2018 (1) TMI 313 - Tri - Companies Law

Condonation of delay - Power to extend time to tribunal - Held that - Under the inherent power provided under Rule 11 read with aforesaid Rule 15 of NCLT Rules, 2016 the Tribunal is clearly empowered to extend period of compliance, although as per the said order the CP has already stood rejected. Acceptance of the requisite certificates by condoning the delay will lead to consideration of the Scheme on merit. Shutting the doors of justice on the face of petitioners without examining the Scheme on merit shall cause great prejudice to the members, creditors and the petitioner companies. Procedural mandate cannot prevail over substantial justice. It is pertinent to note here that the order in question has not been communicated by the registry in time for effecting compliance. Besides the petitioners have placed sufficient, convincing and adequate grounds for condonation of delay. Thus the delay in filing the requisite certificates is condoned .

Summary

Issues:
Condonation of delay in filing certificates from statutory auditors for proposed Scheme of Arrangement.

Analysis:
The joint application filed under Rules 11 and 15 of the NCLT Rules, 2016 sought condonation of delay in filing certificates from statutory auditors regarding the accounting treatment of the proposed Scheme of Arrangement. The order dated 26th May, 2017, mandated the submission of these certificates within two weeks, failing which the petition would stand rejected. The provisos to sub-section (7) of Section 230 and sub-section (3) of Section 232 emphasized the mandatory requirement of auditor certificates for sanctioning compromises or arrangements. The petitioners, due to lack of information about the order, faced a delay of 97 days in filing the certificates. However, they promptly obtained the certificates upon learning about the order, demonstrating no mala fide intention in the delay.

The Tribunal, under Rule 15 of NCLT Rules, 2016, has the power to extend time for compliance based on the justice of the case. Despite the rejection of the CP due to the delay, the Tribunal could still consider accepting the certificates to evaluate the Scheme on merit. Denying justice without examining the Scheme's merit would prejudice stakeholders. The petitioners provided valid grounds for condonation, and the delay was attributed to the delayed communication of the order by the registry. Balancing procedural requirements with substantial justice, the Tribunal decided to condone the delay and allowed the application, directing the placement of the auditor certificates in the company petition for final hearing.

In conclusion, the Tribunal's decision to condone the delay in filing auditor certificates for the Scheme of Arrangement was based on the principles of justice and the petitioners' genuine reasons for the delay. By exercising its discretion under the NCLT Rules, the Tribunal ensured that substantial justice prevailed, allowing the Scheme to be considered on its merits without unjustly penalizing the petitioners for a procedural delay.