unconvincing, noting the lack of evidence for technical issues and the implausibility of geographical distance as a barrier given modern infrastructure.

Application of Law to Facts

The Tribunal applied the legal principles of timeliness and due diligence to the facts, finding that the Applicant failed to demonstrate that the delay was beyond their control or that they acted with due diligence. The Tribunal highlighted the Applicant's lack of earnest efforts to obtain necessary documents in a timely manner.

Treatment of Competing Arguments

The Respondent argued that the delay was intentional and the reasons provided were inconsistent and insufficient. The Tribunal agreed, finding that the Applicant's explanations were perfunctory and did not justify the delay. The Applicant's reliance on precedents advocating a liberal approach was dismissed due to the absence of genuine grounds for delay.

Conclusions

The Tribunal concluded that the Applicant did not provide sufficient cause for the delay in refiling. The explanations offered were deemed inadequate and unpersuasive, leading to the rejection of the application for condonation of delay.

SIGNIFICANT HOLDINGS

The Tribunal held that while a liberal approach to condonation of delay is permissible, it must be grounded in sufficient and justifiable cause. The Tribunal emphasized the importance of timeliness in insolvency proceedings, stating: "In adopting a liberal and flexible approach, we cannot allow any compromise of the well settled precept of 'timeliness' which constitutes one of the cardinal cornerstones of the statutory framework of IBC."

The Tribunal also reiterated that administrative oversight, such as misplacement of documents, does not constitute a valid ground for condonation of delay, especially when the Applicant failed to act with due diligence.

Final Determinations on Each Issue

The Tribunal rejected the application for condonation of the 115-day delay in refiling, citing insufficient grounds. Consequently, the Memo of Appeal was also rejected, underscoring the Tribunal's commitment to maintaining procedural timeliness in insolvency matters.